Thursday, May 18, 2006

Hats Off to Avoca Inc (AVOA)
A Credit to SarbOx Avoiders

If you read our previous post regarding Scheid Vineyards delisting, and de-SarbOxing primarily to save money, you'll remember that de-listing absolves companies with less than 300 shareholders of filing with the SEC.

Your Cheapstocks editor currently has positions in two companies that don't file, JG Boswell (BWEL) and Avoca Inc. (AVOA). Although Boswell has performed well for us, there are no investor communications provided. We are in this one on faith and gut. The only communication I've ever received from Boswell, was information on a company self tender offer in 2004. Nothing since then.

Avoca, on the other hand, continues to send quarterly and annual financials. Avoca is a small royalty trust that owns 16000 acre Avoca island, which is off the coast of New Orleans. Their primary revenue source is royalties from gas leases on the island. We received a report for Q1 today. For the record, sales tripled to $3.6 million from the same period last year, and net income nearly quadrupled to $2.5 million, oe $309.71 per share.

No, that is not a misprint, they really earned $309.71. Avoca split 1 for 100 in early 2005 in order to delist, which left the company with just 8,057 shares outstanding. You can imagine what that does to liquidity. The stock currently "trades" on the pink sheets, with a current bid of $5000. In 2005, they paid a $400 dividend ($350 the year before), and if Q1 is any indication, that should rise nicely for the next annual dividend (Dec 2006).

If you have any interest in this company, be very cautious. I believe there is tremendous value there, and between our originl purchase price, and two nice dividends, we've doubled our money in just over one year. But there just aren't many shares to go around, and both entry and exit will be difficult. There's a lesson in careful when placing orders, especially when there is little liquidity, and wide spreads. That's what limit orders are for.

In any event, our hats go off to tiny Avoca, a $40 million market cap powerhouse.

*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.

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