20 OTC Markets Oddities

Rarer and rarer, but still there!

Happy New Year! I hope everyone had an enjoyable holiday season and that you feel ready to tackle whatever 2025 throws at us. I suspect it will be a lot. These well wishes go out to all you 10,000+ Alluvial subscribers. Seriously, thank you for reading. It wasn’t so long ago that I would log into the old OTCAdventures.com platform and hope to see subscriber number 100. A lot has changed since then. My focus has shifted from looking almost exclusively at unlisted companies to the wider world of obscure and overlooked securities. There are a lot of reasons for this, and I’ll get into some of them. First, housekeeping.

Tactile Fund LP has launched! Alluvial’s newest investment offering, focused entirely on global companies with extraordinary physical assets, commenced operations with $6.3 million in assets. I am eager to spread the word about this unique strategy. With that in mind, I have launched a sister Substack for Tactile Fund. I get that you have enough people trying to sell you something already, so I don’t plan to talk about Tactile Fund all that often here on the Alluvial Substack. So if you’d like to follow Tactile’s progress or learn more, please sign up for the Tactile Substack.

Back to it! I built my reputation by profiling unlisted, OTC-traded securities. But I no longer do much writing or talking about that segment. Why? Sadly, the OTC market is just not what it once was. Why?

• The number of good quality OTC-traded companies has declined. Many profitable, cash-flowing, dividend paying industrial and consumer goods companies have gone private or been bought by competitors or private equity. Their ranks have not been replenished by good new companies joining. This isn’t unique to the OTC world. development. The ranks of public companies of all kinds have been in steady decline for decades now. Many companies did the math and realized the costs of being public didn’t make up for any valuation uplift they experienced (or didn’t, as was the case for many small, more mature companies.) Plus, there are now plenty of financing alternatives. Private equity is swimming in deployable cash. Why offer shares to the public and take on onerous filing requirements when Percy Chadingham IV has raised $60 million from his father’s Wharton ‘92 classmates to deploy in select opportunities in mid-market Midwestern manufacturers and distributors?

• The SEC cut the market in two with its 2020 changes to Rule 15c2-11. Previously, investors were free to buy or sell any OTC security, no matter what level of public disclosure the company chose to provide. And some chose very little or none. Fine by me. I rather liked the game of buying a handful of shares and reaching out to the company for financials. Their response, whether friendly or hostile, was an important tell. But post rule change, companies that do not publish their annual results through OTCMarkets.com are relegated to the “expert market,” where no mainstream retail-oriented brokers will execute buy orders. So another 10 or 20 good quality OTC companies became unavailable to new investors.

With fewer “investment grade” OTC companies out there, finding value is just more of a slog than it used to be. But that doesn’t mean it isn’t out there! The OTC market is still home to intriguing companies, some of which are well worth examining. I challenged myself to draw up a list of 20 OTC-traded businesses with real assets and earnings, further challenging myself to stick to businesses I don’t own. Harder than it sounds! All of these companies have shares trading at some tier of the OTC Markets, expert market excluded. It almost goes without saying, but I’ll say it anyway: most of these are very illiquid, offer only limited financial disclosures, and many have a controlling shareholder whose motivations may differ from minority shareholders. No one should transact in any of these without extensive due diligence and I am certainly not recommending anyone do so. For those who may be newer to the world of unlisted stocks, OTCMarkets.com is the clearinghouse for the financial reports and press releases that these companies produce.

Here goes!

1. Paul Mueller Company - MUEL. Mueller is a Missouri-based manufacturer of large stainless steel tanks and systems. Think giant vats for the dairy, beverage, and pharmaceutical industries and more. The company’s results have been frustratingly inconsistent over the years, but the last three quarters saw Mueller record $18.5 million in profit and a soaring backlog thanks to orders from pharmaceutical companies. This time, can the good times last?

2. American Biltrite Inc. - ABLT. I love the eclecticism on display here. Founded in 1908, American Biltrite makes rubber floor coverings, pressure-sensitive tapes, and…fashion accessories. Seriously, AmBilt is a major manufacturer behind the cheap jewelry from places like Anthropologie, Ross Stores, and Stitch Fix, plus some higher-end retailers. Problem is, they don’t make money. American Biltrite’s annual revenues are nearly $200 million and gross profit exceeds $50 million, but it somehow all disappears in overhead and facilities expenses. This has been the state of affairs for at least a decade now. Between the ongoing lack of profits, pesky asbestos liabilities, and a controlling family that seems content with the company’s floundering, there may not be much here to attract investors. Nevertheless, I enjoy tracking this true oddball.

3. Alaska Power & Telephone Co. - APTL. The OTC markets were once home to dozens of local telephone companies and utilities. Now there are only a handful. Alaska Power & Telephone Co. is both. APT has served the hardy citizens of Alaska since before statehood. Today, the company continues to invest in bringing clean hydro-power to communities once served only by diesel generators, and connects isolated communities to the world outside with broadband. It’s a difficult and capital-intensive business, but APT is consistently profitable and pays dividends. Employees are big shareholders.

4. Dimeco, Inc. - DIMC. I am an absolute sucker for old-timey sounding businesses, and this bank named after a coin fits the bill. Subsidiary “The Dime Bank” has served tiny Honesdale, PA, outside of Scranton, since 1905. Shareholders have been well-served also, with Dimeco shares returning >10% including dividends over the last 30 years. Today, Dimeco trades at 90% of tangible book value and at 7.5x trailing earnings.

5. ACMAT Corp. - ACMTA. ACMAT is an insurer, offering surety bonding to contractors and construction firms. The odd part is the company doesn’t seem to do much actual bonding. Annual premiums are only about $1.2 million, compared to equity of almost $30 million. The firm holds $45 million in cash and securities, mainly bonds. Over the years I have heard that ACMAT is conservative almost to a fault, writing nearly zero business when it believes underwriting conditions are lackluster, than expanding greatly when a hard market comes along. True? I don’t know. Seems more like a bond portfolio with a tiny underwriter attached so that management has something to do all day.

6. Endo Inc. - NDOI. The legal fall-out of America’s opioid crisis forced many opioid manufacturers into bankruptcy, including Endo’s predecessor, Endo International. Endo re-emerged with substantially less debt and without the specter of continued opioid litigation. The company’s suite of pharmaceutical products still includes opioids, presumably with strict guardrails around how these products are marketed and delivered. Post-bankruptcy situations are one of my favorite hunting grounds, but pharma is pretty far outside my wheelhouse and I have not been able to reach a conclusion on Endo’s merit. With a $2 billion market capitalization, Endo is not your usual OTC minnow.

7. Southern Realty Company - SRLY. The “Southern” in Southern Realty refers to Southern California, not “The South.” Southern Realty is one of the stock market’s last vestiges of “Old California",” owning mineral rights to 40,000 gross acres (17,000 net) in the Central Valley. Any surface acreage the company once owned was sold long ago. These days, the company earns money in sporadic fashion by leasing its acreage to solar developers. The prospects of any kind of operating business being established seem remote. Anyway, gotta love a company with no website in 2025.

8. Gould Investors LP - GDVTZ. There were once many public real estate partnerships and MLPs, but tax law changes and the generally dismal performance of the asset class resulted in nearly all of them liquidating or being merged away over time. Gould Investors LP (and listed company New England Realty Associates LP) survived. Gould owns a collection of properties, loans, and affiliated public REIT securities. Gould Investors LP occasionally distributes these securities to holders. The company’s structure is fun to tease apart, with the requisite minority interests and cross-holdings.

9. Pardee Resources - PDER. Long a favorite in crusty value investor circles, Pardee owns a huge portfolio of natural resource assets, including timberlands, oil & gas rights, and coal. These assets were assembled generations ago, and the company leases them to operators, collecting royalties. The company once offered a sumptuous lunch to attendees of the annual shareholders’ meeting in Philadelphia. I never attended, and it seems this perk has gone away as the company has become better-known. In recent years, the company made some sub-par investments in solar developments, grape farming, and almond groves in Portugal, the latter causing some speculation over whether executives simply wanted an excuse to take a sunny annual trip to “check on their investment.” But the company continues to pay dividends and the breadth of its portfolio is truly impressive.

10. Detroit Legal News - DTRL. True to its name, Detroit Legal News publishes nine newspapers that communicate legal notices to the Michigan legal community. The company also does a lot of contract printing. One might imagine both businesses are in steady decline, and one would be correct. Still, Detroit Legal News is a fighter, and the company keeps coming up with new ways to carry on. The company also has a knack for selling hidden assets, like a parking lot, and dropping a big special dividend on shareholders. It might be worth perusing some property records to see what else the company may own.

11. The Reserve Petroleum Company - RSRV. Reserve is an Oklahoma-based oil & gas company with assets in several states. Reserve is a bit plodding, but makes good money most of the time and keeps its balance sheet in pristine condition. Reserve is obligated to file quarterly and annual reports with the SEC due to its large number of shareholders. Not surprising, as the company got its start by approaching farmers and landowners and trading share certificates for their mineral rights in the 1930s. Presumably there are share certificates gathering dust in safety deposit boxes, some lost in fires and floods, and others simply forgotten. Because of this, Reserve long had trouble figuring out who held some of its shares, and dividends owed to these mystery owners would simply accumulate as a liability on the balance sheet. The issue seems to have been resolved, but I always got a kick out of seeing that line in the financial statements.

12. Exchange Bank - EXSR. Some community banks are owned by their founding families, others by local business leaders or community members. Exchange Bank is owned by a community college. Well, at least by a trust established to provide scholarships for one. The Frank P. Doyle Trust owns 50.44% of Exchange Bank of Santa Rosa, California. The trust receives nearly $4.5 million in dividends annually from its ownership, most of which it uses to provide scholarships to students at Santa Rosa Junior College. The trust has paid out over $103 million in scholarships since it was established in 1948 when Mr. Doyle passed and left his majority interest in Exchange Bank to the trust. What a legacy.

13. Burnham Holdings Inc. - BURCA. Lancaster, Pennsylvania-based Burnham is makes heating and cooling equipment. The company is known for its variety of boilers, but it also manufactures heat pumps and air conditioning equipment. Burhnham pays generous dividends, but it also carries a generous debt load. At around 5x EBITDA, Burnham seems like a company that would fetch a meaningful premium if it ever decided to sell.

14. Capital Properties, Inc. - CPTP. I have never been to Rhode Island. If I ever do find myself in Providence, I will have a look around for the parcels that Capital Properties owns. Capital Properties owns 16 parcels in the Capital Center area, most of which are on ground lease to the city parking authority, awaiting development. This would presumably cause a large uplift in the rents that Capital Properties receives. For now, the company trades at a cap rate of around 7.8%, though corporate overhead eats up a good bit of that yield. Might be worth kicking the tires if you’re long-term bullish on downtown Providence.

15. Ferrellgas Partners LP - FGPR. Ferrellgas is a propane distributor, one of the nation’s largest. The company grew rapidly by acquiring mom & pop operators and plugging them into its superior logistics network, raising margins and increasing debt capacity to do the same thing all over again. Unfortunately for Ferrellgas, the company fell into distress a few years back and went through bankruptcy. Ferrellgas exited bankruptcy in typical fashion, shedding debt and onerous contracts. But the new entity is still very capital-intensive and carries high financial leverage. One has to imagine that the company will eventually seek to uplist to a major exchange again, perhaps once its post-bankruptcy capital structure simplifies.

16. Winland Holdings Corporation - WELX. Winland offers water intrusion monitoring systems, humidity sensors, et cetera. Perhaps more notably, Winland was an early mover in Bitcoin mining. Mr. Stephen Bregman of FRMO Corp. and Horizon Kinetics, major proponents of Bitcoin and “inflation-resistant” assets, owns 40%. Magical imaginary internet money isn’t my thing, but maybe Winland’s crypto exposure is interesting. Someone else can figure that out.

17. Bowlin Travel Centers - BWTL. This one is fun! Bowlin owns a collection of gas stations and rest stops in New Mexico and Arizona. But it also owns THE THING. I really must insist you follow the link. Who could put a price on that? It’s like trying to value Shakespeare’s sonnets.

18. ITEX Corp. - ITEX. ITEX operates a barter network where businesses can exchange surplus inventory and capacity. The networks used to be a lot more prominent than they are now thanks to some favorable tax treatment (what else) but they seem to be in steady decline. Members of ITEX’s barter network exchange “ITEX Dollars” with ITEX taking a 6% cut of every exchange. ITEX Corp. carries a lot of cash, but its operating results have been in decline. For reasons inscrutable to the author, Sardar Biglari’s “The Lion Fund, LP” is a 19% owner here.

19. Blue Dolphin Energy Co. - BDCO. Running an oil refinery that sits solidly in the top quartile of the breakeven cost curve is a tough way to make a living, but it’s never boring, and neither is Blue Dolphin Energy. Sometimes, crack spreads widen to the point where the company gushes cash. Just as often, the company struggles to manage its strained balance sheet and stay afloat until next time the cycle turns. Perhaps not one to hold long-term, but the company is capable of earning more than half its market cap in a particularly good year. Blue Dolphin is majority-owned by Lazarus Energy Holdings, a fact I enjoy because Blue Dolphin does seem to rise from the dead time after time.

20. Moro Corp. - MRCR. Moro Corp. is a residential builder and HVAC contractor in Upstate New York. Moro Corp. openly declares itself a “value investor” on its company website, but its results have been only mediocre, growing book value at 8.5% annually this last decade.

There it is: 20 examples of the unusual and obscure companies that still populate the OTC markets. I could easily list 20 more and I probably will, some time. Does anyone have experience with any of these, as an investor, competitor, or customer? I would love to hear some anecdotes. Thanks for reading!