Portfolio Updates Part Two
|Apr 15, 2013|
Now for the second entry in this series of updates on the dozens of companies I've profiled so far!
Care Investment Trust
In January, 2013, Care Investment Trust entered into an agreement to merge with its parent company, Tiptree Financial Partners, LP. The combined company will not retain Care's REIT status and will attempt to list on a national exchange. The transaction is somewhat convoluted and it is difficult to assess whether or not it is fair to minority shareholders. One thing is for certain, and that is Tiptree would not be going forward with the transaction if it weren't advantageous for its own partners.
Care continues to trade at a discount to book value, perhaps because of the company's difficulty in finding a productive use for its large cash reserves. One attempted purchase of senior housing properties ultimately fell through, sending the company back to square one. On February 8, 2013, the company announced a joint venture created to purchase two senior living properties, but this deal has not yet closed.
Until investors gain better clarity on the company's financials and prospects post-merger, I can't see the stock making any significant gains.
Reserve Petroleum Company
Since my writeup in early June, 2012, Reserve has earned $19.94 per share and paid out $10 per share in dividends. Net oil and gas properties rose from $80.26 per share to $89.96. Despite solid performance, Reserve's share price hasn't budged. In fact, the company's total return is -2% since last June, trailing the S&P 500 Index by 21%. Maybe the market is unhappy with Reserve's $111 per share in uninvested cash and securities, but I suspect the company is simply ignored and forgotten. The broad market's gains make Reserve's valuation even more attractive.
Unilens is another flatliner, returning 0.13% since last July and trailing the S&P 500 by a wide margin. Unilens' profits have slipped as royalties from Bausch & Lomb have diminished. The company has cut debt and managed to maintain its lofty dividend, but the market is clearly not confident in the company's future. However, better times may on the horizon Unilens recently cut a new royalty agreement with Bausch & Lomb that extends its current contract and also adds the company's new multifocal contact lens, which are being rolled out nationwide for the first time. With the revenue stream looking more secure and a new product in the marketplace, perhaps Unilens can reverse its revenue declines.
Since Peter Kamin's board shakeup and a tender offer for almost 25% of shares outstanding, Rockford has been as secretive as they come. Beyond a few product-related announcement, the company has not provided any financial information since October, 2012. Last April, the company announced both its annual and first quarter results. Investors should be starting to wonder about the company's commitment to transparency.
While they may have a legitimate complaint regarding the secrecy, shareholders certainly cannot complain about the returns. Since last September, Rockford is up 37.6%.
Spindletop Oil & Gas
Sometimes all it takes is a little attention from the market for a company's share price to rocket. Spindletop is a poster child, rising 75% in just under seven months. Earnings have been solid, and the company has repurchased over 700,000 shares. But it seems like a stretch to ascribe Spindletop's huge gains to these factors alone. The company went from trading at 90% of book value in September, 2012, to trading at 158% today, without significant changes in its business outlook or strategy. Such is life with these unlisted companies. The cheap ones can languish for months or years, only to rocket without notice.
Chesapeake Financial Shares
Chesapeake remains a well-run, highly profitable bank and financial services business that receives far too modest a multiple. 2012's earnings per share were up 7.6% from 2011 and up 14.9% compounded since 2008, yet Chesapeake trades at 7.5 times earnings and 92% of book value. In November, 2012, the company raised its dividend to 12 cents per quarter. I'm happy to hold onto Chesapeake shares for however long it take for the market to recognize the quality of its operations and its track record of growth and increasing dividends.
I've written about plenty of other companies, but I want to give them a little longer to see how they fare before revisiting them. Posting has been a little slow lately due to work demands and some travel, but expect new content soon, including a look at an over-capitalized, highly-profitable small manufacturer, and a turnaround story where losses from weak business lines are hiding big profits and growth at the company's crown jewel operation!
I hold shares of Chesapeake Financial Corp.