Jul 292016

Be Pro-Globalization

By |July 29th, 2016|Blog|2 Comments

Global poverty is not something recently invented for the benefit of multinational corporations.

~Paul Krugman (Nobel winning left-leaning economist)

Globalization has been wildly good for the world, in particular it’s been good for the poor.  It’s interesting because most Americans, 67%, believe that global poverty has increased over the last 40 years.  Fortunately for the world, this just isn’t true.

So what’s to blame for this?  Well, globalization.  Poverty decreases have been fastest where trade with the rest of the world is strongest.


In my view sweatshops are terrible soul crushing places, the faster the world is rid of them the better.

You would be very mistaken however, to think that sweatshops cause poverty.  Sweatshops are a symptom of poverty, and poverty will not be cured by removing the cause.  For example, one of the worst places to work is undoubtably in a Nike factory in Bangladesh. Unless you live in Bangladesh, there a job at a state owned factory pays only a third of what a Nike factory worker can make.  It’s easy in the west to simply say, “well that’s still unfair, it’s still too little. Nike should pay more”.  That’s easy for privileged westerners to say.  If Nike then moves out of Bangladesh and stops using sweatshops we will pay a little more for sneakers.

I don’t know anyone who says they would be unwilling to pay more for sneakers to improve the lives of the Bangladeshi.  Paying more for sneakers wouldn’t hurt middle class Americans much at all, and really, why should we care about how much middle class Americans pay for shoes when the vast majority of the world lives in terrible poverty?  But, if Nike moves out of Bangladesh, it won’t be middle class Americans who will truly suffer for it.  It will be the Bangladeshi.

Take this example from Nicholas Kristof about the people in Cambodia who scavenge a garbage dump for recyclables:

Talk to these families in the dump, and a job in a sweatshop is a cherished dream, an escalator out of poverty, the kind of gauzy if probably unrealistic ambition that parents everywhere often have for their children.

Vath Sam Oeun, hopes her 10-year-old boy, scavenging beside her, grows up to get a factory job, partly because she has seen other children run over by garbage trucks. Her boy has never been to a doctor or a dentist, and last bathed when he was 2, so a sweatshop job by comparison would be far more pleasant and less dangerous.

Americans have a very selfish view of this, many would harm their country and others to end globalization and tear up trade agreements.  They’d prefer this sort of thing to continue instead of sweatshops because then they don’t have to feel morally responsible for it.  Refusing to help other people at your own expense isn’t nice, but it is normal behavior, and it is occasionally defensible.  Injuring yourself to do real harm to other people, and then pretending not to notice the harm you do is the most morally reprehensible thing I can think of.

Buying Local; Supporting Global Poverty

This, in a nutshell, is why I think that buying local is just about the nuttiest thing I’ve ever heard of.  Paying more for a good, not because it’s quality is higher, but just because it happened to be made nearby impoverishes everyone, but the poor of the world most of all.  Putting the global poor out of work so that you can feel morally superior supporting someone with a college education making fancy doilies seems crazy to me.

But, buying local keeps the money in the community!

You have fallen prey to the money illusion.  The standard of living of a community is determined by what it produces not money that it has.  The problem with your reasoning is made obvious if you extrapolate it.  If a community is made better off by buying worse goods preferentially from each other, would the community be better off if everyone paid each other all of their money for spending all of their working hours producing the shoddiest good of all, nothing.  Your community would quickly starve.  Whenever someone is trying to convince you of their economic argument by paying attention to money rather than the actual goods and services, they do not understand economics.

If you think that your local producer of a good makes it better, that’s great, buy it.  If the goods that you buy local are equally good for the same price, then there’s no need for the inducement to buy it locally!  The degree to which the goods you purchase locally are worse, or overpriced (I generally find that a local good commands a 100% markup over its equivalent), is the degree to which you impoverish your community by buying them.

Poverty Matters

It’s very hard for Americans to understand real poverty.  Everything so much poorer than us looks equally wretched and miserable. The only important question in this debate is, what will most quickly bring global poverty to an end.  I’m sorry you don’t like that globalization and its attendant sweatshops are the only answer, but they have reduced poverty at a rate faster than has ever been seen in the history of man.  Many other things have been tried, including just giving people more money.  They don’t work.  Wishing won’t make it different.  Refusing to understand doesn’t improve the situation.  Sweatshops are dirty, miserable and dangerous, but they are their own cure.

Jul 252016

Richardson Electronics (RELL)

By |July 25th, 2016|Blog|Comments Off on Richardson Electronics (RELL)

richardson_electronics (RELL)

This is one of the bigger companies that I’ll profile here.  It has a market capitalization of about $75 million.  Huge in comparison to the sub-10 million dollar companies we’ve been discussing.  The trick to Richardson Electronics is explained far better by Danny DeVito than I:

Richardson electronics has about $110 million of working capital net of all debt and liabilities.  Last quarter it lost about $3 million.  It’ll probably lose $10 million this year.  Maybe it’ll lose another $10 million next year too.  But the company shouldn’t be worth less than its working capital.  Even supposing that Richardson’s inventory is worth half what it cost them to produce, the company is obviously more valuable than what it’s being given credit for.

Why Does Liquidation Value Matter?

“Alright”, you might say, “but if Richardson doesn’t liquidate, why does the liquidation value matter?”

That’s a good point, this is the whole unproven bit of the theory behind value investing.  If you could sum up value investing in one sentence it’d be, “Shares of a company are worth what a private buyer would be willing to pay for the whole company divided by the number of shares outstanding.”  So what does that mean?

If a private buyer would be willing to pay $110 million for Richardson Electronics, then we should divide that by the number of shares outstanding (12.5 million), then the theory of value investing suggests that the fair price for shares ought to be about $8.80.  This would leave us with roughly 50% upside for Richardson.

Why should a company be worth what a private buyer would be willing to pay for it? Well, there’s not a good answer.  Other than, the statistical evidence seems to bear it out.

What would a private buy pay for Richardson Electronics?

Well, that’s a better question.  I value Richardson Electronics’ cash, inventory, and net receivables at full value.  There are perhaps arguments that this shouldn’t be the case.  Perhaps some of the cash deserves a 20% haircut for being overseas and it is therefore still taxable if brought back to the US (suppose a 10% haircut on all of the cash, as maybe half of it is overseas).  The net receivables maybe get the same discount plus a little because there is counterparty risk (say 15%?).  Perhaps some of the inventory deserves a discount, as they might not be able to get what they paid for it.  The inventory doesn’t get the same tax discount as the cash and net receivables because it is held at cost, and is therefore tax deductible.  We may want to give the inventory a haircut, as Richardson might not be able to move all of it just because they paid a certain amount for it.

If you toss all of that in a spreadsheet, and subtract off all of Richardson Electronics liabilities at face value, then you figure that even if the operating company was worth $0 as a going concern, at a bare minimum Richardson Electronics would be worth $90 million to you.  You would probably want to throw in the $8 million of long term CD’s that the company also owns.  The rest of the land, equipment and so on you get for free.  So call it an even $100 million, like Danny DeVito, I too like round numbers.  So, to a private buyer shares are worth at least $8.

Could anything go wrong?


Very many things.

First off, management appears to be overpaid.  The CEO’s base salary went from $630,000 to $700,000 over the last two years, a period during which Richardson electronic’s operating performance substantially deteriorated, and the stock price was cut in half.  Including bonuses the full management team made $3 million last year.  $3 million is a great deal of money when the gross profit for that year was only $41 million. The actual owners of the company were paid $3 million as well, in the form of dividends over that year.

Why is management so overpaid?  Well, management’s is the only vote that actually counts.  Richardson electronics has a special share structure which allows the CEO, Edward Richardson, to control a majority of voting power in the company despite only owning about 20% of the company’s stock.

There are two classes of shares, A and B.  The B shares have 10 votes, while each A share only gets one vote.  The B shares do only receive 90% of the dividend and have rights to only 90% of the earnings that the A shares do, but are convertible into A shares at any time.

This means that the CEO wins every vote that matters, and should a private buyer make that fair offer to buy Richardson Electronics the CEO can simply say “nope, I’d rather keep my million dollar per year salary.”

This might mean that management could continue to run up losses, and burn through the net cash, receivables and inventory we are counting on to give value to the company.  This could certainly go to zero, and it’ll be a long painful slog to get there.

The Ray of Light

On the upside Richardson Electronics is slowly liquidating.  They pay out $0.24 in dividends every year, giving RELL a 4% yield.  In principle this could continue until they paid out all $8 of value in the company, or the company returns to profitability.  This means that investors don’t merely have to sit on their thumbs and hope for the best, and they probably won’t end up with nothing to show for their investment. All in all, I think Richardson is a strong bet.

Disclaimer: I am long RELL (This means that I own Richardson Electronics stock, or that I profit when the stock goes up.  Short would mean that I profit if the stock goes down.). I have no plans to buy or sell any of the mentioned stocks within then next 72 hours. I wrote this article myself, and it expresses my own opinions. This is not a recommendation to buy or sell any stock. I am not receiving compensation for it (other than from the owner of the blog District Media Corp). I have no business relationship with any company whose stock is mentioned in this article.  Always do your own research before making any trade, buying or selling any stock mentioned.


Jul 222016

Where to Exchange Money

By |July 22nd, 2016|Blog|Comments Off on Where to Exchange Money


They say specimen so you don’t try to print them off at home. It’s hard to see how anyone would get what your inkjet spits out confused with a bill, but there it is.

The best place to exchange money is inside your credit card.  Sometimes that’s not possible, in which case we’ve got a list of the rest of the places that you should exchange money.  Ultimately what you’re worried about here are fees.  There are plenty of people out there willing to sell you some story about how they know how to time currency transactions in order to save you money.  The financial world is full of superstitions like that, do your best to ignore it.  If anyone out there thinks I’m wrong I’d be happy to take a bet on the subject.

Credit Cards

Alright, now I’ve said it twice.  Just get one without a foreign transaction fee and call it a day.

High Yield Checking

There are a few high yield checking accounts out there.  The basic idea for these is that you jump through a few hoops and the checking account pays you an above market rate of interest (up to a specific balance) and will often reimburse ATM fees. I recommend Consumers credit union. The requirements usually involve using the debit card a dozen times in a month and setting up direct deposit.  The interest rate alone is generally worth it, but using it to change money from foreign ATM’s is the icing on the cake.  Whenever I need cash abroad I just get it from a random ATM, knowing I’ll be reimbursed.

Your Local Credit Union

You should probably be a member of your local credit union.  In principle the profits from the credit union flow to you rather than to shareholders.  Generally this means that all kinds of things are cheaper at the credit union.  Of course because they don’t have to look after their profits sometimes bureaucracy can get a stranglehold on your credit union and the fee schedule might not make any sense from any perspective, so it pays to check that your credit union is actually giving you a good deal.

What’s a good deal? Whatever google tells you the exchange rate is, basically.

Also, as a bonus your credit union may eventually convert to a bank, in which case you’ll have an opportunity to make money in its conversion.  (You see, the owners of the credit union are its customers, when it converts to a bank it will be owned by shareholders.  To convince current owners, that’s you, to do the conversion the credit union needs to offer you something valuable.  Usually, that means you can purchase stock at a discount.  That’s a fantastic deal.  Your credit union probably won’t do this, but it’s essentially random upside. )

Your Local Bank

Usually you can order foreign currency, online or by phone, in advance from your bank and get a good rate with a minimal fee.  If you show up at the teller demanding Euros you’ll probably get a rate that’s not quite as good.

Their Local Bank

It’s not going to be a great deal to do this, and I’d anticipate it to be somewhat worse than your local bank, but your mileage may vary.  (That’s what YMMV means if you ever see it on line.  That’s one I have to look all the time.  That and TFW, or SMH.)

(That feel when, and shaking my head, respectively)

(I can’t imagine saying either of those things so often that you’d need to abbreviate them, but TYHI.)

(There you have it; That one’s not real but what are you going to do?)

Buy Euros From American’s leaving the country

They need to get rid of their foreign currency, you need the foreign currency.  You can probably get the fair rate, since either of you are going to get screwed at your destination.
Cash Exchange

These places exist mostly in tourist spots.  They’re pretty universally awful, only use in an emergency.  Alternatively, send your enemies there.

Don’t have enemies?  You will if you send people here to change their money.

Cash Exchange at the airport

This is good for when all of your foreign currency gets stolen, as well as your atm card, but you still have a roll of $100’s in your sock.  Change just enough to get you to the nearest bank, or some other place that will repair your problem.  Even then you might be better off begging other american’s for bus fare, or hanging out near the forex place looking for people who look like they’re departing the country.


Jul 192016

Fortune Industries (FDVF)

By |July 19th, 2016|Stocks|Comments Off on Fortune Industries (FDVF)

This is what I imagine it felt like to be a fortune shareholder.

This is what I imagine it felt like to be a Fortune shareholder.

Fortune industries is a Human Resources company.  Basically small to medium sized companies outsource their human resources department to Fortune. Why talk about them? Fortune Industries is the cheapest company I know of on an earnings basis (excepting cases where the business is obviously in sharp decline, like Outerwall). I’m sure there are cheaper companies out there, but Fortune has a special history.

What happened at Fortune

The CEO of Fortune Industries had some money trouble back when it traded under the ticker FFI.  He had put up his shares in FFI against a personal loan.  Unfortunately, he couldn’t pay that loan and it looked like the bank was going to foreclose on the shares.  The company didn’t want to be majority owned by some random bank, so they sprang into action.  Management formed another company CEP, and used this company to do a buyout of Fortune Industries.

Long story short, somehow, the number of shares outstanding went from about 12 million to 55 million, existing shareholders were substantially diluted. As far as I can tell all the company got in exchange was cancellation of the preferred stock, which in my view, was not worth 80% of the company.  Management got majority ownership of the company for a song, I can only imagine it was this one:

I sincerely hope they had to sing it before getting the company handed to them. Fortunately (I see what I did there*), the company would borrow a bunch of money and buy out small shareholders for $0.61 per share.

The trick to this was that only shareholders who had bought before a certain date would get bought out.  When this was announced the stock price of Fortune Industries collapsed.  Arbitrageurs considered this an opportunity, they could buy shares for Fortune for about $0.15 figuring that the company would have to buy them out even if they didn’t make the date in order to get the number of shareholders below 300 (the maximum number of shareholders a company can have before it can no longer be considered “private”).

This didn’t actually happen.  Fortune  and a bunch of shareholders who thought they were going to get a free double or triple were instead stuck with shares that simply could not be traded.  This continued for months as the untradable shares sat in the brokerage accounts of people sure they were just going to make a quick buck.  In the meantime fortunes operating results, under the heavy debt load, stayed stable.  The company continued to grow.

Roughly a couple years ago the company was able to get listed under the symbol FDVF.  All at once the arbitrageurs attempted to sell. This pushed the price down far below where it was before it went private, despite the fact that operating results had been improving.

Operating Results

Over the years since going private Fortune Industries has seen mostly growth.  The company is highly leveraged, so increasing revenue has helped earnings substantially (going from operating profit of 2.5 million to 4.3 million over the last three years, adjusted for non-cash compensation from CEP, and a goodwill writedown in the initial year).  Earnings have been used to pay down debt, which currently has an interest rates ranging from 5.75% to 10%.  Paying down this debt essentially gets the company an immediate ROI equal to the interest rate.  This is extremely good when the company also has organic revenue growth on top of that.

The Hair

This investment has some issues with it.  For one part, small shareholders are certainly just along for the ride.  Management owns over 90% of the company.  It’s probably more efficient for them to take profits in the form of greater pay rather than dividends (management compensation is generally tax deductible at the company level, while dividends are not).  This merits keeping a very careful eye on management compensation.  Unfortunately, it isn’t at all clear to me how one could keep an eye on management compensation.  The figures aren’t public.  It does appear that there is some sort of earn-out for management from the controlling company CEP, and management will earn about $2 million in restricted stock over the next 5 years, not from the owners of Fortune Industries, but rather from the owners of CEP (this should probably be read as, the previous CEO Marc Fortune).

The real hair is that, in my view, this management team already stole the company.  Maybe they’ll do it again.  I can’t think of any reason for them not to.  The money maximizing route for management at this point is to sit on their majority ownership of the company and vote themselves salary increases.  There aren’t any members of the board which aren’t also members of CEP.  The only member of CEP which doesn’t have an incentive to simply vote for salary increases is Marc Fortune.


Flatly, the company is inexpensive.  It last traded at $0.29 per share, and over the last 12 months it’s earned $1.96 million.  The number of shares outstanding is about 55 million.  This works out to earnings of $0.035 per share.  That leaves us with a price to earnings of about 8.  This would not be so impressive, unless we looked at the fact that the q4 from the previous year I’ve excluded as it includes a non-cash compensation charge that appears to be non-dilutive.  I estimate that the actually P/E is closer to 6.  In my view that makes up for a great deal of problems.  I’m not currently long Fortune Industries, but if the price to earnings drops near 4 or 5, I would definitely pick some up.  I think that over the course of the next few years, barring any recessions, earnings will probably grow at 8-12%.  I estimate that this is roughly the return a holder of Fortune Industries would see over the next few years.  Barring, of course, management just stealing the company again.

You might be inclined to think that I would advise against buying and holding this company.  After all, a company can double any number of times you like, if management leaves with everything at the end, who cares?  That’s a fair point, but I think that while it is possible that something like that does happen, I think it’s relatively more likely that the company just grows and pays down debt.  There is no incentive for the company to pay a dividend, but if you have a long-term time horizon I think that eventually something good will happen.  I don’t know what (maybe a buyout), and I don’t know when (5 years), but buying companies at a price to earnings of 6ish will probably be good if you have a basket, and you’re willing to sit.

Disclaimer: I have no positions in any stocks mentioned, and I have no plans to buy or sell any of the mentioned stocks within then next 72 hours. I wrote this article myself, and it expresses my own opinions. This is not a recommendation to buy or sell any stock. I am not receiving compensation for it (other than from the owner of the blog District Media Corp). I have no business relationship with any company whose stock is mentioned in this article.  Always do your own research before making any trade, buying or selling any stock mentioned.


*It was a pun.

Jul 152016

My Worst Investment – It Gets Worse

By |July 15th, 2016|Blog|Comments Off on My Worst Investment – It Gets Worse

A few months ago I wrote this article: My worst investment-ever. The short version is that I invested in a company (Premier Exhibitions: PRXI) which owned the titanic artifacts, figuring that the artifacts were worth much more than the entire company.  I could go on, but it’s really better that you just read the article!

I Was Right

So it turns out, the warning signs that I had feared turned out to be really accurate.  On June 14th Premiere Exhibitions declared bankruptcy (so the stock symbol is now PRXIQ).  Glad I got out when I did, right?  In between when I sold them and the present they had done a 10:1 reverse share split.  So while, I had sold between $0.50 and $0.22, those numbers would be equivalent to $5, and $2.20.

When the declared bankruptcy the stock was at $0.20, 90% lower than what I had last sold it at.  At this point, I had felt pretty good about my decision to sell.  After all I had avoided turning a 90% loss into a 99% loss.  How great is that?

What Happened Next

I submit the price chart of Premier Exhibitions without comment:

Yes, it's up 2000%.

Yes, it’s up 2000%.

So…yeah.  At this point it’s hit $3.86 after hitting an intraday peak north of $4.  Why is this happening after Premier declared bankruptcy? Aren’t bankrupt companies supposed to be worthless?


In a bankruptcy everyone gets represented in the order of their claim on the company.  The important thing here is that people the company owes money, like suppliers or creditors, get paid before any preferred stock, and the preferred stock gets its liquidation value before the common stock gets anything.  Basically in a bankruptcy the company is liquidated in an orderly fashion and whatever is left goes to the common shareholders.

So What’s Going On?

The important issue here is still that Premier Exhibitions owns the Titanic artifacts and salvage rights.  A few years ago they had an agreement with a museum to sell the Titanic artifacts for $189 million (about $24 per share).  If premier is able to sell the Titanic artifacts for this much they will be able to pay creditors quite easily, and after all debtors are paid the common stock will receive a payment of $156 million or about $20 per share.  This seems like a good deal when PRXIQ is trading for $3.86 per share.

It seems really unlikely to me that Premier exhibitions will be able to sell the titanic artifacts for that much.  What seems reasonable?  Perhaps $50 million? This would leave about $18 million for shareholders or about $2.26 per share.  I don’t have any particular reason to believe the $50 million.  Frankly valuing these artifacts can kind of feel like throwing darts at a board.  Basically your breakeven today is a sale of the titanic assets for $62 million, assuming the rest of the company is worthless (and man do I ever assume that the rest of this company is worthless).

My (Further) Mistakes

So what happened to me here?  Well, it appears that I shouldn’t have sold the stock in Premier that I had.  While I was right that Premier was likely to go bankrupt I hadn’t considered that the stock could still be valuable even if they were bankrupt.  Nothing I bought with the proceeds from my Premier stock managed to double over the period, and I would have been better off had I not sold it.  Increasingly, I’m coming to the conclusion that I want to own assets.  Why am I trying to sell them? It’s easy to get lured into too much activity if you’re willing to sell the stocks you own, and while I may have just gotten unlucky with the Premier sale, sales in general just seem to be a bad idea.

Putting 10% of my portfolio into Premier was a mistake, my worst mistake.  It appears that the opposite of a bad decision at one price can be another bad decision if done at a different price.  If I’d have stayed invested in Premier I’d still probably be down 80% or so, but I’d be better off than I am today.

Will I get back into Premier?  Well, it depends on the price offered, and it depends if I can confirm that the Titanic artifacts will be sold, and it depends on whether or not I can figure out what price they are likely to be sold at.  For now the answer is no.

Disclaimer: I have no positions in any stocks mentioned, and I have no plans to buy or sell any of the mentioned stocks within then next 72 hours. I wrote this article myself, and it expresses my own opinions. This is not a recommendation to buy or sell any stock. I am not receiving compensation for it (other than from the owner of the blog District Media Corp). I have no business relationship with any company whose stock is mentioned in this article.  Always do your own research before making any trade, buying or selling any stock mentioned.

Jul 112016

Advant-e Corporation (OTCBB: ADVC)

By |July 11th, 2016|Blog|Comments Off on Advant-e Corporation (OTCBB: ADVC)

bar code

Welcome to the wild world of Electronic Data Interchange!

Advant-e corporation is a tiny company.  There was a time when it was a tiny public company but it is now private and non-reporting.  The main attraction for Advant-e tech is that it makes a lot of money compared to it’s market cap. In 2015 it earned $2.6 million, or 45 cents per share.  The market cap of the company was $23.5 million and individual shares last traded for $4.  The earnings yield of the company is currently 11%.  It generally pays out an annual dividend of 20 or 30 cents per share.  The dividend typically gets paid sometime in spring or summer and this past year it was $0.20, or about 5% on the last trade.

So What Does Advant-e Do?

Advant-e corporation provides an Electronic Data Interchange (EDI) for grocery stores, auto dealerships, and more recently, healthcare providers.  If that doesn’t mean anything to you, I’m unsurprised.  It didn’t mean anything to me either.  The definition from wikipedia is unhelpful as well,

Electronic Data Interchange (EDI) is an electronic communication method that provides standards for exchanging data via any electronic means. By adhering to the same standard, two different companies or organizations, even in two different countries, can electronically exchange documents (such as purchase orders, invoices, shipping notices, and many others)

So what?  Well, this allows grocery stores and grocery store suppliers to do business with each other using a common format.  This doesn’t sound super important but grocery stores are typically only interested in working with suppliers which can support the EDI that they use.  The model here, then, is for Advant-e to give grocery stores access for free.  They then act as a toll booth for suppliers to get access to the grocery stores.

There isn’t really any point for a supplier to use an EDI that doesn’t give them access to the most stores, so the fact that Advant-e has access to a lot of small grocery stores makes it harder for a startup EDI supplier to compete.

This generally only matters for small grocery stores and suppliers as larger chains have their own systems.


So, how has this model been working out?


Click to enlarge

Pretty well, up and to the right is what you want to see with revenue and income. Here’s something more concrete (all dollar values in thousands):

Year Revenue gross profit net income
2007 7160 4660 1020
2008 8870 5390 1060
2009 8650 5090 1200
2010 9300 5640 1590
2011 9588 5800 1710
2012 10106 6145 2000
2013 10705 6468 2393
2014 11720 7385 1510
2015 11895 7081 2620

While we do see a little dip in gross profit in 2015, and revenue has clearly slowed, I chalk that up to the shuttering of Merkur in late 2014 early 2015.  Merkur was a division of Advant-e that also did EDI but was software-based rather than internet-based, it helped companies by sending faxes of their paper documents. .  The division never performed all that well and was written off in 2014 (you can see a dip in net income there.)  The company was then reorganized integrating Merkur’s assets with the rest of the company. My best guess is that there was some loss of Merkur revenue which hid more growth in the company, as the internet-based branch (called Edict systems) did $10.3 million of revenue, in 2014.  Even a small drop in the revenue from the Merkur end after the reorganization, could have hidden a significant amount of growth.


Oh man, where do I even start?  There’s so much hair on this, it could replace Trump’s piece.

  • It’s only recently not a penny stock due to a reverse split (more on that later).
  • It’s an internet company, who even knows if it’ll be around in 5-10 years.
  • It’s not a reporting public company so you don’t get the same amount of information, and they simply do not have to disclose as much.  For example, how much does the CEO make?  No idea.  This is compounded by the fact that the CEO owns more than half the shares.  Really, a lot of money could go out the side door if the CEO just started giving himself raises.
  • The stock is extremely illiquid.  It has traded between $4 and $5.50 in the past week, some days it doesn’t trade at all.
  • If you were a small shareholder you probably had some trouble with this recently for reasons I’ll get into in a future post (a recent reverse split may have cashed you out at market price, the horror).  Suffice to say small shareholders in the past haven’t been treated in a way I would consider fair.
  • Even past all that, there’s just a basic business risk of working with small grocery stores.  I don’t have any reason to believe small grocery stores are even going to be around in 10-20 years.
  • The company rents its location from a company wholly owned by the CEO for about $400,000 per year.  I’m not sure if this is a fair rent or not, but this sort of thing just generally smells bad.


Even given all the hair, I can’t help myself but love this stock.  It’s got basically everything I want.  Priced low, management pays the profits out in dividends, it grows.  Management owns a bunch of the company and, hopefully, their interests are therefore aligned with mine.  It’s illiquid, it’s tiny.  My fervent desire is to simply sit on these shares forever.

Disclaimer: I am long ADVC, I have no plans to buy or sell any of the stock within then next 72 hours. I wrote this article myself, and it expresses my own opinions. This is not a recommendation to buy or sell any stock. I am not receiving compensation for it (other than from the owner of the blog District Media Corp). I have no business relationship with any company whose stock is mentioned in this article.  Always do your own research before making any trade, buying or selling any stock mentioned.