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Otelco, Inc. Message Board

  • djay.r714 djay.r714 Mar 29, 2013 11:01 AM Flag

    Other Opportunities for Greenblatt Followers

    Anyone care to share other candidates for "the Greenblatt Approach" investing? I will offer the following two candidates, PBI and SVU.

    PBI has been on a multi-year down trend and seems to have recently tuned the corner. The company has substantial cash, pays a decent dividend, is transitioning away from a reliance on traditional mail, and is upgrading management.

    SVU has recently received a cash infusion from Cerberus and is now largely controlled by Cerberus. The company is a turn around candidate and the stock price (up around 25% from Cerberus' buyin) should continue to benefit from Cerberus' involvement.

    Full disclosure, I am long both PBI and SVU.

    As always, do your own due diligence.

    Good hunting.

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    • Walk,

      Thank you for your reply and feedback. I appreciate your well-reasoned and infomative comments.

      I agree that OTT Management is most likely conservative in their estimates of future results.

      I also believe that Management is shooting for an initial post-BK stock price of $3 a share so that the market value of OTT will exceed the $50 million minimum necessary to qualify for micro-cap fund investment. IMO if Management can hit or exceed their book value targets (which seems very likely given the high probablilty of conservative estimating) and attract fund investment, the stock could be at $6 to $8 within 2 or 3 years, perhaps sooner.

      While my view of OTT is very positive, I have invested as much in OTT as I care to invest in any one asset. Hence, my search for other alternatives. In addition to beaten down companies, I am also looking at spinoffs, which seem to have interesting dynamics all their own.

      Sentiment: Strong Buy

      • 1 Reply to djay.r714
      • Dj,

        I appreciate your input as well.

        While I'm a believer in a concentrated port, I know where you're coming from. You have to be able to sleep at night.I have recently had to lighten up alot on DF because appreciation has caused it to be a very large percentage of my pie. If you think investor sentiment is negative with OTT, you should have been around DF back in November of 2010. This board qualifies as happy in comparison.

        I bring up DF because you're looking at spins. DF IPO'd WWAV last fall, but it was only less than 20% of the company. Very soon DF will do a tax-free spin to shareholdersof all but 20% of WWAV that they will continue to keep. It will be interesting to see what the DF shareholders do with their fresh new WWAV stock. WWAV has a dominant market share in substitute milk (Silk) organic milk (Horizon Organic) and creamers (International Delight) in the US & Europe. In the fast-growing substitute milk category WWAV enjoys market share dominance to the tune of 70% in some spaces. It is one of the most innovative food companies I've ever seen. It will also be a target of one of the big boys once it is fully separated from DF. It would be cheaper for one of them to just buy it than try to duplicate the products in WWAV's space. Plus, the brand names are very strong. Just something to do DD on.

        FWIW, I like OTT here as much as I liked DF in late-2010.

    • Djay,
      Congrats on SVU. Not too long ago when it was in the depths of despair (when I like purchasing things) I passed. That's the problem now for me. I hate the current cheery consensus of the general market. Yes, there are situations of despair, but they're harder to find in this happy environment. I have things that are still undervalued IMO but are more than through the 6th inning so I don't feel good recommending them. In fact, its about harvest time for most of my port.
      Because I prefer the dark side over the happy crowd when initiating a position, little 'ol OTT is still my favorite at the current time. I know the investor composition of this issue has changed radically since mid-November when I took the first swing. I knew then then stock part of the security was toast. I knew management reacted incredibly quickly to the events thrown at it last year. I didn't know how the banks would treat OTT with the debt due in October, but I had a pretty good idea because they don't like taking haircuts just like the subdebt unitholders don't. They did what I thought they would do, extract a pound of flesh and have a shot at upside from a Chapter 7 scenario of getting clipped by about 50%.
      I know you & I like OTT on strictly a valuation basis. But as I said, there are other things going on. Its in Chapter 11. Its capitalization is small. Nobody on Wall Street follows it, and has no incentive financially to do so. The company is in a mature business, that some say will continue to erode. The investor base has gone within a year from people who care not about unit appreciation as long as the dividend/interest payment arrives to people like me who don't care about things like that.
      I liked your valuation stab the other day. I will add one thing to that. Management in past cases like this when equity is granted have almost always erred on the conservative side when estimating multiple years in advance. Evercore was doing a valuation based on OTT's numbers. Too low, IMO.

 

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