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ATRION Corp. Message Board

  • algo41 algo41 Oct 10, 2006 8:52 AM Flag

    lack of liquidity

    It seems to me that management is not that interested in boosting investor interest over the short term. If there were more interest, there would be more liquidity. I say this because of the lack of conference calls, let alone presentations at analyst conferences.

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    • I agree wholeheartedly with your thinking still. It appears that a tremendous amount of investors, especially small ones, lack the awareness that they have a really distinct advantage over institutions in their being able to buy and sell shares in regard to these good illiquid issues. Then, for some reason, they feel it is better to give up that advantage, and want the company to act like every other company, and have a larger number of shares. For some inexplicable reason, investors who have had some initial success with investing in a good illiquid, all of a sudden get bored or impatient and get this mind-set that bigger is better. It isn't. I've been investing in stocks for over 30 years. When I was younger, I bought a few shares in this really illiquid bank (800,000 shares in total) because I happened to see a great earnings report. There was a four dollar spread between the bid and the asked prices. Sound familiar? This stock at times did not trade for weeks on end. Eventually, it would, especially when those great earnings continued to get noticed by others in ensuing quarters. I would add a few shares every once in awhile but, I really didn't understand what I was dealing with - an illiquid stock which had great earnings, few shares, a very high book value. If I did, I would have loaded the boat like I did with ATRI and some others. My small investment (100 shares) in that bank easily grew 15 fold. But, it did so over time. All of my friends who used to ask me about that small bank and how the stock was doing, would come to own the shares themselves, make a lot of money, and end up loving it. After the fact, I recognized what had happened, and what I had been dealing with. I vowed that in the future, I would specifically look for situations like that small bank. It took a few years but, I found one, and a few years later, I found another, and so on. They don't grow on trees. You need to know what you are dealing with and what to do. Most people don't. They've been brain-washed to think liquid is better. On some occasions it is, just not in dealing with these types of set-ups. And, from having owned these types of companies before, after the stock split and there some upward movement as the result of stock being more liquid, it was never the same. The stock splits proved to be the beginning of the end. The value that had been built up over time, was released with the stock splits. You got a high stock price initially but, it was never the same. The dilution, ie: extra shares, proved difficult to overcome. The earnings were never the same because the number of shares had increased (stock split) more significantly than the earnings were growing. The book value was slashed dramatically. Yep, all the things that kept the stock growing albeit slowly, were no longer in place, and it became just like so many other stocks that just meander about and don't really make good investments anymore. Then, you run into people who have absolutely no clue how splits impact this type of company, and maintain that there is no dilution, and which would you rather have two nickels or a dime? As I alluded to before, learn what you're dealing with, so you can recognize the pattern and the process in the future. These types of situations don't come around everyday. Patience is a virtue, and investments in these types of companies prove incredibly rewarding. Be careful what you wish for.

    • For those who think they need instant liquidity in their investments consider this Warren Buffett quote:

      "I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years."

      Buffett did not need instant liquidity nor should any intelligent investor.

    • Since I want very much to BUY more of this great company, I am very happy to see the illiquidity and the random price drops. You can make quite a bit on these opportunities. I once traded GLYT 13 times in row buying on the random dips and then selling when prices went back to rational levels when larger buyers came in. (that was back when GLYT was an illiquid stock).

      I am not in a bad part of New Orleans, I am a millionaire a LONG term holder and I have no need for daily liquidity. Thin is beautiful in my book.

      I seek out illiquidity on purpose as a major strategy for finding bargains. True in the very long term I expect that these bargains will become recognized, analysts and institutions will come in etc. But that is often when I reduce my position or get out entirely.

    • Okay kids, stock is down three bucks today on 600 shares volume.
      Liquidity is not a problem.
      Find me another example of this kind of BS in a NASD stock? It's time for a split.
      Repeat after me, "Liquidity is not a problem." Now, drink your "Cool-Aide".

      Don't go busting my balls on this one, I've owned this since '01 at 17 Bucks, but jeez, ain't it time for a split?
      Work with me here, I think this is a 100 buck stock--but let's give it some help.
      Four for one (five for one works for me). C'mon Emil, work with me here! C'mon Jeff, us young guys gotta work together.

    • Splits are irrelevant?

      To answer your question; a dime. Reason; its easier on the material in your pant pocket.

      So, answer this question: You are driving in a seedy part, of New Orleans, nearly out of gas, no credit cards, would you prefer a 10 share certificate of ATRI, a cashiers check for $800.00 or sixteen fifty dollar bills?

    • I respectfully disagree with a couple of old pals. Certainly, asset value is immediately unchanged by a stock split. That is inarguable. However, that doesn't mean that improved liquidity and visibility cannot improve stock price, which is by no means the same thing.

      Theoretically, most companies trade at some discount to asset or takeover value. [of course, there are many that trade above] Obviously, many investors ascribe some value to liquidity and information flow. So a company with very little of that will trade at a larger discount. A shareholder in an illiquid stock should require a higher forecast return---hence the larger discount. I have been willing to take that risk, but many won't.

      I think the Berkshire Hathway analogy is a red herring. If Atrion had a 110 billion dollar market cap, it would not be illiquid either, regardless of the price.

      So I continue to advocate for a split.

    • We like it thin and illiquid - market inefficiency is what you need to create extra-normal profits. If you want liquidity try MSFT.

      • 1 Reply to stillwater9999
      • I agree still. ATRI is a true shadow stock. We, who own the shares, know that this is a great company and great investment. There is no need to fix something that really isn't broken. As you infer, if someone wants a liquid stock, let them go elsewhere for it. There is no need to change ATRI into something that it is not, which is (if you really think about it) like just every other stock out there that felt the need to split their stock because it was the "so-called thing to do." I like the anonimity of ATRI. I like the fact it hasn't split it's stock, and therefore, hasn't diluted it's shares and it's numbers. It sends a really simple message. If one likes the company, buy the shares. If one doesn't, don't. It is all pure and simple. There is no magic, and no mystery, just an old-fashioned good company, and that is what I happen to think that is what it is all about.

    • I'm curious what anyone else has seen. Earlier this month Schwab reduce the maginablity of ATRI to 40% and today removed it from margin.They didn't say, but I suspect their concern is the thin trading/availablity of the stock.
      Would a stock split help?

 
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