Does Rogers Presence on the Board Legitimize the Business Model?

Zacks Small Cap Research

By Ken Nagy, CFA

FAB Universal (NYSE MKT:FU), the worldwide distributor of digital entertainment, announced that the international financier and Quantum Fund co-founder, Jim Rogers, was named to the board of directors of FAB Universal.

On June 19, 2013 and June 28, 2013 Mr. Rogers filed SEC form 4 papers to disclose he had purchased an additional two lots of 10,000 shares priced at $3.50 and $3.51. This brings his current total holdings in the firm to 29,060 shares. In addition to the holding he bought he was awarded 24,000 shares for serving as a director as well as an option to purchase 250,000 shares at $3.52. These carry one year lock up periods.

Mr. Rogers made from a special visit to FAB’s Beijing offices where he inspected FAB’s wholesale, retail, kiosk, talent management and live performance businesses. The partnership was a natural given that Rogers has stressed on many occasions his long-term belief in the digital media and entertainment industry in China.

Background

The famous investor, financial professor, author and “father of Austria Stock Market”, has been praised by those including the legendary investor Warren Buffett. Mr. Rogers graduated with a bachelor's degree in History from Yale University in 1964. He then acquired a second BA degree in Philosophy, Politics and Economics from Balliol College, Oxford University in 1966. In 1998, Rogers founded the Rogers International Commodity Index. In February 2011, Rogers announced that he has started a new index fund that focuses on “the top companies in agriculture, mining, metals and energy sectors as well as those in the alternative energy space including solar, wind and hydro.” The index is called The Rogers Global Resources Equity Index and according to Rogers, only the best and most liquid companies go into the index.

He was the Co-founder of the Quantum Fund with George Soros, which famously returned 4,200% to investors in the first 10 years. ( Versus the S&P’s 47% gain over the same period.)

Takeaway

Clearly Rogers has an impressive track record, but what is the takeaway? What does his pickup of shares and placement of the board mean to investors?  The Answer is simple.  He sees trends before others do. His investments all have that in common. He has been ahead of the game whether it is selling banks in 2006 or calling the commodities market correctly several times this decade.   It legitimizes the business model just as we wrote in our initial report.

Recall the point we made in our initiation of FAB on June 4, 2013.

The firm has four things that separate it from the pack in our opinion.
        Ø  Explosive Top-Line growth potential
        Ø  Exclusivity in Kiosk and Podcast
        Ø  Margin Growth
        Ø  Markets  where they are in the sweet spot of the statistics, such as
o   Internet growth in Asia
o   Download Content Worldwide
o   Disposable income growth in China

A copy of the full research report can be downloaded here >>  FAB Universal Report

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