Don’t Sell (Not These, Anyway) September 13, 2007March 8, 2017 But first . . . “HELP US WITH EQUITY AND WE CAN HELP YOU WITH GROWTH.” This interview with Barney Frank, chair of the House Financial Services Committee, is almost like having lunch with him yourself. And now . . . I am pretty heavily in cash myself – perhaps the best reason for you to think stocks are headed for good times. But, at least with money you can truly afford to lose . . . DON’T SELL YOUR FMD The dividend was raised yesterday – yet again. A long time ago, I wrote that the only earnings statement you can really trust ‘is a dividend check that doesn’t bounce.’ This was more glib than factual – there are certainly companies that pay dividends right up to some horrible revelation. But if I were among those who’ve sold more than 9 million shares of FMD short, it would make me nervous to see the company growing at 50% a year with a P/E of 7, highlighted as the Motley Fool’s ‘hidden gem‘ of the month. (As in: who’s the fool now?) None of which is to say FMD is a sure thing; just, I think, a good bet. DON’T SELL YOUR HAPNW Speaking of which – fingers crossed, touch wood, hope to die, I’ll be good! I’ll be good! – there was some good news on HAPN yesterday as well. You will recall that we win or lose this bet in just two weeks, September 26. If the acquisition of Infusion is scuttled, so, for all practical purposes, are our warrants. But if it goes through, our warrants will become exercisable, giving us something like three-and-a-half years during which we can buy the underlying stock (currently $5.70) at $5. Well, yesterday it was revealed that some of the company’s directors had just purchased hundreds of thousand warrants – trading in the open market yesterday at 25 cents – for 70 cents each. They did this apparently because the company needed a final cash infusion to carry it through to completion of the much-delayed acquisition, and these directors supplied it, buying the warrants direct from the company treasury. Seventy cents was the minimum price allowed under the terms of the company prospectus. This doesn’t guarantee anything; but if the directors expected the deal to tank, they might not have done this. The bigger news was that the long-agreed to $140 million acquisition price was lowered to $100 million, presumably in recognition of changing market conditions and perhaps – I’m just guessing here – pressure from large shareholders threatening not to approve the acquisition otherwise. So this is doubly good news. To me, it suggests an even greater likelihood – albeit no guarantee – that shareholders won’t scuttle the merger. (Hurdle one.) And it means that we own warrants on a better deal. So that, some time in the next few years, the stock could be $6 or $7 or $8 or $9 a share. (Hurdle two.) If so, the right to buy it at $5 will be worth a lot more than the 25 or 35 cents we paid for it. DON’T SELL YOUR GLDD John T. ‘I have a bit of GLDD. It is working out fine. But I have one question. For an old-line company which is in the most stolid, boring of businesses, it sure is volatile. For example, today it is down 0.50. Longer term, the price is hanging around 9.00, but with some very large intra-day moves. It seems like it should only move maybe .10 per day. Is this just noise (if so, any guesses on why so much) or is this related to fundamentals of the company?’ ☞ Yes, Great Lakes is a stodgy old-line firm. But it’s just gone through a major financial event, with the exercise of millions of warrants owned by decidedly new shareholders, all with varying game plans for taking their profits (sooner, later, or much later). Eventually, the volatility may subside. In the meantime – assuming you bought this major mud mover with minor moolah not much missed – I’d pay no mind. (The volatility could be even greater with HAPN and HAPNW if the merger goes through. In that case, zillions of warrants and a decidedly new-line company.) SURE – SELL YOUR GOLD Stephanie Hill: ‘It is my opinion that anyone who suggests buying gold as an investment has never really looked at the historic price of gold. I am old enough (just!) to remember gold at $850 an ounce in early 1980. But I don’t think anyone even expects gold to hit that again anytime soon. (Remember, the only meaningful historic price range in U.S. dollars is from 1971 on, when Nixon ended use of the gold standard.) Just in order to keep up with CPI since 1980, gold would have to trade at $2200+ per ounce today.’ ☞ Which I suppose some might take to mean it’s undervalued here at one third that price. But I’m with you, Stephanie. I’ve never advocated buying gold. I just enjoyed the Krulwich piece (when has Krulwich ever not been enjoyable?) – which wasn’t advocating it, either.