Two Potentially Undervalued Stocks

But first . . .

The Patriotic Millionaires‘ new book, Pay the People! Why Fair Pay Is Great For Business And For America, has been chosen by Malcom Gladwell and the Next Big Idea Book Club for their December must-read list. Nick Kristof is touting it as well.

It begins:

Seventy-one percent of Americans think the economy is rigged against them. We have news for them: they are right. Over decades, politicians of both parties coddled the political donor class, screwed working people, and broke the social contract by passing laws that structured the economy in such a way that the wealth created by millions of working people was driven into the hands of a tiny number of very rich people. In 1973, the top 1% took home 9% of the income in the country. In 2023, the top 1% took home 26.5% of the country’s income. One researcher estimated that since 1981, as much as $50 trillion has moved from the bottom 90% to the top 1%. What happened in the United States is pretty simple. As Americans worked harder and the economy grew, working people stopped getting their fair share and the richest among us made out like bandits. They did it with the help of expensive lobbyists and enabling politicians, and they destabilized the entire country in the process.

And now . . .

ILLIQUID STOCKS

BKUT jumped 29% yesterday morning, from $520 to $673, on volume of — are you ready for this? — 2 shares.

We don’t own any.

But we do own BKUTK, its non-voting twin, suggested in this 2012 post and re-suggested in March . . . for two reasons:

> At 7 times earnings and less than half book value, it seems ridiculously cheap.

> Our non-voting shares — though otherwise identical — generally sell at a nutty discount to the voting shares. Yesterday, they were $475 bid, $510 asked. So you could have paid $510 — or $673 for the exact same thing, minus the right to vote.

If your goal were to gain control of the bank, the voting shares are all you’d care about. But that’s not likely your goal, and the $18.50 annual dividend is the same; and whatever improvements the new controlling shareholders made would accrue to both classes of stock.

UPDATE: In a dramatic late afternoon selloff, BKUT collapsed from $673 to $570 — on volume of 4 more shares. (BKUTK remained steady at $510.)

SPECULATIVE STOCKS

If BKUTK is the quintessential illiquid “value” stock, to be bought only with money you can truly afford to lose (but almost surely won’t), then PRKR is the quintessential speculative stock, to be bought only with money you can truly afford to lose (because you really might).

PRKR believes Qualcomm owes it a vast amount of money plus a vast amount of interest (and, in an ideal world, treble punitive damages, which I believe are 100% deserved but 2% likely to be awarded). As I and others have written, the stock could be worth 5X or 10X its current 94 cents a share.

I’m not sure how much news we can expect between now and the trial. One thing to hope for is the announcement of a trial date. That could boost the stock a little (fully disclosure: I have such an outsized position in this one, I will take advantage of opportunities to prune back from what is now a preposterously large bet to more like a merely really, really large bet).

In the meantime, I found this article esoteric but encouraging. It relates to a petition PRKR filed with the United States Supreme Court, asking that the Federal Patent Appeals Court be required to say more than just one word when denying an appeal. If a plaintiff’s appeal is denied, and the Court has given it due consideration, how about a sentence or two explaining why it was denied? That’s what most federal appeals courts do; why not this one?

As you know, the Supreme Court accepts very few — I think fewer than 1% — of the cases it’s asked to hear. So the odds of their taking this one are low; and even if they did and PRKR won, that win would have no direct effect I can think of on the company’s several active lawsuits (the biggest being against Qualcomm). So this is not a huge deal. But as you’ll note from the article, this petition has now garnered no fewer than eight amicus briefs — most petitions to the Court get none or just one or two — and the publicity among people in the patent world, let alone a favorable ruling from the Supreme Court, it seems to me, help to make clear that PRKR is not a “patent troll,” but rather a serious inventor with serious patents that — thus far — has fallen victim to a legal system that greatly disadvantages the very kind of invention and innovation that helped make the country great.

So — “it can’t hurt.”

Have a great weekend!

If you’re really rich and can, thus, afford Broadway, two shows that I think will leave you smiling: Death Becomes Her and Maybe Happy Ending.