Andrew Kuhn October 1, 2021

Some Thoughts on Calloway’s Nursery, Inc.

I plan to use Focused Compounding as my investing journal. My “writeups” will be less structured than Geoff’s, but could serve as a starting point for members to research a new stock. My posts will literally be similar to emails that I send to Geoff whenever I have thoughts on a business — basically straight from the stream of my consciousness, lol. Feedback/your notes/thoughts are highly encouraged in the comment section below. The first stock that I want to talk about is Calloway’s Nursery, the...

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Geoff Gannon August 22, 2021

Kingstone Companies (KINS): A Homeowner’s Insurance Company Focused on Selling Through Agents in Downstate New York

From time-to-time, I research a company where I think I’ll do a write-up of the stock and then discover it isn’t as interesting a situation as what I first thought. That’s the case here. Kingstone (KINS) seemed fairly cheaply priced on the surface. And seemed like an easy enough business to understand. But, several of the things I found – while not individually all that serious – added up to a pass for me. Instead of writing about the company, the valuation, etc. in a...

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Geoff Gannon June 3, 2021

Jewett-Cameron (JCTCF): A Stock That Grew in Value Even When the Business Didn’t Grow in Size  

Over the last 10 years or so, Jewett-Cameron (JCTCF) has roughly quintupled its stock price while the company’s total revenue has remained basically the same. There are some interesting signs here. But, I haven’t learned enough to say anything definitive about this company. I can summarize what we know from the SEC filings though. Jewett-Cameron is an illiquid microcap. The company files with the SEC. In fact, it also files with SEDAR (because it’s incorporated in Canada and used to trade on the Toronto Stock...

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Geoff Gannon March 21, 2021

Universal Insurance Holdings (UVE): A Cheap and Fast-Growing Florida Hurricane Exposed Insurer I’m Going to Pass On

This is a stock I talked about on a podcast with Andrew. It looked cheap based on the simple ratios you might use to decide if something’s a value stock. And the business of writing homeowner’s (and renter’s) insurance in Florida seemed like something that could be good enough (in some years) and simple enough for me to understand and possibly invest in. However, what I found when looking into Universal is a lot of stuff I don’t really like. Having said that, the stock...

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Geoff Gannon February 14, 2021

Silvercrest Asset Management (SAMG): A 4% Dividend Yield For an Asset Manager Focused on Super Wealthy Families and Institutions

Silvercrest Asset Management (SAMG) is an investment manager. It looks cheap if you expect it – as has been the case in the past – to do a good job of keeping its clients and keeping those clients keeping about as much money with them as before. However, most publicly traded asset managers are cheap stocks, because they have experienced – and investors probably expect them to continue to experience – redemptions. In some ways, Silvercrest looks a bit closer to Truxton (TRUX) – another...

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Geoff Gannon February 11, 2021

Investors Title Company (ITIC): A Strong, Consistently Profitable Regional Title Insurer Trading at a Premium to Book Value

This stock was brought to me by Andrew. He wanted to know more about the title insurance industry. ITIC is a publicly traded (it trades on NASDAQ) regional title insurer. There are four large, national title insurers that account for 80-90% of all title insurance market share in the U.S. However, in some states – the leading title insurer is a homegrown operation. These companies are known as “regional” title insurers. ITIC was started by the Fine family in the 1970s (it became operational midway...

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Geoff Gannon February 7, 2021

Alico (ALCO): A Florida Orange Grower Selling Land, Paying Down Debt, and Focusing on its Core Business

Alico (ALCO) is a landowner in Florida. The company is – or is quickly becoming – basically just an owner of citrus groves that produce oranges for use in Tropicana orange juice. The majority of the land Alico owns is still ranch land. The company has about 100,000 acres in Florida. Of this about 55,000 acres are ranch land and 45,000 acres are orange groves. The book value consists almost entirely of the actual capitalized cost of the orange trees on the land. The land...

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Geoff Gannon November 19, 2020

Marcus (MCS): Per Share Value of the Hotel Assets

I’m revisiting Marcus (MCS) with an attempt to appraise the hotel side of the business. Andrew sent me some articles discussing property tax appraisal of Milwaukee hotels (including those owned by Marcus). I looked at some other property tax records. I looked at Penn State’s hotel value index. Andrew spoke with the CFO of Marcus. And I consulted a few other sources. My best guess is that the pre-COVID fair value of Marcus’s hotel assets was around the $235 million to $400 million range. On...

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Geoff Gannon November 16, 2020

Investing in Trusts: Why Andrew and I Don’t Own Them, Why You Probably Won’t Want to Too – And How to Get Started if You’re Sure This is Really an Area You Want to Explore

Investing in Trusts: Why Andrew and I Don’t Own Them, Why You Probably Won’t Want to Too – And How to Get Started if You’re Sure This is Really an Area You Want to Explore

Someone asked me a question about trusts:

“I was watching one of your past podcasts and you mentioned you would not buy dividend stocks for an income portfolio you would buy trusts. How would I go about or is it possible to research and possibly purchase these? I found that idea fascinating.”

The best trusts are usually illiquid and a bit difficult to find. You have to do a little research on them and what backs them. Some examples of the kinds of trusts I was talking about are:

Beaver Coal (BVERS) – Mainly royalties on met coal, timberland, and rental income (variety of business, etc.) in and around Beckley, WV

Mills Music Trust (MMTRS) – Royalties on old songs like “Little Drummer Boy”

Pinelawn Cemetery (PLWN) – Interest in proceeds from sales of burial plots in one cemetery on Long Island, NY

Things like that.

Many investors avoid these because they complicate your taxes. You’ll need an additional form from each trust you own (they should send it to you, if they don’t – you’ll contact them and request the form). And it may sometimes cause you to request late filing of your taxes.

For this reason, partnerships (like the one Andrew and I run) and professional investors running managed accounts (like the ones Andrew and I manage) will avoid buying these trusts simply because they don’t want to lose clients through annoying the client with additional tax work for the client. As a result, many professional investors who may know of and like these trusts (and even own them personally) won’t buy them for clients. This can keep the price of the trusts reasonable. These stock prices (technically they are trust certificates, not stocks) tend to bounce around in price.

It is best to only buy them when the yield on the trust (making sure you check to see if the distribution recently is similar to what it is normally) less the rate you’d pay on taxes still makes it make sense. For example, say you want an 8% annual return in the trust certificate and you pay 30% in taxes on income from a trust, then you don’t want to buy when Distribution/Price is anything worse than 11.5%.

Often, your total return in the trust is not going to be great compared to buying and holding a stock that is actually retaining its earnings.

However, it is true that for income purposes only – these trusts will often yield more than the dividend yield you can get on other kinds of stocks, the yield you can get on preferred stocks, the interest rates you can collect on bonds, etc.

But, keep in mind five things:

1) Owning these will complicate your taxes

2) Income from trusts is usually less tax efficient – …

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Geoff Gannon November 13, 2020

Marcus (MCS): A Movie Theater and Hotel Stock Trading for Less than the Sum of Its Parts

Marcus (MCS) is not an overlooked stock. Despite having a market cap of around $300 million – the level usually defined as the cut-off between a “micro cap” and a “small cap” stock – well over $10 million worth of this company’s stock trades on some days. The stock is liquid. And most of that liquidity is probably highly speculative activity. This is typical for the industry. You can see similar amounts of high share turnover, high beta, etc. at other publicly traded movie theater...

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