Chris Mayer: People Not Personnel, The Case for Owner-Operators

Chris Mayer is the editor of Capital & Crisis. Chris’ topic today is People Not Personnel, The Case for Owner-Operators from the 9th Annual Value Investing Congress.

Chris Mayer: People Not Personnel, The Case for Owner-Operators

Chris Mayer a value investor, is the Managing Editor of Agora Financial, which provides independent financial advice with over 1 million readers across its publications. As mentioned above, Chris is also the editor and founder of Capital & Crisis, a newsletter focused on global value investing. The letter which was started in 2004, now claims over 20,000 paid subscribers. In 2006, Mayer started  a new publication called Mayer’s Special Situations. The publication focuses on small cap value stocks as well as special situations.

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Chris Mayer live coverage

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The Case for Owner-Operators  “…Entrepreneurial instinct equates with sizable equity ownership…”

Wealth Index (from Horizon Kinetics) –looks at companies with insiders who own large ownership and the index Horizon created has outperformed the S&P by 2.7% per year for 20 years   (Horizon created a fund based on the index call the virtus wealth masters fund run by Matt Houk)

Examples Chris Mayer owns, Howard Hughes Corp, Covanta, Kennedy Wilson, Retail Opportunity Inv. Corp

(9:00am EST)    2 NEW ideas

He loves little banks and has made good money on them, as a previous banker at one time in his life, he feels he has an edge

He likes Thrift conversions, when a mutual company goes public.  They have loads of cash and  a defined path to use it.

Charter Financial (NYSE:CHFN)

went through second step conversion on 4/9/13, raised $143M with market cap of $233M

P/TBV= 85%     NPLs?Assets= 1.09%

NFBK is another potential idea, along with BNCL….he prefers to build a basket of these things, set them aside in your low risk portfolio for 2-3 years.  You must be patient, these are not home runs over night, but eventually the banks buy back stock and pay special dividends.

Next Idea:

Pulse Seismic (TSX:PSD) —Canadian owner of seismic maps

One of the best businesses he has ever seen.  leveraged to Natural gas

Seismic Library is a great asset.  They can lease them over and over again, no maintenance costs, hard to replicate.  Cost of library is over $2B

Pulse is a cash machine, but does not screen well due to pass through costs which understate earnings, but cash flow is solid

$0.47 per share of FCF on a C$4.00 stock

Did a large acquisition in 2010

Catalysts: Potential to ship out of British Columbia, Interesting wrinkle–the data is not transferable

Pulse had their best year ever and nat gas prices were very low last year

$10.5M in buybacks in 2012, paid dividend and reduced debt

Trding for less than 10x FCF…..downside is the unpredictability of data sales (so it can be lumpy….)

 

 

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