On Friday, I did something that I have not done since the pandemic started, nibbling on a couple of small names that I've had on and off my radar for years. Today I will take a brief walk through one of them.
The first, luxury wine maker Crimson Wine Group (CWGL) is a member of my Triple-Net Active Versus Passive experiment. Shares have not done well since the company's 2013 spin-off from Leucadia National (now Jeffries (JEF) ), down about 35% in that seven-year period. Revenue has grown very slowly for CWGL, which counts among it's brands Pine Ridge, Seghesio Family Vineyards, Archery Summit, Double Canyon, and Seven Hills, and the name has been viewed as a "value trap" by some of the few who know of it. It currently garners no analyst coverage.
The stocks recent swoon - shares were in the $8 range in late January - has pushed it into "double-net" land (stocks trading below 1x and 2x net current asset value or NCAV) and currently trades at 1.78x NCAV. It also trades at just .67x tangible book value.
The company ended 2019 with $23 million in cash and $22 million in debt, practically a wash. However, it does own some interesting and potentially valuable assets - namely 852 plantable vineyard acres, along with associated equipment that is listed on the books at $119 million.
Despite its lackluster performance, I believe that CWGL might ultimately make an interesting acquisition candidate. Over the years, I've found that "double-nets" have been a very fertile hunting ground for such activity. With a current enterprise value of just $129 million, and some attractive assets, the company might do better under the umbrella of a bigger fish with deeper pockets.
One thing to consider here is that the wine industry has had some struggles in recent years. Not only is it highly competitive, but demographics have been changing, and the younger generation seemingly prefers beer at this point. Whether those tastes will change as that generation ages remains to be seen.
Be that as it may, I saw CWGL in the mid-$5 range as interesting entry point.
