Back in April, which, by the way, seems like a lifetime ago, I took positions in two small names, Crimson Wind Group (CWGL) , and Reading International (RDI) . Both, in my view, were small value plays, CWGL in the wine industry, and RDI primarily a movie theater name. Both also had real estate angles to varying degrees.
Nearly 10 months later, all within a pandemic, the results to date might be a bit surprising and counterintuitive. You might think that the wine company might have flourished, and the cinema company tanked. After all, alcoholic beverage consumption has risen during the pandemic, while theaters have all but been shut down. That, however, has not been the case.
RDI is up more 43%. It was not a straight path though. Between late April and early November, shares fell precipitously, from the $4 range, all the way down to $2.28. Since bottoming, shares are up more than 150%. This is a name that garners little analyst coverage, but is legendary in the small, deep-value community. It has no doubt benefitted from theaters reopening, and prospects that the Covid vaccine will put an end to the pandemic.
However, the uptick may also be driven by an investor revaluation of the company-owned real estate, namely the 44 Union Square property in New York. While commercial property has been under pressure, especially in large cities in high tax states such as New York, it just might be that the market discounted the value of that property too much. That's speculation on my part. RDI is a complicated story with many facets, and a lot of history.
Meanwhile, CWGL has fallen about 3% since late April. Unlike many companies, it has not recovered back to pre-pandemic levels. The stock traded near $8 last January, fell to around $5 in late March, and has traded sideways ever since. Third quarter revenue rose a solid 8.2%, but despite an improving revenue picture, the company was unable to post a profit, and lost 4 cents/share. It has not posted a quarterly profit since the fourth quarter of 2018. Quarterly losses have been small mind you, but CWGL can't seem to shake the notion that it can't consistently turn a profit.
There is a value angle here, CWGL trades at just 1.66x net current asset value (NCAV), and is a member of my 2021 Double Net Value Portfolio. It ended the latest quarter with $34 million, or about $1.50 per share in cash and investments, and $25 million in debt. The potentially valuable real estate asset here is 862 owned vineyard acres. Value here may have been compromised by the California wildfires, however CWGL's assets have not been damaged. CWGL currently trades at just .65x tangible book value. The company has unfortunately been unable to shake its reputation as a "value trap" in some investor's eyes. It has been a disappointment since its 2013 spin-off from Leucadia National. However, I maintain that it might make for an interesting acquisition for a bigger fish.