As we approach summer, things are getting a bit interesting. On Thursday, precious metals took a hit as gold fell 4.6%, silver dropped 6.8%, and the Sprott Physical Silver Trust (PSLV) fell 4.6%. The drop in metals prices was attributed to the Fed, and its overall "aggressive" tone on monetary policy. It may be coming to the realization that the I-word (inflation) is for real, and there's nothing the Fed hates more than the specter of inflation, in my humble opinion. Still, rate hikes are not projected until 2023, with many Fed officials projecting two 25 basis point increases in 2023. Frankly, I'll be shocked if they wait that long.
Elsewhere, cinema/real estate name Reading International (RDI) (RDIB) continued to demonstrate its unique ability to fly under the radar earlier this week. The company filed a Form 8K, which announced the sale by the company's Australian/New Zealand subsidiary of the Redyard Shopping Centre for US$69.7 million. This move will generate a pretax profit of $38.9 million. The sale is material, especially given its size relative to the company's market cap of $174 million. Yet, there was little reporting on the transaction, and RDI shares are up less than 7% this week. The divergence in price between the company's voting shares (RDIB) which closed at $23.05 yesterday, and non-voting shares (RDI) which closed $6.72, continues to fascinate. Dallas Mavericks owner Mark Cuban still owns 12.5% of RDIB.
Finally, yet another example of the value investor's dilemma, courtesy of a name many have likely never heard of, Keweenaw Land Association (KEWL) . The Michigan-based company currently has a market cap of $107 million, minimal debt, and an enterprise value (EV) of around $110 million. The company owns more than 170,000 acres of timberland, and 399,728 acres of mineral rights, primarily in Michigan's upper peninsula. Among its holdings are four miles of frontage on Lake Superior, and 2500 acres of commercial, recreational and city properties.
Just looking at the timberlands, 170,000 acres is the equivalent of about 266 square miles, or an area 16 miles x 16 miles. Using my homegrown EV/acres calculation yields, (for the timberlands only) yields just $650 per acre. That seems crazy cheap to me, but KEWL is a small, underfollowed name that trades "by appointment". Therein lies the value investor's dilemma Assets that on paper are likely worth well in excess of how markets are valuing the entire company. However, there is no guarantee that this value will ever be unlocked. I've been flirting with KEWL for years, but have never been able to pull the trigger...yet.
Have a nice weekend!
