Always on the lookout for "cheap" names, sometimes that takes me to companies and industries that I might not otherwise consider. In late 2017 and part of 2018, that included several small, specialty retailers that were priced for the death of the industry. Many of them, but certainly not all, worked out pretty well, and much quicker than expected.
That brings me to another industry I am not crazy about, but have toyed with in the past, "vacation ownership", more commonly known as timeshares or vacation ownership interests (VOIs). Many years ago, I'd run across Silverleaf Resorts, a net/net at the time that was ultimately taken private in 2011. It was an ugly business, selling timeshares, then making money on the loans used to finance them, and one that seemed to run into trouble often, especially during economic struggles. However, even ugly, distressed businesses can become cheap enough when investors shun them, and there was some money to be made in that name.
In late 2017, Bluegreen Vacations Corp. (BXG) went public, seemingly under the radar (at least under my radar). The company had been public between 1986 and 2013, before Woodbridge Holdings took it private in 2013, and I'd completely forgotten about the name.
Since it's November 2017 IPO at $13, shares have all but done a "round trip", rising to $25 last July, before falling back to the current $13.50 level. The company recently raised its quarterly dividend 13% from 15 cents to 17 cents, which equates to a 5% yield. In November, BXG approved a $35 million share repurchase program, allowing it to buy back up to 3 million shares. We'll see if the company followed through with share repurchases when it releases fourth quarter earnings on February 22. As I've stated ad nauseum, the combination of share buybacks and increasing dividends can be compelling, but a share purchase authorization without follow through is meaningless.
As of the end of the third quarter, the company had 69 resorts, and 216,000 "Vacation Club" owners. It does generate significant amounts of revenue through consumer financing, which makes this business more complicated, and loan defaults can be an issue.
BXG currently trades at about 11x next year's earnings. Complicating matters, or making it more interesting, is the fact that another company, BBX Capital (BBX) , owns 90% of BXG. The question is, if you wanted to own BXG, could you get it cheaper through the purchase of BBX? Admittedly, the seemingly "cheaper" route does not always work out. I was able to get exposure to Cracker Barrel (CBRL) more cheaply through the purchase of Biglari Holdings (BH) , (BH.A) which at one point owned about 20% of the company (recently reduced to 17.4%). Unfortunately, the meteoric rise in CBRL shares has not translated into gains for BH shareholders.
In any event, both BXG and BBX are now on my radar, and it may be time to do a deeper dive.
