Wednesday, February 12, 2014

Income Opportunity Satisfied

Income Opportunity Realty Trust (IOT) is run pretty poorly by an apathetic management team that is poorly incentivized. So it was with much hesitation that I brought it up on this site as a potential value investment a couple of years ago, and you guys roasted me in the comments section accordingly. But somehow, this investment actually worked out to the point where I'm happy to sell and move on.

I consider myself quite lucky here, because management has done literally nothing to help close the gap between market value and book value. And why should they? They pick up fees every year based on the company's assets. Being shareholder-friendly just doesn't seem to be in their vocabulary.

But Mr. Market is one manic depressive dude. While at one point my position was down some 50%, today it is up nearly 100%. What allowed me to stay in the company despite the massive fall was the knowledge that the company still owned a large, well-located piece of land worth in excess of the company's market cap, even though that land was being used for absolutely nothing. I think that's an important benefit of having a value mindset: when you understand that you own a business, you can weather short-term price movements.

I think the most recent move up is thanks to this guy pumping the stock. Whatever the reason Mr. Market changed his mind about this one, I'm happy to be out of it. I don't like investing in companies where management incentives and actions are poor, but sometimes a company can be so cheap that I do it anyway. Though the company still trades at a discount to book value, it's enough of a mess that I'm taking my gains and going home. If you're staying in it, the momentum is on your side and I wish you the best of luck.

Disclosure: No position

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