As value investors, we tend to put more emphasis than do others on the balance sheet. But Nate over at
Oddball Stocks discovered a potential value investment with
no balance sheet! This is because the company requires no capital
, and just pays out to shareholders everything it earns. No cash hoards for management, no empire-building, no potentially wasteful acquisitions. The company has fairly steady royalty income, and pays almost a 10% yield at the current stock price! Check out the
write-up at Oddball Stocks for more details...
It is roughly the same thing as buying a HY bond that pays roughly 10% per year. The question is whether or not the 10% is high enough to compensate for the risk ( business+liquidity).
ReplyDeleteIn 2009 (probably due to low liquidity) you could buy this trust for 20$ which meant you were getting 20% yield + the capital appreciation. Precrisis, the range was between 40-50$.