Monday, April 30, 2012

Holding Company At A Discount

When a holding company for a group of businesses or a closed-end mutual fund is trading at a discount to its holdings or to its book value, it is usually because there is a track record of poor capital allocation decisions at the company. But this is not always the case; sometimes discounts are just plain unwarranted, which could present compelling opportunities for value investors. Capital Southwest may be one example. It has been discussed on this site before, but while its price hasn't changed, its portfolio has continued to increase in price.

Alpha Vulture recently took a closer look at Capital Southwest, including an update of its portfolio holdings. Unlike other stocks trading at discounts to portfolio holdings, Capital Southwest actually has a 50-year track record of 10% CAGR. Read Alpha's analysis of the company here. Finally, check out some of the tax opportunities/risks this company offers/faces as described by Whopper Investments.

Disclosure: No position

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