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HNFSA/HNFSB - Hanover Foods


oddballstocks

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  • 2 weeks later...

 

Me too, just after I contacted the company again. Looked at it briefly for now. Same old same old.

 

Here is what bothers me most about HNFSA, ever since I purchased the stock: When will the employee who is creating the photocopies, straighten out the pages before making the copies?

 

I guess we are lucky that we don't see remnants of the employees breakfast or lunch on the pages, but still.

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Guest notorious546

 

Me too, just after I contacted the company again. Looked at it briefly for now. Same old same old.

 

Here is what bothers me most about HNFSA, ever since I purchased the stock: When will the employee who is creating the photocopies, straighten out the pages before making the copies?

 

I guess we are lucky that we don't see remnants of the employees breakfast or lunch on the pages, but still.

 

haha where are the footnotes and other schedules?

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http://www.creditbubblestocks.com/2017/10/hanover-foods-corp-2017-annual-report.html

 

The expected cash cost of the supplemental pensions for FY 2018 is $1.18 million. If I'm understanding this correctly, it means there were one or more top employees, now retired, who were making just shy of $2 million in salary and bonuses during their final three years, on average. That seems like a TON of money for a company earning only $5.3 million average cash flow and 2.2% ROE!

 

Until we find a better hypothesis, my guess will be that profits and ROE are being siphoned off by overpaid management.

 

Further evidence in support of this: the company owns (in its Sunwise Co. subsidiary) a 1999 Cessna Citation (Model 560XL) business jet that they keep at York Airport in Pennsylvania. According to one data source I have seen, this plane gets flown all the time - apparently 200 flights YTD in 2017 and 275 flights in 2016. I'm not sure whether that's all Hanover & executives flying or if they lease it out, but at normal hourly costs for a business jet this is quite an expensive way of visiting Rogers, AR for WalMart meetings. A diligent analyst might ask the company why the plane has been photographed in San Diego in February and at the Ohio State U airport on the same Saturday as a football game.

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Amongst the dead money stocks, I own, this is like an Egyptian Mummy. Owning this seems like owning a mummy and hope that it comes alive.

 

What are the thoughts? I am not adverse to waiting, but is there a reasonable case, where this stock creates a return on investment for minority owners? The management gets their inflated salaries, the company jets and the pensions but the owners will have to do with $1 in annual dividends for how long?

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I guess it all depends on timing. If the status quo is maintained forever I doubt this investment will work out. But possible at some point in time the majority owners might decide that selling the business is their best option. I don't know exactly what a strategic acquirer could pay for this business, but wouldn't be the first time that some sleepy OTC stocks get sold for a huge premium. If things change between now and the next 5 years you will probably do great. If it's in 10 years.. i don't know. If it's in 20, 30 or 50... probably not.

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I struggle to even come up with a potential buyer for this low margin business that will not get better. The only public peer is SENEA, which actually has much better governance and results over the last decade, yet trades at 0.6x book (or 0.5x book with LIFFo reserve).

 

Best case scenario for shareholder is liquidation but how likely is that?

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