gg Posted May 27, 2014 Share Posted May 27, 2014 strong year overall. ~$415k in free cash flow, gross margins at their highest levels in 3 years. i'd love to just sit here as a long-term shareholder and reap the rewards if shevach would get more responsive to capital allocation strategies. company also disclosed that on 5/23 the nov 2013 3rd party complaint has no grounds to move forward. They just announced a dividend and annual meeting. Link to comment Share on other sites More sharing options...
jschembs Posted May 27, 2014 Share Posted May 27, 2014 strong year overall. ~$415k in free cash flow, gross margins at their highest levels in 3 years. i'd love to just sit here as a long-term shareholder and reap the rewards if shevach would get more responsive to capital allocation strategies. company also disclosed that on 5/23 the nov 2013 3rd party complaint has no grounds to move forward. They just announced a dividend and annual meeting. yes, i saw that - i don't consider 5 cents a share very "responsive" given the existing balance of cash and securities. Link to comment Share on other sites More sharing options...
gg Posted May 27, 2014 Share Posted May 27, 2014 I agree 100%. Was just adding that in as part of the new developments. I actually think it's a pretty tax inefficient way of dealing with the cash hoard, and would have preferred buying another company to generate greater earnings or a buyback or anything else... Link to comment Share on other sites More sharing options...
jschembs Posted May 27, 2014 Share Posted May 27, 2014 I agree 100%. Was just adding that in as part of the new developments. I actually think it's a pretty tax inefficient way of dealing with the cash hoard, and would have preferred buying another company to generate greater earnings or a buyback or anything else... agree...problem is acquiring another company in that size range is like finding a needle in a haystack... Link to comment Share on other sites More sharing options...
ragnarisapirate Posted May 27, 2014 Author Share Posted May 27, 2014 I agree 100%. Was just adding that in as part of the new developments. I actually think it's a pretty tax inefficient way of dealing with the cash hoard, and would have preferred buying another company to generate greater earnings or a buyback or anything else... agree...problem is acquiring another company in that size range is like finding a needle in a haystack... Really? If you use some leverage, and go outside of the niche that SODI is in (doubtful Shevach would go for it), it doesn't seem impossible. Though, price is always a concern. Link to comment Share on other sites More sharing options...
jschembs Posted May 27, 2014 Share Posted May 27, 2014 jeff, i was thinking more so finding a complementary company...i don't see sodi as a platform to build the next outsider story :) Link to comment Share on other sites More sharing options...
Tim Eriksen Posted May 28, 2014 Share Posted May 28, 2014 anybody planning on attending the annual meeting?? Link to comment Share on other sites More sharing options...
thepupil Posted May 28, 2014 Share Posted May 28, 2014 sending my dad (lives in the area), if he is available Link to comment Share on other sites More sharing options...
valueyoda Posted May 29, 2014 Share Posted May 29, 2014 I very much see it as a building block for the next outsider story, as I bought 1.5% of the outstanding shares. Therefore, I actually would prefer management to hoard even more cash and not issue a dividend. Theoretically, one could transform the company into a holding company and over time make attractive acquisitions and/or it could make equity investments and shield taxable gains through the NOLs. Link to comment Share on other sites More sharing options...
ragnarisapirate Posted May 29, 2014 Author Share Posted May 29, 2014 I very much see as a building block for the next outsider story, as I bought 1.5% of the outstanding shares. Interesting that you say that after a guy with a 13D out on the company said he didn't think it would be a building block. That said, I am surprised that there hasn't been a ton of proxy solicitation as the company would be easy to replace the board of and do so without triggering a poison pill or negating the NOLs. Link to comment Share on other sites More sharing options...
valueyoda Posted May 29, 2014 Share Posted May 29, 2014 Hey Jeff, it all depends on what your end game is. Unfortunately, the present value of the NOLs is not maximized by repurchasing shares or by paying a dividend. Furthermore, by buying back shares, remaining shareholders are doubling down on the core business as the business component of the per share intrinsic value is increasing and the net cash component decreasing. Given the small scale of the business and the uneven results over the last decade, I think it would be wise to diversify away from the core business rather than doubling down. Finally, it depends what your ultimate motive is with regard to the stock. If you are an average investor that wants to maximize its returns over a 3 month - 2 year horizon, maybe you are better off pursuing the plans outlined in the 13D. If you want to take a control position and want to hold your stake indefinitely, while transforming the company into an interesting holding company, it is a totally different story. Link to comment Share on other sites More sharing options...
jschembs Posted May 29, 2014 Share Posted May 29, 2014 Hey Jeff, it all depends on what your end game is. Unfortunately, the present value of the NOLs is not maximized by repurchasing shares or by paying a dividend. Furthermore, by buying back shares, remaining shareholders are doubling down on the core business as the business component of the per share intrinsic value is increasing and the net cash component decreasing. Given the small scale of the business and the uneven results over the last decade, I think it would be wise to diversify away from the core business rather than doubling down. Finally, it depends what your ultimate motive is with regard to the stock. If you are an average investor that wants to maximize its returns over a 3 month - 2 year horizon, maybe you are better off pursuing the plans outlined in the 13D. If you want to take a control position and want to hold your stake indefinitely, while transforming the company into an interesting holding company, it is a totally different story. I presume Jeff was referring to my (rather elementary) 13D. I would certainly love to see some 4x or 5x acquisition, which are readily available in the lower middle market, but as I said in an earlier post, finding the right opportunity is somewhat of a needle in a haystack. Assuming we take $4-5 MM of the cash, borrow 2-3x, we're looking at a $12-20 MM acquisition. Obviously we don't need to find a business operating too closely to SODI, but it would be helpful to leverage some of what Shevach has built - military and/or government relationships in particular. If you're envisioning the early stages of a Berkshire situation, I'm all ears, but I think it will take some serious effort on our end to find the right acquisitions. All that said, lower middle market M&A is my day job, so feel free to message me if you'd like to discuss further. Link to comment Share on other sites More sharing options...
valueyoda Posted May 29, 2014 Share Posted May 29, 2014 I am fully aware how difficult it would be to find the right acquisition targets. I would love to discuss these things privately. Are you going to attend the shareholders' meeting? Link to comment Share on other sites More sharing options...
jschembs Posted May 29, 2014 Share Posted May 29, 2014 I don't think I'll be able to make it - in Seattle, with a newborn - but feel free to email me (jschembs@gmail.com) if you'd like to discuss further. Link to comment Share on other sites More sharing options...
valueyoda Posted May 29, 2014 Share Posted May 29, 2014 Congrats with your newborn! I will contact you this week. Link to comment Share on other sites More sharing options...
gg Posted May 29, 2014 Share Posted May 29, 2014 I presume Jeff was referring to my (rather elementary) 13D. I would certainly love to see some 4x or 5x acquisition, which are readily available in the lower middle market, but as I said in an earlier post, finding the right opportunity is somewhat of a needle in a haystack. Assuming we take $4-5 MM of the cash, borrow 2-3x, we're looking at a $12-20 MM acquisition. I assumed Jeff was referring to Nicholas Swenson's 13D because that's the only recent one I see. Have you filed one since 2012, or do you continue to hold ~7%? It seems like there are a significant amount of shares being held by people who agree that the the current CEO is (1) a poor capital allocator, and (2) a good operator that is highly capable of running his niche manufacturer. Any reason why you and others have been able to get control of the board to sway the capital allocation while keeping the CEO as the operator? Also curious if anyone here has a list of the known, large shareholders? Link to comment Share on other sites More sharing options...
oddballstocks Posted May 29, 2014 Share Posted May 29, 2014 I presume Jeff was referring to my (rather elementary) 13D. I would certainly love to see some 4x or 5x acquisition, which are readily available in the lower middle market, but as I said in an earlier post, finding the right opportunity is somewhat of a needle in a haystack. Assuming we take $4-5 MM of the cash, borrow 2-3x, we're looking at a $12-20 MM acquisition. I assumed Jeff was referring to Nicholas Swenson's 13D because that's the only recent one I see. Have you filed one since 2012, or do you continue to hold ~7%? It seems like there are a significant amount of shares being held by people who agree that the the current CEO is (1) a poor capital allocator, and (2) a good operator that is highly capable of running his niche manufacturer. Any reason why you and others have been able to get control of the board to sway the capital allocation while keeping the CEO as the operator? Also curious if anyone here has a list of the known, large shareholders? You can piece together almost all of the shareholders from the filings. There is Jay, Alex, Ancora, and Nick which I believe surpass what the CEO owns. Consider this, if you exclude the CEO's votes 80% of shareholders voted against his picks last year. I know a number of >5% holders as well, quite a few that in total equal a lot of shares. If you attend the meeting you can peek at the shareholder registry with a lawyer breathing over your shoulder (literally). Lots of tiny record holders, a few with bigger positions like FP&L. Link to comment Share on other sites More sharing options...
ragnarisapirate Posted May 30, 2014 Author Share Posted May 30, 2014 I was referring to Jay's statement earlier in the thread. My observation in the totality of this scenario is that a lot of the shareholders want change but have yet to do more than force an annual meeting and temporarily kicking out a board member- at least, that's the case in public forums. Shevach will likely put up a huge fight, unless he is just ready to retire at some point, which may well end up being the case. However, I stick by my statement that as of right now, I see nothing that transforms this company in the near future- and as a shareholder, I hope that I am dead wrong on this. It would probably be really easy to get board seats for about any shareholder that owns a fair bit of the stock- which would be good as it would likely be a voice of reason from an allocation perspective. Link to comment Share on other sites More sharing options...
writser Posted June 10, 2014 Share Posted June 10, 2014 Is any other board member planning to go to the annual meeting in July? If so, are there any specific questions you are planning to ask? I'm really curious about the sudden change in dividend policy. My guess is that Groveland Capital (Swenson) applied a bit of pressure or at least talked them into it. (if it will be possible to ask questions at all - as far as I read last year was a bit tense ;) ) Link to comment Share on other sites More sharing options...
jschembs Posted June 10, 2014 Share Posted June 10, 2014 Is any other board member planning to go to the annual meeting in July? If so, are there any specific questions you are planning to ask? I'm really curious about the sudden change in dividend policy. My guess is that Groveland Capital (Swenson) applied a bit of pressure or at least talked them into it. (if it will be possible to ask questions at all - as far as I read last year was a bit tense ;) ) I unfortunately won't be able to attend. I'm also curious who had the 150k share bid out earlier this week. Link to comment Share on other sites More sharing options...
valueyoda Posted June 12, 2014 Share Posted June 12, 2014 It seems that the order has been filled. Link to comment Share on other sites More sharing options...
writser Posted June 12, 2014 Share Posted June 12, 2014 Impressive chunk. You can file a 13D after one trade .. Did you sell Jay? Or was it somebody else. Link to comment Share on other sites More sharing options...
jschembs Posted June 12, 2014 Share Posted June 12, 2014 Not me...my guess Ancora may have sold...will be interesting to see who our new partner is... Link to comment Share on other sites More sharing options...
Hielko Posted June 12, 2014 Share Posted June 12, 2014 Kinda amazing how liquid this stock is Link to comment Share on other sites More sharing options...
jschembs Posted June 12, 2014 Share Posted June 12, 2014 Kinda amazing how liquid this stock is just wait until the HFTs get a hold of it ;-) Link to comment Share on other sites More sharing options...
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