In the January Issue of Ultimate Value Finder, I included Premier Exhibitions as one of three investment ideas. Since then, the stock has more than doubled. However, over the last few days, the stock price declined from $3.75 per share to as low as $2.58 per share. As a result of the sharp price decline, I received several e-mails about whether I am buying, holding, or selling Premier Exhibitions.
I sold my entire position at the end of March for approximately $3.20 per share. The reason why I sold it was because the price ran up so much so quickly that I did not find the risk and reward scenario appealing anymore. I ran the following back-of-the-envelope calculation:
$190 million for artifacts + $100 million for salvage rights = $290 million
$290 million – 10% for auction fees and CEO’s incentive compensation = $261 million
$261 – 30% for taxes = $183 million/48 million shares = $3.80 per share
At $3.20 per share, I faced the following options:
- Take $3.20 per share and reinvest in something else, or
- Wait for the auction results to get $3.80 per share while facing the possibility of an unsuccessful auction
I chose option number one.
Yes, the Titanic artifacts could sell for much more but I am not in the business of buying undervalued companies and hoping to sell them when they become overvalued. I am in the business of buying extremely undervalued companies and selling them when they become reasonably priced.
Good reasoning, I had a similar reasoning and also sold at about 3.20, although I sold 2/3 of my total position and left the last 1/3 to ride.
I highly doubt that there will be a 30% tax, as there is the option of just selling the whole RMS Titanic Inc. company. On the other hand, I did not count $100 M for the salvage rights. Well, we will know within a week, will be interesting no matter the outcome.
All in all, a good find on your behalf. Congratulations on a good idea and I hope many of your subscribers took advantage of it!
The way things are going it’s possible you could get another opportunity to buy it again.
Long PRXI.
Was PRXI really your idea? This stock was written up a few times recently on ValueInvestorsClub and I believe SumZero.
Was PRXI really your idea?
How could it be anybody’s idea? It is not like something was discovered. The company was public for many years.
With that being said, no I did not discover PRXI. I read about it on one of the blogs that I follow. My favorite ideas are the ones that were written about but most of the value investors gave up on. PRXI is a perfect example. It has been written about so many times but when I talked to some of the people who wrote about it, the majority of them sold at $1.60 per share. Classic. They lost patience.
But when the company announced the auction, I knew that the stock price was going to go up so I wrote about in the newsletter. Then when the price increased to $3 per share I asked myself
“What is a dumb investor thinking?”
Dumb Investor: I am going to buy at $3 per share and sell at 11:55 pm right before the auction.
I thought that if I wasn’t going to hold it until the auction I had to get out at 11:45 before all the dummies join me.
Remember there is no such thing called originality. Originality is judicious imitation.
At what price are you thinking you would get involved again?
It would have to be ridiculous like $1.50 per share. I reinvested the money already so it would have to get really really cheap for me to sell anything to buy Premier Exhibitions.
Johnny Spot,
“Was PRXI really your idea?”
The credit regarding a successful investment should go to the one responsible for the money invested and no one else. Some people have more good ideas, and some have less. Buffett as an example, took many of his early ideas from other people which he had confidence in. I don’t think Mariusz expects to get much credit for this, each and everyone of the subscribers had to make the buy decision themselves.
And to fight about who really came up with an idea is really a kids game. There will always be someone knowing about a specific idea before you, we are many people in this world.
Mariusz,
“But when the company announced the auction, I knew that the stock price was going to go up ”
No one k-n-o-w-s these things, but you can have a very strong suspicion. Biiig difference
You are right. I should have said, “But when the company announced the auction, I believed that the stock price was going to go up.”
Mariusz,
Congrats on the successful pick. I have heard this comment about originality a few times in the past. Well, as long as you (1) understand the business / situation (2) can value it (3) can assess the risks (4) follow through with it (5) feel confident in your thesis ….then it does not matter if the taxi driver pitched you the stock or you read it on VIC or any other blog. Once you decide to buy, you own the shares and the decision is yours!
Thanks
adib
Abid,
Good point.
My first blog entry was on June 18, 2009. It was a company called Arctic Cat. At that time, the stock price was $4 per share. Today it is over $43 per share. This is more than a ten-bagger. You know who told me about this stock? The editor of my book, Why Are We So Clueless about the Stock Market. Do I care where the ideas come from? No.
Here is the first blog entry of Arctic Cat:
http://classicvalueinvestors.com/i/2009/06/hello-world-2/
Re-initiating a position:
http://www.whopperinvestments.com/re-opened-position-in-prxi
This is just fyi.
Long PRXI