Retail Holdings has seen an action packed week. Chris DeMuth Jr., one of the most popular Seeking Alpha authors, published his thesis on the company last week and called it his top pick for 2017. The market didn’t ignore him, and shares rose 25.8% from $14.70 to $18.50. One interesting tidbit that he picked up on, that I failed to spot, is that in the latest annual report the company changed their time frame for the liquidation of the company from 3 to 5 years to 2 to 4 years. It seems like a small detail, but no reason to change that if the liquidation of the company isn’t moving forward.
Yesterday Retail Holdings issued a press release with an “updated strategy statement” that reconfirms this two to four year horizon. More interesting is that they also confirm that they repurchased 542,782 shares last year, a significant amount since it represents 10.6% of the outstanding shares. Assuming they bought back these shares at $15/share (probably a slightly pessimistic estimate) this grows NAV/share with 5.4% from $27.39 to $28.87. Too bad that the shares are now trading higher, since potential future purchases will be less accretive since they have to be done at a smaller discount to NAV.
While I think Retail Holdings is still very undervalued I sold a bit of my position this week. When I called the company “my best idea for 2016” on Seeking Alpha it was trading at an effective discount of 61.5%. Since then shares are up ~70% while the discount is down to 35.9%. Still attractive, just not as attractive as before.
Author is long Retail Holdings