Below is list of their current portfolio, which I took from their website. If we're going to enter a recession, then a few of these businesses really concern me. For example, Florida real estate, golf clubs, entertainment & leisure. I don't know how exactly they value these private businesses on their balance sheet, but I can only imagine their value is going to go down if we enter a recession. That would reduce the fund's NAV, and current discount to NAV.
On the other hand, the discount to NAV is already in the area of 41%, the dividend is about 8%, and they have cash of $4.10/share. That cash represents 39% of the total portfolio, or 66% of the current share price. If you first subtract the cash portion of the NAV, the existing portfolio of companies has already been discounted by an amazing 67% ! It seems completely unreasonable to suggest that the value of these companies has declined that much since the last NAV was reported.
This leads me to believe that investors have thrown the baby out with the bathwater, or else they simply have no confidence in management to move forward. After all, since 10/31/07 the NAV is actually down YTD, by 1.63%, and that led to devastating share price decline of 17.58% (as of 10/31/07)
I can't predict the future, but my best guess is that we'll see some more declines in NAV due to those non-recession friendly companies in their portfolio. That isn't going to help investor confidence. Combine that with year end tax loss selling, and it looks like there could be some more downside to this stock.
But, you can't ignore the fact that the non-cash portion of this stock has already been discounted by 66%, making it look like a real bargain. It's an interesting fund, that's for sure. If you're a short term buyer, I might want to stay away from this thing until after tax loss selling season ends at the end of December. On the other hand, if you're a long term investor, now might be a good time to get in. Keep in mind that anything can happen here. For example, if they sold one of these companies for a great profit, as they have done before, shareholders could get another HUGE dividend, with no warning. On the other hand, a sudden hit to the NAV by an underperforming company could send the NAV south, and that would really hurt the share price.
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The Bradshaw Group
Midrange and high-speed printing equipment
ConGlobal Industries, Inc.
Shipping container repair and storage
Creekstone Florida Holdings, LLC
Real estate in Panama City, Florida
Equus Media Development Company, LLC
Media
Equus Media Finance Company, LLC
Media
HealthSPAC, LLC
Special Purpose Acquisition Companies focused on healthcare
INFINIA Corporation
Alternative Energy
Nickent Golf, Inc.
Golf club manufacturer
PalletOne, Inc.
Wooden pallet manufacturer
Riptide Entertainment, LLC
Entertainment and leisure
RP&C International Investments LLC
Healthcare- Nursing homes in United Kingdom and Germany
Sovereign Business Forms, Inc.
Business forms manufacturer
Spectrum Management, LLC
Business & personal property protection
