RENN Global Entrepreneurs Fund (NYSEMKT:RCG) formerly known as Renaissance Capital Growth & Income Fund III trades on the NYSE-Amex under the symbol RCG. It commenced operations in 1994. It has always specialized in making venture capital investments.
RCG's history has been inconsistent, having experienced both good and bad times. As of December 31, 2006 its net asset value had been $10.84, which has subsequently declined to $2.59 as of June 30, 2011. Portfolio turnover has been averaging approximately 10%.
With 4,463,967 shares outstanding, RCG has unrealized losses of approximately $17,000,000. The value of these unrealized tax losses exceed the present market value of the stock.
The geographic distribution of the portfolio is as follows:
United States: 78%
As bad as this all looks, changes are in the wind. Manangement has been making changes to improve its performance.
greatly affecting recent performance has been the collapse in the value of its investments in U.S. listed Cinese companies, which are 24% of its total portfolio. I agree with management that much of this decline is unwarranted. The allegations of fraud are way overblown and if fraud does exist, it only affects a few of those companies. I believe that these Chinese companies have a good chance of making a strong recovery in the near future.
The largest is holding is PHC, Inc (PHC), which is approximately 17% of assets. PHC is traded on the NYSE-Amex, and has announced an agreement to merge with Acadia Healthcare Company (NASDAQ:ACAD), a private company, which is six times larger than PHC. Both companies operate in the drug and alcohol abuse field.
Another large holding is Bovie Medical Corporation (NYSEMKT:BVX). Approximately 11% of assets, it anticipates receiving clearance on a new super surgical product, J-Plasma.
The discount on RCG has recently narrowed but it has traded at a discount in excess of 25%. I would only seek to purchase RCG when its discount is inexcess of 20%. It is a risky investment but has great potential, for the following reasons:
- Some of its investments stand a very good chance of working out and of making substantial recoveries;
- Any profits or gains, for the foreseeable future, will be tax free because of the hugh unrealized depreciation in its investment; and
- The susbstantial discount from net asset value only adds to its appeal.
RCG trades for under $2.00 and can be irratic. Only use limit orders and be careful to monitor its discount from net asset value. It is interesting and does have a strong chance for dramatic appreciation. It is risky and you must be careful.
Disclosure: I am long RCG.