Bexil Trading Below Liquidation Value

While I usually won’t bother looking at companies trading below more than 2/3 of net current asset value, Bexil (BXL) is a rare exception. Net Current Asset Value is defined as current assets - total liabilities - any preferred stock. As of the March 31, 2007 Balance Sheet the company has

Cash and cash equivalents $ 1,121,795
Investment securities, available-for-sale 36,545,615
Receivables:
Interest receivable 152,377
Refundable taxes 472,199

Total 38,291,986

Current liabilities:
Accounts payable and accrued expenses $ 366,698
——————-

Total current liabilities $366,698

This gives us a rough liquidation value of 38291986 - 366698 = $37,925,988

The current market cap of the stock is currently 29,730,000 or 78% of net current asset value.

The company has all this cash and cash equivalents from selling its 50% stake of a previously held insurance operation. The cash equivalents are just US Treasury Notes. The CEO certainly looks up to Warren Buffett as well - he states on his website:

Our objective is simple, straightforward, and sharply focused: to increase book value per share over time. We believe that long term stockholders will benefit from a rising book value as market recognition builds and investors come to appreciate Bexil’s intrinsic value as well.

Also interesting are the very Berkshire Hathaway-like acquisition parameters:

1) A proven track record with demonstrated earning power.

2) Sales of between $10 million and $50 million.

3) A seasoned business with solid customer relations.

4) Good return (at least 15%) on equity, little or no debt.

5) Solid management must remain. Audited financials required.

6) Particularly interested in a “spin-off” from a larger company.

To me, buying this stock is a no brainer. You are essentially buying risk free bonds at a 30% discount while waiting for a value investing oriented use of the cash. There isn’t much risk in that.

Comments

[Thorsten.Laux:]

Factor in that there are 143k options outstanding at $21.66 average exercize price and that corporate overhead is eating up more than the interest of the current bond holdings and things don't look that attractive anymore.

2007 May 25 02:06 PM