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Why I Sold Premier Exhibitions

April 05, 2012 | About:
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:

  1. Take $3.20 per share and reinvest in something else, or
  2. 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.

About the author:

Mariusz Skonieczny
Mariusz Skonieczny is the founder and president of Classic Value Investors, an investment management firm. He is also the editor of Ultimate Value Finder, a monthly newsletter that features three underfollowed, unknown, and undervalued companies ignored by Wall Street.

Visit Mariusz Skonieczny's Website


Rating: 2.6/5 (11 votes)

Comments

AlbertaSunwapta
AlbertaSunwapta - 2 years ago
I've done that. And then the odd mistake (a couple value traps but more often than not some accounting fraud) has wiped out my gains because I've introduced a downside bias/risk. Or as Peter Lynch once described it as 'picking the flowers and leaving the weeds.'

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