I’ve recently re-initiated a small-ish long position in Premier Exhibits (PRXI), as it has fallen from the $2.60 range to the $2.20 range. I’ve talked about them quite a bit in the past and sold my position in them about a month ago, after they failed to announce a sale by the deadline for their broker to receive their full bonus.

So why did I restart my position?

1. The company currently has a market cap of $105 million or so. They have no debt that is recourse to the parent company (the note payable on their balance sheet is only recourse to the exhibition company). I tend to agree with this analysis of the artifacts worth, but even if you think that is too optimistic, the artifacts have been appraised at $190 million. Take out a 10% commission (likely too high at this point!) and 30% for taxes and you get $120 million in after-tax value of the artifacts. The company has already said they plan on distributing all proceeds from the sale to shareholders, so there is no real reinvestment risk. Thus, with a market cap of $105 million, the market is forecasting a really negative sale scenario
2. I don’t think this is frequently pointed out, but the $190 million appraisal does not include the value of the intellectual property from their most recent excavation, which produced things like this History Channel special box set. What do I think the value of that type of intellectual property is? Honestly, I have no idea. But there is some real value there, and it should add another layer to the margin of safety.
3. The exhibits business, which I had always treated as a net negative, is really turning a corner. The recent acquisition looks to be a home-run, and the company was solidly profitable despite elevated SG&A expenses from the acquisition and (likely) related to the recent management changes and expenses associated with the auction process. While the value from the exhibit business is likely to be small compared to the value from the Titanic assets, there’s some real upside here, and it really represents a cherry on top of the investment.

So I’ve reacquired a position. I’ve said it before and I’ll say it again: I think there’s a huge margin of safety buying in the low $2s (well below appraised Titanic asset value). Not so much when the stock is in the $2.60-ish range (selling around the after-tax value of the Titanic assets). We’ll see how it goes!

Disclosure: Long PRXI

Track Gurus’ Stock Purchases Daily – Real Time Guru Picks

GuruFocus "Real Time Picks" reports the stock purchases and sales that Gurus have made within the prior 2 weeks. The report time lag can be as short as 3 days after the date of the transaction. This is just one of the features provided with GuruFocus Premium Membership.

Click Here to Try It Free!

More Gurufocus Links

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool