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IDT is in the erstwhile business of communications and calling cards. Guru’s Marty Whitman of Third Avenue and Bruce Berkowitz of the Fairholme Fund together own about 17% of the company. Unfortunately, founder Howard Jones controls 63% of the voting stock. The B share only has 1/10 of a vote while the C share has a full vote.
The most enticing aspect of IDT is that it holds about $8.95 of cash, per share. This is valuing the rest of the business at about only $2.63 a share, along with its liabilities. IDT produces over $2 billion in annual sales. That’s a pretty steep discount for a company with such high sales. Unfortunately, no bidders can unlock this value without Mr. Jones’s say so.
Recently, the company paid a $.25 dividend and plans to pay $.125 a share in the future. This equates to a 4.3% yield. In a rational market, one would expect a stock that pays a 4.3% yield to be worth more than a stock with no yield, apples to apples.
IDT knows that the telecom business has atrophied and is expanding into other businesses. These eclectic businesses include “ethnic” groceries, energy, debt collection, venture capital, and advertising. The telecom business still makes up the vast proportion of its sales. IDT is very active with buying and selling its divisions. Perhaps this could be another way to unlock value. * Holmes R. Osborne III, Inc., holds 19,902 shares of IDT for clients.
About the author:
____________________Holmes R. Osborne III, CFA, is a principal of his own firm that specializes in value stocks. Mr. Osborne worked for Merrill Lynch’s money management division prior to starting his own firm and is an active speaker on the subject of investing. He is also a member of the Programming Committee of CFALA and a member of the Board of the Applied Behavioral Finance Group of CFALA . Mr. Osborne is a member of the Los Angeles Venture Capital Association and National Association of Business Economists. He is a graduate of the Martin J. Whitman School of Management at
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