Reach for your GravolHi All,
At the time of writing, the stock has sunk to $.90/share. The market cap is now at $80 million and even a dividend yield of more than 11% can't entice investors to hold onto their shares. Even with all the incompetence at Postmedia, considerable debt and no dividend they can boast a market cap of $111 million.
What gives you might ask? Has all investor money migrated into cannabis stocks and out of favour stocks like Torstar are being shunted to the sidelines? My suspicion is unsavvy investors are concerned the dividend will get slashed and they will be left with worthless shares. A reasonable concern if you don't understand the company and have lost confidence in the future of newspaper companies.
As painful as it is to watch the value of your shares decline in the short-term I still believe patience will be rewarded in spite of much of what I regularly comment on. Between the Board, senior executives and the Voting Trust it is like watching a sailing ship caught in a typhoon with a drunken captain, a terrified crew and rocky shoals everywhere. Hard to see how it isn't going to end badly, but they will find a safe harbour if they don't intentionally sink the ship.
Enough nautical metaphors. Here is why I remain confident:
- In round numbers, the company has $.60/share in cash and no debt;
- The Toronto Star is worth $1,00/share to someone;
- Metroland Media is worth $1.50/share;
- The other dailies are worth $.75/share;
- VertigoScope is worth at least $1.50/share;
- Blue Ant, Black Press, CP, Nest Wealth is worth $.40/share.
This totals $5.75 without stretching valuations for VS. That makes the current share price of $.90 represent slightly more than 15% of the liquidated value. That makes no sense and Fairfax and others know it makes no sense. Still a great opportunity to average down while taking a full dose of Gravol.