A few months ago, I posted two special situations with a deep value framework- Premier Exhibits (PRXI) and Gyrodyne (GYRO). Now that it’s been a few months, I figured I’d take a second to review the performance and whether value investors should continue holding the stocks w/ the major catalysts behind them.
While the results were a bit volatile, I hope for your portfolio’s sake that you had acted on these ideas- I’m personally kicking myself for not acting on GYRO and only betting a small piece on PRXI. The results were absolutely spectacular. GYRO did see some volatility as they had to do a rights offering to preserve liquidity and saw the stock price fall to the low 50s, but they eventually had their claim against New York affirmed and saw their stock price go from the mid-60s at the time of the writing to the low 100s currently. PRXI, likewise, had to create an equity based line of credit that could result in significant dilution to their shareholders if tapped, but recently announced they are auctioning off their Titanic assets. The move was pretty obviously in the works for months, as the company had been realigning divisions and their leadership team in preparation for the move. Their stock has gone from the mid$1.70s when mentioned to ~$2.25 today, with all of the move coming on a huge 25% move during mid-day trading today.
So should you continue holding either? At this point, it’s a grey area for both stocks.
GYRO still seems to be a bit undervalued relative to its assets, but the gap has narrowed down significantly. If you are holding a position and sitting on a big short term gain, I’d probably continue to hold it and wait for long-terms gain tax treatment. But I wouldn’t want to put new money to work here.
Premier still trades at a huge, huge discount to the assessed value of their Titanic assets. But there is a significant risk that the auction comes in lower than expected- remember, at this point, basically all of Premier’s value is in these artifacts. Plus, Premier is going to be paying a pretty hefty commission on the auction, which somewhat detracts from the upside. I’ve been trimming my position into the rally, and I don’t think there’s any shame in doing so for those of you who continue to hold the stock. For those of you who don’t, with a visible catalyst present, it might be worth a review, but with the stock price having already risen 25%, the risk/reward is materially different now than it was even this morning.
Disclosure- Long PRXI
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