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:
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.
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:
- Take $3.20 per share and reinvest in something else, or
- Wait for the auction results to get $3.80 per share while facing the possibility of an unsuccessful auction
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.
