This is going to be a pretty quick post…. I have a stock that I’m ready to make a nice write up on, but I’m trying to acquire it in size before posting my write up.
Daxor (DXR) is a company that one of my readers had sent me a few months ago. It’s a pretty interesting stock- it trades for less than net working capital despite almost all of its working capital being in investments and a solid history of profitability, plus it has a solid dividend yield of almost 6%. I think dividends are pretty irrelevant…. unless you find them in a net net. In a net net, they serve to enhance the margin of safety because they effectively will slowly liquidate the company if they can’t turn a profit.
However, upon closer review, I don’t think DXR’s quite as good as advertised. You can see this article (by one of my new favorite blogs) to see a description similar to my thoughts, but basically the company’s operations are generating massive losses. All of their profits are coming from investment income.
So you could basically view the company in two ways. 1- the bull case- the company has a successful history of generating investment profits, and you are buying into their investment portfolio at a discount and getting their operating business as a free lottery ticket with significant upside. 2- the bear case- the investment portfolio is pretty risky and has limited disclosure. Sure, you are getting it at a discount, but when you combine it’s riskiness with an operating business that serves as a cash sucking cancer, the discount is probably deserved.
Do I see anything wrong with investing in DXR at these prices? Absolutely not…. but I just don’t think there’s a real margin of safety unless you really feel like DXR’s CEO is a truly talented investor capable of outperforming the market.
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