Gramercy Capital (GKK) – this ain’t your daddy’s net net

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One of my favorite new blogs, csinvesting, had this post up for a case study on valuations. Part of the answer key contains notes from famed value investing guru Bruce Greenwald’s class which contains these three quotes (from page 4):

“The stock goes up from $15 to $50. Management has delivered in spades. Is this a stock that is likely to be overlooked? No.

As an outside value investor, are you like to be the smark one in the trade here? No, you are not. You are the dumb money.

Nothing about this company says value. Nothing says that in buying stock like this, you ought to expect to be smarter than the anonymous person on the other side of the trade.”

All of those quotes got me thinking about the largest position in my portfolio, Gramercy Capital (GKK). The stock’s gone from $35 to under $3. It has an incredibly complex balance sheet that requires enormous amounts of digging to uncover its true value. It’s in an industry so hated that 99% of investors would immediately pass it by rather than look into it. And it’s in an asset class (REIT) that people generally own for income… and not only is the common not paying a dividend, they haven’’t paid dividends in several quarters on their preferreds and thus can’t pay a dividend on the common.

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