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Barrett Business Services, Inc. - The Missing Link



April 12, 2009 – Comments (2) | RELATED TICKERS: BBSI , C , MSFT

I read an article on The Motley Fool site the other day titled One Outrageously Cheap Stock. The article was written by Tim Hanson, who writes lots of articles for The Motley Fool.


The thing that caught my eye about the article was the missing link. Mr. Hansen's article was written to attract subscribers to one of the newsletters at The Motley Fool, Hidden Gems.

Before I get tons of flames, let me say that I am a subscriber to one of the other Motley Fool newsletters, Stock Advisor, and while the newsletter is very well done, I find it sort of the same old thing.

Anyway, this link think made me curious, since it's the link thing that gets the articles picked up by the news services of the web, and it is the clicking on the link thing that gets TMF paid.

What was missing, was something that should have looked like this. Barrett Business Services, Inc. (Nasdaq: BBSI). Yet here was an article that hightlighted a TMF Hidden Gems company, a company in which the author of the article owns stock, and yet, no link.


At first I found that to be very odd. Why TMF would not support a promoted company with a link. Then I realized that the other links in the article were far more likely to be clicked on than the link for Barrett Business Services, Inc.

I mean to many investors, information about Cisco Systems (Nasdaq: CSCO), Microsoft (Nasdaq: MSFT), and Citigroup (NYSE: C) is far more important than information about Barrett. So the odds are far better that a reader will click on one of the other links, instead of Barrett, meaning the odds are greater that the TMF web traffic count will increase, not to mention all of the other things that the web clicking world does.

But I was curious about Barrett, a company that I have on my watch list with reasonable value estimate of $21.85, based on the company's latest SEC Form 10-K for fiscal year ending December 31, 2008.

So being curious, the first thing I did was scan the company's latest SEC DEF 14A Proxy Statement filing.


As an aside, I believe that the long-term success of an investment in a company comes down to three things. Buying the company's stock with a margin of safety, the transparency of managment, and the entrepreneurial spirit of management.

While I can get a sense about the abilities of management reading through a company's 10-K, for me it's the 14A that provides the greatest insight into management.

For example, Mr. Thomas J. Carley is a director. Mr. Carley is listed as a Co-founder of Portal Capital, an investment management company. Yet the only website I could find for Portal Capital was in Cleveland, Ohio, and Mr. Carley's name was not among the principals of that particular firm.

Another of the things that made me wonder was that Director Roger L. Johnson and Director Ljn L. Justeseen are cousins. Nothing wrong with that of course, and the 14A did disclose that fact. But what I found strange was the name Sherertz, as in Director and President and Chief Executive Office of the company, William W. Sherertz.

The 14A listed a Mr. William W. Sherertz as controlling 27.3% of the outstanding shares of the company, while a Ms. Nancy B. Sherertz controls 8.2% of the outstanding shares of the company. It is noted that Mr. Sherertz's shares include..."10,500 shares held by Mr. Sherertz’s wife, 91,479 shares held by Mr. Sherertz for his children, and 17,390 shares held by him for his niece, as to each of which he shares voting and dispositive power."

Why is any of this so odd?


Well to me the name Sherertz is not a very common name. To be honest, until reading the company's Proxy Statement, I had never heard of the name. Yet according to the 14A, ..."Nancy B. Sherertz and William W. Sherertz are not related to each other." Wonder what the odds of that are?

One of the other things that a 14A does, is present all of the shareholders of a company the right to re-elect company officers, as provide the right to vote on matters requiring approval by a company's shareholders, such as changes in executive compensation and approval of stock incentive plans.

The Barrett proxy statement is no different. The company's upcoming annual meeting, includes an opportunity for all company shareholders to elect directors and to vote on the company's 2009 Stock Incentive Plan.

Simply put, the directors want the approval of the shareholders to dilute the value of the existing stock shares by adding 1,000,000 to the company's stock incentive plan, in order to recruit and keep the best and the brightest.

From the company's 14A...

"1.2 Purpose. The purpose of the Plan is to promote and advance the interests of Corporation and its shareholders by enabling Corporation to attract, retain, and reward key employees, directors, and outside consultants of orporation and its subsidiaries. It is also intended to strengthen the mutuality of interests between such employees, directors, and consultants and Corporation’s shareholders. The Plan is designed to serve these purposes by offering stock options and other equity-based incentive awards, thereby providing a proprietary interest in pursuing the long-term growth, profitability, and financial success of Corporation."


Personally, I think it's all a large bunch of crap, and were I a CEO the deal would be simple. Work hard and contribute, you have a job and an annual bonus. Sit on your stones move the same piece of paper from one side of your desk to the other, you're gone.

And that would be for all of the suit people, not just management!

Look, I'm not saying there is any smoking gun with the management of Barrett, and certainly in scanning the company's 14A, there is nothing that appears out of the ordinary, although I would like to dig a little further into any relationships between the company and The Royce Funds since they control 13.6% of the company's outstanding shares. But that's more of a curiosity than a concern.


As I said, it's the little things that mostly attract my attention.

Why do birds sitting on a wire mostly face the same direction? Why do the vast majority of guys button their shirts starting at the bottom? Why do a guy's pants hit the floor when he hits the can?

And why wasn't there a link thing to click on in the article Mr. Hanson wrote?

If I can ever separate my pants from my shirt and get out of this extremely confined space, maybe I can find an answer to that question.

Until then I think the burning question remains. Why aren't the two Sherertzs related?


2 Comments – Post Your Own

#1) On April 13, 2009 at 12:39 PM, Scott479 (< 20) wrote:

This was a very high quality post-thank you for contributing to the value of these boards.

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#2) On April 13, 2009 at 2:09 PM, wax (< 20) wrote:

Thanx Scott...I think writing about investing should be fun.


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