Why I love CRBC - Citizens Republic Bank
February 28, 2011
– Comments (8) |
RELATED TICKERS: CRBC
Afraid of the baking industry? Afraid to buy a company with a stock price under $1? So is everyone else in this country. That's why you should be looking at (if not already invested in) CRBC.
A few months back i wrote about CRBC. It was then trading at .59 a share, had a fair market value of $1.20-1.4 and was just putting in place their plan to recover from their bad decisions that swept the nation. They said they were going to lose money in Q4. Guess what? They lost money. They say they're going to lose money in Q1 of 2011, probably not turning a profit until Q3 of 2011. Guess what will most likely happen? They're probably going to lose money in 2011, not turning a profit until Q3, maybe even Q4.
Why none of that matters:
Since i wrote about this company, the stock price has moved from .59-.60 range to .85. that is a about a 40% move. Guess what? it's still being offered at a price that is .46 times BOOK VALUE. That means, this company is not even trading for 1x what it's worth in terms of tangible book value. The price of this company should be double where it is today.
Everyone is screaming about Net Income... it's so low, it's negative, it's off..... blah blah blah. I don't even look at Net Income when i invest. Why? Because I deem it to be insignificant, and often times "played with" in a cheap attempt to "cook the books" on a per quarter basis. I learned this from listening to Warren Buffett. I used to think it was the end all be all.
Buffett basically said:
Net Income can screw with you; here's how. I run company X. we have Earning From Operations (a much better measurement) of 1 million a year. I took some cash and made some really poor investment decisions and lost 2 million this year. I now have a net income of -1 million. But my BUSINESS still EARNS 1 million a year. Am I in bad shape? only if i continue to invest like that every year. I should be shot. Example two: I run company x and we lost 1 million in Earnings from Operations. But i was slick, and i made 2 million in investments with some cash we had. So my Net Income shows that i Made 1 million this year? Is that accurate? Or is this really a terrible business with a brilliant investor handling the money? In both of these situations, ANALYSTS don't care, understand, or even consider. They simply regurgitate net income and think - oh man, this is terrible. or Wow, look at how great they are. Foolish.
I personally own over 30k shares of CRBC. I have a cost basis of mid .60's. Guess what? I'm still buying. As i free up more money from other investments i have made, i am buying more CRBC. Why? Well, it's worth double what it's trading at now. This company will eventually be worth what it used to be worth. When? In the future. For the last 20 years, CRBC was on the low side, a $20 stock. Will they get there again? Maybe, Yes. When? in the future. Well how long? Who knows or cares. It will be worth more in 2012 than it is now. It will be worth more in 2015 than it is in 2012. and it will be worth more in 2025 than it is in 2015.
The real reason my time line is FOREVER (and i mean this). CRBC used to pay $1.16 ANNUALLY in dividends. They did that from about 2000 - 2008 or so. When that comes back (and it will) I will make 100%+ back ANNUALLY in dividend payments. Remember, I only spent mid .60's for the stock. For simple math, I will get my 100% investment back, plus an additional 80% annually just for holding on to it long enough to receive this (if it's restored to 1.16 - probably not right away, but eventually). So, why is stock price not that much of a factor for me? because my time-line is forever. and in the future ( i dont know when) this company will back at it's levels of above $20 per share and it will restore it's dividend eventually raising it up back up to above $1.00. (100% of my investment is back at a .65 dividend, and from there, it's additional gravy).
For me, I plan on willing this investment to my children with one stipulation in the will: You will NEVER be allowed to sell this, and you must will this to your children with the same rules.
PS. I own CRBC in 3 different accounts. An IRA (tax exempt until i cash out, which is never), and two ROTH IRA's (mine and my wifes). (Tax Exempt, period). So i can't cash out for many many many years. (i'm 28 now). it forces me to make a long term decision with the money.
The first 4 rules of investing by Warren Buffett:
Rule #1 - Don't lose money
Rule #2 - Don't forget Rule #1
Rule #3 - Buy and Hold FOREVER
Rule #4 - Don't forget the "Hold" part of Rule #3.
The reason buy and hold "doesn't work" for most people out there; they forget the hold part of buy and hold. Stocks prices go up and down each day. if someone came to you and offered you 10k for your house, and it's paid off (no mortgage), and you feel it's worth 100k, are you going to sell just because someone blew up an oil field in Iran? Nope. Who cares? Wait until someone offers you 200k for that house, and you know it's worth only 100k to sell. Stay away from margin accounts in investing, and buy really great companies at fair prices and you'll never be "forced" to sell for a loss. Hold on to it until the price is so ridiculously high you can't bear it anymore.
I feel the same way about FBC (Flag Star Bank - currently building there, too). I will hold both forever. I will make a lot of money on both investments. You can, too. But don't cry to me because you decided to sell CRBC @ .5 because they "lost money Q1 and Q2 of 2011". No one forced you to buy, or sell for that matter. I'm just letting you know what i'm doing with my money. track it for a while. Be your own judge. If you don't like it, you won't hurt my feelings. If you do like it. Great. Just remember to hold it long enough to make it an investment, and not a speculation.
RSS Headlines
Fool UK