A tiny microcap on a tear
I found a stock a few years ago using a small-cap no-debt dividend yield screen, the same one that turned me on to OLN and GHM. It had been languishing on my CAPS watchlist for most of that time, but then I noticed a change in the tenor of its price movement and put it onto my CAPS for real, where it has netted me 31 points as of this blog entry.
The stock is called "Collector's Universe" (Nasd: CLCT) and it is a small company, $112m or so market cap. Most of their revenue comes from grading and authentication of collectibles: antique coins, modern coins, and cards. If you're a collector or hobbyist you know all about this: the coin or card comes sealed into a little plastic doohickey, with windows so the collector can look at his item without damaging it; and the non-counterfeit nature and the condition of the piece is recorded so that the item can be accurately valued for buying and selling purposes.
This company valued the second Honus Wagner baseball card a few years ago and gained some notoriety that way. Recently their business has become much more robust; some say, with reason, that this is a by-product of the gold craze currently going on. A lot of antique and modern coins are gold and a lot of collectors like to own gold in the form of collectible coins, for a variety of reasons; and CLCT is grading a lot of these coins.
Recent failed ventures have included an attempt to open a storefront and offices in Midtown Manhattan, which turned into a costly exit strategy; and an abortive attempt to enter the diamond grading business (the offices, near 47th St, were tied to this effort.) The New York diamond industry is a cartel and I do not know how they got the idea they were going to break into it, but they failed and have exited.
Despite these headwinds, they are growing revenue fairly consistently. Two key stats of the stock really stand out to my mind: they have no long term debt; and they are paying a fairly astonishing 11% dividend yield with a payout ratio TTM of only 37 per cent. Another interesting stat is their beta; the stock movement has very little to do with what the market is doing. I look for this statistic because it is not possible to make outsize gains without it.
They are, however, micro-cap in size, and you know you're in for a choppy ride when the CEO makes a point, on the conference call, of how their summer 2010 operations were influenced negatively (adding to backlog) by the retirement of a single key employee, a coin grader.
I found the company's strong balance sheet, recession-resistant market niche, consistent increase in market share, and strong dividend yield too attractive to ignore and recently accumulated a small real-world position in my Roth IRA (which is immune to the capital gains tax on dividends, eliminating noisome double-taxation.)
I would love for other Fools to take a good hard look at the stock and tell me their unvarnished opinions. I have learned so much from all the readers of this blog in the past and I really value the collective intelligence of the CAPS community.