15 May ADD – Dundee Corporation DC.A, TSX
Posted at 18:07h
ADD – Dundee Corporation DC.A, TSX
I added 3000 shares of Dundee Corporation (DC.A) to the portfolio’s existing 3000 shares (2.4% of the portfolio). The average cost is now just over $4.00 per share and the shares trade at $3.41, near where the additional shares were purchased. I’ve owned Dundee from time to time over the years, typically buying when the shares have traded down. This time around, Dundee is headed by David Goodman, the son of the founder, Ned Goodman. Ned was a legend and most investors trusted his judgement, even though temporary set-backs occurred (as they always do). In the end, everyone made money with Ned…what’s their not to like? Unfortunately, the verdict is still out on David.
Reading through the Q4 2016 earnings release is painful. It’s hard to imagine a firm losing more money in more investments than Dundee. The list is long and too long for me to catalogue here (you can find the report here:http://dundee.financial/dc/-/media/DGC/DC/20161231-DC-MDA-and-FS-COMBINED-Web-Version.pdf
or for proper torture, listen to the conference call). Anyhow, net result is the stock is down 90% over the past few years. Since selling their $500 million in Scotiabank stock (received when they sold Dundee Wealth (ie, Dynamic Mutual Funds) in 2013, they’ve basically thrown money out the door. Looking at things now, DC.A, with a market cap of about $200 million, debt of $60 million and “Preferred Shares” (which I consider Debt because it is in front of me, the common shareholder), of another $210 million, the whole shebang is available for under $470 million. In addition to the heavy and ongoing losses in every single one of their investments, the market is also concerned that the business required about $35 million per year in order to pay interest and preferred share dividends. $35 million they aren’t earning. Which means Dundee will need to borrow to pay the interest. Despite all of this, I am buying a bit more. For the $470 million, you get 20% of DREAM, a large Condo and Residential Developer (worth $90 million), 20% of Dundee Precious Metals (a mining company), worth $80 million, $25 million in various real estate developments in Croatia, Cuba, etc., $40 million in Dundee Securities, $20 million in Osisko Mining, $50 million in debt securities held, 37% in PARQ Holdings, an 800 room hotel being built in Vancouver. Other assets include a food processor, assets in mining and energy in Africa and Latin America. Dundee has invested hundreds of millions, however, the ultimate value of these assets are up for debate.