Is there anyone else in Fooldom who owns this stock, or am I alone on this one?
Aye there's at least 2 fools attracked to HAMP. I recently increased my position on the anouncement that they intend to divest themselves of the real estate venture. As I recall they used about 25 mill of cash flow from the apparel business to get into the real estate venture. If they just break even and use the money for stock re-purchase,it could bode well for share value. However, if they invested in commercial real estate they may take a bath. Any thoughts?
If they just break even and use the money for stock re-purchase,it could bode well for share value. However, if they invested in commercial real estate they may take a bath.Their RE is almost exclusively residential, with the most suspect being the property they bought in Eastern Europe and the renovated apartments over an old Woolworth's in Charlottesville. I think it's highly likey that Kuttner purchase some or all of the RE directly from the company, probably using some of his HAMP shares as consideration. Legg Mason will probably be the ones to shop the rest of the book and give the fairness opinion on the valuation.I wrote HAMP up a couple of years ago on another site, and while the original write-up has become a bit dated, the follow up thread is fairly informative. You can read through it with guess access to the site -- here's the link:http://www.valueinvestorsclub.com/guests/view-thread.asp?id=380&more=dtrue
Well, you lived up to your namesake on this one, Howard. That sale came to pass very much as you described. Brilliant.The sale is a good thing too, in my mind, because it un-muddies the picture and makes the company value easier to project.I'm happily continuing to hold this one. The company is pleasantly boring to follow as an investor, generates cash, and does nice things with the cash. The CEO's speeches are almost sleep inducing. Blah-blah, cash flow, blah-blah, share buyback, blah-blah debt retirement. Blah-blah growing equity per share. Ho hum. ;-)I hope they can meet all their challenges as well as they have in the past.--- Steve
The CEO's speeches are almost sleep inducing. Blah-blah, cash flow, blah-blah, share buyback, blah-blah debt retirement. Blah-blah growing equity per share. Ho hum. ;-)Take a trip to Carolina and you'll see that his speeches tend more toward boisterious jokes colored in thick German accents than the buyback and cash flow variety. I think the ultimate value of the RE deal is still somewhat ambiguous, all things considered. Getting rid of the RE is certainly a move I strongly supported, but it's always difficult to assess the fairness of a conflicted transaction like this, fairness opinion or no fairness opinion. The price paid looked low at first glance, but because Hampshire all transferred $11m+ of debt associated with the RE as part of the deal, it's a bit more palatable. The stock consideration is also a question mark. On the one hand, I think repurchases at these prices continue to be good allocations of capital (though I'd rather have gotten my wish at lower prices) and I'm very happy to see what is essentially a 17.5% tender, but the terms of the deal essentially increase the magnitude of the conflicted by lowering Kuttner's (et al.) position in Hamp while also purchasing asset from shareholders. Still, Kuttner reteains a very significant position (~1m shares, over $30m) in Hampshire and this comes as no surprise. When management bought the flailing Hosiery business from shareholder several years ago, they actually overpaid for a terrible business. Overall, I do see it as a net positive -- and probably a significant positive -- that I've exchanged my stake in their far flung RE ventures for a bigger position in the core business (and attendant cash), but it's a good idea to stay pretty skeptical about these kinds of transactions.A rapidly ballooning issue with Hampshire will now be capital allocation. The should end this year with a significant net cash position -- maybe as much as $70-$80m -- though some of that will depend on whether the summer margin squeeze has lightened with improved retail sell throughs. They have always maintained the inclination to keep a certain level of liquidity ready for potential apparel acquisitions, which they have evaluated regularly over the past 18-24 months. To their credit, they haven't jumped at some of the arguably questionable prices paid by people like VF, Kellwood and maybe JNY, and their one apparel acquisition in recent years (Item-Eyes) has been a substantial success. But they also haven't had such a significant cash position, and I would be disappointed if they didn't increase repurchase from current nominal levels (ignoring the RE deal) or institute a dividend if attractive purchases remain elusive. I especially hope they don't make a war chest-induced, as opposed to value-induced, acquisition, though they haven't given me any reason to think they will.
Thanks, I agree that the real estate deal is conflicted. I can only *hope* that they're conducting honest business on the real estate. (This was also true before, through.)The remaining shares in the hands of the CEO do seem to ensure his ongoing interest in my interest.The share repurchase has pros and cons. The pros are clear, the only con I can think of is that the float on the company is already so small that it keeps some investment bodies out. Maybe a share repurchase followed by a split would be nice.Hampshire's deliberate approach to acquisitions seems to me to be Buffet-ish. I'm very leary managers who build empires at the expense of shareholders, and Kuttner and company seem to be avoiding that approach. I hope they can keep up the self discipline. I hope the brand partners continue to do well also. The stock price has been behaving really nicely. I still don't great downside risk in the stock price, though.--- Lover
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