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Posts Tagged ‘Fansteel Inc (OTC:FELI)’

A guest post today from Jim Hodges on Fansteel Inc (OTC:FELI). Jim is a deep value investor who also invests in Philip Fisher-style growth stocks when he can’t find value in Ben Graham NCAV’s. At 19 he was the youngest registered insurance agent in North Dakota’s history. He reports that he’s had a monstrous 683.44% return thus far for 2009, a 27.85% return for 2008, and returned 11% in 2007. He tells us that he was one of the original followers of this site, and presently operates the ValueInvestorToday website. Investing is as much a passion as music. He’s a full-time musician who has toured with Rascal Flatts. Here’s his take on FELI:

A few times I have been asked how do I go about selecting a stock for investment purposes. This dissertation is to explain in a condensed fashion how I do this as well as to fully prove to proponents of the Efficient Market Hypothesis that their theory that stocks are always correctly priced is erroneous.

The company: Fansteel Inc. (OTC: FELI)

Fansteel recently announced an amendment to effect a 7,500 to 1 Reverse Split of all issued and outstanding Fansteel Common Stock.

Fansteel does not need a proxy to go through with this motion. All they needed was an agreement from the major shareholders of the company.

The proposals were adopted on September 3, 2009 by the written consent of the holders of 2,388,730 shares of Common Stock, representing a 70% interest in the issued and outstanding Common Stock and were submitted to the Secretary of the Corporation on or about September 4, 2009. In other words, nothing is standing in the way of the Reverse split from happening.

The Effective date of the transaction will be 20 days following the distribution of this Information Statement, as required by applicable federal securities laws. This information was distributed on September 9th, 2009 making the transaction to occur on or after September 29th, 2009.

Fansteel’s amendment is for the purpose of diminishing the interests of their current shareholders. They want more control of the company and most likely are interested in taking the company private.

So, what’s in it for me?

For every shareholder who owns fewer than 7,500 shares before the Effective Date (September 29th, 2009), each shareholder will receive $0.35 per share for each share they own and no longer be a shareholder of the company. For each stockholder who owns 7,500 shares or more before the Effective Date will receive 1 share for each 7,500 it held before the Effective Date and $0.35 in cash per each such share that would result in a fractional share.

Currently, Fansteel is trading for $0.21 per share which is a 66.67% discount to what a shareholder will receive.

Are the markets efficient? I think a reasonable person can answer that question with logic for himself.

Why am I sharing this information and not purchasing shares for myself? Taxes are important in the overall valuation of your aggregate returns. I am currently 100% invested into companies that I believe are in a financial sound position and I have no interest in paying at least a 15% tax to take them out. This investment is a simple one and one that someone who isn’t fully invested, such as I am, to consider.

[Full Disclosure:  We do not have a holding in FELI. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]

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