Tim Eriksen, “The Road Less Traveled”

By Travis Johnson, Stock Gumshoe, April 3, 2014

These are my notes and instant reactions from a presentation at the Value Investing Congress, the notes below might contain errors, paraphrases, incorrect quotes, or misinterpretations.

Tim Eriksen of Eriksen Capital Management also presented at the Value Investing Congress a year ago, and his idea (Internet Bancorp, INBK) seemed pretty interesting at the time. It has done pretty well since, up about 50%, but that’s far short of its much larger competitor, Bank of Internet (BOFI), a stock the Fool subsequently touted and teased pretty heavily in 2013 and which is up close to 150% in the same time frame.

Both have done better than the market, and better than the average bank stock (both are very small for their sector, INBK is less than $100 million and BOFI about a billion, and both trade at higher multiples of book value than most banks and have been seeing their stock price grow far faster than their book value).

That’s about all I know about him… so what does he have to share with us today?

He generally likes to look at areas where big investors aren’t playing — spinoffs, microcaps, unlisted stocks, etc — that’s where he thinks there’s some value. And he notes that Warren Buffett also focused on these kinds of stocks in his first decade or two, often investing in stocks with sub-$10 million market caps (that’s tiny, even inflation adjusted).

His idea today: Awilco Drilling, trades in Oslo (at AWDR) and over the counter (AWLCF in the US). UK based drilling operator, 49% owned by Awilhelmsen, a big shipping company. The parent sold Awilco Offshore in 2008, got back into the market just a few years ago and they operate two mid-water semi-submersible drilling units — they bought them from Transocean (RIG) when they merged with GlobalSantaFe. They got a bargain price in 2010 after the first deal collapsed in 2008.

January 2013, started trading OTC in US, payed first dividend in May 2013, sold debt last month to refinance their debt at lower interest rates and add to cash balance.

Price around $21, market cap about $600 million. Cash of about $80 million, debt of $130 million.

Earnings and dividend of about $4 per share, 20% yield and not that heavily levered. They aren’t paying out all of their depreciation, but they are paying out most of the cash flow.

Performance ...

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