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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Robohogs who wrote (47063)	3/16/2012 9:27:47 PM
From: Difco	Read Replies (2) \| Respond to of 78715

Jon, I understand your point and probably once shared it, but I think in this case there are few items going DIT's way. 1) In the last 5 years net debt represents about half of the '05 level and book value has grown exponentially and consistently from negative to over $40 million. If you have time, I encourage you to read through the Chairman's annual letters, where liquidity and low debt have been focus points. Additionally, I think it was in '09 when the company redeemed convertible preferred shares at a discount - at the time they felt strongly not to have dilutive shares out there threatening the shareholders. I've never met the CEO, but he strikes me as what Jim Collins would call a "Level 5 leader". 2) If you look at a map of DIT's distribution area, you would see that it is primarily focused in the Midwest - "Serving Middle America" begins the 2011 annual report. As bullish as a person can be on railroads, in this area of the country trucking has advantage of reach. Think of it like this; being a refiner in the Northeast is unenviable position, but in Cushing, Oklahoma it's a wonderful business enjoying healthy margins. Here's the list of DIT's distribution centers: Bismark, North Dakota Crossville, Tennessee Omaha, Nebraska Quincy, Illinois Rapid City, South Dakota Springdale, Arkansas Springfield, Missouri If these aren't places you are excited to go, so would the competition. In 2010, DIT acquired Discount Distributors for approximately $4 million, expanded its reach and added $60 million of sales. 3) One thing that we didn't mention is that 72% of their revenues are from cigarettes, which face high excise taxes - this is the one item that will be a drag on the business. Finally, one question keeps coming back to me: "Why would a micro cap company helmed by a private equity guy distribute freely its annual report through the WSJ annual report service?" Difco