I first came across The Marketing Alliance in the 2009 1st quarter letter of the rather excellent, Chanticleer Advisors. After this holding was revealed, the folks at Chanticleer Advisors wrote up a number of articles and presentations detailing who TMA are, and what they do. So rather than regurgitate material that is far more expertly written than I could ever manage, I’m simply going to link to what they’ve written.
The Marketing Alliance – Buffett Group Presentation
The Marketing Alliance – A Micro Cap with a Network Effect Advantage
Interview with Tim Klaus – TMA President
Matt Miller of Chanticleer on TMA
Financial information for TMA.
Selected financial data.
- Market cap: $11,952,137
- Current price: $6.25
- Cash: $3,686,705
- Investments: $2,349,207
- Debt: $0
- Book value: $5,183,395
- Price to book value: 2.31
- Average ROE (5 years): 21.24%
- Earnings per share for Q3: $0.08
Positives
- High returns on equity: This is without a doubt, the stand out aspect of TMA. Also, as the business is not capital intensive, marginal revenue will be strongly income positive.
- Management seems shareholder friendly: Management have been highly receptive of suggestions put forward by Chanticleer (reducing equity exposure, share buy-backs, etc).
- Significant equity exposure on the balance sheet: A large part of TMA balance sheet comprises of equity investments. With the recent rise in the markets, TMA have been able to book investment gains.
- As TMA are only a facilitator to insurers, they are not bound to many of the restrictive rules and laws that insurers are subjective to.
Negatives
- This certainly isn’t a classic Ben Graham stock with a margin of safety (price-to-book is quite high). While there is no indication that the businesss won’t continue to perform, there is always a risk a competitor might emerge and put TMA out of business.
- TMA is about as “dark” as a stock can get. They do not file with the SEC, therefore executive compensation, insider ownership and a whole host of other information isn’t publicly accessible. The financial statements themselves are also a little vague; what do recievables, current liabilities, etc. consist of?
- Significant equity exposure on the balance sheet: This is both a positive and a negative. If a rising market will bolster TMA results, a falling market will impact them too. Another factor to consider is the lack of transparency in the degree of exposure that TMA have. The investment portfolio could consist of anything.
There’s no doubt that TMA is an interesting business with a lot going for it. While I haven’t purchased shares in it yet, I may do so if I can get them just a little bit cheaper. It will certainly remain on my watch list however.
Tags: chanticleer, maal, stock, The Marketing Alliance, value