Another point is that in their latest report in 2024, they also wrote that they are probably not going to be profitable in 2025 (due to HQ move and owning to leasing moves), but regardless, this doesn't change the story much.
Good work on this write up, enjoyed the contents of this post keep up the good work.
Regarding Tandy, I think this a great business who dominates a niche that nobody really thinks about. The ideal net net candidate.
However, I think Tandy has been mismanaged for a number of years. I know folks get excited about the chairman and his fund and comes from value investing circles but they've seriously let shareholders down with the issues that this company has had from the inventory valuation issues which turned into late filings/delisting from the NASDAQ, and the excessive compensation for the last CEO (paid $1.3m last year i believe off top of my head).
I'm not sure what benefit shareholders have gotten paying a CEO 3-5% of the current market cap in compensation per year.
Regardless I would still buy a stock like this at NCAV or less. I don't know how confident I am that the chairman will find competent management to takeover, think shareholders at this point would feel better with looking for an outside buyer but either way this is a compelling investment.
Thanks for the kind words! I really appreciate it.
And yes, I think you’re right. Tandy is a solid net-net opportunity, but it’s not perfect. The business itself is strong, and the niche is defensible, but there’s definitely been some questionable execution over the years.
The CEO compensation, especially in a business this size, does feel hard to justify.
Stock Based Comp and Comp in general is high. Are these owners just paying themselves rent and double dipping on the rest of us. Just because they own 50% of the company doesn’t make them fully aligned if they’re also pulling salaries. I’d prefer an unpaid director or chairman to be the inside ownership as they ONLY get paid when shareholders get paid.
That’s an interesting take, I was thinking something similar especially when the gains from the HQ sales were immediately distributed to shareholders.
Anyways OP has made a great job bringing this company to Substack attention, I did look into it and also believe there is some value not fully reflected in the company as the liquidation value-market cap ratio seems interesting. However, I usually discount inventory to calculate liquidation value as, under a liq event, inventory is typically sold cheap and fast. For retailer that can mean selling inventory on hand at 20-40% of its value which would mean the current market cap would not be far off the current book value.
The above for me means there is not enough margin of safety, or any at all, however will probably keep an eye to see if the stock gets cheaper / margins recover in the future.
It could also be seen as a company divesting (shutting down stores, selling hq), paying its board and executives large special dividends and not re-investing a dime into the business. They could be quietly preparing to shut down the whole company based on what the story says.
Interesting take, you could have a valid point here.
It doesn’t paint that picture for me, though. As I mentioned, to me it looks more like the company is actively trying to optimize shareholder value, especially when you factor in the buybacks.
Also, a big part of their customer base is made up of recurring buyers, not just one-time hobbyists. And the business is still consistently profitable, which makes a full shutdown seem unlikely in my view.
Maybe they’re positioning for a potential acquisition, but even in that case, the business should be worth more than it’s trading for today.
That said, I could be wrong. Your point definitely makes sense.
Hi Noel, thanks for the take, interesting indeed. Where did you find this insider ownership? Because this is not what I get when I look into it, take a look at MarketScreener (https://www.marketscreener.com/quote/stock/TANDY-LEATHER-FACTORY-INC-120789525/company-shareholders/).
Another point is that in their latest report in 2024, they also wrote that they are probably not going to be profitable in 2025 (due to HQ move and owning to leasing moves), but regardless, this doesn't change the story much.
Yeah, that confused me at first too. Most online screeners seem to have outdated or incomplete data when it comes to insider ownership.
But in their latest DEF 14A proxy statement, the company lays it out very clearly themselves. You can find it here:
https://www.sec.gov/Archives/edgar/data/909724/000114036124022021/ny20022896x1_def14a.htm?#tSOC
Scroll down to the section titled “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.”
There, they break down insider and institutional ownership in full detail.
Noel,
Good work on this write up, enjoyed the contents of this post keep up the good work.
Regarding Tandy, I think this a great business who dominates a niche that nobody really thinks about. The ideal net net candidate.
However, I think Tandy has been mismanaged for a number of years. I know folks get excited about the chairman and his fund and comes from value investing circles but they've seriously let shareholders down with the issues that this company has had from the inventory valuation issues which turned into late filings/delisting from the NASDAQ, and the excessive compensation for the last CEO (paid $1.3m last year i believe off top of my head).
I'm not sure what benefit shareholders have gotten paying a CEO 3-5% of the current market cap in compensation per year.
Regardless I would still buy a stock like this at NCAV or less. I don't know how confident I am that the chairman will find competent management to takeover, think shareholders at this point would feel better with looking for an outside buyer but either way this is a compelling investment.
Thanks for the kind words! I really appreciate it.
And yes, I think you’re right. Tandy is a solid net-net opportunity, but it’s not perfect. The business itself is strong, and the niche is defensible, but there’s definitely been some questionable execution over the years.
The CEO compensation, especially in a business this size, does feel hard to justify.
I was eyeing them since the end of last year, but got no time to understand the business. Thanks for writeup.
I'm glad you liked it!
Stock Based Comp and Comp in general is high. Are these owners just paying themselves rent and double dipping on the rest of us. Just because they own 50% of the company doesn’t make them fully aligned if they’re also pulling salaries. I’d prefer an unpaid director or chairman to be the inside ownership as they ONLY get paid when shareholders get paid.
That’s an interesting take, I was thinking something similar especially when the gains from the HQ sales were immediately distributed to shareholders.
Anyways OP has made a great job bringing this company to Substack attention, I did look into it and also believe there is some value not fully reflected in the company as the liquidation value-market cap ratio seems interesting. However, I usually discount inventory to calculate liquidation value as, under a liq event, inventory is typically sold cheap and fast. For retailer that can mean selling inventory on hand at 20-40% of its value which would mean the current market cap would not be far off the current book value.
The above for me means there is not enough margin of safety, or any at all, however will probably keep an eye to see if the stock gets cheaper / margins recover in the future.
Thanks!
It could also be seen as a company divesting (shutting down stores, selling hq), paying its board and executives large special dividends and not re-investing a dime into the business. They could be quietly preparing to shut down the whole company based on what the story says.
Interesting take, you could have a valid point here.
It doesn’t paint that picture for me, though. As I mentioned, to me it looks more like the company is actively trying to optimize shareholder value, especially when you factor in the buybacks.
Also, a big part of their customer base is made up of recurring buyers, not just one-time hobbyists. And the business is still consistently profitable, which makes a full shutdown seem unlikely in my view.
Maybe they’re positioning for a potential acquisition, but even in that case, the business should be worth more than it’s trading for today.
That said, I could be wrong. Your point definitely makes sense.