Wednesday, August 10, 2022

Keeping the Faith in BDRL

I seek stocks at the bottom: fallen and forgotten.  Company problems and perception issues push them down with eventual convergence to a single question: will they survive?

Blonder Tongue Laboratories (BDRL) has no shortage of issues but with a market cap of $1.6m and the stock at an all time low, I'm a buyer.  

I've told this story before with TCCO.  Bad news and poor results drive the stock down.  Investors get fed up or bored and sell out at any cost.  It's understandable because who wants to hold half dead crap no one has ever heard of?

I like to go where others won't.  Results will only be different if the inputs or process are different.

Look at this long term chart of BDRL.  The stock is at a bottom.  Those highs of the 90's showcase the possibilities and highlight upside vs downside.  What if they recapture the magic.  What if the new leadership punches that magic ticket and the product shift takes hold.  This is what's always running through my mind.  What if...

Here's the last 10 years.  I've bought and sold this stock a couple of times.  First buying in early 2016 just around $0.40 and selling out in those spikes you see around 1.50-2.  

And the past year.  I was completely out of the stock until it dropped down to a dollar in Oct 2021.  I've been buying ever since as it continues to fall through support, now sitting at $0.12.

What a drop.  On Dec 10, 2021 the company announced "NYSE Regulation has determined to commence proceedings to delist the common stock..."  The stock gapped down 30% immediately then 6 months later opened 40% down as BDR put out a press release confirming the move to OTC would happen in 3 days.  

But BDRL has not changed anything in the way they file.  They still put out 8k's and form 4's and quarterlies.  They trade on the OTCQB tier which requires an audit.  They even still do quarterly conference calls with one scheduled 5 days from now.  I've been buying.  NYSE vs OTC is not worth that drop.  It's the same company. 

Some numbers:  
  • 13.3m shares outstanding
  • market cap $1.6m with latest stock price $0.12
  • book value $2.4m
  • TTM revenue $15.8m
  • TTM net income -$0.65m
    • without PPP loan forgiveness stuff this would be closer to -$3m
Blonder Tongue is losing money and the latest 10Q spells out the risk, "there still exists substantial doubt about the Company’s ability to continue as a going concern."  But how many 12 cent stocks hold quarterly conference calls?  This website here does not look like a $1.6m market cap to me.  

The company is trying to turn it around.  The CEO started in 2018 as did the CTO.  They got one new board member in 2018 and two others in 2020.  In Dec 2021 the company adjusted executive pay with 5-10% reductions plus 5-10% coming as stock.  Starting in 2019 the president's letter inside the annual report began referencing the efforts:
"the Company secured two rounds of senior subordinated convertible debt financing, resulting in $1,000,000 of additional capital. These investments came primarily from members of our Board of Directors and senior management team"

"Beginning in mid-2019 the Company began a series of changes to our organization, expenses and structure, in an effort to improve our cost-efficiencies and reduce operating expenses, while concurrently preserving our ability to implement our strategic plan and operate our U.S.-based manufacturing functions"

"In January 2020, the Company began implementing a strategic plan to improve operating results and increase shareholder value. This plan consists of:

○ Adapting operating expenses in line with expected revenue and income levels

○ Focusing R&D on short-term high confidence opportunities with compelling ROI

○ Expanding sales and marketing efforts directly to service operators

○ Streamlining manufacturing operations and simplifying product offerings, and

○ Increasing gross margins."
I imagine the company will have to raise money somehow.  They've been adjusting loan agreements and arranging financing.  They are coming out with new products and shifting around the organization.  

With this stock I see a single question: will BDRL survive.  Either they go into bankruptsy or not.  The company has been around for 70 years and publicly traded almost 30.  My bet is the stock trades considerably higher at some point over the next 5 or 10 years.  

disclosure: long BDRL

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  1. Good article. This is exactly the type of stock I look for as well. Beaten down but the same company before delisting. I have direct experience with this equipment in one of my prior jobs and it's legit in the A/V industry. Hope they can recapture some of that market presence that they had before.

  2. Makes sense as an investment with option-like characteristics. I wonder, given the uncertainties and risk of this situation, what percentage of your whole portfolio have you made it?

    1. it's a little less than 1% right now. I'd like more but got impatient and wrote it up and don't have a lot of spare cash. I'm down a lot since as I said I started buying around a dollar so at cost it would be a little more than 2%.

      You can see my portfolio as of a few months ago here:

  3. Hi, do you do any kinda of value appraisal for this type of investment? Like do you have any valuation for the business?

    Best Regards,

    Jorge S√°

    1. Well my main valuation here is I think it's worth more than the current price. Beyond that I will wait and see. It's hard to put a number on something like this since since the outcome is not clear. I think it's either a bankruptcy or a big win

  4. Whats your estimated chance in percent this investment turns into a winner?

    1. I don't know that. I suppose you can infer my feelings based on my portfolio sizing answer above

  5. I think it is a good stock for 12 cents. But for the current 19 cents it is rather expensive. MC is slightly higher than book value of 2.4 Mio., they did record an operating loss of 2.96 Mio. in 2021 (and in prior years) and have relatively high debts. The Business is not so exiting and gives rise to little growth imagination. I like the chart.

  6. forgot to mention the BDRL "review of strategic alternatives" press release they put out in Mar 2022:

    I don't know what will happen but it's another piece of the pie. They are trying. On the conf call the other day they said a lot of discussions have been had as a result of this announcement, with some still ongoing. who knows

  7. These blogs seem to follow a very similar strategy and cover the smallest value stocks. The difference is that they cover Polish (translation required) and international stocks:

    1. thanks here's another new one: