Buffett Small Cap Investing
When Disaster Strikes: PRXI

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By deadcat2
November 1, 2007

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By now many are probably PRXIed out;-), so I'll make this post short.

When disaster strikes, like buying into PRXI just days before its stock price drops 20-30%, it's definitely time to take a look at the original investment thesis. From my own perspective, the buy decision was predicated on earnings growth, not hidden asset value. The recent news strikes me as a classic example of hubbub and consternation that takes a bite out of an equity in the near term, but has absolutely nothing to do with its future growth in the mid- to long-term. Time may prove me wrong, but I consider the current price an even better buying opportunity for the following reasons:

1) Dynamic, scalable and profitable business model offering museum quality exhibitions around the world.

2) Business is showing tremendous growth over the past 2-3 years. Based on only the first three quarters, eps currently stands at $0.44, 83% higher than all of last year. Management guidance for the full year - with only one quarter left - remains at $0.68, representing yoy growth of 180% while the p/e has now dropped to 16 (based on a stock price of $11). Not often does a growth story sell at such a low multiple.

3) According to management, new exhibits are already expected to be introduced soon. Such exhibits are the lifeblood of a company like Premier and suggest a good story for the mid term (2-3 years).

4) The moat for Premier would probably be characterized as relatively narrow but again, for the mid term, probably reasonable. Premier has built a good collection of contacts and past experience with exhibit locations, museums, etc. which a competitor would not replicate overnight. Similarly, competitors would have to develop a stable of exhibits which also will take time and money.

This stock isn't for everyone and I'm certainly not encouraging anyone else to be a buyer, but for those who remain owners, it's always a good idea to recheck your thesis. Is it still intact? Does the recent news affect the value proposition based on your original thesis? I've considered the reports, read through all the links that others have generously provided, considered the substantial content of this thread, and still come to the same conclusion. I like PRXI. I still believe the opportunity for significant CAGR exists, particularly with my new cost basis.

Thanks all,