What happened?
Shares of Boston Omaha (BOC 3.62%) are down almost 7% at 2:23 p.m. ET on a pretty bad day for most stocks. At this writing, the S&P 500 is down almost 1% as investors watch the debt-ceiling negotiations play out in seemingly slow motion in Washington D.C.
So what
At least a portion of Boston Omaha's sell-off is tied to the aforementioned negotiations over federal spending and debt. Boston Omaha is one of a handful of companies that issues few press releases, and it's been almost two weeks since anything of substance came out of the company.
But what we learned on May 12 when it filed its first-quarter results with the Securities and Exchange Commission (SEC) could have something to do with today's sell-off: the potential risk of holding what has become the gold standard of safe assets: U.S. Treasuries. According to its filing, Boston Omaha held almost $58 million in Treasuries at the end of March; that's well over half of its working capital.
Additionally, there are reports that an analyst at Wells Fargo has lowered their price range for Boston Omaha stock; it's not uncommon for a company's shares to move on that sort of news as well.
Now what?
Let's unpack this a little bit, working backwards with the news of an analyst price reduction. The interesting thing about this move is it wasn't a downgrade; the analyst retained an "overweight" rating on the stock. Even their lowered price target of between $28 to $31 is well above the stock price before today's sell-off.
Based on that, it's highly likely that this microcap stock is taking the biggest hit because of concerns that its balance sheet might not be as strong if we do see the U.S. government default.
There's some reason to be at least aware of this, if not a little concerned. If a default impacted its working capital, it could disrupt Boston Omaha's ability to meet its near-term financial obligations. Frankly, there is little risk of this happening, and it's not likely to pose a long-term threat to Boston Omaha. Let's be honest here: If the federal government defaults on its debts and our elected officials don't very quickly respond, we have bigger problems on our hands.
If you think Boston Omaha is on the right track (which I do), then consider this a buying opportunity.
