As a partial homage to Oddball Stocks the excellent blog by Nate Tobik. I’m going to go over the concept of oddball stocks as well as talk about one of my favorite oddball stocks and maybe one of my favorite articles from Nate Tobik.
An oddball stock is a stock which is unusual or discarded by the market. By some standards it could be called, “special situation” investing.
One great example that I recently encountered happens to be one that Nate Tobik has already written up (several years ago) called the Mills Music Trust ($MMTRS).
Mills Music Trust
This is a trust whose sole assets are royalties on certain pieces of music. All royalties are finite and several of the royalties the company owns are going to roll off within the next 10 years. Notably a couple classic Christmas tunes make up a substantial portion of the income of which both go out more than 20 years.
The royalties have gone down over the years as some royalties have rolled off into the public domain but many will remain for the next 30+ years. Many, or more, of the songs are classic jazz songs that could conceivably become less popular over the upcoming years. I can see the Christmas songs having similar or slightly improving royalties over the next 20-30+ years. So the main question in my eyes in terms of seeing if this is an attractive investment is to figure out what the Christmas song royalties minus general expenses are and seeing what sorts of distributions an investor can expect over the next 30 years. Leaving the rest of the royalties as a margin of safety.
Assuming the Christmas song royalties stay the same or go up and expenses related to Sony administrating these royalties within my estimate (guesstimate) of 5-10% of revenue then investors can expect about $1/share for the first 20 years. A $1 dividend on a $22 stock isn’t very awesome considering the value of this trust could be near worth close to zero in about 30 years. Of course this is fairly conservative and ignores more than 1000 other royalties royalties.
General expenses have risen from 50k to more than 200k in recent years perhaps as apart of lawsuit expenses related to a lawsuit filed by the trust against Sony. If trust expenses dropped to something more like 100k for then that would increase distributions by a little more than 33 cents a unit.
One area of interest is that the trust is claiming that Sony has underpaid the trust by around 500k (a significant sum compared to the 277k shares outstanding). Another area of interest is that the stock is owned 28% by Paul McCartney (yes that Paul McCartney). In fact, an employee of McCartney’s holding company is a trustee of the company. I assign about a zero percent chance of this but an interesting thought would be if McCartney (or his estate) buys out the rest of the trust. They could use 100% leverage given the high current ownership (McCartney would just roll over stock) and it would readily be supported by the top two or three royalties. He could theoretically pay more than $30 a unit using debt at 5% interest and actually make more money per year than he currently is (assuming the current rate of about 800k).
Overall I’d say the current price is a bit too high to get excited about the trust now but at more like $15-16/ unit it would be a bit more interesting.