This article is excerpted from a letter by MOI Global instructor Jim Roumell, portfolio manager of Roumell Asset Management, based in Chevy Chase, Maryland.
On March 26th, RAM filed a Form 13D with the SEC encouraging the company to take actions that we believe are necessary and prudent to realize the value we believe is embedded in ENZ’s shares. We have analyzed and discussed our ENZ investment rationale in our two past quarterly letters, thus we will not restate the case here. RAM now owns 4% of the company. Below are a few highlights from our letter to ENZ’s Board of Directors:
If the Board acts responsibly, shareholders should be richly rewarded from the current depressed market price. We believe our investment rationale is sound, predicated on the multiple avenues the company possesses to unlock significant shareholder value. Our investment thesis rests on the simple observation that the company has “multiple shots on goal”, a cash-rich balance sheet, and a market price significantly below any reason- able sum of the company’s discrete assets.
The Board should take a careful and discerning look at the amount of capital and time required to execute its growth strategy, as well as assessing the probability of success as a stand-alone enterprise. We believe it’s likely that the company’s enviable product and IP portfolio would be better suited in a larger company’s hands, where Enzo’s promising AmpiProbe platform can go to market more efficiently and quickly. In reviewing the company’s long history, one cannot avoid noting that the company’s leading-edge IP assets did not translate into shareholder returns. Why will this time be different? The Board should consider the advice of Warren Buffett when he said, “Aesop Was Right…a bird in the hand is worth two in the bush.”
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The specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients, and the reader should not assume that investments in the securities identified and discussed were or will be profitable. The top three securities purchased in the quarter are based on the largest absolute dollar purchases made in the quarter.