Someone posted a comment on Twitter the other day that I find important as an investor:
I find myself spending probably 75% of my time on the public stocks that we already own, learning more about them by reviewing past earnings calls, conference appearances, news articles, etc. It’s like waxing the same spot again and again. I find it astounding how I can pick up one important tidbit or thread together multiple tidbits from difference sources the 2nd or 3rd time around versus simply reading something once and tossing.
B.Riley Financial is a business that I bought shares for us during the Dec / Jan ’21-22 mini-panic (mostly within tech). It’s an odd duck, with half of its revenue from a small cap capital markets / advisory business and half from balance sheet investments in odd old line companies (dial up internet, Magicjack, etc.) and securities. It doesn’t fit in a clean box, so it has little to no analyst coverage nor much investor interest. Never-mind it dished out $10 per share in dividends last year with the stock price between the $40-80 range. While unlikely to repeat in the near / medium term future (capital markets are effectively shut for small caps), the next year may be another productive one for the company, albeit strategic versus peak cash generation.
I was re-listening to their Q4-2021 earnings call and the following stood out to me in the CEO’s parting words:
Well, great. Thank you, everybody. I guess I would close by saying with the recent market dislocation, this is where we gain market share, and this is where we find opportunities, and this is often where we will find great people that might be looking for a more diversified platform or a change, and this has always been the best time for us. So while you might take a little bit of short-term pain in your Principal Investments or our underwriting might be a little slower. If you go back in time, this is really where we’ve been able to make a big difference in our business. So that’s the plan, and we appreciate your support.
RILY Q4-2021 Earnings Call
Strategically it appears that RILY has filled all of its self described product gaps:
…look, we’ve been a capital markets shop. That’s been our strength. And so there were three areas that we thought needed to really be addressed and because we could really leverage what we’ve built, [buying a platform for] M&A was a big one. [Buying a platform for ] Asset Management was a big one, and [hiring a leader for] fixed income and credit was the big one. And so we’ve got all of those pieces in place.
RILY Q4-2021 Earnings Call
Having a comprehensive capital markets business (equity and fixed), private and public M&A practice, restructuring practice, retail liquidation practice, along with a balance sheet to perform merchant banking transactions – paired with an opportunistic management approach seems like a machine that may have a better foundation than in the past.
Disclosure: We own shares of RILY, this is not investment advice. Do your own work.