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Shareholder activism is a tried and true method for generating outperformance in an investment portfolio. One company that may be in need of a shareholder activist is Bexil (OTC:BXLC), which holds millions in cash on its balance sheet, and has no operating businesses. Bexil management has spent the last three years leisurely looking for an operating business to purchase, protected from the market vicissitudes by its high stock ownership in the company.

Prudence is always wise before buying a business, but it would seem that nearly three years is enough time to make a decision or return the cash to shareholders and close up shop. The book value of Bexil at the end of the second quarter ending June 30, 2008, was $43.74 per share, and with the stock now trading at $24 per share; the company could liquidate and pay out its cash hoard to investors. (To learn more, read Digging Into Book Value.)

How Activism Works
One legendary, some may say infamous, shareholder activist is Carl Icahn. Icahn has led well-publicized battles against Yahoo (Nasdaq:YHOO) to get it to sell out to Microsoft (Nasdaq:MSFT), and against the management at Motorola (NYSE:MOT) to force them to sell some of Motorola's businesses. (For more on Icahn, read Can You Invest Like Carl Icahn? and The Greatest Investors: Carl Icahn.)

Another activist is William Ackman of Pershing Square Capital Management. One of his most recent targets was literally Target (NYSE:TGT). Ackman amassed a large stake in the company with the goal of forcing Target to sell its credit card portfolio and engage in some transaction to monetize its real estate.

Sold Out
In April 2006, Bexil sold its 50% interest in York Insurance Services Group, its only operating business, for $39 million. The company has since promised every quarter in its 10-Q that it is diligently working to find a business to buy with the funds. The requirements that the company has set out include:

  • A proven track record with demonstrated earning power.
  • Sales between $10 million and $50 million.
  • A seasoned business with solid customer relations.
  • Good return (at least 15%) on equity, little or no debt.
  • Solid management must remain. Audited financials required.
  • It's particularly interested in a spinoff from a larger company.
Bexil has always been under the radar as a micro cap company with no analyst coverage. This became even more pronounced last year when the company elected to deregister from its Amex listing and trade on the over-the-counter Pink Sheet exchange.

Ever since the Sarbanes-Oxley act was passed in 2002, it has become much more expensive for public companies to comply with auditing and government disclosure requirements. Some companies have elected to delist their share from the NYSE or AMEX and trade on the pink sheets or OTC Bulletin Board exchanges, where disclosure requirements and costs are much less. Other companies that have done this recently or are in the process of doing this are Capital Properties (AMEX:CPI) and Kaiser Group (OTC:KGHI)

Family Control
The Winmill family exercises significant control over Bexil, as Bassett Winmill, the chairman of the board, and Thomas Winmill, his son, and CEO and president, control 40% of the stock, according to the final proxy filed in April 2007.

This is not the only stock that the Winmill family controls. They control three other public companies to varying degrees:

  • Foxby - a closed end fund
  • Winmill & Co. (OTC:WNMLA) - the manger of the Midas Fund
  • Tuxis (OTC:TUXS) - another closed end fund that owns real estate in Dutchess County, New York
Bottom Line
It's time that shareholders spoke up. Bexil holds $39 million in cash and has no operating business. It has been looking for something to buy for three years and if it can't find anything, it should return the cash to its shareholders.

For more about shareholder activism, read Activist Hedge Funds.

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