Dual Class Voting Shares

Edwards highlighted several stocks that trade at discounts that happen to be dual class voting structures.

(1) Farmer Mac (AGM), Trades at 0.5 Tangible Book Value (TBV) and at a 5 PE

(2) Skechers (SKX), Trades at 1.1 TBV and a 7 PE

(3) Century Bancorp, Trades at 0.9 TBV and at a 10 PE

(4) Tyson Foods, Trades at 2.08 TBV and trades at a 8 PE (Adjusted NI to take out goodwill impairment in Q3)

(5) Magna International, In 2006 trades at a 1.32 TBV and a 14.6 PE

(6) Ford has historically had a poor valuation compared to its peers in terms of PE and Price to Book. Especially at the beginning of the decade when Ford would be valued at 6 to 7 times earnings when Toyota was valued at 30 times. This has a lot to do with the dual class voting shares in Ford.

Expert stock picker and CEO of The Markets Are Open, Allan Edwards notes that while some of these stocks appear cheaper than other, all of them have a similar trend. Edwards valued each of these stocks about double to triple their current stock price. He feels that if Skechers, or Century Bancorp where to change its voting structure the stocks would skyrocket.

Tyson Foods appears much more expensive than the rest, but in actually it is an extremely cheap stock as well is Magna.

The popular belief Edwards noted is that these trade at cheap valuations because shareholders feel management will screw up the company if left to their own doings. He said he would have full confidence in a management team with dual class voting shares. His problem is in what is actually owned by the investor.

When you own a dual class share you don't own anything, you have a stake in the companies future profit but you have no say in how you will get it. This creates a valuation gap. The shares are valued on what it actually is.