IMAX Corporation: An Investment Case

This afternoon we at RGA Investment Advisors published our investment thesis on IMAX Corp (NYSE: IMAX).  The report was featured at Manual of Ideas' Beyond Proxy, and I've also included an embedded PDF available for download below.  

We look forward to any additional thoughts, critiques, and/or ideas about our thesis.

IMAX Research Report by RGAInvestments

A Kevin Douglas Update

A few commenters have pointed out the extent of the American Superconductor losses, and they are vast: Mr. Douglas has lost somewhere in the neighborhood of $220 million over the past two years in this position.  The loss is real, and absolutely impacts his performance over the past ten years.  That being said, it’s most likely not nearly as bad as the sticker shock number suggests, considering he first purchased the stock in the single digits in 2006, and did sell 20% of his holdings during 2008 and 2009, at prices double what he first paid, before piling back in during 2011.  Have no doubt, I clearly recognize that the man lost a bunch of money on this investment, particularly of late.  Yet still, what is most impressive is that DESPITE the loss in AMSC, his outstanding gains on Monster/Hansen, IMAX and Westport combined are well in excess of his losses in AMSC, and those are just three of his investments. 

Let me further add that I under-calculated his stake in Monster/Hansen in the original post, as the numbers quoted were based on his personal stake, held in his own name, not additional shares purchased for the Douglas Family trusts, and other family members for whom he invests.  The losses in AMSC are reflective of these other beneficial holders as well, and as such, this greater gain helps provide more context to the AMSC loss.  With this new number on MNST, Mr. Douglas’ initial investment in Hansen was closer to $950,000 and total gains were at minimum $120 million, and realistically more like $150 million considering he locked in some profits during the company’s initial surge in 2006.

Further there remain several significant gains that I glanced over for the purposes of this writing.  One substantial gain was his ~14.5% stake in Rural Cellular Corporation, which he accumulated primarily in the single digits, with buys up to $20.  In 2007 the company sold itself to Verizon for $2.67 billion, or $45/share (the deal closed in 2008).  At the very least, he cashed out $387 million on an investment that was no more than $150 million.  I am fairly certain that I am overstating his initial investment in the company, however I cannot track down an old price chart on Rural Cellular in order to more accurately calculate a cost basis.  I only know dates and filings. 

But I digress.  It is unquestionable that Mr. Douglas has made massive amounts of money on his investments, it’s simply impossible to calculate a) how much capital he was working with; b) what his cost basis was in most investments; c) if he made any investments that did not require SEC filings.  For these reasons, building a composite performance number is in my view, unnecessary to understand the magnitude of Mr. Douglas’ gains and his investment track-record.  Further, let me make explicitly clear that my intentions in writing about Mr. Douglas were two-fold: first, to deliver some accolades to a man who unquestionably has built an outstanding track-record; second, and most importantly to me, to share some of the insights I have gained from my attempt to back into his investment thesis for 10 of his investments, 8 of which were successful, one of which is a failure as of today, and another which in my opinion remains to be seen.  There is much to learn from the process Mr. Douglas undertakes, even when presented with a losing outcome on an individual investment.