Done with Dundee

I was an investor in Dundee Corp. preffered shares (TSE:DC.PR.B), but I have sold with about a 25% loss after factoring in dividends.  Like most I was attracted to the large dividend yield on the preferred shares and comforted by the diverse set of assets owned by Dundee that backed those yields.  What I did not count on is the almost comical number of write-offs and losses Dundee has incurred over the past year.

I don’t know too much about the history of Dundee Corp., but what I understand is that it was well run by it’s founder Ned Goodman.  Since then though his sons have taken over and have proceeded to run the company into the ground.  Over the past year I have seen several of Dundee’s investments experience significant losses due to bad luck or bad choices.  Dundee Energy is more of less bankrupt, their investment in Tender Choice foods was written off due to a fire, they had losses in Blue Goose as a result of fires, they have written off most of their investment in Union Group and Cambridge Medical and most of their other businesses are just slowly bleeding cash.

The final nail in the coffin for me though is in their most recent quarter they wrote off part of their investment in a casino and hotel in B.C.  This investment is very significant for them and if it’s a loser too then there is not much value left at Dundee to keep those preferred share dividends flowing.

One redeeming factor is that the brother than has been running the company has been replaced by another one who wants to clean house.  It is possible that right now is the ultimate low for Dundee and he will turn things around, but I am not willing to take that gamble.