Well I have continued researching EBIX as an investment. To summarize quickly, I sold my entire position. It came at a -20% loss.
The more I read, the more I realized that it has had a long history of allegations over the years of possible financial inaccuracies. Here is an example from a short: https://viceroyresearch.files.wordpress.com/2019/07/sec-inve…
SEC basically says it would not provide the requested documents required by law because it could compromise a “whistleblower”. Well that put enough doubt in my mind, that I sold pretty much immediately.
I think the company business model is complicated but interesting. However after diving deeper seeing the long history of accusations coupled with the recent changing of auditing firm to Indian based which many looked at as a warning sign. I have decided there is better places for my money.
Thanks, retirementdough, for sharing the fruits of your research.
I never forgot that I committed to a deep dive on Ebix for Saul and this board. I’m sorry it has taken so long, but it is bubbling up closer to the top of my queue. I still own shares, so your reaction is a bit disheartening for me. I won’t second-guess it until I’ve had a chance to study the situation myself. Yes, this is one of the downsides of having a very diversified portfolio. When you have ten companies, you can keep one finger on the pulse of each. For me, Ebix is on a low enough rung that it doesn’t get one of my toes. The upside is that Ebix isn’t killing me. My portfolio results are inferior to many here who publish them, but they are beating the market nicely (i.e., not “mutual-fund-like”) and I sleep well. I’m sorry that my post devolved a little into portfolio management. I’ll try to begin my Ebix study within the next week or two, perhaps sooner.
Thanks and best wishes,
TMFDatabaseBob (long: EBIX)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth
Please note: I am not a member of any newsletter team. My opinions are my own and do not necessarily reflect those of the TMF advisers. I am not an investment professional, merely an investor.
I look forward to TMFDatabaseBob’s deep dive. I’ve been following EBIX for more than 5 years now and currently hold a significant position. I’ve bought and sold EBIX throughout those 5 years, and I think the price now is significantly below intrinsic value. If I have more time, I’d like to add to the work that TMFDatabaseBob provides. But, with respect to the history of allegations, I’ve done a lot of reading (court filings, letters on short attacks, etc) and thinking about those over my 5 years of following the company. Many of the allegations have been baseless in my opinion. My most fruitful purchase of EBIX stock came in 2013 after “new” allegations/investigations were revealed. I dug into the information that was publicly available, decided there was a high chance the allegations were baseless, and made a significant purchase. The stock price tripled over the course of the next year. The repeated attacks on EBIX over the years have offered similar opportunities.
The recent FOIA letter doesn’t do anything to change my mind on that. Several years ago, EBIX was under investigation by the SEC and DOJ. That resulted in no significant negative findings/penalties. So, it is unsurprising that the SEC may have documents (whistleblower filings, etc.) related to those old investigations that it will not now release. I don’t think there is anything extraordinary at all in the SEC’s FOIA response. Additionally, I do not think the shift to an Indian audit firm is a harbinger of anything inappropriate. The business has shifted from a US-centric business to one that is now pretty firmly centered in India based on it’s recent growth. I found the company’s explanation of its change in auditors persuasive (after reading the SEC filings of both EBIX and its US auditor), and I believe EBIX still uses its old auditor (a US-based accounting firm) for much of its US-based business.
Although EBIX hasn’t had the wild growth that many of the SAAS stocks followed here have had in the past few years, it has steadily grown for many years. If you look at the business growth–and can ignore the stock price–you see a company that has been strategic in how it has grown both organically and with acquisitions. Given the unique opportunities this company has in India and the beaten down stock price, I think there is a significant likelihood of upside from here.