He’s the founder and Portfolio Manager of a Chicago-area investment house focused on “micro-cap value equities.”
According to his LinkedIn profile, its portfolio “is constructed through [an] in-depth, fundamental research process focused on the potential risk and return of each investment.”
Among the companies that part of his portfolio: Saga Communications.
According to a SEC filing made Friday, Gate City Capital Management LLC on the final day of 2021 emerged as a significant investor in Saga, the radio-industry pure play led by CEO Ed Christian and CFO Sam Bush.
The Schedule 13G filing indicates that Gate City holds some 309,895 shares in Saga, valued at $7,155,475.55 as of Monday’s Opening Bell on the Nasdaq market, where Saga shares trade as “SGA.” Saga stock began the day’s trading at $23.09 on extremely light volume, which is typical for the company.
Gate City was founded in 2014 by Michael Melby, following a stint as a Research Analyst for Crystal Rock Capital Management. The Notre Dame graduate and 2011 Booth MBA began his career in 2003 as a Deutsche Bank Securities associate focused on North American debt capital markets.
Now, it is No. 5investor in Saga, based on Fintel data reflecting the most up-to-date positions. The Daniel Tisch-led Towerview LLC remains by far the biggest shareholder, with some 1,161,144 shares in the company comprising 19.29% ownership. Behind them is T. Rowe Price and Associates, with 657,258 shares comprising 10.9% ownership.
The third-largest investor is Fidelity Institutional Asset Management, with 564,969 shares (9.38% ownership), followed by Dimensional Fund Investors, with 365,392 shares and 6.08% ownership.
Then comes Gate City, when discounting “value funds” from T. Rowe Price and Fidelity that account for Saga shares totaling more than what Gate City holds. Its shares make it a 6.1% interest holder in the radio broadcasting company.
Still, Gate City is now a larger holder of Saga shares than The Vanguard Group, Minerva Advisors, and Renaissance Technologies.
Interestingly, while Melby and Gate City are headquartered in Chicago, the Gate City logo prominently features a logo depicting the state of Montana. The city of Glendive, Mont., is known as “The Gate City.”
As of March 2021, Gate City had discretionary assets totaling $67.05 million. And, in addition to snagging Saga shares, it reported a 4.9% stake in New Mexico real estate investor AMREP Corporation, based in Pennsylvania; Canterbury Park Holding Corp., of which it holds a 5.2% stake; and CKX Lands Inc., of Lake Charles, La., in which it holds 8.1% interest.
These reported investments follow a August 31, 2021 reported stake in Optex Systems Holdings.
Among the first acquisitions by Gate City, in 2017, is AMREP.
Then there is Canterbury Park, which hosts pari-mutuel wagering on live thoroughbred and quarter horse racing at its facilities in Shakopee, Minn., and pari-mutuel wagering on races held at out-of-state racetracks that are simulcast to the racetrack.
CKX Lands, meanwhile, is a land management company that earns revenue from royalty interests and mineral leases related to oil and gas production on its land, timber sales, and surface rents.
Thus, the addition of Saga to a diversified portfolio with a touch of risk could prove beneficial for investors seeking big rewards from their investment dollars. With Saga’s Q4 and year-end 2021 fiscal results coming March 10 and the company recently declaring a dividend bonus, getting SGA today may prove wise for a short-term buy. The long-term view? It’s cloudy.
Given Gate City’s timing, the question is now whether the hedge fund is in Saga for the long term. On December 14, Saga’s board of directors declared a $0.16 per share quarterly cash dividend and a special cash dividend of $0.50 per share. The ex-dividend date? December 27, 2021, four days before Gate City’s reporting of its stake.
With 79 FM, 34 AM radio stations and local digital in 27 medium- and small-sized markets, Saga’s future is enmeshed in the continued success of traditional radio.
How that river flows could largely determine the Saga story — and, in turn, Gate City’s investment strategy in a company it now has a significant stake in.
