I Am Not Impressed By Engaged Capital’s Jamba Inc. (JMBA) Purchases

Engaged Capital has been adding to its already large position in Jamba Inc. (NASDAQ:JMBA) over the last month. If you go through its latest filing, you will see that its average cost of this large investment is about $11.50. If Glenn Welling followed Warren Buffett’s advice and invested in a small-cap index fund he would have been 40 percentage points ahead.

I don’t agree with Warren Buffett (he doesn’t agree with himself regarding investing in index funds either which is why he hired 2 investments managers instead of handing his cash to Vanguard) about passive investing, but I love Warren Buffett’s following quote:

“When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”

Retail stocks have been a graveyard for dozens of brilliant investors before. Does anyone remember Ackman’s Target or JC Penney fiascos? How about Eddie Lampert’s Sears investment? Activist investors can’t make people visit certain stores or buy certain juices or smoothies. The only thing they can effectively do is to force the management to shut down unprofitable locations and try to minimize costs. Unfortunately, what matters at the end of the day is whether consumers like the product or not. Engaged Capital has been involved with Jamba Inc. (JMBA) for more than 2.5 years. Whatever they have been doing over this period wasn’t enough to turn the tide.

As an investor I look for fat pitches.I don’t think Jamba Inc. is a fat pitch.

The details of Engaged Capital’s most recent transactions and filing are presented below:

Ownership Summary Table

Page 1 of 11 – SEC Filing