Stock tip! Hometown International, Inc., is a company that consists of one Italian delicatessen, Your Hometown Deli, founded by a high-school wrestling coach in Paulsboro, New Jersey. On a typical day, Hometown’s sales total about eighty dollars. A few years ago, during the current bull market, Hometown decided to go public. The Securities and Exchange Commission was leery: Hometown’s major shareholders include mysterious entities based in Macao; plus, it is just one deli. When Hometown submitted its I.P.O. paperwork, the S.E.C. warned, “Please revise your disclosure throughout your filing to state that you are a shell company.” Hometown took exception to this. Shell companies don’t actually do business. Hometown, on the other hand, was procuring meats and sprucing up its storefront. “Various sinks and tables were purchased,” Hometown responded. “There is also a cable phone line available to use.” The I.P.O. went ahead. Revenue declined. The stock price did not. Hometown is currently valued at two billion dollars.
By now, even people who don’t know their N.F.T.s from their U.F.O.s can opine that we’re in a stock-market bubble. Hypotheses for what was going on with Hometown have abounded. It was a “pump and dump.” Or a “box job.” Maybe it was just a late-boom amusement: too much money, too much free time. A backdoor “SPAC”? This, essentially, is how one big Hometown investor in Hong Kong has explained it. (Hometown has declined to comment, although its wrestling-coach founder, Paul Morina, has been spotted at tournaments.) Hometown wasn’t GameStop-level popular—the number of shares traded was low. Still, real people were willing to pay for it. David Einhorn, the president of the hedge fund Greenlight Capital, cited Hometown in a letter to his investors. “From a traditional perspective, the market is fractured and possibly in the process of breaking completely,” he said. He added, “The pastrami must be amazing.”
But what if shareholders just believe in the business plan? Perhaps the pastrami actually is amazing. To find out, one prospective investor recently set out to analyze the fundamentals. A visit was paid to the deli, a small concrete building near some petroleum refineries. Two friendly women were on duty. It was the lunch rush, but there were no other customers. Every now and then, callers availed themselves of the cable phone line—mainly pranksters asking about buying stock. The menu was expansive, if somewhat aspirational; the chicken parm was unavailable, because the deli was out of chicken. Same for the roast beef, which needed a day to cook. The prospective investor ordered a sampling of hoagies. They were prepared in the back, out of sight. One or more of the various sinks could be heard running. Then the product emerged, wrapped in white paper.
A private valuation was arranged. To insure a knowledgeable analysis, the hoagies were brought to an Italian specialty store ninety minutes up the turnpike. Ron Ferreira, the manager at Benvenuti, in Garwood, volunteered to give ratings. He’d heard, vaguely, of Hometown, but he didn’t know the stock price. He did, however, know sandwiches. “I’ve been in this kind of work for forty years,” Ferreira said—Sbarro, delis, a local place called Antonio’s Mozzarella Factory. He ran his own shop for sixteen years. “I appreciate when it’s done right,” he said. For experimental integrity, a classic Italian hoagie from Wawa, the convenience chain popular in the Philadelphia area, served as the control.
First up: the cheesesteak. Ferreira, who had a shaved head and wore a black button-down, took a bite. “It’s got that good Philly bread,” he said. “By that I mean it’s got a crust to it, not too hard, and it has a chew. It’s soft, but not fall-apart soft.” The meat was solid, even at ninety minutes old. Rating: BUY.
The next two sandwiches, Italian and Sicilian combos, were fine but lacked zing.“That’s cheap-ass vinegar,” Ferreira said. “Bread is good, there’s plenty of meat. I think the dressing falls short. I’d give it a seven.” Rating: HOLD.
The final hoagie was a turkey with cheese. Ferreira was satisfied but not inspired. “It’s just a sandwich,” he said. Rating: MODERATE BUY.
Ferreira judged the sandwiches to be Wawa-level quality—pretty good. But there were red flags. “Those pickles are cheap pickles, first of all,” he said. “If you’re a deli, get a fuckin’ pickle guy.” Then there were the supply-chain issues. “For them not to have chicken on a weekend? I don’t know, it doesn’t equate,” he said. “And they’re cooking the roast beef, and it’ll be ready tomorrow?” He went on, “It doesn’t sound kosher to me.” Asked for a target valuation for investors, Ferreira did some mental calculation and declared, “You’ve gotta look at the numbers. But it could be a fifty-thousand-dollar business.”
Analysis done, Ferreira prepared for the dinner crowd—there was balsamic spread to make, prosciutto di Parma to slice, chicken cutlets to bread. The stock market was about to close. Hometown was up another nine per cent. ♦
