There may be a chance to ‘take over’ a unit, it seems they know somebody who’s owned one for years and wants to retire. He wants to give it to his son, but the son doesn’t want it. I realize vending machines tie you down, but these units are not that big. I used to complain that the bank machines in Key Biscayne were a rip-off at $4 per withdrawal. Now I know who owns them. I’m thinking, especially how I would have to leave my money in the bank for six years to earn 1% in total. I have no doubt the good locations are gone and the business is very competitive. But I’m a competitive person, and I don’t have to make a living off the thing. I also think the $2,900 price tag is misleading, because very few people have the additional cash to fill up the machine and last ten days until the funds clear. (You must open a bank account to which the banks replenish all withdrawals after a fixed period, usually ten days.)
I’m thinking you really need closer to $10,000 to get one machine up and running. At $62 per withdrawal, that is less than 100 transactions until you’ve used up the average machine full (which is around $5,800). If the fee was $2, you would only have ‘made’ $200 which you would also have to wait ten days to receive since that also must come from the bank. I’ll run the numbers this week.
By coincidence, this afternoon my statement from Investment Co. of America arrived. There is $7,100 in there, of which $6,200 is equity, $542.61 is return and the rest is a rather tame short-term capital gain. The point is, the total return this quarter (Jan. 1 – Mar. 31, 2005) was $29.46 or enough to buy just .943 new shares in the rollover. That is $9.82 per month.
That means the true price-to-earnings ratio is in the order of 60:1. Somebody must think this is a good deal, but I have always thought it really sucked. Did you know they charge a 5.75% front end load? It happens to be the first place Tammie [my broker] recommended back in 2000 as safe and conservative, otherwise it has done nothing in four years. This is the company you see listed as ICAP in my books and it has always had the bad practice of including unrealized capital gains in their publications of annual returns.
Let’s see, I have $1,086 in a savings account that pays .18%, that is 18/100s of one percent per year. Before taxes. The Sunbird should move before long, so that is another $1,500. Let me add this up. Not counting my reserves, I could get $9,500 together within the week. The reserve could easily last me a full four months. This is all just talk for now, but I do have a concrete example of a man successful at this business, and you should see the house he lives in! I’ll wait to see if the old guy wants to sell cheaply. The P81 books would not show any change except in assets and if you think about it, should I ever run short of cash on this investment, I’ll know where I could make a withdrawal. Joke.
[Author’s note: in the end I decided against purchasing the ATM. Every way I looked at the thing, in the end it was just another vending machine.]
Author's note 2015-03-24: I specify these are those mini-ATMs that you see on small business premises. They hold a lot less cash because of the danger of somebody with a forklift stealing the whole machine. This was the determining factor for me, as I know that all the prime vending locations are long gone and any newer locations have already been scoped by the big companies. However, make no mistake, I keep tabs on the industry and would not hesitate to get back into it. In my life I have owned three small vending businesses, including a laundromat in my early 20s. I've got the experience, just not the motive.
