Investment Matters

The $100m deli

Last week, we came across one of the more interesting investments in capital markets.

A business in the US has been nicknamed the “100-million-dollar deli”.

Hometown International (CODE: HWIN) is a US company that owns a single deli in rural New Jersey.

On first blush, we agreed with hedge fund manager David Einhorn who remarked “The pastrami must be amazing”.

The famed investor to conclude the deli is a sign that “the market is fractured”.

However, we ponder whether the viral news story provides more insight into human behaviour than the broader stock market.


“The pastrami must be amazing”

The little deli in New Jersey has a very large valuation. In 2019, it managed a total of just $21,772 in sales, yet it currently has a market capitalisation of $110m.

Adding to the absurdity – its largest shareholder is also its entire executive team.

Paul F. Morina is the company’s CEO, CFO, Treasurer and director. He also happens to be the wrestling coach of the high school next door. A busy executive indeed.

How on earth does a company with just north of $20,000 in sales continue to be worth $110m?

Some have pointed to Hometown as one of many canaries in the coal mines of financial markets. The financial news media have used this as evidence that “retail investors have gone mad” and “valuations are stretched”. However, digging a little deeper tells a far more nuanced story.


Devil in the details

As is often the case, there is more nuance to this story than first appears.

Hometown International is what is known as an “Over the Counter“ traded stock, more commonly known as a “penny stock”. Stocks traded over the counter are traded between two entities directly and are therefore not regulated by an exchange.

These markets are often the capital market equivalent of the wild west - they are not regulated by any governing body, with trades facilitated through broker-dealers (as an aside: there are suggestions the company is being kept alive as a “shell company” for an offshore entity).

What this also means is trading volumes are thin. Very thin.

The company has traded an average of around $4,000 per day over the last year, sometimes going weeks without trading.

This means it takes very little stock to move the stock price significantly. A few hundred dollars sold at the right price and voila! – a $110m deli.

A fascinating story? Yes. But is it representative of the broader market? Unlikely.


One of the biggest challenges investors face is their own psychological biases.

The 24-hour news cycle and need to generate content throws up anecdotes such as the “$100m deli” on any given day. More recently, this has included the birth of a satirical cryptocurrency now worth $37.22 bn (see below).



Anecdotes like these can provide single data points that are useful. They can bring our attention to pressing and emerging issues or trends. However, they can be incredibly dangerous, particularly when falsely taken as representative and extrapolated.

Extrapolation is natural for us as human beings. We tend to search for information that confirms our preconceptions (Confirmation Bias) and relate two similar things or events as more closely correlated than they are (Representative Bias).

The ability to maintain objectivity in the face of this is part of what makes professional investment management valuable.

A more nuanced, thoughtful, and contextualised approach takes more time, requires more gathering of evidence and effort but is ultimately more likely to lead to success.

This is what we look to provide as investment managers.

No doubt increased retail participation over the last year has given birth to some strange happenings of late.

But caution needs to be taken in seeing this as representative of the broader market and individual investments in your portfolio.