Myth465

I have similar thoughts. I have never really found LUK that cheap and alot of the assets other then the 3 listed appear to be of low quality. LUK did get pretty cheap though when it hit 17 in March, but everything was cheap at that point.

Tx thats a very astute analysis

As a purist I agree with you, why not pickup the remaining 10% via a buyout and get yours subs under full control. As a realist I think its best to keep it public. Loews has an almost useless 10k due to consolidating CNA and it would be a nightmare to review unless they drastically improved reporting. Now they just have to highlight the public parts and tell you about the non public assets and let you make your own judgment. DO - Fair to slightly undervalued. CNA - Undervalued should sell for book once fixed up. BWP - Fair to slightly overvalued depending on how you see things. Loews sales for cheaper then those 3. You get hotels, bwp gp, hotels, cash & securities, and highmount for free. I think it makes for an easier story. Once we can place a value on the hotels and highmount things will get even easier for Mr. Market. To your point, Buffett has done very well fully owning most of his subs and trades at a premium to book most of the time. ---------- The cash portion, is what is most interesting to me. Selling BWP made sense from a value perspective, but the Highmount sales with gas at $3.99 dont. Unless Highmount wants to move out of that area completely it looks like they are raising cash. I have the same question as you. What do they want all that cash for? I dont really like the hotel business because its too small and needs high debt but, they have mentioned wanting to expand that platform, also if you want to grow that segment now is the time to do so. It will be interesting to hear the next call because I think many will ask that question.

On that basis an investment in ELF makes sense. My problem is today you could close your eyes and hit a cheap insurer. I own 3 and am watching 2 - 3 others. CNA - Nice discount to hard book and is turning around by a Chubb CEO. Not to good on the investing side but with a $40 billion portfolio you dont have to be. FFH - Excellent investor, buying cheap insurers now. Should grow BV at 15%. LRE - Best underwriter I have seen. Can buy below book. Combined ratio below 60%. Hit a bit by Chile though. HALL - Similar to FFH but at 70% BV. A bit higher if you net out the goodwill. ELF seems interesting but unnecessarily complex. Its nice to see 100% BV in equities though.

I guess these things are never long term. You just have to trade the cycles.

Gas futures are now getting towards $3.99. I am looking for a pullback in some of the key stocks. The issue still remains the catalyst. With half the rigs not working we still have equal supply and demand. What will fix this?

Looks like Loews sold some BWP and also lightened up on some assets in Highmount to Line Energy. This is what I think they will do with CNA if it rebounds. I believe they should keep the subs at 80% for the DRD except for the MLPs. They should keep the MLPs at 50% and sell high and buy Low. They did well with the BWP buyback and sale. The problem with CNA is they cant really by more due to it being 90% owned by Loews already. I really like the new presentations on CNA just think if they could get a 4% return on that $40 billion dollar portfolio, that plus breaking even on insurance would do wonders for book value.

valuegeek and txlaw you guys both brought up a very important note. I am managing my own money. I wouldnt know where to start when it comes to managing other peoples money. I have a hard time just recommending a mutual fund for them. I am still training myself to ignore volatility, and unless you have good clients dealing with them during market downturns can be a nightmare. I view cash as insurance. But Micheal Burry and Prem definitely have me thinking about better forms of insurance to manage risks. Another problem I see is the importance of the catalyst. Pershing creates thier own catalyst and Berkowitz is great at going in towards the beginning of the catalyst. With regard to eww/ick stocks. I choose the name due to reading Burry but have been investing in them for the better part of 2 years. I noticed that most of my returns come from out of favor Owner Managers - FFH Leaps, ORH, ORH Leaps, FUR or eww stocks ATSG and SFK. If you put just 1-2% of your portfolio in the ick stocks at the right time then they really juice the returns. I currently have 2-3 of them, but would like to have a basket of 7 or so of these stocks. I know ATSG very well and am getting comfortable with SFK Pulp. I think the trick is to buy a small position to get to know the company. As the knowledge increases and the price decreases you can average down. If I had more excess cash I could have picked up more shares of ATSG and would be up an easy 10% today. You also bring up a good point regarding solid earnings. I think I will add a bucket for those. Many have done well with JNJ, Kraft, and Wells Fargo over the last year or so.

You cant have free trade without fair trade. If the currency is pegged to keep it unusually low how is that free trade? China has what amounts to a 40% government subsidy towards exports. It doesn't hurt the US, but hurts Germany, Japan, and other Asian exporters per historian Neil Ferguson. We benefit in the short term if they are financing our debt, but this debt financing probably hurts in the long term. I would put sanctions on China - not in the interest of American manufacturing jobs, but in the interest of trade fairness. Our manufacturing will go if it is labor intensive. We will keep high tech stuff that has patent risks and items which are too heavy to warrant shipping but everything else will likely go elsewhere. Also Protectionism is such a silly word. The US has basically exported its wealth, jobs, and a considerable part of its middle class promoting free trade. What China is doing is basically undermining free trade with this unfair but effective peg. They are a richer country, their currency needs to raise, and other poorer countries need to have a shot at exploiting their cheap labor costs. ---- Finally me owning you a significant sum of money is more of a problem for you and not so much for me. Especially when I can print the money on my computer and give it to you.

My biggest problem is management likes the discount. They could liquidate the closed end funds, cancel excess shares, and by and large make the company much easier to understand but they choose not to. Fairfax has done an amazing job of simplifying the company and eliminate the cross holdings. ELF should follow suit.

Parsad where did you raise most of your assets from? Who are your clients?

When it comes to allocation advice, Taleb's recommendation in The Black Swan is interesting. It consists of an asset allocation plan of 85% in risk free investments (T-bill) and the 15% remainder in buying way out of the money Calls and Puts. By doing so, he positions his portfolio to capture the occasional mispriced Black Swans which delivers outsized returns, but has the bulk of his assets in risk free investments. I like this idea and have decided to augment it for a portfolio built on value investing and Owner Managers. A Value Investor's Take I plan to allocate 50%-70% of my investments into a small, but diversified basket of Owner Managers who have skin in the game and cash on hand. I am hoping that these investors will act as a counter cyclical force during Market crashes. I believe they will have the skills and capital (FFH, BRK, FUR, Loews) to expand their businesses by making great deals, buying chap assets, and expanding market share during a downturn. They should also do better then cash in up years. I next want to invest 30%-50% of my assets into a diversified basket of deep value high reward securities. These securities should be of decent quality, but should have an attribute that has the potential to lead to outsized returns. They could be businesses experiencing extreme stress (ATSG with DHL at 11 cents or SFK), be highly leveraged (URI during the market collapse), deep discounts to book value (CNA and FFH (with CDS) due to misunderstanding), or could be Leaps with a catalyst (FFH, ORH, Ensco Leaps). This capital is riskier then the owner managers, but should deliver outsized higher returns. Finally I want to have up to 20% of my total portfolio in cash on hand for downturns. This cash could be invested in bonds or held in cash. I will go all in when I have more options then cash, but the options have to be of the highest quality. When I do go all in I will deploy the capital into either Work Horse Owner Manager positions or deep value high return positions. I will also hold no short term debt related to stocks. I would like to hold cash in the following percentages / market conditions - 2% (Market Undervalued), 5-10% (Market Fairly Valued), 10-20% ( Market Overvalued). ---- What do you guys think and what are some Eww stocks. Right now I hold AI, ATSG, and SFK. They all have a slight smell to them, but I think all of them will deliver outsized returns over the long term. FFH has an entire portfolio of these so they may be a good place to start.

I think the run has legs, at least 2 quarters worth. Unlike say natural gas I dont think its that easy to increase supply and everyone has a bad taste in there mouth from the last downturn.

is anyone continuing to add. I have been adding up to 1.20 or so, and so far so good. I have a healthy amount right now, is anyone overweight?

Sorry about that you are right it was UPS. Even still I hope a dry / wet lease with DHL goes through. It would give some visibility on cash flows and a straight forward lease doesnt leave alot of wiggle room for disputes. Also I believe the stock price would double back to $5 or $6 which would be great for my portfolio. ATSG could diversify its customer base as it converts old aircraft over to the freighter config. DHL has to find someone to provide the lift and per ATSG, there arent really any other options in terms of 767s. The only issue is its been 7 months and still no deal. Something has to give pretty soon.

ATSG is one of Pabrai's old holdings. Its similar to SFK Pulp. Seemed like an easy buy at $6 due to a take over offer from a DHL affiliate at $7.50 or so. They rejected the offer and bought another small package carrier for cash to diversify from DHL. DHL promptly cut the contract and announced a pull out of the US Market and a deal with Fedex to carry the packages from International shipments. ATSG had 80% of their business with DHL and went down to .16 cents. The deal with Fedex feel through and DHL and ATSG are working out a few things, but not much is finalized. ATSG has the largest fleet of 767 planes and if they can find business for them (DHL or other companies) they should be worth north of $5. Its hard to tell, the balance sheet changes significantly quarterly due to layoffs and payoffs from DHL and its tough to model the cash flow for the planes as they come off of contract. We need 1 - 2 more quarters (with additional color on profitability for the planes / customers) or an announced deal from DHL to make this one a slam dunk. This is my largest holding due to me buying at .16 cents after a wash sale for tax purposes. My true basis is probably around $2, I added an insignificant amount today and thought the coaster rides were largely over.

Hopefully things clear up over the next few days.

Very true, but Buffs do get called. Ask Sadam Hussein. Sometimes the big stick comes out for better or worse. Chinese capital control goes to those, and much, much deeper levels. I recently read that the largest telecoms company in China (China Telecom) has taken a stake in a large Chinese bank. Considering that China Telecom is 75% owned by the Chinese government; who do you think was reasonable for this absolutely ludicrous allocation of capital? I fear that investors who entrust their capital to the hands of the Chinese Politburo are going to sorely regret their decision in the future. Thats what makes these things so interesting. The same people who say the bailouts were anti capitalistic (They were) also look up to China, a country where the government has its hands in everything.

I think its a slight loss for the US and a big loss for China. Plenty of other countries in Latin America and Asia would love to be our workshops. We have them over a barrel. We want a weaker dollar (Look at Bernanke), so that currency treat doesnt mean much.

We must have drastically different definitions for pure capitalism. Even so I doubt anyone would want to live in a purely capitalistic society, perhaps you would though.

Can a person publicly invest aside Wilbur Ross currently?

Thanks that was a good catch, I pulled the market cap from Google finance and you are right their share count was off. Must be related to the debt conversion of the series B, or just an error on their website. Yahoo shows $260 or so. We are now at 109% of my perversely calculated book value and I am comfortable with that. I think the loan platform has at least $20 million if not more of built in gains, but want to leave the one timers off until they hit the financials. We also have gains in LXP and possibly in other REIT securities. I also only used an 8 multiple on the CF when I think it deserves a 10. Finally I think the Interest on the loans will be nice and come Q1 we can forecast them for the whole year. Thanks alot for the tip regarding the mortgage debt and it being non recourse. FUR has shown they will walk away from buildings which are underwater so I look at the debt as an operating expense. ---- Also looks like Clarus is being a bit more active and may make a move on something soon.

Here is my stab in the dark at valuing FUR. Refer to attachment. Please let me know if anything is double counted or the valuation looks flawed.

I was thinking FPA because I really like Rodriguez. The Vanguard option is another good one due to the capital being so low. I never considered the closed fund, but that's another good idea, you could potentially get a double discount that way. Thanks for the quick responses guys, keep em coming if you have additional ideas. I will share them with the person and discuss all of them.

for someone with a small amount of assets. We are looking at about $1000 and the person is interested in beginning to invest. I was recommending FAIRX in a Roth IRA, but the minimal has been raised to $10k. I have a few funds in mind, but does anyone have any recommendations. They would be interested in stocks as long as the Manager follows rule number 1. I think they are comfortable with a loss of 15% at any point in time. I have explained the process to them and had them listen to several FAIRX interviews and reports. What do you all suggest?