mevsemt

I have a somewhat different take on the succession issue / mgmt's age. My guess is the company will be slowly wound down (via some combination of special dividends, spinoffs, etc.) rather than handed over to new mgmt. I also think the value of LUK's assets/businesses is higher than the stock price reflects, so as shareholder I actually look forward to this "liquidity event" (or series of liquidity events).

That's true, it's all about location. Based on very preliminary due diligence, in Atlanta (i.e. surrounding area, within 20 miles of downtown) you can find single family houses selling <60x one month's rent, so a typical transaction might look something like this: Purchase price: 60K Monthly rent: $1100 Initial Cash in (10% downpayment, closing costs, prepaids, ~4K in rehab): 12K Pro forma revenue (assume 1 month vacancy): $12.1K Less Operating Costs (Mgmt company placement & admin expense, taxes, insurance, repairs & maint): ~6K Mortgage Payments (principal & interest, ~6.5% rate, 30 yr fixed): ~4K Total pro forma expenses: 10K Cash profit: $2,100 (As % of Cash In): 17.5% 17.5% return on investment is VERY attractive IMO. But here's kicker, this house might've sold for 150K to 180K at peak, so maybe it'll be worth 80K to 100K in 5 years (or maybe not). So basically your downside is limited by the cash flow, but the upside from paying down principal and any appreciation is all gravy... Thoughts?

Maybe they're not looking to retire just yet!

I think ubuy2wron hit the nail on the head when he called it "the perfect Dhando investment." Myth, you probably can't get a 20% ROI if there's no increase in rents or housing appreciation (but you'll still do slightly better than breaking even). However, IF there is an increase in rents or housing you can easily find yourself with IRR or 30% to 50% per annum (btw if you think inflation is around the corner this is not unreasonable). I think the key is to find properties that are cash flow positive even after appropriate allowances are made for vacancies, repairs, mgmt fees, etc.

I just wish there was a way to ignore the "Poll: Ignore user feature" thread...

I totally agree with Packer... Before I got into the investment industry I used to think it was my dream job. However, years ago I got the opportunity to work in private equity and within months of taking the job was completely miserable (granted, I was a grunt chained to my desk, but you probably will be too). Luckily, one of the partners got offered a CFO role and brought me along with him, and I am much happier in corporate finance (occasionally doing a merger or divestiture but otherwise working a much more reasonable 50-55 hours per week). Additionally, since I'm still very interested in investing I was able to carve out some time to start a blog to talk about my stock picks, www.mevsemt.blogspot.com. Anyway, just food for thought.

HomePath houses are available to investors w/ only 10% down and you can always hire management companies to do just about everything, from screen tenants to collect rents to evictions (if need be). Where I live (Southeast) there are opportunities to buy houses for $60K and rent them for $1,000 per month. The returns on something like this are very solid under normal circumstances, BUT if you think inflation is on the horizon then the returns only get better.

For those of us in the U.S. maybe it's time to invest in real estate... I for one am actively looking to purchase rental properties (especially since I'm having a lot of trouble finding bargains in the stock market) - are there any other landlords on the board?

I was about 28% cash at the end of Q1 (go to http://mevsemt.blogspot.com/2011/04/q1-2011-returns.html and click on the screen shoot to enlarge). However I've recently added money to my portfolio (http://mevsemt.blogspot.com/2011/04/adding-money.html), putting me around 40% cash. My watch list is pretty thin right now, although I do think some of the big banks look interesting...

Mid, maybe late 60's?

LUK is the largest position in my portfolio (% of total portfolio is high teens or low 20's depending on the day). Does anyone have any thoughts on rebalancing (i.e. selling some shares), especially since it's been bumping up against its 52 high? I'm tempted to do this BUT I'm worried selling LUK now could be like selling BRK in the 80's...

If you want to learn more about M. Smith here's a good article by Zeke Ashton - http://www.sumzero.com/postings/2985/guest_view I've also written several posts on my blog about the company, if interested here are the links: http://mevsemt.blogspot.com/2010/09/transaction-alert-bought-ttt.html http://mevsemt.blogspot.com/2010/10/some-more-thoughts-on-tttmcfaf.html http://mevsemt.blogspot.com/2010/11/adding-to-ttt.html http://mevsemt.blogspot.com/2010/11/adding-to-ttt-again.html http://mevsemt.blogspot.com/2011/02/sold-khdhf.html

With the recent out-of-left-field CEO appointment I thought it might be a good time to revive the SHLD discussion - I'd love to hear what this board thinks. Also, I just wrote a post on my blog discussing SHLD's high short interest, check it out here if you're interested (and feel free to poke holes!). http://mevsemt.blogspot.com/2011/03/short-analysis.html

Does anyone have any thoughts on the new CEO (I don't know what to make of it)?

I only became aware of this board several months ago and now I check it daily, it really is a fantastic achievement, congratulations!

You're probably right... although the situation feels somewhat similar the Kmart/Sears merger... (Kmart had a smaller market cap vs. Sears I think [but not positive], ESL had a controlling stake in Kmart and a low teens stake in Sears]. Anyway, it's just food for thought - like everyone else I really no idea what will happen in the Lampert/Sears saga (if anything at all).

ESL just disclosed they own 5.8% of Gap Inc. Is there any chance this could be related to the 2 CT Orders that Sears has filed in the last couple of months or am I way off base?

Frog, is there any particular reason you only included 1997-99 for BB? I think those are his worst years, so obviously only including those has a meaningful impact on his overall performance. Anyway, I guess what I'm saying is if you're going to include the worst years from his Fairholme Capital days, don't you think you should include ALL years and go back to the early 90's? when he formed it? I think you may get a very different picture of his performance...

Partner, I'm not quite sure I understand your gripe: are you saying investor relations at FFH should have to answer your questions b/c they're "fair, honest, and long term oriented" BUT it'd be ok to ignore other questions? That feels a little bit like a slippery slope... who's to say what questions should and shouldn't be answered? My guess is FFH is trying to side step this issue altogether and I'm not sure I can fault them for it. Also, I think this is just a reality of investing in FFH-like companies. I've never tried this personally, but my guess is you'd get similar (lack of) responses from BRK, LUK, even SHLD. Heck, I remember reading that Buffett, in his partnership years, kicked an investor out b/c the investor asked where his money was invested...

I just posted my returns (18.1% for 2010) and all the relevant details on my blog. If you're interested you can check it out at www.mevsemt.blogspot.com. And good luck in 2011 everyone! -mevsemt