Article on Fortescue Metals

[txlaw]

For those of you who follow Leucadia.

 

http://www.bloomberg.com/apps/news?pid=20601109&sid=a.SVHtsvhHTI&pos=11

[Guest Bronco]

Txlaw - good post - thanks.

 

What is your take on this company?  I have always struggled to get my arms around it - I always kind of viewed it as a play on Fortescue, Jeffries, and Americredit. 

 

I do not own the stock, but I have written some LEAPs (puts) with a $15 strike. 

 

This is an interesting company, but my own personal biased has led me to invest in Fairfax, BRK and Loews as alternatives.

 

 

[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.

[Guest Bronco]

Myth - unfortunately for you, I find myself agreeing with almost everything you are posting these days.

 

 

[txlaw]

I've actually never done a thorough analysis of LUK, and I've never owned it directly (I own it indirectly via FAIRX).  Last year, I did a very simple back of the envelope calculation and almost bought at $16 but then didn't as a result of thumb sucking. 

 

Leucadia is much more than just ACF, JEF, and FMG.  They have a huge variety of assets, including real estate, stakes in investment partnerships, and stakes in startup ventures.  They also have lots of NOLs that will get used up when they start making profits again.  Who knows when they will ever pay tax again.

 

But it's too difficult for me to figure out this company.  One of these days, I'm gonna try to find and read all their 10-Ks and figure it out, but I don't have the time or inclination to attempt to do so anytime soon.  Until then, I'll let Bruce Berkowitz decide whether to put money into it. 

 

[Myth465]

Myth - unfortunately for you, I find myself agreeing with almost everything you are posting these days.

 

I dont think thats good news for you either.

[scorpioncapital]

"Who knows when they will ever pay tax again. "

 

Never have and probably never will. It's a giant vacuum cleaner of operating losses which it then uses in other parts of its business. In the US, you can use capital gains against operating losses I think which makes it quite lucrative. LUK's philosophy is to turn junk into gold, inefficiency into money with a few large strategic investments forming the major pillars of this strategy.

 

I have looked at all the standard alternatives, BAM, L, FFH, MKL, WTM, BRK, etc.. and LUK is in my opinion by a significant margin the best all around investment of the lot from a risk-return perspective. BRK is good but it can never get the returns you'll get from LUK due to size. This is one investment I'd put 100% of my net worth into (and I am not far off).

 

 

 

 

[bookie71]

And if things slow down and they can't find deals, they will pay a large return of capital dividend.  A few years ago they returned 12.50 (I think)per share