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LUK below $20 ?


elltel
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I think LUK is extraordinarily cheap, selling perhaps 1/2 of intrinsic value. Give it time.

 

 

 

Based on what IV calculation?  They're trading a bit higher than book value, although I'm not sure what to make of book value given the large NOL presence.

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Guest Bronco

I like berkshire's businesses and capital structure much better.  That being said, everything is relative to it's price.  But I vote brk at these levels.

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How can you guys think that a $180 billion market cap company can possibly produce a return as good as a $5 billion one? Berkshire needs to create nearly $200 billion in market cap for your stock to double, Leucadia only needs to generate $5 billion or 3% of that. Being loyal to Berkshire is one thing, but stop and think about the kind of market gains you need.

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How can you guys think that a $180 billion market cap company can possibly produce a return as good as a $5 billion one? Berkshire needs to create nearly $200 billion in market cap for your stock to double, Leucadia only needs to generate $5 billion or 3% of that. Being loyal to Berkshire is one thing, but stop and think about the kind of market gains you need.

 

This has and continues to be my biggest problem with Berkshire. I think its a great store of wealth though. The problem is I don't have much of it, still in the building phase.

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How can you guys think that a $180 billion market cap company can possibly produce a return as good as a $5 billion one? Berkshire needs to create nearly $200 billion in market cap for your stock to double, Leucadia only needs to generate $5 billion or 3% of that. Being loyal to Berkshire is one thing, but stop and think about the kind of market gains you need.

 

Both have different risk/return profiles but problem I am having with LUK is more around trying to nail down its IV at something other than its adjusted book value. LUK's value can vary quite a bit based on how you estimate the IV of NOL and Fortescue (stock and the 4% revenue note). I just am not able to get a good handle on these two items. Do you have any suggestions on this?

 

Thanks

 

Vinod

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I thought the NOLs were written off. What do you make of the new Aussie miners tax, LUK said it hurts but the mining company should still be very profitable.

 

Yes I think you're right about the NOLs.  For some reason I thought they had recognized them once again, but that's not the case after a quick read of the 10Q and annual letter.  That said, it's still an asset going forward if they can use it.  I think it lasts till 2030 so my guess is they'll get some use out of it.  So, the question is do you use that in the IV calculation?

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Both have different risk/return profiles but problem I am having with LUK is more around trying to nail down its IV at something other than its adjusted book value. LUK's value can vary quite a bit based on how you estimate the IV of NOL and Fortescue (stock and the 4% revenue note). I just am not able to get a good handle on these two items. Do you have any suggestions on this?

 

Thanks

 

Vinod

 

Yes that's the thing.  You can use book value + some portion of NOLs, but since the underlying securities fluctuate, there's that volatility.  On the earnings and cash flow side I have a tough time evaluating it too..  Then there is also the presumed investment prowess of Ian and Joseph (and the risk that they leave). Which is why I was asking how others are evaluating IV?

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"On the NOL, it is very likely they'll be able to use at least a portion of it against their stake in Fortescue and other relevant capital gains... so I would net it against the DTL that they have there"

 

Not for Fortescue you can't do that - it is not an associated company and its gains run through comprehensive income similar to unrealized gains in insurance companies - the tax not paid is already included in this account. There is no "hidden" value in tax not paid on their mining investments.

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