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Leucadia Reloaded!


Parsad
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This is exciting!  I finally did the work on LUK, and it appears to be pretty damn cheap. 

 

Can't wait to see how they deploy.  Real estate, perhaps?  More mortgage servicing businesses?  Who know what they'll come up with.

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I agree...what most do not know is that they were cash strapped for the last two years...with a lot of debt (mostly longterm)... some coming due...and

negative cashflow.

They must be excited now ...my problem is that you might just as well buy inmet, jefferries or fortesque because that is where their immediate future is. Just as should

have bought Americredit instead of Leucadia. I hope they get it together.

 

As I said sometime ago Fairfax was the buy at the same market caps.....they now have closed the gap...but Fairfax is still the much better company now.

Dazel.

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Can they offset this gain with their massive net operating losses?

;D

I've been following LUK for several years and still don't see what people like about this company.

 

 

I cant find it either but havent looked too too hard.

 

With regard to page one what about going forward? End of 2007 LUK would have been a good short / horrible investment.

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Their track record is unmatched....better than Buffett's.

 

Fortescue,inmet etc are absolute out of the park homerun's...their problem has been the capital

to find others...Fairfax had the advanatge to pick up all the bargains in 2009..they did not...however, Capmark (with Buffett)

should turn out well.

 

As Sanjeev has said they now have capital! We know they have the brain's. Jefferies CEO said they

have never seen anyone allocate capital better.

Good luck guys love to see it back in the $50's...

 

dazel.

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Anybody know what the latest is in the spat with Fortescue?

 

http://biz.yahoo.com/e/100901/luk8-k.html

 

Yes, it's great that they have some cash from the Americredit buyout, but that could be blunted by a reduced NAV of their Fortescue investment.  I note that Mr Market hardly blinked when the above news came out, so maybe he's not taking it seriously.  But, should we?  I don't know what to make of it.

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I've been following LUK for several years and still don't see what people like about this company.

 

Like any investment, price should dictate what is cheap and isn't.  Whether LUK is, was, or isn't a good investment should be evaluated by the prudent investor.

 

Aside from that, Cummings and Steinberg are arguably the greatest investors I have ever seen or read about that specialize in distressed businesses and investments.  They are damn good!  So good, that they are one of the few people Buffett trusts to run distressed investments that Berkshire owns like Berkadia. 

 

Also like Buffett, they are getting older and Leucadia IS Steinberg & Cummings...when they are gone, there is no real succession plan.  Cheers! 

 

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Also like Buffett, they are getting older and Leucadia IS Steinberg & Cummings...when they are gone, there is no real succession plan.  Cheers! 

 

i've noticed justin wheeler quietly being given more responsiblity over recent years. he's young & is possibly being tested if not groomed

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there is no real succession plan.

 

Sanjeev, I have received a personal letter from one of the two Leucadia top managers and he wrote me that the succession issue has been a topic of every LUK board meeting over the past decade. It doesn't necessarely means that they have found a successor (?), but that means that unless that this topic is an inside joke from the board, that issue is taken very seriously by Leucadia.

 

Cheers!

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Sanjeev, I have received a personal letter from one of the two Leucadia top managers and he wrote me that the succession issue has been a topic of every LUK board meeting over the past decade. It doesn't necessarely means that they have found a successor (?), but that means that unless that this topic is an inside joke from the board, that issue is taken very seriously by Leucadia.

 

Hi Partner,

 

When I meant "no real succession plan", I meant that there was no real possible successor that has been brought to light with the capabilities of Steinberg or Cummings.  For example, at Berkshire you have a deep bench of very capable replacements...Ajit Jain in insurance, David Sokol in operations and the CIO candidates in investments.  At Fairfax, it is the same...Mark Ram is one among other highly capable insurance executives and you have a very solid team at Hamblin-Watsa.  Markel...same!

 

At Leucadia, they specialize in distressed investments, bankruptcies, etc.  You really have to have the aptitude or gift for this.  I don't  know of anyone who is currently a suitable successor to this type of investment philosophy.  If there is anyone, they will be taking the company in a different direction...value investing perhaps, but not this deep, distressed type of structure that S & C's are so good at.  Cheers!

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At Leucadia, they specialize in distressed investments, bankruptcies, etc.  You really have to have the aptitude or gift for this.

 

Yes, I hear you Sanjeev, but that second part of the letter was about the "Fortress Leucadia" and cigar butt issues. I don't know the exact words at the top of my desk, but what I understood from what I red is that Leucadia will try to find more durable and well managed Conwed Plastics kind of businesses and less financial genious cigar butts kind of situations going forward. So the puck might be in a different place than it's been most of time in the past.

 

Cheers!

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I think growth in book value per share is a better gauge of performance that share price because as you mentioned they can't control the share price, that it went up 600% is no reflection positive or negative. BV/share however has been more steady, averaging around 19%/year when you factor in divestments and return of capital to shareholders.

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I recently started analysing the company (had never looked at it before) and found a few things, which i am trying to figure if i have the math wrong or these guys are really this amazing

 

- 100 Mn Fortesuce notes which gives 4% of the revenue from the mines (after royalty and other expenses). the company made 68 Mn in 6 months and in the lastest quarter recieved a gross payment of 172 Mn. any interest not paid accrues at 9.5%. No wonder Fortesuce is trying to wriggle out of this deal

- Investment in keen which was done at a distressed price of 15 Mn for 50% stake where this company could easily be worth 300 Mn or more (provided gas doesnt permanently stay below 4$)

-CLC mines where the 30% stake could be around 500 Mn+ in terms of NPV

 

 

there seem to be a lot such attractive pieces all over the place. i am still digging and trying to figure it out and wondering if i am really missing something obvious

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Thanks Txlaw for presentation,

 

pg 6 indicates $280 million to LUK for FY 10, would that be the interest on the $100 million note? Wow.  Obviously note is worth way more than the face value of $100 milllion. At 10% discount would it be reasonable to value the note at $2.8 billion? I am trying to sum up all their different parts, as based on BV it seems to be fairly priced, but obviously BV seems to be understating current value of their assets.

 

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My novice valuation of LUK is ~$8 billion less ~$1.6 billion in debt divided by ~243 million shares or approximately $26 per share . (no value given for net operating loss carry forward, I was not sure how to value this).

 

What are others opinions on current valuation? There does not seem to be a great MOS. 

 

Would this be classified as a great company (certainly has been a great capital allocator) at a fair price and still a good buy at current price?

 

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