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Leucadia bottoms feed again


philassor
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Thanks for the update.

 

Own them as well but only for the past year

 

Concern re age of founders--there must be a considerable team of people that have worked with them for the past many years- i.e there has to be a number of people doing the due diligence on these acquisitions at LUK (or do they outsource) -there has to be qualified personel that have been trained by Cummings/Steinberg that can eventually take over?

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Concern re age of founders--there must be a considerable team of people that have worked with them for the past many years- i.e there has to be a number of people doing the due diligence on these acquisitions at LUK (or do they outsource) -there has to be qualified personel that have been trained by Cummings/Steinberg that can eventually take over?

 

That's one thing I worry about with LUK. Berkshire has been buying great businesses for a long time and so it bought a lot of good managers, but when you mostly buy troubled business (and something they don't buy them whole), you have a much smaller intake of good managers.

 

I'm no expert on LUK, but I haven't seen anything so far that really eased my mind about succession.

 

But afaik, they're healthy, so it's no an immediate problem.

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Succession only affects future deals not current deals and valuation. If the current deals and valuation represent a fair price/share then even if they are gone tomorrow, an investor can either a) wait and see or b) sell and buy something else. In no case does one have to worry or decide before the event happens. Thinking that way one will miss out on making a considerable amount of money :)

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Succession only affects future deals not current deals and valuation. If the current deals and valuation represent a fair price/share then even if they are gone tomorrow, an investor can either a) wait and see or b) sell and buy something else. In no case does one have to worry or decide before the event happens. Thinking that way one will miss out on making a considerable amount of money :)

 

You're right, that's why I own lots of Berkshire :)

 

But with LUK, I would be a bit concerned that they buy really troubled assets and then are gone and succession isn't clever enough to fix the assets, and so you are left hanging... But that's not a huge problem and the probabilities of that happening and having a significant impact on valuation are relatively low, so not the end of the world.

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I share the concerns about the age of the management against a superb track record and a very difficult to duplicate skill. I sold my LUK position because of that a few years ago. My new suggestion is to create a basket of the following companies that I consider good but not the same: Markel, Fairfax, Leucadia and Brooks Asset Management.

Michael

 

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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). 

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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). 

 

Have they ever mentioned something like that explicitly or is this more of a guess?

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It's just a guess as Ian and Joseph don't take my phone calls  ;)

 

Anyway, I only purchased LUK in the late 2008's / early 2009's so I'm only somewhat familiar with the company's history (disclosure: LUK is by far my largest holding, click on the screenshot here http://mevsemt.blogspot.com/2011/04/q1-2011-returns.html). 

 

HOWEVER, my understanding is they talked about winding down the company in the late 90's when they couldn't find any bargains.  In fact, they even paid out a special $4 dividend (vs. a stock price of $20) in May of 1999.  Also, I think HomeFed Corp was originally spun off from LUK (although not sure of the timing). 

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I believe in a recent annual letter they suggested they would either liquidate or merge. They also stated in this year's letter that they are working on a plan in more detail. However, 2 years ago, Ian Cumming said he'd like to do this job until he's "horizontal", so I suppose like Buffett he's in it for life. 10 years of 20% compounding = 10x your money! That is far too much money to leave on the table. It's quite possible for someone to live to 80 (he's 70) and his partner is 65 and will be 75 in 10 years.

 

 

 

 

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10 years of 20% compounding = 10x your money! That is far too much money to leave on the table. It's quite possible for someone to live to 80 (he's 70) and his partner is 65 and will be 75 in 10 years.

 

I could not agree more.  When BRK.B was at the low point in 2000 I bought some but did not load up because Buffett was about 65.  I do not intend to make the same mistake with LUK.  When someone loves what they do and stays active, they can work well in to their 80s.  My parents are in their late 70s and remain very active and alert, although they are not compounding money at 20% per year. 

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good catch, guess the rule of 72 is off by a bit, 10x is about 13 years at 20%

 

13 yrs is not bad for this kind of return. Just to continue the age argument on the other side: I am still holding BRKB, the biggest position, by far in my portfolio because I consider it better than cash but without any expectations of above average returns in the long-term. In the case of LUK, age is an issue to me despite the fact that my father is 91 and my mother 89 with all their faculties intact. I think, in order for a careful investor to be convinced, one should make sure that the Liquidation event or events mentioned by another member will happen. I am wondering if this board or a group of us could "contact/write a letter"" asking about such a potential plan.

 

Michael

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