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Leucadia (LUK)
22-04-2014, 07:10 PM.
Post: #1
Leucadia (LUK)
Article

http://investorplace.com/2014/04/mini-be...1ZM8-0azCQ

Is ‘Mini-Berkshire’ Leucadia the Real Deal? The conglomerate doesn't get respect from the market, but it should

By Lawrence Meyers, InvestorPlace Contributor |

Apr 21, 2014, 9:56 am EDT

One of the stocks I’ve followed, and occasionally owned, almost since I began investing has been Leucadia National Corporation (LUK).

What I find most interesting about Leucadia is that it takes the same approach that Warren Buffett does with Berkshire Hathaway (BRK.B) —

and, for that matter, what John Malone pursues with his oft-restructured Liberty Media Corporation (LMCA).

That is, LUK stock is a collection of business that the management has purchased during the company’s 30-plus years in existence. Yet for some reason, the market has never rewarded it in the same way its peers have been over the years.

It has taken Malone’s operation a long time to be properly recognized by Wall Street. Maybe Leucadia is overdue. I haven’t checked in on Leucadia’s holdings, many of which are publicly held, in quite some time.

But I’m blown away by the list.

First of all, Leucadia merged with investment bank Jefferies Group, which brought a lot of balance sheet support and expertise to the table.

Beyond that, the entity now owns 79% of National Beef (fourth-largest U.S. beef processor), 50% interest in Berkadia (co-venture with Berkshire in real-estate driven lending operation), Garcadia (the 15th largest U.S. auto dealership group), The Hard Rock Biloxi, Conwed Plastics, Idaho Timber, Italy-based start-up wireless broadband company Linkem, and HomeFed Corporation (real estate developer).

Leucadia is more active in liquidity events than Berkshire, as it sells its holdings from time to time.

Recent events have generated more than $2 billion for LUK stock, including a Fortescue Metals note redemption and stock sale in 2012 for $868 million; a Inmet Mining merger payment of $732 million including about $340 million in acquirer Quantum stock; a Mueller Industries (MLI) stock sale of $427 million, a sale of Keen Energy for $128 million, and the sale of TeleBarbados for $28 million.

LUK stock has always had a solid balance sheet.

With Jefferies added to the group, the company now has $27 billion in cash and short-term investments, and $8 billion in long-term debt.

Outside of Jeffries, LUK stock generated $299 million in operating cash flow in FY12 and $228 million in FY13.

There’s really no great way to assess the value of LUK stock.

I’ve always focused on the company’s cash position, cash flow and how the individual portfolio companies perform.

With LMCA, you just had be patient as a long-term investor, and that patience has been rewarded. I think the same is true of Leucadia.

John Malone tends to buy companies and hold them. He will buy and sell the stakes of public entities he gets his hands on, as he is able to directly monetize those assets. He usually manages to sell those assets, however, in a trade — taking on an equivalent position in a new entity in order to avoid taxation.

Leucadia isn’t quite as sophisticated.

My view of LUK stock?

Historically, Leucadia became volatile in mid-2006 and has remained that way. Looking at the chart, I would wait for it to fall back toward $20, then buy a stake to cut up into two pieces. The first piece I would hold for the long term, hoping one day the market recognizes the long-term value of the company as with Liberty.

The second I would use to trade, selling at various points up the price scale as you see fit.

As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities.

He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses.

He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs.

Contact him at pdlcapital66@gmail.com and follow his tweets at @ichabodscranium.

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22-04-2014, 07:20 PM.
Post: #2
RE: Leucadia (LUK)
kikababoo Wrote:damn. even though im rooting for flash boys but i hold shares in leucadia. sobz.

Interesting company Leucadia.

Thanks for the link kikababoo

Leucadia
Mkt cap 9.48B
P/E ratio 24.92
Div yield 0.96%
Price to book 0.9396


Vs

Berkershire
Mkt cap 312.25B
P/E ratio 15.99
Div yield -
Price to book - to be determined
Article http://www.forbes.com/sites/robertlenzne...ul-amount/

I think Berk is still a better buy in PE terms

Conglomerates are more difficult to valuate at fave value e.g. jardine, swire, berkershire

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22-04-2014, 07:57 PM.
Post: #3
RE: Leucadia (LUK)
Conglomerates on NYSE

Jardine Matheson (JMHLY)
Mkt cap 42.02B
P/E ratio - (14.61 via SG yahoo finance)
Div yield 2.13%

Swire Pacific (Swray)
Mkt cap 10.72B
P/E ratio - (10.32 via SG yahoo finance)
Div yield 3.53%

Leucadia
Mkt cap 9.48B
P/E ratio 24.92
Div yield 0.96%
Price to book 0.9396

Berkershire
Mkt cap 312.25B
P/E ratio 15.99
Div yield -

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22-04-2014, 11:12 PM.
Post: #4
RE: Leucadia (LUK)
(22-04-2014, 07:20 PM)orangetea Wrote:
kikababoo Wrote:damn. even though im rooting for flash boys but i hold shares in leucadia. sobz.

Interesting company Leucadia.

Thanks for the link kikababoo

Leucadia
Mkt cap 9.48B
P/E ratio 24.92
Div yield 0.96%
Price to book 0.9396


Vs

Berkershire
Mkt cap 312.25B
P/E ratio 15.99
Div yield -
Price to book - to be determined
Article http://www.forbes.com/sites/robertlenzne...ul-amount/

I think Berk is still a better buy in PE terms

Conglomerates are more difficult to valuate at fave value e.g. jardine, swire, berkershire

You are welcome! Haha one thing to note is LUK pays 1 percent dividend yield (in four payments) so in essence ur paying 0.3 percent annually. That's one main reason I own more brk than luk.

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23-04-2014, 02:25 PM.
Post: #5
RE: Leucadia (LUK)
Cyclone had a thread on this company as well:
http://www.valuebuddies.com/thread-2452.html

What intriqued me is why the compounding of this company lags so much behind Berkshire if they employ the same strategy
=========== Signature ===========
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)

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29-04-2014, 09:03 AM.
Post: #6
RE: Leucadia (LUK)
specuvestor Wrote:Cyclone had a thread on this company as well: http://www.valuebuddies.com/thread-2452.html What intriqued me is why the compounding of this company lags so much behind Berkshire if they employ the same strategy

I think the answer has to do with the succession planning.

Yes it is teported that Leucadia is managed by gifted investors Ian Cumming and Joseph Steinberg.

But Ian is 74 (whos contract ends June 2015 and will not renew) and Joseph is 70 years old.

http://beta.fool.com/scavengerreport/201...lan/16459/

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29-04-2014, 09:35 AM.
Post: #7
RE: Leucadia (LUK)
(29-04-2014, 09:03 AM)orangetea Wrote:
specuvestor Wrote:Cyclone had a thread on this company as well: http://www.valuebuddies.com/thread-2452.html What intriqued me is why the compounding of this company lags so much behind Berkshire if they employ the same strategy

I think the answer has to do with the succession planning.

Yes it is teported that Leucadia is managed by gifted investors Ian Cumming and Joseph Steinberg.

But Ian is 74 (whos contract ends June 2015 and will not renew) and Joseph is 70 years old.

http://beta.fool.com/scavengerreport/201...lan/16459/

... u should read the latest two shareholder letters first... ian cummings retired and sold out i think 2% or more of his stake the company while joseph steinberg remained on the firm for a while more.

Also, LUK has been underperforming the index by quite a bit since GFC, and buying into LUK now is the same as buying into an investment bank as half of its market cap is made up of jefferies. It is essentially just a bet on the jockey - Richard Handler.

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29-04-2014, 03:57 PM. (This post was last modified: 29-04-2014, 04:08 PM by specuvestor.)
Post: #8
RE: Leucadia (LUK)
(29-04-2014, 09:03 AM)orangetea Wrote:
specuvestor Wrote:Cyclone had a thread on this company as well: http://www.valuebuddies.com/thread-2452.html What intriqued me is why the compounding of this company lags so much behind Berkshire if they employ the same strategy

I think the answer has to do with the succession planning.

Yes it is teported that Leucadia is managed by gifted investors Ian Cumming and Joseph Steinberg.

But Ian is 74 (whos contract ends June 2015 and will not renew) and Joseph is 70 years old.

http://beta.fool.com/scavengerreport/201...lan/16459/

not sure what u mean... aren't they the equivalent of the "younger version" of Buffett and Munger if we can compare them side by side?

Berkshire bought a "float" company but Leucadia bought an investment bank. The difference in mindset is glaring enough IMHO that they are actually not comparable hence the difference in compounding. After 35 years Leucadia is ~US$10b market cap company and the founders own 10% of company.

http://www.forbes.com/sites/thestreet/20...o-buffett/

I'm not saying they are not good. But I am grasping the essence of how compounding is a glaring difference over the long term if the initial actions or ideology are just slightly different. Something of a chaos theory result, though in between u can always argue about how Leucadia has done much better in a 10 years period, depending how u capture the period..
=========== Signature ===========
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)

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29-04-2014, 04:05 PM.
Post: #9
RE: Leucadia (LUK)
(29-04-2014, 03:57 PM)specuvestor Wrote:
(29-04-2014, 09:03 AM)orangetea Wrote:
specuvestor Wrote:Cyclone had a thread on this company as well: http://www.valuebuddies.com/thread-2452.html What intriqued me is why the compounding of this company lags so much behind Berkshire if they employ the same strategy

I think the answer has to do with the succession planning.

Yes it is teported that Leucadia is managed by gifted investors Ian Cumming and Joseph Steinberg.

But Ian is 74 (whos contract ends June 2015 and will not renew) and Joseph is 70 years old.

http://beta.fool.com/scavengerreport/201...lan/16459/

not sure what u mean... aren't they the equivalent of the "younger version" of Buffett and Munger if we can compare them side by side?

Berkshire bought a "float" company but Leucadia bought an investment bank. The difference in mindset is glaring enough IMHO that they are actually not comparable hence the difference in compounding. After 40 years Leucadia is ~US$10b market cap company and the founders own 10% of company.

http://www.forbes.com/sites/thestreet/20...o-buffett/

I'm not saying they are not good. But I am grasping the essence of how compounding is a glaring difference over the long term if the initial actions or ideology are just slightly different. Something of a chaos theory result.

LUK is a very different company from BRK (in terms of investment strategy wise). Though their key concepts (very value based is still the same).

If you are looking at LUK in the past, you would be incorrect to say that LUK is not insurance based. LUK acquired quite a few insurance companies and sold one of them for (i think) a billion USD around end 90s or early 00s.

Cummings and Steinberg just have a tendency to flip assets quickly. They are more comparable to the typical distressed investors. They prefer to buy stuff in bankruptcy auction rather than BRK buying companies with strong moat and etc. Their long term results are quite comparable though (If you only take the first 20-30 years of LUK, you would find that LUK compound at around 25% per annum for more than two decades, which is better than the 40 years BRK record).

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29-04-2014, 04:34 PM. (This post was last modified: 29-04-2014, 04:47 PM by specuvestor.)
Post: #10
RE: Leucadia (LUK)
Agree. That's my observation as well that they are effectively asset traders than business owners. I tend to be more inquisitive when people say they are mini-berkshire or Asia's Buffett etc, because usually they don't stand up to close scrutiny.

If you look at the last annual report by the founder, LUK compounded at 18.2% in 33 years. Buffett probably did better in first 33 years of >20%. Not forgetting that returns diminishes as size becomes bigger, hence we should compare starting point with starting point. In the first 33 years for Berkshire in 1998, it was worth roughly $106b non-inflation nor crisis adjusted. That's the discrepancy I am talking about. Same philosophy but different execution, something we can observe and learn.

Again I am not saying they are not good but maybe people should stop comparing with Berkshire or Buffett. Or Steve Jobs. They are outliers.

PS it is similar to the multiple threads discussing XIRR vs NAV. I tend to look at NAV or in this case, market cap, which to me is far more tangible.
=========== Signature ===========
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)

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