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Leucadia National and Ian Cumming's Top 5 Picks: JEF, INTL, GLPW, CSWC, WINN

Charles Cliff

Charles Cliff

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Ian Cumming is the current Chairman of Leucadia National Corporation (LUK). Ian Cumming was born in Vancouver and went on to graduate from Harvard Business School in 1970. In 1979, Cummings joined Leucadia National. He currently owns approximately 13% of the corporation.

Leucadia National is a publicly traded investment and holding company controlled by a pair of primary investors, Ian Cumming and Joseph Steinberg. Through its subsidiaries, Leucadia engages in telecommunications, health care services, manufacturing, banking and lending, real estate, and winery businesses with a market cap of about $6.6 billion as of the end of 2006. Leucadia is known as a "mini Berkshire Hathaway" with a comprehensive average annual return of over 22% since 1978. From the end of 1978 through the end of 2004, Leucadia's shares increased at an annualized rate of 33%.

Cummings focuses on distressed companies, buying large interests at discount prices. Leucadia then revives them and sells them on for large, turn-around profits. Leucadia then improves their performance until they are the most efficient and productive in their market segment, reselling their stock at a significant profit. Cummings targets companies that provide products or services that people want. Such companies can be easily and quickly reinvigorated, as long as a demand remains for their product. Investing in such companies during under-valued periods has yielded high returns for Leucadia National for the past 30 years. Despite the recent economic slump, Cumming shows an optimistic outlook: “There is increasing evidence that the financial carnage brought on by excessive risk taking is beginning to repair itself. In 2009, Leucadia recorded $550.3 million in profits while shareholders’ equity grew $1.7 billion.” These trying times provide numerous opportunities for those investors that are both willing and able to take advantage of them.

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Top Five Holdings in 2010 Ticker Percent Composition Number of Shares
Jefferies Group Inc JEF 97.19% 49,351,385
INTL FCStone Inc. INTL 2.42% 32,686
Global Power Equipment Group Inc GLPW 0.23% 3,171
Capitol Southwest Corp CSWC 0.15% 2,053
WinnDixie Stores Inc WINN 0.01% 15,926


Jefferies Group Inc. (JEF)

Jefferies Group Inc. and its subsidiaries operate as a securities and investment banking firm. The principal operating subsidiary of the Company is Jefferies & Company Inc. The principal international operating subsidiary of the Company is Jefferies International Limited. Jefferies operates in two business segments: capital carkets and asset management. The capital markets segment is managed as a single operating segment that provides the research, sales, trading and origination effort for various equity, fixed income and advisory products and services. The asset management segment includes asset management activities and related services.

Their shares trade around $24.06, with a P/E ratio of 22.07 and an EPS of $1.09. In 2010, JEF reported revenue of $1 billion but a net income of $58 million. Cumming has a long-standing relationship with Jefferies Group, and believes in the long-term returns this holding will continue to produce for Leucadia: “We have known Jefferies for a very long time and are particularly fond of and hold in high regard its longtime Chief Executive Officer, Richard B. Handler. We believe that over the long haul Jefferies will thrive and further enrich its shareholders.”GuruFocus rated JEF with the business predictability rank of 1-star.

INTL FCStone Inc. (INTL)

INTL FCStone Inc., formerly International Assets Holding Corporation, along with its subsidiaries, provides risk management consulting services to mid-sized commercial customers, as well as provides foreign exchange and treasury services, securities execution, physical commodities trading services and execution in both listed futures and option contracts, as well as structured over-the-counter products in a range of commodities. On April 1, 2010, the company completed the acquisition of Risk Management Incorporated and RMI Consulting Inc.

Their shares trade around $24.37, with a P/E ratio of 28.1 and an EPS of $0.87. In 2010, INTL Group reported revenue of $16 billion but a net income of $4 million. Over the past 10 years, INTL has seen a revenue growth of 176.1% per share. GuruFocus rated INTL with the business predictability rank of 1-star.

Global Power Equipment Group Inc. (GLPW)

Global Power Equipment Group Inc. (GLPW) is a provider of power generation equipment and maintenance services for customers in the domestic and international energy, power infrastructure and service industries. The company, along with its subsidiaries, designs, engineers and manufactures heat recovery and auxiliary power equipment primarily used in the operation of gas turbine power plants, as well as for other industrial, energy and power-related applications. It provides routine and specialty maintenance services to nuclear, coal-fired, fossil and hydroelectric power plants and other industrial operations. Global Power Equipment Group provides a range of industrial maintenance, modification and construction services to power generation, pulp and paper, chemical, refining, manufacturing and other industrial markets. It also manufactures, designs, installs and retrofits auxiliary equipment for gas turbines.

Their shares trade around $24.36, with a P/E ratio of 14.59 and an EPS of $1.67. In 2010, GLPW reported revenue of $116 million but a net income of $14 million. Leucadia invests liberally in precious metals and various mining operations. In keeping with this, Leucadia holds a large number of shares in GLPW, betting on the economic growth of the mining industry. GuruFocus rated GLPW with the business predictability rank of 1-star.

Capitol Southwest Corporation (CSWC)

Capital Southwest Corporation (CSWC) is a business development company. Its investment interests are focused on expansion financing, management buyouts, minority recapitalization, industry consolidations and early-stage financing in a range of industry segments. The portfolio is a composite of companies in which it has interests, as well as a number of developing companies and marketable securities of publicly traded companies. Capital Southwest makes available managerial assistance to the companies in which it invests.

Their shares trade around $92.02, with a P/E ratio of 5.9 and an EPS of $15.52. In 2010, Capital Southwest reported revenue of $1.04 billion but a net income of $58 million. Over the past 10 years, Capital Southwest has seen a revenue growth of 10.2% per share. GuruFocus rated CSWC with the business predictability rank of 3-stars.

Winn-Dixie Stores Inc. (WINN)

Winn-Dixie Stores Inc. (WINN) is a food retailer operating primarily under the Winn-Dixie banner. It operates about 514 stores in five states in the southeastern United States and operates its grocery warehouse stores under the SaveRite banner. All of the company’s stores offer grocery, meat, seafood, produce, deli, bakery, floral, health and beauty and other general merchandise items. It offers national brands, as well as many of its own private-label products. These products are delivered from its distribution centers or directly to stores from manufacturers and wholesalers.

Their shares trade around $6.85, with an EPS of -$0.43. In 2010, WINN reported revenue of $2 billion but a net income of -$23 million. GuruFocus rated WINN with the business predictability rank of 1-star.

http://www.leucadia.com/


Rating: 2.0/5 (5 votes)

Comments

superguru
Superguru - 3 years ago
Any opinions on LUK current valuations?

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