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I've got to start with what the Dallas Mavericks did to the Miami Heat though. It's basically what the bears have been doing to the bulls for the last six weeks. The legend of LeBron James grew even bigger, just not for what he'd like to be known for. His play over the last three games was a bit like the high school student who consistently gets Cs telling himself he could easily get an A if only he would have studied. LeBron can tell himself he didn't actually lose... because his noticeable lack of effort meant he didn't try.
Same thing with the buyers recently. It's not that the sellers have controlled the market, rather more that the buyers have had no reason to get involved. Perhaps we've reached, or will soon reach, a level where value investors will move in to take control. We're not quite there yet.
Will takeovers fuel another leg up? Here's one I've watched for awhile, and even owned briefly earlier this year. M&F Worldwide (MFW) is a Ron Perelman-owned outfit and received a buyout bid for $24 per share from, wait for it, Ron Perelman. That sent the stock up from its $17 perch. Great news for the stock, yes, but still only at a level it traded at just one month ago. Its heavy debt load and declining business scared the market over the last eight weeks, but if you aren't afraid of the debt, wow, is it cheap at $24 per share. For some background, you might be interested in an article I wrote about the company in January.
Staying on the merger theme, an interesting insurance merger between Allied World (AWH) and Transatlantic Re (TRH) was announced last night. Alice Schroeder of "The Snowball" fame had a blog post up today about the transaction. What's strange is that it's being billed as a merger of equals and involves a stock swap where the issuer, Allied World, is trading at about a P/B of 0.75. Theoretically, book value is supposed to be the value of the company if it were to be liquidated. In reality, this large discount in book means investors don't believe the accounting and think reserves aren't up to snuff. Investors thinking it doesn't necessarily make it true. Executive should know, though obviously in this case they don't. If they did, the more rational thing to do would be for Allied World to liquidate and let shareholders walk away with a 25% gain.
Alas, it seems rationalism is in short supply in the insurance world right now. Could this stock issuance mean anything other than Allied World's board doesn't believe it has reserved well enough itself? Unfortunately I don't think David Dreman, who owns just under 2% of the company, will have the clout to stop this scheme.
While looking at Alice Schroeder's blog, I noticed that Munger's former Wesco meeting has finally been rescheduled for July 1. It will now be called "A Morning with Charlie" and will begin at 10:00 am.
Speaking of Berkshire, the Warren Buffett lunch ended on Friday at $2.6 million, with the bidder topping off last year's record by $100. The winner hasn't disclosed their name. The lunch will take place at a Smith & Wollensky's in New York and the proceeds go to The Glide Foundation, which is a charity supported by his first wife, Susie.
On stocks, Pfizer (PFE) is going to court to make its Viagra patent last much longer, until 2019 to be exact. Teva Pharmaceuticals (TEVA) is in Pfizer's crosshairs as Teva is planning to produce a generic Viagra when it is due to come off patent in 2012. If Pfizer wins, it should be a boon to its shareholders, and probably make David Einhorn a very happy man. However, as these court cases typically go, we could be waiting quite a while for a decision.
Disclosure: Long BRK.B
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