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Friday's Value Overview

Happy Friday! Today we’ve got more Bill Ackman, a quick take on RIM (RIMM), a look at a BJ’s Wholesale (BJ) offer, pain for some employees at Goldman Sachs (GS), Morgan Stanley (MS), and Bank of America (BAC), a defense of his holdings in BAC, AIG and MBIA by Bruce Berkowitz, and a big CEO insider buy at ATP Oil & Gas (ATPG).

As if he didn’t have enough news surrounding him, a report came out yesterday that Bill Ackman is considering bringing Pershing Square Capital public. The idea is that he would have a more permanent base of capital to deploy. He has to set money aside right now, in case of investor withdrawals. As a public company he wouldn’t have to worry about this and he would have a larger capital base, made up of investors that aren’t limited by an accredited status.

Comments in The Wall Street Journal this morning say that the IPO would be in London because of U.S. regulations. All of that is interesting, but the most interesting thing is that by floating this idea now, the implication is that Ackman sees tremendous opportunities to create value.

Research in Motion (RIMM) was crushed today, and rightfully so. The company announced poor results and offered disappointing guidance. Analysts jumped all over each other to lower their price targets after it became apparent that RIMM’s market share not only has continued to slide, but is now accelerating. The company is well on its way to completely losing its moat. Some value investors are talking about a bounce, but with no predictability, I’m just going to avert my eyes.

Leonard Green has made a buyout bid for BJ’s Wholesale Club (BJ) for an undisclosed amount. The warehouse retailer has struggled to compete against Charlie Munger-owned Costco (COST). It’s also had trouble expanding because of Walmart’s (WMT) Sam’s Club.

With the realization that a lot of Dodd-Frank will actually be implemented, at least to some degree, the big banks are announcing cost cuts. It appears the preferred method will be to cut headcount rather than compensation. Goldman Sachs (GS), Morgan Stanley (MS) and Bank of America (BAC) all have plans to significantly cut their expenses now that their ROE is being hurt by new regulations. The Fed seems to want them to operate as utilities and not inject the credit the Fed is creating into the economy. At any rate, these schizophrenic policies are going to be anti-big bank either way. Will lower pay be far behind?

Thanks to my friend, David Kessler, for sending around an article on Bruce Berkowitz’s recent Morningstar presentation last week. Berkowitz has come under fire from a few different angles, and has trailed the overall market significantly this year. I’m not concerned about that short term performance in any way. He currently has a major focus on financials which has hurt performance. He defends those holdings in AIG (AIG), Bank of America (BAC), and MBIA (MBIA).

He takes somewhat of a return to normalization approach to Bank of America, noting that they are trading below tangible book value and at only about half of book. Obviously the overall market thinks they’ll have to raise more money or add to reserves or take some other significant hit. Berkowitz thinks that’s unlikely, and you can see that if you look at how conditions are improving across the board for them, from credit cards to home loans.

ATP Oil & Gas (ATPG) has been a favorite among some value investors. Here on GuruFocus, hypermann299 noted that CEO Paul Buhlman bought about $1 million of company stock a few days ago. Shares have fallen nearly 25% since March and Buhlman was able to pick them up at $15.38. Could now be the time to build a stake? For a bullish take, see Why ATP Oil & Gas Is a Buy.

Disclosures: Long BAC

About the author:

Steven Kiel
Steven Kiel is the president and chief investment officer for Arquitos Capital Management, a Virginia-based investment management firm. He is a graduate of George Mason School of Law and a captain in the Army Reserves. He manages two spoke funds, The Freedom Fund, a value-oriented portfolio, and The Hayek Fund, a portfolio dedicated to free market principles. He can be contacted at or through the firm's website at

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