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Monday Value Overview

August 08, 2011 | About:
We started off the week with a nightmare. Bank of America (BAC) may have been the worst. Berkshire Hathaway (BRK.B) made an offer to TransAtlantic Holdings (TRH) resulting in TRH being one of the very few positive stocks on the day. I’ve got a McGraw-Hill (MHP) crack, a Carl Icahn video, some stats from today, and a suggestion to ignore the crowd.

What can you say about Bank of America? The stock totally fell apart today. CNBC reported that David Tepper sold out of his stake. Dick Bove said they won’t need to raise more capital, but others disagree. This seems like a concerted effort by hedge funds to force Bruce Berkowitz to make major sales. It just goes to show how little day to day trading has to do with actual fundamentals. This makes Berkowitz’s August 10 conference call with Brian Moynihan even more compelling. For those investors not concerned with the short term, this stock at this price is as good a deal as it has ever been.

Berkshire Hathaway made an offer for TransAtlantic Holdings over the weekend. This one came from Ajit Jain and at least one commentator thought it was “Bizarre.” Ronald Barusch put up a post at the WSJ.com critiquing the proposal. While Barusch doesn’t seem to be as close of a Buffett follower as GuruFocus readers, he does make a few points that make Jain’s offer appear a bit hastily arranged. I wonder if Buffett intentionally let Jain handle this one. I don’t recall Jain ever taking the lead in a buyout offer before, though, certainly could be wrong. The Berskhire offer may be a superior one, but TransAtlantic seems to be hamstrung here.

Speaking of Berkshire, I saw a great quote on my Twitter feed earlier today. If I could recall who it was from, I’d link to it. They said the best way to solve this downgrade situation, both of the U.S. and Berkshire, would be for Buffett to buy S&P’s parent, McGraw-Hill. Not a bad idea.

Carl Icahn is always a great one to listen to in times like these. Sure enough, he was on CNBC today an said he thought the sell-off was “completely overdone.” He was buying today. He then took a few well-deserved shots at the government and quoted Calvin Coolidge. “The business of America is business.”

Business Insider has a list of stats from today. After you read that, try to ignore the market stats going forward and crack open some 10-Ks. The next few days would be a good time to turn the TV off, set The Wall Street Journal aside, and do some of that research you’ve been wanting to do for awhile. I’d say to start at the 52 week low list, but that wouldn’t do you much good. I suggest starting with insurers, tech, or any business with a good balance sheet. There has also been a ton of insider buys lately. Go for the CEO and CFO level. They’re the smart ones. Good luck.

Disclosure: Long BRK.B, 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 steven.kiel@arquitos.com or through the firm's website at www.arquitos.com.

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