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Friday Value Overview

The end of the week is mercifully here. Insider buying was way up this week. Take a look at Morgan Stanley (MS) and General Motors (GM). Fairfax Financial’s (FRFHF) Prem Watsa is pessimistic, but still owns some stocks, AbitibiBowater (ABH), Dell (DELL) and Johnson & Johnson (JNJ). There is some news about Seth Klarman and PDL BioPharma (PDLI), Sycamore Networks (SCMR), Audiovoxx (VOXX), Microsoft (MSFT), and BP. Finally, a Twitter account that I suggest you consider following.

One of the things I like to follow is insider trading. The recent volatility was a good time to see how much the CEOs, CFOs and other company insiders actually believed in their companies. If there would have been limited buying, I would be more worried about the overall markets. However, insider buying was extremely strong. GuruFocus has an article up with a picture showing that insider buying was as strong as it’s been since March 2009. That was a great time to buy, and I have a feeling last week was as well. Health care and financials were the two industries with the highest ratio. Morgan Stanley CEO James Gorman took advantage of his company’s stock price drop by buying 100,000 shares. General Motors CEO Dan Akerson also made a big purchase, picking up 10,000 shares. Insiders aren’t a perfect indicator, but if you like the company already and were waiting for a good stock price, an insider buy might help to show you that the time to buy is now.

One who is not quite that optimistic is Fairfax Financial’s Prem Watsa. He has had on significant hedges for more than a year, and it hurt his portfolio substantially last year. He’s moved into U.S. Treasuries and out of some corporate bonds. He thinks deflation will ruin the world’s economy and is worried about a Chinese property bubble, in addition to no growth in the U.S. “You have interest rates at zero per cent, you have had deficits coming down, meaning reduced government spending, which means there’s no ammo left for the governments of the world, particularly the United States. So what do you do next to get the economy going?” I’m not an economist, but my answer would be that small businesses should by the ones to get the economy going and the government is holding them back. We all know we have to pay back the money the government borrows, right? By the way, his three top holdings are AbitibiBowater, Dell and Johnson & Johnson.

Seth Klarman has made some portfolio adjustments recently. He added to PDL Biopharma and Sycamore Networks, sold some Audiovoxx, and initiated positions in Microsoft and BP. There were some other changes that you can see by clicking here. The Microsoft and BP picks are especially interesting since Klarman typically goes after less well-known stocks. These aren’t small positions either. Each of them is in the stock portfolio’s top five positions. Remember that most of Klarman’s portfolio is outside of common stocks, though. Still, more than $300 million towards Microsoft and almost $250 million towards BP is nothing to sneeze at.

Twitter can be very entertaining, and here’s one that is hilarious. Dealbook has an email interview purportedly with an anonymous Goldman Sachs banker that is tweeting things he overhears in the elevator. Here’s the most recent tweet, "Thx but I'm gonna go with Jeff. The seaplane from westside is much quicker than battling traffic to the east side heliport." Ain’t that the truth?

Disclosure: Long PDLI, MSFT

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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