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Tuesday Value Overview

August 23, 2011 | About:
Stocks were up today by the third highest percentage this year as the east coast saw a rare earthquake, a coming hurricane, and beautiful weather. Today’s article mentions New York Community Bancorp (NYB), ViaSat (VSAT), News Corp (NWSA), and Dominion Resources (D).

ValueWalk has an article about investing legend Irving Kahn. Kahn sounds bullish.

“There are a lot of opportunities out there, and one shouldn’t complain, unless you don’t have good health,” says Kahn. At 105, he might well be the last man on earth who can speak authoritatively on both longevity and making money amid a historic market meltdown. In 1928, at the age of 23, he went to work on Wall Street as a stock analyst and brokerage clerk. By the tail end of the Great Depression, in 1939, he’d made enough money in the market to move his wife and two children out of public housing and into their own house in the suburbs.

His largest holding right now is New York Community Bancorp, which trades at book value and yields 8.2%. This stock is near its 52 week low and nearly 35% off its highs. James Barrow also owns shares.

Seth Klarman always holds a large cash position. My Investing Notebook has a quote from Klarman that I had not seen before, and that gives tremendous insight as to why he holds so much cash and why he’s so risk-averse.

"For years, when someone asked me what my biggest fear was as an investor in managing my portfolio, my answer was that it was buying too soon on the way down from often very overvalued levels. I knew a market collapse was possible. And sometimes, I imagined that I was back in 1930 after the market had peaked the year before, and then dropped 30%. Surely, there would've been some tempting bargains then. And just as surely, you'd have been crushed by the market's subsequent plunge over the next three years — down to below 20% of 1929 levels. A fall from 70 to 20, and from 100 to 20, would feel almost exactly the same by the time you hit 20."

Klarman’s largest equity holdings right now are ViaSat and News Corp.

In the weird news of the day pile, former Guns ‘N Roses bassist, Duff McKagen, is opening up a wealth management firm. McKagen will be joined by Imprimatur Capital’s Andy Bottomley. Apparently this is in response to other rockers asking McKagen for financial advice. McKagen doesn’t claim to be a pro, but Bottomly is. His firm manages some money for Paul Tudor Jones. The new firm will be called Meridian Rock and will focus on musicians. Hat tip to the London Spectator.

The east coast earthquake caused Dominion Resources to move to back up power for one of its nuclear plants. This wouldn’t have been a big deal before Japan. The diesel generators are maintain cooling operations at the North Anna Power Station as the two plants located there shut down due to the quake. Dominion was still up a bit less than 2% today, but did have a 3% drop after the initial announcement. A hurricane is headed that way as well.

Disclosure: No positions

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.

Visit Steven Kiel's Website


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