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Wednesday Value Overview

August 31, 2011 | About:
Wednesday’s edition discusses Apple (AAPL), General Growth Properties (GGP), Bank of America (BAC), and AOL (AOL). There’s also a mystery Bill Ackman stock that we may not know about for months. We end with a BKNY Mellon (BK) note.

Imagine Steve Jobs living down the street from you. You see him at neighborhood barbeques, high school events, Halloween parties dressed as Frankenstein. This post by Lisen Stromberg is a worthwhile read. Jobs puts his pants on one leg at a time, just like the rest of us. But it’s interesting to hear the perspectives of those who are both in awe of him, and also on the periphery of his life. My Neighbor, Steve Jobs. Hat tip to Joshua Brown.

CNBC has an article about a mystery trade from Bill Ackman that hasn’t been disclosed yet. “It is both an attractive standalone investment and one that offers significant hedging benefits for our portfolio. For a modest amount of capital commitment, this investment offers the potential for extraordinary profits.” He told investors in a letter from two weeks ago that he’ll be able to share this investment in the next few months. Until then, it would be an interesting exercise to make some educated guesses. There is a good chance it is a retailer, as that is Ackman’s expertise. Ackman compared it his General Growth Properties investment. It’s also likely some sort of special situation. Dan Nathan of RiskReversal.com thinks it’s in the $1 billion range and levered up. An investor who can guess correctly will probably make a nice chunk of change when the name comes public. If you have a good guess, put it in the comments.

Bank of America’s Brian Moynihan told us on the Bruce Berkowitz call a few weeks ago that he would be shedding non-core assets. They sold half of their China Construction Bank shares this week and are now looking at selling their correspondent mortgage lending division. Correspondent loans are loans that were originated from a third party and then sold to Bank of America. If a high percentage of these loans go sour, they can often be put back to the originator. Unfortunately for Bank of America, most of the originator companies no longer exist.

It turns out AOL is for sale. The company says that isn’t true, but the New York Post contends that management is just working through a price. Did the Huffington Post deal accelerate the dive or delay it? Either way, Arianna Huffington was smart to take her payout in cash and Tim Armstrong was not smart to buy $10 million of stock in February that is now worth less than $7.5 million. The rumor is that private equity firm KKR may make a bid. For KKR’s sake, I hope that’s not true.

In a shocking development, chairman and CEO of BKNY Mellon, Robert Kelly, has stepped down. He apparently cited “differences in approaches to managing the company.” This seems particularly bizarre considering he was the chairman and CEO. Could a majority of the rest of the board disagree with what Kelly wanted to do? Remember he was reportedly offered the Bank of America job before Brian Moynihan and turned it down. Stay tuned for more information…

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

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