I write lots of articles analyzing hedge funds portfolios and they help me (hope others too!) find good “seed” ideas for further research. This article is based only in my personal research and my portfolio.
I hope you can find value too and do not hesitate to ask me something about them.
Leucadia National (LUK):
Leucadia National is owned by Ian Cumming and Joseph Steinberg who collectively own 18.5% of shares outstanding. LUK is a very interesting company because it has a track record of book value growth of 19.6% since 1979.Gurus like Donald Yacktman, Jean Eveillard and Bruce Berkowitz also hold the stock. In 2010, LUK
had a near 35% ROE but the stock is trading at multiples not seen since the 2002 recession. For example, LUK commands a near 0.7 P/BV and P/E of just 6. The market is discounting a grim future for LUK businesses but the Company is profitable and keeps growing its equity base. I think that the market value of the shares will reflect the intrinsic value of the diversified portfolio of financial, industrial and basic materials businesses in the near future. LUK also pays a dividend and the owners-operators will keep investing in businesses that are long-term attractive for their portfolio.
Liberty Starz Group (LSTZA):
Liberty Starz group is a major producer, developer and distributor of television and movie programming, operating 16 premium subscription channels.I find attractive companies that their major shareholder is also the operator, as John Malone is in Liberty. LSTZA has a cash position of over 1/3 the value of the Company, a big plus that talks how conservative is the balance sheet. Many investors have been waiting for a stock repurchasing plan in Liberty Starz. That appear in the last quarter when the Company bought back $51 million worth or 807,000 shares through October 31st. LSTZA also made a strategic investment in Barnes & Noble through a convertible preferred stock. That stock converts into about a 16.6% common equity stake in Barnes & Noble and It has a 7¾ quarterly dividend. LSTZA trades at depressed P/BV multiples that assume no future growth in the short and long term.
Brookfield Asset Mgt (BAM):
I take BAM idea from Ron Baron portfolio. BAM portfolio include assets as diverse as timberlands, the largest hydro-electric power plant portfolio in North America, and electricity transmission grids in South America,
among many forms of hard asset investments.I found very interesting that BAM shares trades at almost 35% discount over their NAV portfolio, in other words, below liquidation value. Similar to LSTZA and LUK, the market is very negative assuming not future earnings and no growth in BAM properties. I think a housing or real estate market recovery could make BAM shares trade near its true value. As can be seen in the chart below, BAM is trading in the lowest end of its valuation bands, with a current P/BV of just 0.6, a P/E of near 7 (close to 2008-2009 levels) and P/S just above 3.2. I believe the real estate market will recover in the near future so I think BAM is the best exposure for that theme.
Howard Hughes Corp (HHC):
The Howard Hughes Corporation has a very savvy owner: William Ackman who controls 15.8% of the shares
outstanding. The shares trade at just 0.8 P/BV and the management is very aligned with the shareholders objectives because they earn very low salaries but own warrants that only have value if the shares are 20% above the current levels. The asset quality of HHC is very solid and management has a vested interest in the business. Some prominent Gurus hold the stock and Tilson gave a very solid presentation on HHC investment that can be seen here.
Bill Gates and Ed Lampert are big investors in AN, both owning almost 50% of the Company. Since 2007 AN reorganized and closed low performing locations. By reading some reports I found there are 17% fewer
new-car dealerships than in 2004 so should car sales return to pre-recession levels, AN could perform well in that trend.AN reported earnings per share from continuing operations of $0.48, a record for third quarter results and up 23% compard to 2010. Op Income increased 19% from the same period one year ago. Management also is repurchasing shares, $247 last quarter and $250 for the current qtr, with $316 million now remaining for share buybacks. The current “non-normal” trends in the auto industry has prompted many investors to overlook investment in the sector. I believe that AutoNation could generate more than $500 million in FCF next year that could allow management to keep reinvesting in the business (management said is commited to that, with record reinvestment of $145M) and keep repurchasing shares at undervalued prices.