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Ian Cumming of Leucadia National Corp. Doubles Down On AmeriCredit Corp. (ACF)

April 02, 2009 | About:

(gurufocus.com, April 2, 2009)Investment Guru Ian Cumming, for his company Leucadia National Corp. (LUK), bought an addition of 225,000 shares of AmeriCredit Corp. at the price of $6.26 per share, on March 27, 2009. The purchase brought Leucadia’s ownership of AmeriCredit to 32,940,440 shares, or 25.02% of the total 131.66 millions shares outstanding.

AmeriCredit Corp. is an independent automobile finance company that provides financing solutions indirectly through auto dealers and directly to consumers in the United States and Canada. Specifically, AmeriCredit purchases new and used car loans, mostly by subprime borrowers. AmeriCredit then securitizes these car loans and sells them to investors as asset-backed securities. It services these loans, earning income from the difference between the payment received and the cash outlay to investors of the asset-backed securities.

Since late 2007, economic downturn and disappearance of asset-backed securities market interrupted the business model of AmeriCredit. On January 29, 2009, the company reported a quarterly loss of $25.6 million or $0.21 per share of its fiscal second quarter ended December 31, 2008. . For the six months ended December 31, 2008, AmeriCredit reported a net loss of $27.2 million, or $0.23 per share, versus earnings of $42.7 million, or $0.35 per share, for the six months ended December 31, 2007.

“Over the past year, the recessionary environment has accelerated, including increasing job losses, falling consumer confidence, a decline in demand for new and used vehicles, and the scarcity and high cost of funding and capital. We do not expect improvement in the macroeconomic outlook in 2009. As such, we are focused on maximizing cash collections from our loan portfolio and diligently managing the business to preserve capital and liquidity,” Commented AmeriCredit President and Chief Executive Officer Dan Berce.

Against this backdrop, GuruFocus data shows that two of the smartest investment managers, Bruce Berkowitz and Ian Cumming bought into the company. Together, they control nearly half of the shares outstanding. On Dec 12, 2008 AmeriCredit even announced the appointment of Bruce R. Berkowitz to its board of directors.

Realtime holding information for Bruce Berkowitz, Ian Cumming and other Gurus are available to premier members, 7-Day free trial is available.


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