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Leucadia National Q2 Portfolio: Jefferies Group Inc., AmeriCredit Corp., Buys TravelCenters of America LLC

Leucadia National Q2 Portfolio Update

August 11, 2009 | About:

Leucadia National just reported their Q2 equity portfolio, which consists of 5 stocks with a total value of $1.5 billion, all in financial sector. The portfolio has very little change compared with the first quarter. These are the details

Leucadia National is managed by its CEO Ian Cumming and president Joe Steinberg. The company buys TravelCenters of America LLC, sells CRESUD S A C I F Y A during the 3-months ended 06/30/2009, according to the most recent filings of his investment company, Leucadia National:

New Purchases: TA,

Sold Out: CRESY.PK,

For the details of Ian Cumming's stock buys and sells, go to http://www.gurufocus.com/StockBuy.php?GuruName=Ian+Cumming

Leucadia has most their equities in just two companies, which are Jefferies Group Inc. and AmeriCredit Corp.

Jefferies Group Inc. is a holding company offering global investment banking services. It had an annual average earning growth of 21.9% over the past 10 years.

Discussing their investment in JEF, Cumming and Steinberg stated in the letter:

In April 2008, we sold to Jefferies 10,000,000 Leucadia shares at $49.83 per share and received 26,585,310 shares of Jefferies stock and $100 million in cash. In cash transactions during 2008, we increased our holdings to 48,585,385 shares, which is approximately 30% of Jefferies.

The total investment was $794.4 million (the largest single investment we have ever made) and the fair market value of our investment was $683.1 million at December 31, 2008 .

Jefferies is not in trouble, not a ward of the U.S. Government, not burdened by toxic assets and not overleveraged. Its employees own a substantial interest in the firm and their pay expectations are being managed with the best interests of the firm in mind. Jefferies has successfully hired talented individuals from troubled or failing firms and recently acquired amuni trading and underwriting business. Trading volumes have been good, their restructuring business busy, but their capital markets and mergers and acquisition businesses remain lethargic. This will inevitably improve, but timing is uncertain.

In 2000, Leucadia and Jefferies entered into a joint venture to trade high yield debt. We invested $100 million and received for the next seven years an average return of 20% per annum.

In 2007, Leucadia and Jefferies formed Jefferies High Yield Trading, LLC (JHYT) a registered broker-dealer that engages in the secondary sales and trading of high yield and special situation securities. Each company has invested $350 million and has no current plans to invest more. In the midst of the financial meltdown JHYT survived pretty well by avoiding dangerous and highly leveraged situations and by remaining very liquid. Our return for 2008 was minus 20%. We hope for better results in 2009.

We have known Jefferies for a very long time and are particularly fond of and hold in high regard its long time Chief Executive Officer, Richard B. Handler. We believe that over the long haul Jefferies will survive and grow to enrich their shareholders!

AmeriCredit Corp. is a leading independent automobile finance company that provides financing solutions indirectly through auto dealers and directly to consumers in the United States and Canada . AmeriCredit Corp. has a market cap of $1.71 billion; its shares were traded at around $12.85 with a P/E ratio of 214.2 and P/S ratio of 0.7. AmeriCredit Corp. had an annual average earning growth of 13.2% over the past 10 years. GuruFocus rated AmeriCredit Corp. the business predictability rank of 2.5-star.

These are comments from Cumming and Steinberg:

As of December 31, 2008, we acquired approximately 25% of the outstanding common shares of AmeriCredit Corp., a company listed on the NYSE (symbol: ACF ) for aggregate cash consideration of $405.3 million. ACF is an independent auto finance company that is in the business of purchasing and servicing automobile sales finance contracts, historically for consumers who are typically unable to obtain financing; this segment of the business is known as subprime. At December 31, 2008 , our investment in ACF is classified as an investment in an Associated Company and is carried at fair market value of $249.9 million.

Years ago we owned a similar business and as a result carefully followed ACF . We observed that their large volume and efficient processing and underwriting abilities made them a fierce competitor. We also observed that when a recession hit ACF went through a period of poor results, but when a recovery began they were able to make very large profits by being able to select more credit worthy customers and to charge more for loans.

Much of the above remains true; however, we began to buy the stock too soon and paid too much. The recession has been much harder and much deeper than we anticipated, though ACF is succeeding in acquiring more credit worthy customers and is able to charge higher rates. The fly in the ointment has been that it has been almost impossible to secure additional funding to make loans. Securitizations, which were the lifeblood of their financing, are in rigor mortis. The Federal Reserve has announced a program to restart consumer lending known as TALF, but as yet ACF has not been able to access it. Perhaps that will change. ACF has adequate financing to operate at a much reduced volume and is committed to preserving its net worth of $15.03 per share. We have a high regard for its management.

These are the 5 holdings of Leucadia:

  1. Jefferies Group Inc. (JEF) - 48,585,385 shares, 68.85% of the total portfolio
  2. AmeriCredit Corp. (ACF) - 32,940,440 shares, 29.65% of the total portfolio
  3. International Assets Holding Corp. (IAAC) - 1,384,985 shares, 1.37% of the total portfolio
  4. Capital Southwest Corp. (CSWC) - 19,776 shares, 0.1% of the total portfolio
  5. TravelCenters of America LLC (TA) - 275,308 shares, 0.04% of the total portfolio

New Purchase: TravelCenters of America LLC (NASDAQ:TA)

Ian Cumming initiated holdings in TravelCenters of America LLC. His purchase prices were between $2.06 and $2.7, with an estimated average price of $2.4. The impact to his portfolio due to this purchase was 0.04%. His holdings were 275,308 shares as of 06/30/2009.

TRAVELCENTERS OF AMERICA LLC. is a full-service national travel center chain in the U.S. with nationwide locations serving hundreds of thousands of professional drivers and other highway travelers each month - including virtually all major trucking fleets. Their travel centers operate under the `TravelCenters of America` `TA` and `Petro` brand names and offer diesel and gasoline fueling services restaurants heavy truck repair facilities stores and other services. TravelCenters of America LLC has a market cap of $41.6 million; its shares were traded at around $2.5 .


Ian Cumming sold out his holdings in CRESUD S A C I F Y A. The impact to his portfolio due to this sale was less than 0.01%.

CRESUD SA-ADR is involved in the Agriculture Industry. They are based in Argentine and they produce basic agricultural products. Products such as beef milk or crops. CRESUD S A C I F Y A has a market cap of $480.98 million; its shares were traded at around $1.3 with and P/S ratio of 4.66. The dividend yield of CRESUD S A C I F Y A stocks is 1.05%.

Rating: 2.8/5 (15 votes)


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