Leucadia National In The Shadows Of Berkshire?

 Leucadia National Corp.(LUK) is a publicly traded diversified holding company with investments ranging from telecoms, medical products, real estate, auto finance, investment banking, timber,mining, plastics, gaming entertainment, energy and  even a couple of wineries. Their current track record goes back almost 30 years with their roots being traced back even farther to the mid 1800's. Leucadia which is run by the duo Ian Cumming and Joseph Steinberg does not come up  in the media as much  as  the well known Berkshire Hathaway(BRKA)(BRKB) run by Warren Buffett. However, over the last 30 years these value players have quietly compounded an impressive track record which ranks highly amongst any peer group. Many of their investments are private companies in which they own a significant stake or the whole company. They currently hold positions in 8 publicly traded companies with the largest being the Jefferies Group(JEF).

Currently LUK  trades at $19.50 per share with a book value of $25.00 per share. Their debt/equity ratio is .38, with revenues slightly over 1 billion. Management currently owns 23% of the shares outstanding while large institutions such as, Fairholme(FAIRX), Morgan Stanley(MS) and others own 66%. At the end of September their net worth or stock holders equity came to $5.7 billion dollars. According to their last annual report they had an opportunity to make a large investment in a real estate, farming and ranching business in Argentina which they will give further details at the end of 2008.

Below is Leucadia National's Track Record For The Last 30 Years:

       Book Value    Equity

        Per Share

                                                                     

1978 ($0.04) (a) ($7,657) (a)
1979 0.11  22,945  
1980 0.12  24,917 
1981 0.14  23,997 
1982 0.36  61,178  
1983 0.43 73,498  
1984 0.74  126,097 
1985 0.83  151,033 
1986 1.27  214,587  
1987 1.12  180,408 
1988 1.28  206,912 
1989 1.64  257,735 
1990 1.97  268,567 
1991 2.65 365,495 
1992 3.69  618,161 
1993 5.43  907,856
1994 5.24  881,815 
1995 6.16  1,111,491 
1996 6.17  1,118,107 
1997 9.73  1,863,531 
1998 9.97  1,853,159 
1999 6.59(b) 1,121,988(b) 
2000 7.26 1,204,241 
2001 7.21 1,195,453 
2002 8.58  1,534,525 
2003 10.05  2,134,161 
2004 10.50  2,258,653 
2005 16.95  3,661,914(c)
2006 18.00  3,893,275 
2007 25.03  5,570,492(d)

                         21.7%  compound return on equity

(a) A negative number cannot be compounded; therefore, we have used 1979.

(b) Reflects a reduction resulting from dividend payments in 1999 totaling $811.9 million or $4.53 per share.

(c) Reflects the recognition of $1,135.1 million of the deferred tax asset or $5.26 per share.

(d) Reflects the recognition of $542.7 million of the deferred tax asset or $2.44 per share.

(Dollars in thousands, except per share amounts)

* All information is believed to be reliable but as usual you need to do further research

A Cash Rich Insurer: Odyssey Re

Odyssey Re (ORH) is a leading reinsurance underwriter that provides property and casualty insurance as well as specialty insurance. Odysseys biggest shareholder is Fairfax Financial which I talked about in a previous post. Fairfax holds 66% of the outstanding common shares. Currently ORH has a market cap of 2.5 billion and its revenues are 3.2 billion. Total cash on hand is 2.5 billion, which means it only trades for 1 x cash. Very little debt with a debt/equity ratio of .18. ORH sports a 27% REO(return on equity). They pay a small dividend which yields .70% which was recently raised. With so much in cash and backing from Fairfax, Odyssey looks to be in a strong position to weather out the current financial crisis.



Author does not hold any position.

Fairfax Financial Holdings Looking Cheap!

I recently wrote an article that mentioned Fairfax Financial(FFH). Fairfax is an insurance holding company run in the same fashion as Warren Buffet's Berkshire Hathaway. They take the float from the insurance business and re-invest it in common stock, bonds, or whole companies. Fairfax is run by Prem Watsa who is looked upon as the Warren Buffet of Canada. Fairfax has sold off with the market in general reaching a high of $355 a share. Currently Fairfax is trading at book value of $252 a share with a market cap of 4.7 billion and sales near 8 billion. With over 6 billion in cash (which represents $333 per share) and a debt-to-equity ratio of only .35 this company is looking quite attractive. They have a high REO(return on equity) of 37% with a trailing P/E of 3.25 and pays 1.9% dividend. To boot they have a stock portfolio worth 3 billion.

The author suggest further research before investing.
The author is long FHH.

STOCKMANMARC

3 Mini Berkshire Hathaways???

For those of you interested in purchasing Berkshire Hathaway stock (BRKA) A shares and (BRKB) B shares which trade at $111500 and $3710 respectively, but do not want to pay the price, here are 3 companies that operate in the same fashion as Berkshire Hathaway hence the title. Markel (MKL), Fairfax (FFH), and Alleghany Corp. (Y) all 3 are insurance companies just like Berkshire. They take the insurance float and invest it in common stock or buy the whole company. All 3 have a portfolio of businesses ranging from railroads to pharmaceuticals with Markel having the most diversified portfolio. All have very competent management in place. All take a value approach to investing. These companies are not in the limelight like Apple(AAPL), Google(GOOG) or Research in Motion(RIMM), so you are probably not familiar but all 3 have prodded along allocating capital (insurance float) into new businesses. It has even been rumored in certain circles that Tom Gayner the Chief Investment Officer of Markel could be in line to run Berkshire. All 3 trade in the triple digits MKL $315, FFH $285, Y $275, but keep in mind folks the price does not have anything to do with the valuation of the underlying business.

I hope this article was some what informative.

STOCKMANMARC