Guest JoelS Posted March 3, 2015 Share Posted March 3, 2015 Just finished reading the Leucadia letter and Harbinger Group stuck out as an attractive idea. HRG's 2015 Q1 presentation cites book value as $17/share. At the current price of $12.46/share that is a 36% discount. The underlying businesses have grown over the years at very decent rates. You also have Joseph Steinberg as chairman of the board. What do others think of this company at this price? Link to comment Share on other sites More sharing options...
ni-co Posted March 3, 2015 Share Posted March 3, 2015 Looks interesting. Do you have an idea why Falcone stepped down as CEO to build HC2 Holdings instead? http://dealbook.nytimes.com/2014/11/25/falcone-steps-down-from-top-roles-at-harbinger-group/ Link to comment Share on other sites More sharing options...
Guest JoelS Posted March 3, 2015 Share Posted March 3, 2015 No idea other than what you linked in that article. But I like his replacement. Link to comment Share on other sites More sharing options...
watsa_is_a_randian_hero Posted March 3, 2015 Share Posted March 3, 2015 in the past, I had wanted to given falcone the benefit of the doubt. However, recently with HC2 is in the midst of squeezing out shareholders of Schuff International, this is just another sign to me he is out for himself and willing to do shady deals to further himself. I wouldnt invest in one of his companies. Its surprising to me that Leucadia was willing to. I'd be fearful of Falcone coming back, or that the strings arent competely cut, or that potential shady dealings or pennywise/poundfoolish dealings will come to surface as new management starts to clean up. Link to comment Share on other sites More sharing options...
Guest JoelS Posted March 3, 2015 Share Posted March 3, 2015 You make a good point. He has left the board, but remains HRG's largest shareholder. Link to comment Share on other sites More sharing options...
CorpRaider Posted May 1, 2015 Share Posted May 1, 2015 Interest in this was piqued by announced acquisition of armor all group by spectrum brands. Also noticed LUK buying the stock, they are now the largest shareholders, I believe. Falcone is no longer driving the bus. Link to comment Share on other sites More sharing options...
Homestead31 Posted May 5, 2015 Share Posted May 5, 2015 HRG is really a levered bet on SPB b/c most of HRG's NAV is SPB. I don't love the fact that SPB's CEO recently sold shares, and they used shares to pay for the Armor All acquisition. this is supposedly a company run by a very savvy capital allocator, so if he is using shares as currency, that suggests he thinks they are fully or even over valued. the fact that he personally sold stock as well seems to confirm that view. Link to comment Share on other sites More sharing options...
CorpRaider Posted May 6, 2015 Share Posted May 6, 2015 Thanks for the response. It looks like SPB is paying cash for the acquisition but are planning to finance it with the issuance of stock and debt in which HRG will participate. The CEO sales are under a 10B-5 plan and coincided with a large vesting of options around late last year, for what that is worth. I'm sure you saw this, but HRB has an estimate of NAV on the IR section of the site, which I thought was interesting, if for no other reason than to see all the other businesses. Link to comment Share on other sites More sharing options...
Homestead31 Posted May 12, 2015 Share Posted May 12, 2015 i am coming around on this due to some initial skepticism tied to insider selling at Spectrum. I think Ackman's Sohn presetation http://www.marketfolly.com/2015/05/bill-ackmans-sohn-conference_4.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarketFolly+%28Market+Folly%29&utm_content=Netvibes is a great mental model for looking at Spectrum. The Spectrum business model is to offer "same quality, lower price" goods to retailers, and to allow retailers to make more margin on these goods than the top level brands. The retailers are thus incentivized to give premium shelf space to Spectrum products. While Spectrum loses some margin under this strategy, they make up some margin by relying on retailer placement and lower prices to drive sales rather than advertising. How much do all those energizer bunny commercials cost? Spectrum also has tremendous operating leverage through their distribution network. they are already spending the time selling and delivering products to Wallmart etc, so when they buy a new brand they can eliminate alot of costs by just including the new SKUs with their existing sales team and delivery teams. This is a great model. My skepticism regarding raising equity to purchase Armor-all is tempered by the fact that LUK's Steinberg is the Chairman of HRG, and Spectrum wouldn't make a big acquisitions without HRG's ok. Chris Mittleman recently commented that he thought NAV for HRG was $16.25 a share. You can get close to that level on just the publicly traded parts, meaning you get the asset management (a great business, although small) and energy stuff (not a great business, but clearly depressed at the moment) for free, in addition to a large discount to NAV. There is an argument to be made that conglomerates deserve a discount to NAV, but if capital is allocated effectively between units, then there is an argument that they should trade at a premium. It will take time for the gap to close, but if HRG is able to keep growing, it will close eventually. Given the defensive revenues attached to Spectrum and the Insurance business, and alot of room for acquisitions at Spectrum, i think it is very likely this growth will continue. Additionally, at this point in the cycle, defensive revenues are increasingly attractive. I don't know when the economy/market will turn, but it will eventually, and those defensive cash flows are more valuable in a downturn then they are during the good times. thanks for posting on HRG Joel Link to comment Share on other sites More sharing options...
CorpRaider Posted May 12, 2015 Share Posted May 12, 2015 Yeah, I've noticed anecdotally that the Spectracide brand products are placed like they are store brands (or at least that was my impression, because I believed they were Lowes store brand products, until I found the same stuff at the Home Despot). Looks like the Falconer was buying some recently, based on filings. I'm also sort of intrigued by HRG just because of the recent changes in ownership and the name and whatnot. It seems like there may be a catalyst somewhere on the horizon. I like it circa $10. Link to comment Share on other sites More sharing options...
gfp Posted May 12, 2015 Share Posted May 12, 2015 Yeah, I've noticed anecdotally that the Spectracide brand products are placed like they are store brands (or at least that was my impression, because I believed they were Lowes store brand products, until I found the same stuff at the Home Despot). Looks like the Falconer was buying some recently, based on filings. I'm also sort of intrigued by HRG just because of the recent changes in ownership and the name and whatnot. It seems like there may be a catalyst somewhere on the horizon. I like it circa $10. It looked to me like Falcone was selling in late April - where do you see him buying recently? (not that it matters to me what he is doing) Link to comment Share on other sites More sharing options...
CorpRaider Posted May 12, 2015 Share Posted May 12, 2015 Yeah, I think I may have been conflating this with something else I was looking at, as I'm not seeing anything now. My apologies. Link to comment Share on other sites More sharing options...
gfp Posted May 13, 2015 Share Posted May 13, 2015 http://www.sec.gov/Archives/edgar/data/109177/000095014215001036/xslF345X03/es1500638_4-asali.xml Link to comment Share on other sites More sharing options...
WhoIsWarren Posted May 20, 2015 Share Posted May 20, 2015 The HRG-calculated sum of the parts valuation was $14.36 a share at Q2:15 (31st March 15), down from $17.06 in Q1. This was mainly due to a write-down in the value of HGI Energy Holdings LLC, as well as lower share prices for FGL and (to a lesser extent) SPB. SPB and FGL obviously move around and so affect the sum-of-the-parts and therefore the NAV discount. I'm wondering if anyone has looked deeper into HRG to see if the company's SOTP valuation includes some undervalued / hidden assets. One potential area of hidden value might be the valuation allowance on the deferred tax asset. I'm certainly no expert on tax matters, but I think Leucadia / Steinberg probably are and if anyone can maximise this value they can. Quickly scanning the 10-K, I think the DTA valuation allowance as of last September was $712m, of which c.$280m relates to HGI Energy, $118m relates to FGL and $333m relates to Spectrum (I know the numbers don't add up, so I'm clearly doing something wrong here). I assume these are fully consolidated numbers, so HRG shareholders' ownership of these allowances is lower (I suggest c.$450m, or c.$2.2 per share). Now they could be worth nothing and I probably wouldn't pay much for them, but you never know...... Anyone got any thoughts on this? Thanks Link to comment Share on other sites More sharing options...
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