JEF - Jefferies Group

[rogermunibond]

Tough to say, these are complex, expensive projects. View them as free options with potential ig payoffs but low chances of success.

 

Lake Charles, La. Pet coke to methanol looks to be progressing.

 

Indiana, and Chicago projects were looking good last year but both are now dead due to political oppo. - governors in both states killed them.

 

Miss. gasification is still alive but I haven't seen anything recently.

 

Oregon LNG is sure to get significant environmental and state oppo. 

 

 

[giofranchi]

Muscleman sent me the following PM:

 

Hi gio,

Since you really like great capital allocators, I am curious if LUK fits your taste, and if you have any opinions on it? It is trading below book value as of this week, though it is still far above tangible book.

 

 

Thanks!

Muscleman

 

Hi muscleman,

First of all, I don’t care about “tangible book”. Tangible book per se is meaningless and might even be very often deceiving. As always, you must know and understand the business. There is no substitute for that.

Second, truth be told, I don’t like change… because change decreases my knowledge and understanding of the business. Imo, Mr. Cumming and Mr. Steinberg were Leucadia National. Are they so out of the business to not even put out the shareholders letter for year 2012? Well, I fear that my knowledge and understanding of the business has decreased… a lot! So, LUK might certainly be cheap, if it still were the business that I used to know. But, what if it is no longer that business? It might still be “statistically” cheap… But statistically cheap things are for traders, when I invest (I mean, when I buy something for the next 10 years, with no intention of selling), I NEED and REQUIRE to know and understand the business. No matter what the price is, because there is no substitute for knowledge and understanding.

I stay away for now, while I try to watch the new management very closely and get to understand them better. If in time I still like what I see very much, I will be glad to invest in LUK once again! :)

 

giofranchi

 

[racemize]

I am similarly cautious with luk right now, but am still holding on to my old position given handler's own bvps record.

[Grenville]

Are they so out of the business to not even put out the shareholders letter for year 2012?

 

I was wondering about this as well.

 

I asked IR at JEF if there was a LUK AR/letter coming out along with the proxy. They replied that the annual report with chairman/president's letter will be mailed out the week of June 24th because the AGM is July 25th.

 

 

[giofranchi]

I asked IR at JEF if there was a LUK AR/letter coming out along with the proxy. They replied that the annual report with chairman/president's letter will be mailed out the week of June 24th because the AGM is July 25th.

 

Thank you Grenville,

good news! I will certainly read that letter with the utmost attention and, as always, with much pleasure. :)

 

giofranchi

[premfan]

I think people put too much importance on a candid letter. Yes having a long candid letter is a great luxury for the shareholders cause we are "programmed" to think the more candid the letter and longer the letter the more its like berkshire so it gathers more trust  Track record and business economics i feel are the most important for future growth. Luk is a much stronger company now with jef and handler's track record is very good. Investors questioning luk based on not having a letter out yet doesnt reasonate with how real bussiness's are run.  Candid letters can easily be faked. A  track record cant be faked.  Ingredients of a candid letter with someone with not a established track record

 

1.) Mention Intrinsic Value

2.) Reference Buffet

3.) " will forgo short term gain for long term value"

4.) At least 8 pages long

 

Cue motley fool articles " the next warren buffet of x" .

 

 

 

 

[giofranchi]

premfan,

believe me: I don’t care much about a “candid letter”. What I want is to understand a business. Saying that LUK is much stronger now with JEF, though it might certainly be true, doesn’t help me understand it any better. Is LUK a new animal? If so, please, give me something useful to understand its new behavior. Otherwise, it is unpredictable to me, and I don’t invest in unpredictable things.

A good, long, well-reasoned, and stacked with news, letter might lend a hand and provide some help. Though far from me saying it would be enough!

 

giofranchi

 

[premfan]

premfan,

believe me: I don’t care much about a “candid letter”. What I want is to understand a business. Saying that LUK is much stronger now with JEF, though it might certainly be true, doesn’t help me understand it any better. Is LUK a new animal? If so, please, give me something useful to understand its new behavior. Otherwise, it is unpredictable to me, and I don’t invest in unpredictable things.

A good, long, well-reasoned, and stacked with news, letter might lend a hand and provide some help. Though far from me saying it would be enough!

 

giofranchi

 

This wasnt directed at you . Its been a thought i been having recently where there are alot of books on how to write the perfect shareholder letter. People evolve by doing things more intelligently and its so easy to write a fake candid letter.  Knowing that the letter will trigger trust and the feelings of finding the next big thing. My research has shown me great companies or great anything is great from the start. Greatness doesnt wait. Greatness constantly evolves. Being static is a sign of something not being great. Greatness keeps on moving, evolving, and learning. Also greatness is defined by product/service that has a system of abnormal economics that is repeatable ( I use CROIC coined by joe ponzio for abnormal economics). Sorry i went on a tangent lol and i'm not a luk expert. Although, adding a well run investment bank with handlers track record really cant be a negative thing. It gives luk a more stable source of cash flow to reinvest into different assets in the upcoming decades. Last thought is everything is inherently unpredictable. I think people should accept this and continue to evolve instead of having false ideas of something being predictable.

[giofranchi]

Last thought is everything is inherently unpredictable. I think people should accept this and continue to evolve instead of having false ideas of something being predictable.

Well, I guess it depends on anyone's idea of predictabily. My idea of predictability is different from my idea if certainty. I define a business predictable, whenever I possess a very clear idea of how and why it could achieve a high compounded return on invested capital for many years into the future. This doesn't mean it will actually achieve such a result. It simply means that it might, and that I have recognized how and why. This is the process I follow managing my own businesses: I say yes to the activities that I understand, and I say no to those that I don't understand. And you kown what? Until now I have never experienced very unpleasant surprises!

Why should I invest differently?

And management counts! To fully grasp the true potential of any business, management matters a lot!

 

giofranchi

 

[mcliu]

I guess your true concern is whether Handler has the investment acumen of Cumming/Steinberg, which is a valid concern.

 

On the asset side, the changes haven't been that drastic. Weighting to JEF has increased, and Crimson was spun-off, otherwise, it's mostly the same collection of assets.

[muscleman]

Thank you Gio!

I see people comparing LUK to BRK and said LUK is a mini-BRK. BRK has free insurance float to invest, but LUK does not have that luxury.

What kind of synergy should we expect from the merger of LUK and JEF? More efficient deal making?

[twacowfca]

I asked IR at JEF if there was a LUK AR/letter coming out along with the proxy. They replied that the annual report with chairman/president's letter will be mailed out the week of June 24th because the AGM is July 25th.

 

Thank you Grenville,

good news! I will certainly read that letter with the utmost attention and, as always, with much pleasure. :)

 

giofranchi

 

Yes! The letter is very important.  The power of words to create or destroy is not always appreciated.  Cumming & Steinberg's letters are classics in the all too rare straight shooter genre. They will be tough to equal.  :)

[giofranchi]

Thank you Gio!

I see people comparing LUK to BRK and said LUK is a mini-BRK. BRK has free insurance float to invest, but LUK does not have that luxury.

What kind of synergy should we expect from the merger of LUK and JEF? More efficient deal making?

 

Those are good questions. And the fact LUK lacks the luxury of having free insurance float to invest is a valid point. As twacowfca’s remark that Cumming & Steinberg will be tough to equal is also certainly true (I would add not only in straight shooting communication with shareholders…). Simply put, I still ignore the answers, or I don’t feel comfortable enough with them yet. Both Mr. Handler and Mr. Wheeler are young and there will be plenty of time to watch them carefully and to get more confident with the new management, both their strengths and weaknesses.

 

giofranchi

 

[rjstc]

Thank you Gio!

I see people comparing LUK to BRK and said LUK is a mini-BRK. BRK has free insurance float to invest, but LUK does not have that luxury.

What kind of synergy should we expect from the merger of LUK and JEF? More efficient deal making?

 

Those are good questions. And the fact LUK lacks the luxury of having free insurance float to invest is a valid point. As twacowfca’s remark that Cumming & Steinberg will be tough to equal is also certainly true (I would add not only in straight shooting communication with shareholders…). Simply put, I still ignore the answers, or I don’t feel comfortable enough with them yet. Both Mr. Handler and Mr. Wheeler are young and there will be plenty of time to watch them carefully and to get more confident with the new management, both their strengths and weaknesses.

 

giofranchi

 

Giofranchi. As I have told you before I really respect your thinking.

  I own LUK and have for a while. In fact it is one of my larger positions. I trusted Cumming & Steinberg with investing my money and was very confident in their acumen.

  Just like my belief in Buffett, & Watsa I just can't see them just haphazardly turning over their portraits without being VERY confident in their successor choices. I also suspect that they are still very in tune with the continuing brush strokes being made. Ron

[twacowfca]

Thank you Gio!

I see people comparing LUK to BRK and said LUK is a mini-BRK. BRK has free insurance float to invest, but LUK does not have that luxury.

What kind of synergy should we expect from the merger of LUK and JEF? More efficient deal making?

 

Those are good questions. And the fact LUK lacks the luxury of having free insurance float to invest is a valid point. As twacowfca’s remark that Cumming & Steinberg will be tough to equal is also certainly true (I would add not only in straight shooting communication with shareholders…). Simply put, I still ignore the answers, or I don’t feel comfortable enough with them yet. Both Mr. Handler and Mr. Wheeler are young and there will be plenty of time to watch them carefully and to get more confident with the new management, both their strengths and weaknesses.

 

giofranchi

 

Giofranchi. As I have told you before I really respect your thinking.

  I own LUK and have for a while. In fact it is one of my larger positions. I trusted Cumming & Steinberg with investing my money and was very confident in their acumen.

  Just like my belief in Buffett, & Watsa I just can't see them just haphazardly turning over their portraits without being VERY confident in their successor choices. I also suspect that they are still very in tune with the continuing brush strokes being made. Ron

 

I agree.  The jury is still out, but the extradinordinary action of turning over the keys to Handler is inconsistent with any other sensible hypothesis than the idea that Steinberg and Cumming hold a  firm conviction, based on close observation, that  Handler is as good a value investor, holding the same values, as they are.  :)

[giofranchi]

Thank you Gio!

I see people comparing LUK to BRK and said LUK is a mini-BRK. BRK has free insurance float to invest, but LUK does not have that luxury.

What kind of synergy should we expect from the merger of LUK and JEF? More efficient deal making?

 

Those are good questions. And the fact LUK lacks the luxury of having free insurance float to invest is a valid point. As twacowfca’s remark that Cumming & Steinberg will be tough to equal is also certainly true (I would add not only in straight shooting communication with shareholders…). Simply put, I still ignore the answers, or I don’t feel comfortable enough with them yet. Both Mr. Handler and Mr. Wheeler are young and there will be plenty of time to watch them carefully and to get more confident with the new management, both their strengths and weaknesses.

 

giofranchi

 

Giofranchi. As I have told you before I really respect your thinking.

  I own LUK and have for a while. In fact it is one of my larger positions. I trusted Cumming & Steinberg with investing my money and was very confident in their acumen.

  Just like my belief in Buffett, & Watsa I just can't see them just haphazardly turning over their portraits without being VERY confident in their successor choices. I also suspect that they are still very in tune with the continuing brush strokes being made. Ron

 

I agree.  The jury is still out, but the extradinordinary action of turning over the keys to Handler is inconsistent with any other sensible hypothesis than the idea that Steinberg and Cumming hold a  firm conviction, based on close observation, that  Handler is as good a value investor, holding the same values, as they are.  :)

 

Ron and twacowfca,

yours is good reasoning indeed. No doubt about it! Anyway, I think conviction about a business is something not entirely rational… I might be very well wrong about this, but let me ask you a question: if we agree on all the facts and numbers, do you think that it automatically entails we share the same degree of conviction about a business? Though I am an engineer and I tend to rely heavily on facts and numbers, I have gradually come to the conclusion that the right answer is: not necessarily. And yet, think of how easily you can buy and sell a business today… just a few clicks on your mouse are required… And that’s the reason why you MUST have conviction! Because, otherwise, you are going to commit errors. Imo, no one who lacks conviction will be spared! That’s exactly why

investing is most intelligent when it is most businesslike

I “feel” I need to watch Mr. Handler and Mr. Wheeler a little bit longer, to get back to the same degree of conviction I had when Mr. Cumming and Mr. Steinberg were at the helm. At the same time I understand that your “feeling”, and therefore your behavior and investment choices, might be different. I respect them. :)

 

giofranchi

 

[twacowfca]

Thank you Gio!

I see people comparing LUK to BRK and said LUK is a mini-BRK. BRK has free insurance float to invest, but LUK does not have that luxury.

What kind of synergy should we expect from the merger of LUK and JEF? More efficient deal making?

 

Those are good questions. And the fact LUK lacks the luxury of having free insurance float to invest is a valid point. As twacowfca’s remark that Cumming & Steinberg will be tough to equal is also certainly true (I would add not only in straight shooting communication with shareholders…). Simply put, I still ignore the answers, or I don’t feel comfortable enough with them yet. Both Mr. Handler and Mr. Wheeler are young and there will be plenty of time to watch them carefully and to get more confident with the new management, both their strengths and weaknesses.

 

giofranchi

 

Giofranchi. As I have told you before I really respect your thinking.

  I own LUK and have for a while. In fact it is one of my larger positions. I trusted Cumming & Steinberg with investing my money and was very confident in their acumen.

  Just like my belief in Buffett, & Watsa I just can't see them just haphazardly turning over their portraits without being VERY confident in their successor choices. I also suspect that they are still very in tune with the continuing brush strokes being made. Ron

 

I agree.  The jury is still out, but the extradinordinary action of turning over the keys to Handler is inconsistent with any other sensible hypothesis than the idea that Steinberg and Cumming hold a  firm conviction, based on close observation, that  Handler is as good a value investor, holding the same values, as they are.  :)

 

Ron and twacowfca,

yours is good reasoning indeed. No doubt about it! Anyway, I think conviction about a business is something not entirely rational… I might be very well wrong about this, but let me ask you a question: if we agree on all the facts and numbers, do you think that it automatically entails we share the same degree of conviction about a business? Though I am an engineer and I tend to rely heavily on facts and numbers, I have gradually come to the conclusion that the right answer is: not necessarily. And yet, think of how easily you can buy and sell a business today… just a few clicks on your mouse are required… And that’s the reason why you MUST have conviction! Because, otherwise, you are going to commit errors. Imo, no one who lacks conviction will be spared! That’s exactly why

investing is most intelligent when it is most businesslike

I “feel” I need to watch Mr. Handler and Mr. Wheeler a little bit longer, to get back to the same degree of conviction I had when Mr. Cumming and Mr. Steinberg were at the helm. At the same time I understand that your “feeling”, and therefore your behavior and investment choices, might be different. I respect them. :)

 

giofranchi

 

Feeling is important. This is an aspect of what separates us from computer algorithms.  Numbers and algorithms should be more objective, and often they are.  What's behind the numbers is what really counts. Words are rich in  meaning with the power to create or destroy. I believe our world was created through words, imbued with meaning and purpose far deeper than mere algorithms.

 

Steinberg and Cumming are a tough act to follow.  Handler has demonstrated excellence in one domain.  Does he understand the power of words to build value in another?  Lets read his first Leucadia shareholders letter.

[rjstc]

Steinberg and Cumming are a tough act to follow.  Handler has demonstrated excellence in one domain.  Does he understand the power of words to build value in another?  Lets read his first Leucadia shareholders letter.

  " Agreed".

 

giofranchi. If I could split my investible funds equally between you and twacowfca I "feel" that I would be perfectly satisfied with the results. In that I have great conviction. Until proven otherwise.

 

Leaning on the next alternatives available I have conviction investing with Buffett, Watsa, Cummings/Steinberg (now their chosen successors), Gayner, Parames & a few others. I had been a very early investor with Berkowitz and Van Den Berg but I came to have less conviction with them so I no longer invest with them for various reasons.

 

I also understand and respect your rational ideas about LUK now. I think in the end we pretty much end up in the same place. I'm not great at math. The numbers I use are simple, what have you shown me. The conviction is would I like to be in business with you as a partner or absent that who you pick to carry on for you, until proven otherwise.  Ron

 

[bargainman]

Parames & a few others.

 

Just curious, is there any way to invest with Parames?  Just read a bit about him, would like to hear more.. Maybe we could start another thread?

[rjstc]

Parames & a few others.

 

Just curious, is there any way to invest with Parames?  Just read a bit about him, would like to hear more.. Maybe we could start another thread?

 

You can invest in the funds he is involved in but I find them a little expensive. What I do is follow what he's doing & if I like what I see I follow. Such as BMW preferred and EXOR & Wolters Kluwer which have done well since I've bought them.

[twacowfca]

Parames & a few others.

 

Just curious, is there any way to invest with Parames?  Just read a bit about him, would like to hear more.. Maybe we could start another thread?

 

You can invest in the funds he is involved in but I find them a little expensive. What I do is follow what he's doing & if I like what I see I follow. Such as BMW preferred and EXOR & Wolters Kluwer which have done well since I've bought them.

 

Following what Parames is doing is a very good strategy.  Based on valuation,  Parames rotates in and out of maybe 80 or so mostly European companies he has identified as being better businesses with family ownership and/or ethical management.  He pretty much does what Buffett did up until the 1980's wham a change in the tax law made it expensive for corporations to flip stock investments.

 

In Europe, there is absolutely no taxable event when funds like Parames sell shares they bought for a profit. Taxation of profits is delayed until an investor in his funds sells his shares in the fund at a profit.  Even then, shares in one of his funds can be rolled over to another fund tax free.  :)

 

As a result of the favorable tax regime,, Parames gets in and out of the  stocks in the set that he likes a lot more frequently than Buffett did when he employed that same strategy. :)

[frog03]

Following what Parames is doing is a very good strategy.  Based on valuation,  Parames rotates in and out of maybe 80 or so mostly European companies he has identified as being better businesses with family ownership and/or ethical management.  He pretty much does what Buffett did up until the 1980's wham a change in the tax law made it expensive for corporations to flip stock investments.

 

In Europe, there is absolutely no taxable event when funds like Parames sell shares they bought for a profit. Taxation of profits is delayed until an investor in his funds sells his shares in the fund at a profit.  Even then, shares in one of his funds can be rolled over to another fund tax free. 

 

As a result of the favorable tax regime,, Parames gets in and out of the  stocks in the set that he likes a lot more frequently than Buffett did when he employed that same strategy.

**********

 

Twa, this is not quite true for the capital gains.  Some countries, like Spain where Parames is based, have nominal capital gains for funds when they sell their stocks, about 1% if my memory serves me right.  In France, on the other hand there are no such gains.  For European investors it is usually a good thing to hold a top performing fund as you get both market beating performance and much better tax treatment.

 

Parames gets good recognition for good reason but his track record is not as good as Thierry Flecchia leading the Flinvest Entrepreneurs fund and before this a couple Oddo funds.  Flecchia has better net performance than Parames despite higher fees.

[scorpioncapital]

http://www.crainsnewyork.com/article/20130616/FINANCE/306169990

[buylowersellhigh]

Any news on LUK lately?  Has come down to almost book value.

 

 

[jouni1]

Any news on LUK lately?  Has come down to almost book value.

 

jefferies net profit dropped 34%. on another note; this is why i read this forum. been beating myself up for missing this ever since the p/b started running away.

 

guess i'll start building a position. i'm almost certain handler can give me 10+% a year at book value.

 

http://blogs.wsj.com/moneybeat/2013/06/18/jefferies-second-quarter-net-drops-34/?mod=yahoo_hs