JEF - Jefferies Group

[ratiman]

Why didn't they take these writedowns alraedy? They had the opportunity with the latest 10K.

[scorpioncapital]

Write-downs of goodwill are not quite so in their power. It is a judgement made by the accountants and evaluated one per year in August. After all, what is considered a reason for a write-off? Making a few percent is not reason enough, you need to see substantial losses for some period of time. Same with the DTA, it takes several years of analysis and future projections to determine when to take it "off the books". (sometimes a big loss year but LUK has not really shown a big loss year so it's unlikely to be taken off). Luk suffers from mediocrity, not losses as far as the eye can see. That's a big difference.

 

[zenith]

small position intitated by fairfax, 300K shares

[arcticfox]

Anyone planning to attend the Leucadia annual meeting this week? Personally I think it's quite interesting at these levels but it still feels like a 2-3 year story as they need to grow tangible book value and have recent investments start to bare fruit + they need the cyclical businesses to have a moderate up cycle.

 

 

[BG2008]

Anyone planning to attend the Leucadia annual meeting this week? Personally I think it's quite interesting at these levels but it still feels like a 2-3 year story as they need to grow tangible book value and have recent investments start to bare fruit + they need the cyclical businesses to have a moderate up cycle.

 

When and where is the meeting? 

[BG2008]

2016 Annual Meeting of Shareholders

 

May 26, 2016

10:00 a.m.

AXA Event Center

787 Seventh Avenue, Auditorium

New York, New York 10019

 

 

[benhacker]

Sadly, I was hoping to make it, but I won't after all.  Would appreciate anyone who could share their notes.

[EricSchleien]

Was anyone else at the meeting today? Would love to discuss.

[Deepdive]

Was at the meeting today, here are my notes for those interested.

 

Leucadia_Shareholder_Meeting.pdf

[adesigar]

Was at the meeting today, here are my notes for those interested.

Thanks

[benhacker]

Ditto, thanks Deepdive.

 

You wrote Linkem, did they say anything substantive?

[racemize]

What was their general feeling on the future?  Sounds somewhat neutral?

[VersaillesinNY]

I like the fact that they changed the format presentation. They skipped the classic subsidiaries power point and had a 55 min concise talk and Q&A.

Although, it was only 55 min for an AM because as usual Joe Steinberg was keeping a close look at the watch!

 

General feeling from management and shareholders: The stock is undervalued generating some frustration and disappointment.

They are shy with the share repurchasing program because of rating agencies and also because they like to keep cash for future opportunities.

 

Management is conservative, disciplined, transparent (see proxy) and opportunistic.

 

Regarding Linkem: They are adding subscribers and have a winning strategy.

Regarding asset management & selecting partners:

Looking for people with the ability to make money, assess risk/reward

They like a multi-sectoral / multi-market approach; Diversification helps them and Quality helps value delivery.

They invest in asset classes & business that they understand.

 

There was a question/complain about why the AM is not webcast and no transcript is available for shareholders unable to attend.

Rich Handler answered that it is a good point and that they can do it.

 

You should sit on a porch, watch the world go by and then if you see something succulent, jump on it.

Ian Cumming

[Deepdive]

Ditto, thanks Deepdive.

 

You wrote Linkem, did they say anything substantive?

 

Not too much granular detail except that things are going well

[Foreign Tuffett]

Leucadia talks about being shareholder friendly, but the overall level of disclosure is poor. They don't hold conference calls of any kind, commentary in the quarterly earnings press releases is limited, and they don't attend investor conferences. With no PowerPoint presentation at this year's annual meeting, one of the best sources of information provided to shareholders last year is no more.

 

For all but the closest of observers Leucadia must appear to be a hodge podge of assets, with no discernible long term strategy. If management wants to change that they need to (a) simplify the company or (b) provide more information about their long term strategy to create value for shareholders.

 

No position

 

[arcticfox]

How is that much different than Berkshire? Which is often praised for their approach. Leucadia included the business units and a thorough discussion in the annual letter and had a one hundred page power point at the October investor day. There is plenty of info in the 10q and 10k. I think the negative opinions come from the poor stock performance, they want to let their actions speak for themselves but the reality is the business has performed poorly.

 

Thank you to all who shared the meeting notes and feedback.

 

 

[Foreign Tuffett]

How is that much different than Berkshire? Which is often praised for their approach. Leucadia included the business units and a thorough discussion in the annual letter and had a one hundred page power point at the October investor day. There is plenty of info in the 10q and 10k. I think the negative opinions come from the poor stock performance, they want to let their actions speak for themselves but the reality is the business has performed poorly.

 

Thank you to all who shared the meeting notes and feedback.

 

Yes the business has definitely performed poorly, but better disclosure about the long term strategy for the company and the current value of its operating businesses could help close the discount to fair value that every SOTP analysis (including my own) seems to come up with. It is possible to divine all of the information needed to value the various components through the filings, but more disclosure would make it easier.

 

The annual investors day is great, but there's no reason they couldn't at least record it and put it on the website the next day. They own an investment bank, they should be really good at this kind of thing.

 

 

 

 

 

[WneverLOSE]

I don't think someone mentioned Warren Buffett and Charlie Munger talked about National Beef in their annual meeting.

 

Here is the exact part : https://youtu.be/hrulcIBe3Z0?t=19862

 

I think that Warren is referring to  Ian Cumming ,Joseph S. Steinberg ,Richard B. Handler and Brian P. Friedman when saying "I know a few people who did reasonable in it"

 

While Charlie says "Somebody has to acupay the tough niches in the economy"

 

It seems that Warren don't like the cattle business but he think LUK management is smart and able (I don't think he would have partnered with them on Berkadia And spend his time getting to know them otherwise)

 

[benhacker]

Wneverlose,

 

I think you are likely inferring something that isn't there.  The questioner asked about cattle ranching... Nat Beef isn't in the cattle breeding business... its in the cattle processing business, which also happens to be an oligopoly of sorts.  I don't think it's really the same at all and I'm guessing that Buffett isn't making an illusion to National Beef / Joe / Ian / Rich in his comments about "some" who have done well...

[WneverLOSE]

Hi,

 

Since Buffett didn't mention them by name it is impossible to say who those people are, but it is with very high degree of certainty that he does refer to LUK for the following reasons :

 

1) The question is about "Cattle Investing". The speaker just mentioned that his family has some cattle ranches in Arizona but he asks "I am curious on your thoughts as its relates to the expanding global population and investing in cattle and if you think its wise". one of the reasons that past LUK management gave for the reasons to buy NB is that the global population growth will make american cattle much more valuable and exports of meat products should rise in the future.

 

2) Warren is quite familiar with LUK management since he partnered with them on berkadia and he mentioned the partnership in the annual report - "Berkshire also has fine partnerships with Mars and Leucadia, and we may form new ones with them or with

other partners. Our participation in any joint activities, whether as a financing or equity partner, will be

limited to friendly transactions.", Warren buffett is the world's greatest money maker. I bet he knows a lot about LUK management and he studied their investment success. There are many interviews where Warren speaks kindly on Mars management, and I don't think he would group Mars and Leucadia in the same sentence if he didn't feel the same way about them.

 

3) Warren says "I know a few people who done reasonably well in cattle but they usually own a bank on the side", how many people do you know that own both a bank and a cattle business ?

 

Personally I don't think it makes much difference if Warren did speak about them or not, the main takeaway from the video is that Munger hates it and buffett doesn't love it.

[gfp]

I doubt he was talking about Leucadia.  He knows actual cattle ranching families.  Not sure which ones he has met but even Henry Singleton purchased an enormous cattle ranch in the 80's.  His family still runs it today - Singleton Ranches.  There are also a ton of extremely wealthy families in cattle breeding that you would never know unless they told you.  The family of my Land Rover parts guy, crazy George, were normal middle class-seeming in all respects and then they lost multiple lear jets in Katrina at Lakefront airport.

[benhacker]

WNL,

 

but it is with very high degree of certainty that he does refer to LUK for the following reasons :

 

I'll agree to disagree.

[sys]

how many people do you know that own both a bank and a cattle business ?

 

probably a lot more than you'd guess.  west of the mississippi, a cattle ranch is pretty much de rigueur for the wealthy.

[Deepdive]

I doubt he was talking about Leucadia.  He knows actual cattle ranching families.  Not sure which ones he has met but even Henry Singleton purchased an enormous cattle ranch in the 80's.  His family still runs it today - Singleton Ranches.  There are also a ton of extremely wealthy families in cattle breeding that you would never know unless they told you.  The family of my Land Rover parts guy, crazy George, were normal middle class-seeming in all respects and then they lost multiple lear jets in Katrina at Lakefront airport.

 

I don't think that Buffett is referring to Leucadia. BenHacker mentioned National Beef is in the cattle processing business not the cattle breeding business. I'm sure that there are a bunch of wealthy bankers who own ranches, particularly cattle ranches. In the grand scheme of things, this doesn't really matter.

[Orchard]

Below are my notes from Leucadia shareholder meeting. It's my understanding that the powerpoint presentation will be done at the shareholder day which is different from the shareholder meeting. Also, I apologize, but my notes are unlikely to be correct.

 

Opening Comments:

Rich Handler:

- Stay liquid and defensive with low leverage

- Wait for opportunities because opportunities do arise

 

Brian Friedman:

- Equities is an opportunity to grow market share at Jefferies

- Have made recent hires in tech IB in San Francisco

- Adding client facing bankers is a continuous opportunity

- Consultants are predicting a cyclical turn at National Beef

- FXCM is post stabilization phase

- HRG expects closing of FGL later this year

- HomeFed, expect lot sales to begin later this year; HomeFed repurchased other half of Otay during the year

 

Q&A

1) 13F, small equity interests, that seems to be new

- Those are positions at Jefferies market making

- KCG is the only strategic holding disclosed in 13F

2) Trade below book, why not buy back stock?

- Are balancing needs of bond holders and stock holders given volatility in all of our markets

3) Berkadia

- There are currently a lot of one-time sales because there's some valuables items there

- Refinance opportunity in multi-family

4) Long-term track record of Jefferies during volatile periods?

- During my 26 years at Jefferies every 2-3 years there's been extreme volatile periods. There's generally few places to hide during those times

- Low interest rates have had people reaching for yield and there's extreme panic when there's a shock in the system and people own things that they haven't historically owned

- There will be fewer competitors once this is over

5) Ares buying ACAS. Is that a competitor? Leucadia business seems really large and touches everything.

- The goal of Leucadia is to be more entrepreneurial than large banks and based on brains, client services

- Ares and ACAS are competitors and clients

6) Jefferies' highest pre-tax income was in 2009 at $500M. Can we get back there? What are the reserves of mining companies that Leucadia owns?

- Are working very hard to get to double digit ROTCE; we believe we can get there

- Our partner is Golden Queen Mining which is public and has data on website

7) Why pay dividends when there are reinvestment opportunities and ability to do buybacks?

- More people tell us to do dividends than repurchases

- Would love to be aggressive in buying back stock but don't want to poke rating agencies

8) Acquisitions at Leucadia level?

- A decade or two it was easier to buy whole companies

- Today it's harder to get exclusive opportunities

- Are patient and use Jefferies network to get unique opportunities

- We back management to build businesses

- Investment banks are more important than ever and bring opportunities to everyone

- Need 1-2 smart decisions every year to move dial

- Landcadia SPAC is a creative ways and is a partnership to get access to opportunities not available to Jefferies network

9) Good proxy statement. Target return of 8% of ROTCE and TSR? Asset management partnerships.

- It's challenging to put metrics around LUK business. Peer in proxy have similar targets which guided us

- We're looking for a couple key attributes for asset management investments

x They consistently make money and outperform masses

x Right risk / reward in terms of upside / downside and therefore have stayed away from niche strategies. Use diversification across managers as a hedge. Folger Hill is a multi-manager

- We like to deal with assets classes that we know and people that we know

10) Landcadia SPAC?

- Unique opportunity. Tilman Fertitta is a good client and a friend

- It's hard for SPACs to source a transaction and close

- Hard to scale and turn a SPAC into an interesting public stock

- Have good network in consumer space

- Tilman provides proper management insight

- Last year the environment was too healthy to raise a SPAC and make a good acquisition

- Tilman wants to create a growth vehicle outside of his current holdings

- We don't need to do a deal. We'll only do a smart transaction

11) Why no webcast

12) National Beef. Can you explain the cycle?

- It's a commodity business

- We buy cows when they're near to slaughter and also have case-ready business

- We wouldn't have bought National Beef

- We are trying to position the company for a sale

- It's a scarce resource and attractive for the right person

13) Bigger banks. Implications for Jefferies?

- In 1990 there were hundreds of broker dealers and so many disappeared

- Foreign banks have created small group of players that do what we do, Barclays, DB and CS are head to head competitors

- If we watch our risk and keep and attract good people we can grow market share

- There's potential for JVs with foreign banks that want access to US capital markets

- This business feels horrible in volatile times

- Access to these interesting deals