Lowlight Posted May 15, 2015 Share Posted May 15, 2015 I also have ballpark 350 mn for JEF, at 10x that's only 3.5bn.. Which is almost its tangible book value if you let its 2 bn of intangibles out (and thus ascribe no value to its franchise value). Important to keep in mind is that it's only the first time in operating history that JEF has posted around 350 mn in earnings.. I saw an analysis somewhere that pointed to 1.2 bn in earnings in 2017/2018. Seems like a stretch but would mean a homerun for LUK as an investment. Any chance you can locate the analysis you reference above? Would be interested in seeing how they arrive at 1.2bn. Thanks. Link to comment Share on other sites More sharing options...
innerscorecard Posted May 21, 2015 Share Posted May 21, 2015 Not so relevant to the valuation of LUK, but an interesting commentary on the culture and character of Jefferies' management: http://seekingalpha.com/article/3200576-how-wall-street-enables-stock-promotions-a-case-study-of-jefferies-and-unilife Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted May 21, 2015 Share Posted May 21, 2015 I also have ballpark 350 mn for JEF, at 10x that's only 3.5bn.. Which is almost its tangible book value if you let its 2 bn of intangibles out (and thus ascribe no value to its franchise value). Important to keep in mind is that it's only the first time in operating history that JEF has posted around 350 mn in earnings.. I saw an analysis somewhere that pointed to 1.2 bn in earnings in 2017/2018. Seems like a stretch but would mean a homerun for LUK as an investment. If your assumptions are 10% ROE and 10x price multiple then you will always arrive at 1 TBV. Might be worth plugging in historical numbers to get a better reference point. True "IV" of JEF seems likely to be much closer to 1.3-1.5 as opposed to 1. I know you're trying to be conservative but they have a nice business/culture. Link to comment Share on other sites More sharing options...
scorpioncapital Posted May 21, 2015 Share Posted May 21, 2015 It's a cyclical business too. If you assume 15-20% in good times and 5-10% in bad times (sort of like right now), the average is 10-15% ROE. So yeah, 1 to 1.5 seems a reasonable range. Link to comment Share on other sites More sharing options...
scorpioncapital Posted May 25, 2015 Share Posted May 25, 2015 http://leucadia.com/toc_2015_presentations.html Link to comment Share on other sites More sharing options...
WhoIsWarren Posted May 25, 2015 Share Posted May 25, 2015 http://leucadia.com/toc_2015_presentations.html Huh? Not much of a presentation! When I click through there is just the Group Overview page (compared to the 104 pages in the Sept-2014 presentation). Am I missing something?? Don't know if it means anything (probably not), but for some reason Leucadia's 65% stake in HomeFed (resi developer) now comes under "Financial Services"; previously HomeFed came under the Merchant Banking line. FXCM.....what a bit of business! You won't capture deals like that in a DCF...... Link to comment Share on other sites More sharing options...
scorpioncapital Posted May 25, 2015 Share Posted May 25, 2015 Probably an error, hopefully the full presentation will be available soon. I think LUK is so tied to inflation. And like most financial service firms, the < 10% ROE should normalize with interest rates - if interest rates normalize. Link to comment Share on other sites More sharing options...
WhoIsWarren Posted May 25, 2015 Share Posted May 25, 2015 I think LUK is so tied to inflation..... You mean the nice gently increasing inflation from zero to a nice 2-3%......as opposed to sharp surprising jump that catches the market / Fed / Jefferies off guard and all sorts of things you expected to be no longer are...... ;D Stability creates instability. We can opine, but it's only in unstable times (be it inflation or whatever) will we know how good a business Jefferies / Leucadia really is! Link to comment Share on other sites More sharing options...
Sportgamma Posted May 25, 2015 Share Posted May 25, 2015 "Stability creates instability. We can opine, but it's only in unstable times (be it inflation or whatever) will we know how good a business Jefferies / Leucadia really is!" That's a good point. It just so happens that we can look into the not so distant past and compare how JEF fared in a real life stress test scenario in comparison to other investment banking firms or just relative to inflation. Link to comment Share on other sites More sharing options...
scorpioncapital Posted May 25, 2015 Share Posted May 25, 2015 I'm thinking of something more prosaic, 1% interest rate on their 50 billion in assets vs today's 0% could add something like $1-$2 per share/yr in net. Link to comment Share on other sites More sharing options...
WhoIsWarren Posted May 25, 2015 Share Posted May 25, 2015 "Stability creates instability. We can opine, but it's only in unstable times (be it inflation or whatever) will we know how good a business Jefferies / Leucadia really is!" That's a good point. It just so happens that we can look into the not so distant past and compare how JEF fared in a real life stress test scenario in comparison to other investment banking firms or just relative to inflation. Sportgamma, so you're in the "they survived that one, which means they'll survive the next one" camp? I'm being slightly facetious here because I genuinely think Jefferies is managed prudently and they'll likely come through the next (different-to-the-last) crisis. However while Jefferies is in the inventory business, where most of their inventory is fast moving (seconds / minutes / hours) and where they have shorts offsetting longs, the reality is that Jefferies is always net long inventory. And I say most of the inventory is fast moving because they have some of the inventory in slightly off mainstream stuff that they may hold for periods of days or weeks and another smaller part of the book in highly illiquid stuff that they might end up owning for a year or so. If things tank, their net long position -- and their slightly illiquid and very illiquid stuff -- will get hurt. Jefferies, while conservatively managed for an investment bank, is still 10x levered. They play the confidence game! scorpioncapital, I knew what your inflation comment meant and my answer was probably irksome to you. Also to you Sportgamma. To be clear, I own quite a bit of Leucadia stock. Here's hoping that you guys are right (and that I'm just being annoying). Link to comment Share on other sites More sharing options...
jay21 Posted May 25, 2015 Share Posted May 25, 2015 "Stability creates instability. We can opine, but it's only in unstable times (be it inflation or whatever) will we know how good a business Jefferies / Leucadia really is!" That's a good point. It just so happens that we can look into the not so distant past and compare how JEF fared in a real life stress test scenario in comparison to other investment banking firms or just relative to inflation. Sportgamma, so you're in the "they survived that one, which means they'll survive the next one" camp? I'm being slightly facetious here because I genuinely think Jefferies is managed prudently and they'll likely come through the next (different-to-the-last) crisis. However while Jefferies is in the inventory business, where most of their inventory is fast moving (seconds / minutes / hours) and where they have shorts offsetting longs, the reality is that Jefferies is always net long inventory. And I say most of the inventory is fast moving because they have some of the inventory in slightly off mainstream stuff that they may hold for periods of days or weeks and another smaller part of the book in highly illiquid stuff that they might end up owning for a year or so. If things tank, their net long position -- and their slightly illiquid and very illiquid stuff -- will get hurt. Jefferies, while conservatively managed for an investment bank, is still 10x levered. They play the confidence game! scorpioncapital, I knew what your inflation comment meant and my answer was probably irksome to you. Also to you Sportgamma. To be clear, I own quite a bit of Leucadia stock. Here's hoping that you guys are right (and that I'm just being annoying). Hard to know an IB's net exposure to any risk. If you are long a floating rate bond with CDS protection, your B/S while probably show a net long exposure but your risks are primarily hedged. I'll admit though somehow its impossible to perfectly hedge out risk. Counterparty risk, curve shape risk, vol risk, etc. It's impossible. But you should be able to be theoretically short through use of derivs which don't show in the B/S a lot of times. One thing I think I like about JEF (Im not IB expert) is that JEF deals mostly in sovereigns, TSY, MBS, etc. They use JVs for their HY and more esoteric things I believe, which lessens the amount of equity exposure. So you have a JV, owned by JEF which is owned by LUK which has a lot of liquidity. Pretty easy to bail out the JV if they need the capital (and potentially at the expense of the other investors in the JV if they can't raise the capital?) Link to comment Share on other sites More sharing options...
Sportgamma Posted May 25, 2015 Share Posted May 25, 2015 "Sportgamma, so you're in the "they survived that one, which means they'll survive the next one" camp?" Feel free to interpret my comment any way you like. Link to comment Share on other sites More sharing options...
scorpioncapital Posted May 28, 2015 Share Posted May 28, 2015 There's quite a thorough writeup of AGM notes at this thread: http://boards.fool.com/leucadia-annual-meeting-notes-31767494.aspx?sort=whole#31767494 Link to comment Share on other sites More sharing options...
txlaw Posted May 28, 2015 Share Posted May 28, 2015 There's quite a thorough writeup of AGM notes at this thread: http://boards.fool.com/leucadia-annual-meeting-notes-31767494.aspx?sort=whole#31767494 Thanks for posting. Link to comment Share on other sites More sharing options...
thepupil Posted October 8, 2015 Share Posted October 8, 2015 https://www.bamsec.com/filing/119312515339799?cik=96223 investor presentation. I skimmed, don't think there is much new or radical for those that have been following. LAM seems to be showing some promise and planting lots of seeds. Garcadia and Berkadia are doing really well and the easiest things to point to in terms of IV > Book. Jefferies and National Beef remain "turnaround" stories. Don't appear to be any major changes to strategy at any of the subs, but I could have missed something because i looked at it for 5 mins pre-coffee. Link to comment Share on other sites More sharing options...
BG2008 Posted October 8, 2015 Share Posted October 8, 2015 Anyone know what its means to be a "qualified investor" who is allowed to go to today's event? Can any Johnny lunchbox investor go or do you need to be manage X million in AUM? Link to comment Share on other sites More sharing options...
racemize Posted October 8, 2015 Share Posted October 8, 2015 Anyone know what its means to be a "qualified investor" who is allowed to go to today's event? Can any Johnny lunchbox investor go or do you need to be manage X million in AUM? Well, I was going to quote something from the SEC, but I'm not seeing a good Qualified investor. From my series 65 and previous knowledge, I believe it is an individual having a net worth exceeding $2 million, not including house. Link to comment Share on other sites More sharing options...
gfp Posted October 8, 2015 Share Posted October 8, 2015 Not sure if qualified investor is the same thing, but 'Qualified Purchaser' is the Investment Company Act term and it's $5 million and up for individuals. Link to comment Share on other sites More sharing options...
benhacker Posted October 8, 2015 Share Posted October 8, 2015 I think the additional info about LAM is nice. I still think this is a misunderstood gem. Little downside, potential great upside. I'm basically at max position size here... I'm not (edit: "now") hoping for the stock to rise... so get to your buying guys. ;-) Regarding Qualified, I think the relevant definitions are here, but these rules are always confusing to me. http://www.sec.gov/rules/final/ia-1731.htm Link to comment Share on other sites More sharing options...
scorpioncapital Posted October 8, 2015 Share Posted October 8, 2015 Slide 174 is a good summary. Conwed/Idaho - 130m book - 20m income Berkadia/Garcadia - I averaged the income over 5 years - 56m + 130m = 186m , book - 400m national beef - book 99m - income - unknown...let's say 100m over a cycle hofd - $400m above book publicly traded -- net book ~ 1b net tangible book at 380m shares out - $21/share revaluation of above - $306m/year x 10x = 3 billion (minus 1b) - 2billion + 400m or ~$6.3/share. At book - Jefferies. Perhaps it's worth more. It's too bad, they paid $2.6 billion above tbv when most ibanks are at book a few years after the crisis. Questionable - fxcm - I'd mark down $1/LUK share. Getting the money back I think is a stretch within 6 months, not to mention anything extra. Retail forex does not seem as a great a business as Handler thinks. energy investments + gold - not too enthused but let's say book. I'm going to eyeball $27/share as a conservative valuation with some upside in Linkem, Jefferies, the energy investments and perhaps National Beef/FXCM. I'll say a range of $27-$30/share. The key is they are doing so many things it's like a portfolio with 100 stocks, how can you ensure you don't blow up a few of them and end back at square one? Reminds me of why add to your 10th best idea when you can add to your best? Anyway, current price $21 - so seems about 20-30% undervalued on a conservative basis assuming no major losses anywhere across the asset base. Unfortunately the only catalyst is these kind of investor days, better net earnings, perhaps increased dividend or buybacks, none of which are currently certain. It would be politically incorrect to say the merger didn't create much value. I was reading a book on IBM by Gertsner called Who says elephants Can't dance where he talks about how investment banks don't really add too much value to great companies, it tends to attract the desperate or misguided. Good companies don't need i-banks to buy businesses. The premise, which was the premise for the merger, was that LUK would get insight into investment opportunities from an ibank. My view is now that this reason for the merger was not a good one as there really is no benefit in that respect. Overall, the impression from the day I got was that a) they are honest - if perhaps a little green about running a conglomerate like this. This is at least safe. b) they are value guys and prefer the ben graham style. The questions at the end were very instructive about their style. I am concerned about this style because quality beats value over time. c) they are far too diversified and pretty much are hyper - buying or starting everything in sight. Friedman even suggested they would have even more investments in 5 years than today! Perhaps this is safer. d) they are aware of the low value of the company in the market. I suspect there will be a consistent management discount to the IV calculated above. It will be a slow slog to get there but I think the downside is very well covered at LUK. The issue is whether a well covered downside is enough to create ongoing value or is more prone to constant undervaluation and slow upward revision similar to watching paint dry. Link to comment Share on other sites More sharing options...
cogitator99 Posted October 16, 2015 Share Posted October 16, 2015 Thanks for your thoughts scorpion Link to comment Share on other sites More sharing options...
Phaceliacapital Posted October 16, 2015 Share Posted October 16, 2015 They also took the management when they bought Jefferies right. Link to comment Share on other sites More sharing options...
LowIQinvestor Posted November 3, 2015 Share Posted November 3, 2015 Given LUK's operating performance over the past few years, I'm not sure it deserves to trade much above book value. https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1446584400000&chddm=498916&chls=IntervalBasedLine&cmpto=NYSE:LUK&cmptdms=0&q=INDEXSP:.INX&ntsp=1&ei=Ptc4VpG4McikmAGbtYeIAg Link to comment Share on other sites More sharing options...
Txvestor Posted November 3, 2015 Share Posted November 3, 2015 Given LUK's operating performance over the past few years, I'm not sure it deserves to trade much above book value. https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1446584400000&chddm=498916&chls=IntervalBasedLine&cmpto=NYSE:LUK&cmptdms=0&q=INDEXSP:.INX&ntsp=1&ei=Ptc4VpG4McikmAGbtYeIAg Fair enough, but it is trading at near 35% discount to BV. Link to comment Share on other sites More sharing options...
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