merkhet Posted September 23, 2013 Share Posted September 23, 2013 Marty Whitman is in my class today and Wednesday. Anyone have any burning questions for me to ask him? Link to comment Share on other sites More sharing options...
SFValue Posted September 23, 2013 Share Posted September 23, 2013 his current take on monoline insurance? (MBI, AGO, AMBC, etc...) Link to comment Share on other sites More sharing options...
sswan11 Posted September 23, 2013 Share Posted September 23, 2013 How about Fannie and Freddie preferreds? Link to comment Share on other sites More sharing options...
Packer16 Posted September 23, 2013 Share Posted September 23, 2013 What are his views on Chinese real estate given his holding in Lai Sun Garment, Wheelock and other RE holding companies. How does he get comfortable with management's reported NAV value for these firms. Thanks. Packer Link to comment Share on other sites More sharing options...
Philip Morris IV Posted September 23, 2013 Share Posted September 23, 2013 Tellabs. They've been building their position for a few years, riding it down and still adding. Selling for just above net cash/WC with no debt, they own 10% and have someone on the board. Their letters have vaguely referenced activist and cost-cutting efforts but nothing more. Link to comment Share on other sites More sharing options...
alwaysinvert Posted September 23, 2013 Share Posted September 23, 2013 I'b be very interested to hear his current view of Posco and what they have done in terms of diversification and growth investments? What does he think about them paying a dividend and at the same time selling treasury shares? You could even be a little cheeky and ask if his fund were in on the buying of those shares? :) Link to comment Share on other sites More sharing options...
indythinker85 Posted September 23, 2013 Share Posted September 23, 2013 HK real estate assuming Third Ave still owns a lot of that (havent checked in a while). Link to comment Share on other sites More sharing options...
A_Hamilton Posted September 23, 2013 Share Posted September 23, 2013 Forest City. They have owned it for years. They owned it when it traded at $70 in 2006 and years before that. They still own it and now it is at $19. What do they see in this company and what discount rates do they use on the properties that allow them to be a holder at both $60 and $19. Just seems like there is no valuation work being done there. Link to comment Share on other sites More sharing options...
Saidal Posted September 23, 2013 Share Posted September 23, 2013 Merkhet, if you can take notes I'd appreciate it! I'd love to dig more on his NAV valuation process and perhaps his overall view on a few of the holding companies he holds, i.e. Pargesa, Cheung Kong, Exor, Leucadia, etc. Thanks! Link to comment Share on other sites More sharing options...
merkhet Posted September 23, 2013 Author Share Posted September 23, 2013 I'm hoping that I'll get to ask more questions on Wednesday -- today we talked generally, and I was only able to ask two questions edge-wise. Mr. Whitman mentioned J.C. Penney was in dire straights and that it was likely to be in receivership at some point soon. Pressed for an answer as to the timeline, Mr. Whitman mentioned that it'll probably happen within the next year, but that he didn't want to be held to that. Since JCP was on the menu, I decided to ask a question about Sears, since he owned K-Mart back in the day. He indicated that it was a mistake for him to own K-Mart back in the day even though he made an immense amount of money on the company. He believed that K-Mart could reorganize and be profitable based on the retailing -- which ended up being wrong. He also mentioned that Mr. Lampert has been a little quicker to realize that the retailing isn't working than J.C. Penney -- maybe an indication that he has been following the developments around the real estate. I was also able to ask a quick question on the Fannie & Freddie preferred shares, but it turns out that the credit team didn't consult him on that one -- it's purely a credit fund idea rather than his. We have another class with him that should be more of a Q&A on Wednesday -- then we're off to dinner. I'll try to ask as many of these questions as possible. Link to comment Share on other sites More sharing options...
jay21 Posted September 24, 2013 Share Posted September 24, 2013 I'm hoping that I'll get to ask more questions on Wednesday -- today we talked generally, and I was only able to ask two questions edge-wise. Mr. Whitman mentioned J.C. Penney was in dire straights and that it was likely to be in receivership at some point soon. Pressed for an answer as to the timeline, Mr. Whitman mentioned that it'll probably happen within the next year, but that he didn't want to be held to that. Since JCP was on the menu, I decided to ask a question about Sears, since he owned K-Mart back in the day. He indicated that it was a mistake for him to own K-Mart back in the day even though he made an immense amount of money on the company. He believed that K-Mart could reorganize and be profitable based on the retailing -- which ended up being wrong. He also mentioned that Mr. Lampert has been a little quicker to realize that the retailing isn't working than J.C. Penney -- maybe an indication that he has been following the developments around the real estate. I was also able to ask a quick question on the Fannie & Freddie preferred shares, but it turns out that the credit team didn't consult him on that one -- it's purely a credit fund idea rather than his. We have another class with him that should be more of a Q&A on Wednesday -- then we're off to dinner. I'll try to ask as many of these questions as possible. Interesting comment on Kmart. I think he discussed that investment in one of his books as a good investment. I think I also remember him saying Kmart was a good buy because it was distressed and had some interesting assets (e.g. assignable leases) but that the merger with Sears was dumb. That might summarize his view on Kmart, the price and assets were good but the business is bad, and explain why he didn't stick with Eddy and invest in Sears. Link to comment Share on other sites More sharing options...
merkhet Posted September 25, 2013 Author Share Posted September 25, 2013 Apologies for not being able to get to everyone's question. Mr. Whitman started the class talking a little bit about K-Mart's Disclosure Statement (attached). Indicated that the following sections are where you can find the most important parts: (1) History of the Debtors (2) The Chapter 11 Cases (3) Summary of the Reorganization Plan (4) Resale of Securities Received Under the Plan (5) Certain Federal Income Tax Consequences of the Plan (6) Liquidations Analysis (Appendix) -- mostly for laughing purposes (7) Pro Forma Financial Projections (Appendix) -- mostly for laughing purposes He then said that when investing in distressed securities, the important thing is to figure out the fulcrum security (which is the most senior security that will not be made whole): (1) Look at the financials and come up with a cash flow number for the company. (2) Then figure out a reasonable amount of debt for the company (3) Next look at the existing capitalization and go down the list until you find the fulcrum (the next dollar after the reasonable amount you calculated in (2)) (4) Buy a crap ton of that security so you can control the bankruptcy proceedings. I'm sure there are other nuances, but that's the gist of it. A lot of people were asking questions at dinner, so I was really only able to get in the additional question of the Chinese investments. (I also tried to ask about monolines, but I don't know if MBIA is still a sore subject or if he didn't hear me.) He invests in China through HK securities. He prefers these because there are very strict regulations as it pertains to those companies. The history of Hong Kong having been a British colony means that there are a variety of protections afforded to foreign investors. The flip side seems to be that it's very difficult to effect takeovers of companies, since you need to have a 90% vote in order to do that -- thus he likes to buy a little over 10% of a company so that he is a gatekeeper. On HK real estate, he thinks that both the Chinese and HK real estate markets are likely overvalued. However, that doesn't bother him given that his cost basis was very low. He is much more worried about permanent impairment than these "little blips" in valuation. In other words, he's worried more about China trying to make Shanghai a world class financial sector in 20 years and thus extracting value away from Hong Kong real estate. Note: Mr. Whitman is 89 years old, so I was surprised that he still thinks 20 years out. :) Apparently, he used to teach a class on value investing here, but that was a while ago. It's too bad that I missed out on that -- would have been amazing.Kmart_Disclosure_Statement.pdf Link to comment Share on other sites More sharing options...
muscleman Posted September 25, 2013 Share Posted September 25, 2013 Thanks a lot! Which university are you in? Is that an MBA program? Link to comment Share on other sites More sharing options...
Packer16 Posted September 25, 2013 Share Posted September 25, 2013 Thanks for asking the question about China. Interesting response. Packer Link to comment Share on other sites More sharing options...
merkhet Posted September 25, 2013 Author Share Posted September 25, 2013 Thanks a lot! Which university are you in? Is that an MBA program? I'm in Yale's MBA program. Link to comment Share on other sites More sharing options...
Packer16 Posted September 25, 2013 Share Posted September 25, 2013 Speaking of Shanghai rivaling Hong Kong: http://www.bloomberg.com/news/2013-09-17/li-ka-shing-says-hong-kong-may-lose-out-to-shanghai-rthk.html Packer Link to comment Share on other sites More sharing options...
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