Author Topic: JEF - Jefferies Group  (Read 595643 times)

jay21

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Re: JEF - Jefferies Group
« Reply #520 on: February 23, 2013, 03:06:56 PM »
I am starting to dig into LUK again (so I will probably be posting a good amount of questions/thoughts).  The first time I looked at them I thought I was out of my circle of competence with some their assets.  After re-reading some letters I feel a little more comfortable with what they are doing; it seems like there is a ton of optionality in their assets. But I still have plenty of questions and want to scrutinize all the assets they own  and hopefully hear other's opinion.

The one slide in the presentation was really good at breaking down the assets that LUK will own once the merger goes through.  The combined BV will be 9.1b.  Of that ~3b will be net cash and DTA.  Thats seems pretty straight forward.  Some haircut should probably be applied the DTA.

4b will be JEF, which itself requires plenty of analysis and I may have to ask questions in the JEF thread.

The remaining 2.4b is all the other subs.  National beef seems to be worth the most at first glance.  Spits out ~$100m pre-tax this year and historically higher.  The shareholder letters say National Beef is levered towards growing protein consumption in the world.  I think I specifically heard mention of opportunities for growth in China.  I thought there might be optionality here in a re-inflationary environment.  However, they describe National Beef as a spread business (which makes sense given their low margins).  So if there is re-inflation or growing demand in emerging markets, National Beef's volume will increase, but more investment will need to be made in PPE.  I don't see this as moated company so I imagine the ROIC is low.  Is there something I am missing here?  Is there option value here or will the nature of the business only result in more PPE with normal ROIC?  Or will there be spread widening do to the increased demand?  I think LUK described National Beef as the best in their space, so maybe the moat is in good management and good operations?

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jay21

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Re: JEF - Jefferies Group
« Reply #521 on: February 24, 2013, 10:18:59 AM »
....But I still have plenty of questions and want to scrutinize all the assets they own  and hopefully hear other's opinion.....

LUK has become my largest position (about 30%). I do not scrutinize each and every asset (do not get into "analysis paralysis") since I trust mangement's abilities, integrity and their judgement, and their track record. The only thing I look for is entry points where I can add more at a good discount.

I agree for the most part.  This is an investment where it is necessary to have a lot of faith in management (much more than maybe any investment I have come across).  But, they also have a history of buying distressed and selling them when they become more fully valued.  So its important to look at their assets to see where they are in the value realization process.  Also, they said they are changing their acquisition philosophy to look for more moated companies.  So I think you definitely need to scrutinize the moated assets to see if there is a moat.  Are National Beef and Jefferies pillars in the new fortress LUK?
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cogitator99

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Re: JEF - Jefferies Group
« Reply #522 on: February 24, 2013, 10:59:33 PM »
Just looking simplistically at the valuation of LUK @ P/B 1.1, would you rather own this or GS? Or perhaps even FFH?

Given that we know that Handler will not be like Cumming/Steinberg, and will probably push LUK to be more IB-like in how it is run, would you consider this to be higher quality than its IB peers?

Or is it a "simpler" investment because of the bricks-and-mortar businesses from legacy LUK and thus should trade at a premium?   


jay21

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Kiltacular

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Re: JEF - Jefferies Group
« Reply #524 on: February 26, 2013, 10:19:27 AM »
I don't, yet, believe that Handler is simply planning on spinning everything off and leaving JEF as the new LUK.

In the presentation regarding the merger they mentioned that this wasn't the plan.

But, I think it is worth watching carefully.  No reason the worry yet, though. 

I will also be watching to make sure that C&S keep their stake in LUK.

--

In the 10k, I noted that Nat'l Beef had pre-tax income of $59 million.  But, this number is net of more than $45 million of "amortization of identifiable intangible assets".  This is huge.  Adding this back, and Nat'l Beef had cash flow of $114 million in 2012.

That $114 million is net of depreciation and, because of the NOL carryforwards, is effectively after tax.

The Wal-Mart issue looks like it will hurt but it is hard to tell how much.  They say they sell 10% of all of Nat'l Beef's production to Wal-Mart.

But, I don't think they're losing all of that.  I read the 10k as saying that they are losing just their "case ready" sales to Wal-Mart.  They also say that TOTAL "case ready" business for all of Nat'l Beef is 7% of total sales.

They do not make it clear how much of their case ready sales go to Wal-Mart. 

In any case, Nat'l Beef produced some huge returns for Leucadia.  If Handler doesn't screw anything up, LUK still appears very cheap to me.

Parsad

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Re: JEF - Jefferies Group
« Reply #525 on: February 26, 2013, 10:40:57 AM »
Book is now at $27.60 or so, and they are quite liquid.  Cheers!
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Ross812

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Re: JEF - Jefferies Group
« Reply #526 on: February 26, 2013, 12:02:03 PM »
I just looked at my account and noticed a new stock symbol in there. My first thought was I can't believe I fat fingered a trade when I was inputing buy orders on Fiat yesterday. Then I figured out they are the new shares of Crimson Wine (CWGL). This was a much better surprise. CWGL appears to be off to a good start! Up 17% today...
96% Fixed Income CDs, Muni, Corporate Debt - 4% SPX Options

fareastwarriors

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Re: JEF - Jefferies Group
« Reply #527 on: February 26, 2013, 12:07:58 PM »
I just looked at my account and noticed a new stock symbol in there. My first thought was I can't believe I fat fingered a trade when I was inputing buy orders on Fiat yesterday. Then I figured out they are the new shares of Crimson Wine (CWGL). This was a much better surprise. CWGL appears to be off to a good start! Up 17% today...

Which brokerage are you using?

Ross812

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Re: JEF - Jefferies Group
« Reply #528 on: February 26, 2013, 12:10:31 PM »
Interactive Brokers. I received one share of Crimson Wine for every ten shares of Leucadia I own. YahooFinance:

http://finance.yahoo.com/q?s=cwgl&ql=1
« Last Edit: February 26, 2013, 12:12:04 PM by Ross812 »
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compoundinglife

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Re: JEF - Jefferies Group
« Reply #529 on: February 26, 2013, 12:50:13 PM »
I just looked at my account and noticed a new stock symbol in there. My first thought was I can't believe I fat fingered a trade when I was inputing buy orders on Fiat yesterday. Then I figured out they are the new shares of Crimson Wine (CWGL). This was a much better surprise. CWGL appears to be off to a good start! Up 17% today...

Which brokerage are you using?

Mine showed up in schwab, fidelity and etrade today.