Author Topic: JEF - Jefferies Group  (Read 604840 times)

Scunny Bunny

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Re: JEF - Jefferies Group
« Reply #1520 on: June 10, 2019, 03:39:27 PM »
Gee - how to get trolled on CoBF: just post about JEF. OK in response to a few comments:

(1) I also own GS - much bigger position than JEF.
(2) The deal in Australia will cost money - 30 folks in one of the world's more expensive economies for rent and people. In addition, it's what it continues to say about Handler's empire building. Australia is one of the world's more overworked markets, five bank stocks and four resource stocks make up around half the index. The former (exception MQG) are under the pump divesting stuff, the latter four have money coming out of their ears but extreme discipline due to past misdemeanours.  It's the worlds 4th largest pension market but has been picked over extensively and boutique managers are closing at a rate of knots as the massive not-for-profit super funds bring things in-house and index
(3) Look at all the stuff on JEF's balance sheet which can be freed up: Minority stake in Nat Beef (~$590m my numbers), Linkem (going nowhere - $140m again my #), Vitesse, using JEF undervalued scrip to buy HomeFed at a premium, and the never ending saga of Spectrum Brands/HRG ($470m worth). All this effectively funded by the >$1billion of parent debt;
(4) I reckon the shares are worth ~$25 so the economics of continuing down the path of selling off non/low yielding stuff is compelling.
(5) The more so when you think where we are in the market cycle - move some of this stuff while you can and be conservative for the near future.  You'd have thought some investment banker types might get that.

Totally accept GS is a far superior business; in my portfolio JEF is a smaller "value" play on an ongoing liquidation back to the broker - a bit silly it's below the level pre the NBF announcement in April 2018. However, for me, GS, KKR and BX are bigger positions, superior businesses and management. FWIW.




petec

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Re: JEF - Jefferies Group
« Reply #1521 on: June 10, 2019, 10:10:14 PM »
Scunny Bunny - I for one wasn't intending to troll and apologies if it came across that way.

FWIW I'm buying JEF in the 17's and 18's (but I'm not in a hurry because I'll get an even better opportunity if we get another risk off period). I have no position in GS, which I don't know at all well.

Re: your specific points:
- Aus deal - I have no real thoughts on this.
- National Beef - I'd love them to have sold the whole thing but it's a pretty big ticket in a narrow market and they got a good price. What they're left with is a cash flowing stub with sale options. That's not so bad.
- Linkem - bit harsh to describe this as going nowhere when the subs are growing like a weed, spectrum is increasingly valuable, and third party valuation has only ever gone up. I don't want them selling this before it's reached the top of the valuation S-curve.
- Vitesse seems to be building value quite smartly. Do you have a different view?
- Homefed might have been at a premium to last trade, but not to where it had traded for most of the last year and not to underlying value.
- Spectrum/HRG - we agree on this.

I think the Merchant Bank side has some attractive assets that will sell at fat premiums over the next few years. If the shares continue trading at a discount then that means a lot more buybacks, but I rather hope not - I would rather see them maintain a permanent capital base and deploy the cash into new investments in a downturn.

This thing has been transformed since the original deal and none of that has turned up in the stock price. I like that. The one thing I am not sure on is the criticism of Handler et al. What they've done with Jefferies over the long term has been impressive, but more recently they have come in for a lot of criticism, at least on here. I need to do more work and thinking on whether that is justified. I can't help but feel that this is one of those threads where people are pissed off because they share price hasn't performed, rather than because of what management has actually done, e.g. in untangling legacy Leucadia. Measured commentary like yous re Australia is very useful to me for assessing that. Thanks.


Spekulatius

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Re: JEF - Jefferies Group
« Reply #1522 on: June 11, 2019, 03:25:12 AM »
The problem is they JEF is a terrible business and they keep building it up, even though it clearly isnít earning its cost of capital. What good does it do to slowly liquidate non-core assets, when the core operation isnít a good business. The $25 value/sharemay be correct, but I think it is going to still be $25 in 5 years.
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petec

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Re: JEF - Jefferies Group
« Reply #1523 on: June 11, 2019, 03:54:07 AM »
That terrible business compounded BVPS at 14% from 1990 to 2012. I am aware much has changed, but still...

Parsad

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Re: JEF - Jefferies Group
« Reply #1524 on: June 11, 2019, 12:14:28 PM »
That terrible business compounded BVPS at 14% from 1990 to 2012. I am aware much has changed, but still...

Steinberg and Cumming picked Rich Handler as their successor.  He did a fantastic job at Jefferies over the years.  Problem was that Jefferies and Leucadia were two very different types of businesses...one was an investment bank, the other a merchant bank.  It would seem like a no-brainer to combine the two and provide a worthy protege to take over as S&C got older, but it wasn't...markets had a hard enough time valuing Lecuadia...combine it with Jefferies and it became even more confusing for them.  Where one business succeeded on conservative distressed investments, the other operated more conventionally based on leverage.

Finally now, after nearly a decade, Jefferies is a Rich Handler vehicle and he's moved it back into more of the conventional investment banking business he built his reputation on.  The good thing is that after the financial crisis, Jefferies finds itself one of the few mid-sized investment banks in the arena...everyone else is on the large size now merged into various large banks since 2008.  Handler was always known for his innovative ability to target the mid-size and smaller market...go after business that the larger institutions didn't care as much for, and now there are even fewer competitors in that space in terms of smaller investment banks.  I think the next decade will be much better for Jefferies than the past decade.  Cheers!
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Mungerish

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Re: JEF - Jefferies Group
« Reply #1525 on: June 11, 2019, 01:16:01 PM »
The stock price sucks in part because they really suck at Investor Relations and as shareholder stewards. Jamie Dimon can make time to do Quarterly calls and be the ambassador of a great bank... but not Handler. Jamie's even called out the Health Care Banker at JEF on the January call as doing a hell of a job. How is this good for JEF?
Handler chalks it up to not wanting to give guidance, etc but that is BS in my opinion. Guidance and visibility are two different things
Ever since the MF Global and subsequent shorting campaign that drove them into merging with LUK, they have acted like a black box with no quarterly calls and one investor day per year. Value is not always its own catalyst and even  LT shareholders suffer the opportunity costs of sitting in dead money and having to chose to either sell below liquidation value or just keep grinding it out. The one saving grace is that they raised the dividend some and now there is some yield at the current depressed price
I believe that the attitude on "the street" is something like: "What professional manager in his/her right mind wants to buy a black box/value trap that's going to kill their performance numbers for god knows how long?"

If it weren't for Handler's compensation news, the only time they would get any press for themselves ( excluding analysts appearances) is when Tilman Fertitta and Handler announce something in their Bromance.
They got one analyst to cover JEF a while back....But then he changed jobs...so that ended. Really? You're an investment bank and can't get any coverage of your own bank?

Kind of hard to believe that it isn't tough on morale to be an investment bank and have your own stock trading at 70% of TBV. They do their own NAV every year that shows substantial upside, but obviously no one is buying in to it, even after they have executed well on monetizing some assets in the merchant bank recently

It's worth $27 per share at TBV. Typically that would be a great buy for a bank without huge problems.
 It's one of my longs and has been a big disappointment for all of the above

Parsad

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Re: JEF - Jefferies Group
« Reply #1526 on: June 11, 2019, 01:42:29 PM »
The stock price sucks in part because they really suck at Investor Relations and as shareholder stewards. Jamie Dimon can make time to do Quarterly calls and be the ambassador of a great bank... but not Handler. Jamie's even called out the Health Care Banker at JEF on the January call as doing a hell of a job. How is this good for JEF?
Handler chalks it up to not wanting to give guidance, etc but that is BS in my opinion. Guidance and visibility are two different things
Ever since the MF Global and subsequent shorting campaign that drove them into merging with LUK, they have acted like a black box with no quarterly calls and one investor day per year. Value is not always its own catalyst and even  LT shareholders suffer the opportunity costs of sitting in dead money and having to chose to either sell below liquidation value or just keep grinding it out. The one saving grace is that they raised the dividend some and now there is some yield at the current depressed price
I believe that the attitude on "the street" is something like: "What professional manager in his/her right mind wants to buy a black box/value trap that's going to kill their performance numbers for god knows how long?"

If it weren't for Handler's compensation news, the only time they would get any press for themselves ( excluding analysts appearances) is when Tilman Fertitta and Handler announce something in their Bromance.
They got one analyst to cover JEF a while back....But then he changed jobs...so that ended. Really? You're an investment bank and can't get any coverage of your own bank?

Kind of hard to believe that it isn't tough on morale to be an investment bank and have your own stock trading at 70% of TBV. They do their own NAV every year that shows substantial upside, but obviously no one is buying in to it, even after they have executed well on monetizing some assets in the merchant bank recently

It's worth $27 per share at TBV. Typically that would be a great buy for a bank without huge problems.
 It's one of my longs and has been a big disappointment for all of the above

I agree with you, but the lack of visibility is a Leucadia trait, not Jefferies.  Handler used to do quarterly calls before they were acquired.  I suspect Joe Steinberg as Chair was dictating some of the public relations/visibility.  In the last two years, I think they've loosened up and are now realizing that Handler can't do his job with his hands tied.  The Investor Presentation day last year was a good start in helping the market understand the business and its valuation.  Hasn't taken yet, but as intrinsic value widens from market price, they eventually will notice.  Cheers!
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Scunny Bunny

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Re: JEF - Jefferies Group
« Reply #1527 on: June 11, 2019, 02:07:19 PM »
Thanks Petec, Mungerish & Parsad. Three different but informative perspectives. Just hope they are appropriately positioned given where we are in the market cycle.

Mungerish

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Re: JEF - Jefferies Group
« Reply #1528 on: June 11, 2019, 02:15:12 PM »
The stock price sucks in part because they really suck at Investor Relations and as shareholder stewards. Jamie Dimon can make time to do Quarterly calls and be the ambassador of a great bank... but not Handler. Jamie's even called out the Health Care Banker at JEF on the January call as doing a hell of a job. How is this good for JEF?
Handler chalks it up to not wanting to give guidance, etc but that is BS in my opinion. Guidance and visibility are two different things
Ever since the MF Global and subsequent shorting campaign that drove them into merging with LUK, they have acted like a black box with no quarterly calls and one investor day per year. Value is not always its own catalyst and even  LT shareholders suffer the opportunity costs of sitting in dead money and having to chose to either sell below liquidation value or just keep grinding it out. The one saving grace is that they raised the dividend some and now there is some yield at the current depressed price
I believe that the attitude on "the street" is something like: "What professional manager in his/her right mind wants to buy a black box/value trap that's going to kill their performance numbers for god knows how long?"

If it weren't for Handler's compensation news, the only time they would get any press for themselves ( excluding analysts appearances) is when Tilman Fertitta and Handler announce something in their Bromance.
They got one analyst to cover JEF a while back....But then he changed jobs...so that ended. Really? You're an investment bank and can't get any coverage of your own bank?

Kind of hard to believe that it isn't tough on morale to be an investment bank and have your own stock trading at 70% of TBV. They do their own NAV every year that shows substantial upside, but obviously no one is buying in to it, even after they have executed well on monetizing some assets in the merchant bank recently

It's worth $27 per share at TBV. Typically that would be a great buy for a bank without huge problems.
 It's one of my longs and has been a big disappointment for all of the above

I agree with you, but the lack of visibility is a Leucadia trait, not Jefferies.  Handler used to do quarterly calls before they were acquired.  I suspect Joe Steinberg as Chair was dictating some of the public relations/visibility.  In the last two years, I think they've loosened up and are now realizing that Handler can't do his job with his hands tied.  The Investor Presentation day last year was a good start in helping the market understand the business and its valuation.  Hasn't taken yet, but as intrinsic value widens from market price, they eventually will notice.  Cheers!

There in lies the problem. Handler and Freedman do not have the cred that Ian and Joe had and they can't pull it off. FWIW, I think they all would like to just continue in low profile mode, but its been chronically undervalued for a long time. Joe actually shut down the meeting in March because the audience was really pissed and asking tough questions. Rich and Brian spent the first 20 minutes or so talking about the stock price and not much changes.

Mungerish

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Re: JEF - Jefferies Group
« Reply #1529 on: June 11, 2019, 02:21:10 PM »
I forgot to add that if you do a chart of the comp set since the merger the results are disgraceful. I don't want to sound like a bear or a short term oriented long....But the merger was announced in 11/2012. At some point in time, there need to come a rational judgment of the results to shareholders who want more than leaving behind an undervalued stock in their estate.