For stock pickers who want to invest like Warren Buffett,
Street Authority recommends they take a look at Leucadia National Corp., a company that has been dubbed a "baby Berkshire Hathaway."
Leucadia is a diversified holding company like Berkshire, but has only about one-thirtieth of its market cap. The company trades at a price-to-book ratio of 0.8, compared with Berkshire’s 1.4.
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“Leucadia's similarities to Berkshire are downright scary,” wrote Street Authority columnist Marshall Hargrave, managing partner of Bridgewater Investments. “It buys great businesses for less than fair value and then develops them into rewarding investments. Even better, the company is cheaper than Berkshire.”
Leucadia's biggest business is investment bank Jefferies Group. It also owns the U.S.' fourth-largest beef processor, National Beef; a 50 percent interest in a venture with Berkshire itself in real estate lending concern Berkadia; large U.S. auto dealer Garcadia; plus restaurants, telecom and real estate.
Like Berkshire, Leucadia also likes energy and infrastructure.
Leucadia has major investments in liquefied natural gas. The company has applied for permits in Canada to export natural gas from British Columbia, and Alberta to Leucadia’s proposed LNG plant in Oregon.
“If all goes according to plan, Leucadia will be one of the few companies capitalizing on the higher natural gas prices in markets outside of North America,” Hargrave wrote.
Leucadia has attracted money from some high-profile hedge funds, and insiders have managed to keep a 13 percent stake in the company, which Hargrave views as a positive.
Hargrave sees the primary risk of owning Leucadia is that its largest investment, Jefferies, relies on the financial markets for its revenues and profits.
“A severe economic slowdown would reduce investment banking activity and trading revenues.”
However, he estimates Leucadia has about 20 percent upside from its current share price because it is trading less than book value, and puts a $30 price target on the stock. Meanwhile, at Berkshire Hathaway,
Reuters reported Buffett and his colleagues may be looking among energy companies for their next large acquisition.
Reuters suggested drilling services company Baker Hughes, oil and gas distributor Williams Partners or utility Pinnacle West would fit the bill.
Buffett’s popularity continues to grow, and not just among institutional admirers like Leucadia.
MarketWatch reported Berkshire’s annual meeting, where Buffett delivers his annual letter full of value investing wisdom to shareholders, may be becoming something of a destination for Chinese tourists.
At a cocktail reception for Chinese investors at his annual meeting in Omaha, Nebraska, Buffett, according to one presentation, was described as “gu shen,” or “the God of stock investing.”
“But what people admire is usually what they can’t have,” MarketWatch said. “In China’s underdeveloped capital market, finding good companies at a bargain is no cakewalk. It’s especially true for retail investors, many of whom have lost faith in a market inundated with frauds, insider trading and price manipulations.”
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