April 9, 2018: The S&P 500 closed up 0.3% at 2,613.25. The DJIA closed up 0.2% at 23,979.86. Separately, the Nasdaq was up 0.5% at 6,950.34.

Monday was another positive day for the broad U.S. markets. This was yet another push towards recovery and back to even for the three major indices. Crude oil also made a handy recovery as well. The S&P 500 sectors were mostly positive. The most positive sectors were health care, technology, and financials discretionary up 1.0%, 0.8%, and 0.6%, respectively. The worst performing sector was industrials which was down 0.3%.

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Crude oil was up 2.1% at $63.35.

Gold was up 0.3% at $1,339.90.

The S&P 500 stock posting the largest daily percentage loss ahead of the close Monday was Lowe’s Companies, Inc. (NYSE: LOW) which traded down about 3% at $85.57. The stock’s 52-week range is $70.76 to $108.98. Volume was about 7 million compared to the daily average volume of 7.4 million.

The stock posting the largest daily percentage gain in the S&P 500 ahead of the close Monday was Leucadia National Corp. (NYSE: LUK) which rose about 11.5% to $24.28. The stock’s 52-week range is $21.72 to $28.30. Volume was 6.8 million compared to the daily average volume of nearly 2 million.

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September 19, 2017: The S&P 500 closed up 0.11% at 2,506.67. The DJIA closed up 0.18% at 22,372.22. Separately, the Nasdaq was up 0.10% at 6,461.32.

Tuesday was another positive day for the broad U.S. markets with all three major averages hitting new all-time highs in the session. Crude oil was lower on the day and oil & gas stocks had a mixed response. The best performing S&P 500 sector was finance, up nearly 1% mainly due to major money center banks. Materials and tech were the next best performing sectors, both coming in around 0.5%. Real estate was the worst performing sector on the day, down about 1%, although this was closely followed by the healthcare sector.

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Crude oil was down 0.7% at $49.56.

Gold was up 0.3% at $1,314.50.

The S&P 500 stock posting the largest daily percentage loss ahead of the close Tuesday was Best Buy Co., Inc. (NYSE: BBY) which traded down 8% at $52.75. The stock’s 52-week range is $37.10 to $63.32. Volume was 22.1 million versus the daily average of 4.3 million shares.

The stock posting the largest daily percentage gain in the S&P 500 ahead of the close Tuesday was Leucadia National Corp. (NYSE: LUK) which rose about 4% to $24.26. The stock’s 52-week range is $17.87 to $27.34. Volume was more or less 3.0 million compared to its average volume of 1.5 million.

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With the stock market having hit all-time highs almost monthly in 2017, and with this bull market eight-and-a-half years old, investors are routinely hearing that the stock market is expensive. The problem in calling the whole market expensive is that this a market full of many stocks and full of multiple sectors from which investors can pick and choose. It turns out that some parts of the market actually still look cheap in August of 2017.

Value investors often look for companies trading below their book value, and one sector that has continued to offer stock prices under their book value is the financial sector. This includes money center banks, regional banks and insurance companies.

Investors need to consider one issue about “value” when it comes to value investing. This is where beauty is solely in the eye of the beholder, and if a stock is considered “cheap” it is often cheap for a reason.

Companies tied to business development or that were foreign based with American depositary shares were excluded from this review to avoid unknown and perhaps circumstantial issues. The minimum size of the financial institutions screened were listed as having market capitalizations north of $2 billion, they had to trade over 100,000 shares per day for liquidity purposes, and they had to be paying a dividend to show that they had that minimum financial health metric. Each group also had to be profitable.

Please note that some of these stocks are only under book value to an August sell-off or due to other selling pressure in prior months. Some are also fighting over the systemically important financial institution (SIFI) status, which also means “too big to fail.” Again, “cheap” stocks often look cheap for a reason.

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The book value screens came from Finviz.com and from second-quarter earnings press releases. We have included trading data, corporate data, consensus analyst price targets and future valuations from Thomson Reuters, dividend yields and market caps. Please note that some dividend yields are the “current yields” rather than dividends that have been approved by the Federal Reserve but that have yet to be paid to shareholders. After all, anything can change until it formally takes place!

Here are 12 mid-cap and large-cap financial sector stocks trading under the current stated book value as of August 2017.

Ally Financial

Ally Financial Inc. (NYSE: ALLY) is valued at 0.75 times its stated book value. The company announced recently that the Federal Reserve has released its Ally Bank from the capital, liquidity and business plan commitments that had been made in connection with its application for membership in the Federal Reserve System. This includes the commitment to maintain a Tier 1 leverage ratio of at least 15%. The company further noted that Ally Bank may now manage its capital and liquidity subject to applicable regulatory requirements and is expected to distribute a dividend of approximately $2.9 billion to Ally Financial during the third quarter of 2017.

Ally Financial recently traded at $22.06 and has a 52-week trading range of $16.68 to $23.62. Its consensus analyst target price is $25.91, and its market cap is $9.9 billion.

AIG

American International Group, Inc. (NYSE: AIG) is valued at 0.77 times book value, and unlike some of the other financial players it has been in state of flux and reorganization since the Great Recession. Its core business focuses on insurance products for commercial, institutional and individual customers, and the AIG name is widely recognized around the world. Its dividend yield is over 2%.

AIG was last seen at $61.22 and has a 52-week range of $57.35 to $67.47. Its consensus target price is $70.00, and its market cap is $55.3 billion.

Capital One

Capital One Financial Corp. (NYSE: COF) is valued at 0.80 times book value, and the credit card issuer has had a hard time with some of its internal metrics, along with other companies seeing some soft internals on credit card payment metrics. That has depressed Capital One’s market valuations, and its dividend yield is close to 2%. All risks aside, this is still considered to be a well-managed credit card issuer, and while it has raised rewards, the bank holding company hasn’t gone as “rewards crazy” as other credit card issuers.

Capital One traded at $81.44, in a 52-week range of $68.27 to $96.92. Its consensus target price is $95.57, and its market cap is $39.4 billion.

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Citizens Financial

Citizens Financial Group Inc. (NYSE: CFG) is valued at 0.85 times book value, and the stock was last seen trading down more than 15% from its 52-week high, despite beating earnings expectations in July. This is the holding company for Citizens Bank, and Citizens Bank of Pennsylvania for retail and commercial banking products and services in the eastern and midwestern United States. Its dividend yield is about 2.2%.

Citizens Financial traded at $33.42, in a 52-week range of $23.37 to $39.75. Its consensus analyst target is $38.96. The market cap is $16.7 billion.

Leucadia: The Mini-Buffett Stock

Leucadia International Corp. (NYSE: LUK) screens out as being valued at 0.84 times book value. There was a debate on including this “miniature Berkshire Hathaway” due to real estate, car and motorcycle leases and dealerships, food, and oil and gas. Still, Leucadia owns the well-known Jefferies investment banking firm and this makes up a large part of its $8.6 billion market cap. Its dividend yield is about 1.6%.

Leucadia was last seen at $24.00 and has a 52-week range of $17.87 to $27.34. Its consensus target price is $30.00.

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Citigroup

Citigroup Inc. (NYSE: C) is valued at just 0.87 times book value, the lowest valuation of all money center banks. The banking giant still has many international operations and arguably could still sell off more assets. That being said, Citi was recently given approval by the Federal Reserve to increase its capital return plan for shareholders by a larger amount than Wall Street was expecting. Its current dividend yield is 1.21%, but that will go to almost 2% when its 16-cent payout goes as high as 32 cents.

Citigroup traded at $66.85 and has a 52-week range of $45.16 to $69.86. Its consensus target price is $72.41, and its market cap is $182.1 billion.

Prudential

Prudential Financial Inc. (NYSE: PRU) is valued at 0.90 times book value, and the insurer’s stock is still about 15% under its 52-week high. It comes with nearly a 3% dividend yield, and its stock has doubled in the past five years. The provider of life insurance, annuities, investment management and other financial products is also said to be trying to get out from under its “too big to fail” (SIFI) status as well. With a $43 billion market cap, it may seem like it is not too big to fail, but it dates back to the 1800s. As of 2017 it had $3.7 trillion worth of life insurance in force and over $1.3 trillion in assets under management.

Prudential traded at $101.90, in a 52-week range of $76.37 to $115.26. Its consensus target price is $115.46. Its market cap is $43.5 billion.

NYCB

New York Community Bancorp Inc. (NYSE: NYCB) is valued at 0.94 times book value, and the bank now has about $48 billion in assets. The bank specified a continuing desire to manage its balance sheet below the current $50 billion SIFI threshold. The bank also has exposure to New York City taxi medallion loans, but its latest 17-cent dividend would imply a 5.7% yield that feels too high for a regional bank. It has also been hitting 52-week lows and is now down more than 30% from its 52-week high.

The shares were last seen at $11.96, in a 52-week range of $11.86 to $17.68. The consensus target price is $13.48, and the market cap is $5.9 billion.

Lincoln National

Lincoln National Corp. (NYSE: LNC) is valued at 0.95 times book value, and the life insurance company has seen its shares sell off by more than 10% in the past month alone. Its dividend yield is currently just about 1.7%, and it is valued at less than nine times next year’s expected earnings.

Lincoln National traded at $67.84 and has a 52-week range of $44.74 to $75.78. Its consensus target price is $78.27, and its market cap is $15.0 billion.

Bank of America

Bank of America Corp. (NYSE: BAC) has more or less remained under book value along with Citi in the money center banks. It is valued at 0.95 times book value, and its dividend yield is currently about 2.0%. With a $234 billion market cap, each basis point under book value represents $2.3 billion in discounting. Bank of America has remained under the Fed’s nose for a while longer than JPMorgan and Wells Fargo, and that has been why it has been at a relative discount.

Bank of America traded at $23.83. It has a 52-week range of $14.81 to $25.80 and a consensus target price of $27.00.

Umpqua

Umpqua Holdings Corp. (NASDAQ: UMPQ) is valued at 0.96 times book value and it is only under book value due to the sell-off seen in August. This is the parent company of Umpqua Bank, an Oregon-based community bank with more than $25 billion in total assets and almost $23.5 billion in tangible assets. Its market value of $3.8 billion comes with a 3.7% yield. Its shares are also down more than 10% from its 52-week high.

Umpqua was last seen at $17.30, and it has a 52-week range of $14.78 to $19.50. The consensus target price is $19.68.

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FNB

FNB Corp. (NYSE: FNB) is valued at 0.97 times book value, but that discount is only because its shares are down 22% from its 52-week high and it was a $16 stock back in March. Its stated book value discount is also a bit different than some other regional banks because it is valued at more than twice tangible book value. The bank’s average loans of $20.4 billion were up $4.2 billion (by over 25%), and the average deposits of $21.2 billion were up $4 billion (about 23.5%) due to its acquired Yadkin balances and organic loan growth. While this screens out as a regional bank with total assets of $31 billion with over 400 regional bank offices, FNB also has wealth management services for asset management, private banking and insurance. FNB has a yield of about 3.7%.

Its shares traded at $12.89, in a 52-week range of $11.86 to $16.43. Its consensus target price is $16.78, and its market cap is $4.2 billion.

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After a week when the indexes finally fought their way back to even for 2016, one probably would think that insiders would be selling the huge rally. Just the opposite happened, and while there was insider selling, the buyers dominated our screens as they dominated the action. That is a very positive overall sign for the markets in general, given the bearishness that has been present for months.

We cover insider buying every week at 24/7 Wall St., and we like to remind readers that while insider buying is usually a very positive sign, it is not in of itself a reason to run out and buy a stock. Sometimes insiders and 10% owners have stock purchase plans set up at intervals to add to their holdings. That aside, it still remains a positive indicator.

Here are some of the companies that reported notable insider buying this week.

Seattle Genetics Inc. (NASDAQ: SGEN) had one of the biggest biopharmaceutical funds buying even more shares of the stock this past week. The Baker Brothers added a total of 1,349,237 shares at prices between $31.77 and $33.77 per share. The total for that buy was a very impressive $43 million. Earlier in the week, the company bought an additional 694,666 shares at prices between $32.03 and $33.10 at a cost of $23 million. Seattle Genetics is a biotechnology company that develops and commercializes antibody-based therapies for the treatment of cancer. The stock closed Friday at $33.92.

Ecolab Inc. (NYSE: ECL) had a big name buyer last week. Microsoft founder Bill Gates’s Cascade Investments, which is a 10% owner of the company, bought a whopping 499.999 shares at prices that ranged from $104.59 to $105.43. The total for the purchase came to a huge $53 million. The company provides water, hygiene and energy technologies and services for customers worldwide. The stock closed trading on Friday at $108.14, so the timing looks good.
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Aquinox Pharmaceuticals Inc. (NASDAQ: AQXP) is another company the Baker Brothers were buying this past week, and it was already a 10% holder of the shares. The fund picked up an additional 471,667 shares at between $7.98 and $8.00 apiece. The total for the trade came to $4 million. This clinical-stage pharmaceutical company engages in discovering and developing targeted therapeutics for diseases in the areas of inflammation and immuno-oncology. It primarily focuses on anti-inflammatory product candidates targeting SHIP1, a key regulator of a cellular signaling pathway in immune cells. The stock ended last week at $8.32.

Sarepta Therapeutics Inc. (NASDAQ: SRPT) saw three directors at the company purchasing shares this past week. The trio bought a total of 154,500 shares. Prices ranged from $14.54 to $16.54 per share, and the total for the trades came to $2.5 million. This biopharmaceutical company focuses on the discovery and development of RNA-based therapeutics for the treatment of rare, infectious and other diseases. Shares closed the day on Friday at $18.00, so again, well-timed buys.

Itron Inc. (NASDAQ: ITRI) had a 10% owner adding to a position this week. Scopia Capital bought a total of 82,234 shares of the stock at prices between $40.37 and $43.05. The total for the buy came to $3.5 million. The company provides metering solutions to electricity, gas and water utility markets worldwide. It offers standard electromechanical and electronic, gas and water and heat meters, as well as advanced and smart electricity, gas and water meters and communication modules. The stock ended on Friday at $42.26.

These companies also reported insider buying this week: Flamel Technologies S.A. (NASDAQ: FLML), Flex Pharma Inc. (NASDAQ: FLKS), Leucadia National Corp. (NYSE: LUK), Mosaic Co. (NYSE: MOS) and Tempur Sealy International Inc. (NYSE: TPX).

Again, the strong buying into a big market rally can only be seen as a positive. While 2016 could again prove to be a volatile year, if insiders like their shares at this level, we could have a move higher as the spring rolls in.

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Stocks were indicated to open higher on Tuesday. Investors have bought stocks on pullbacks for four years now in a bull market that is nearing seven years old. 24/7 Wall St. reviews dozens of analyst reports each morning to find new investing and trading ideas for its readers. Some analyst reports cover stocks to buy, while other calls cover stocks to sell or to avoid. These are this Tuesday’s top analyst upgrades, downgrades and initiations.

AbbVie Inc. (NYSE: ABBV) was downgraded to Equal Weight from Overweight at Barclays. AbbVie has a consensus analyst price target of $75.21 and a 52-week trading range of $45.45 to $71.60.

Alcatel-Lucent S.A. (NYSE: ALU) was raised to Outperform from Neutral at Credit Suisse. Alcatel-Lucent American depositary shares (ADSs) closed at $3.93 and have a 52-week range of $3.06 to $4.96.

CDW Corp. (NASDAQ: CDW) was started with a Buy rating and was assigned a $52 price target (versus a $43.17 prior close) at Goldman Sachs. CDW has a consensus price target of $50.00 and a 52-week range of $32.57 to $46.92.

Computer Sciences Corp. (NYSE: CSC) was downgraded to Neutral from Buy and the price target was cut to $34 from $44 (versus a $31.33 close) at SunTrust Robinson Humphrey. CSC has a consensus target of $30.00 and a 52-week range of $24.77 to $31.96.

Eli Lilly and Co. (NYSE: LLY) was raised to Overweight from Equal Weight at Barclays, and the price target is $95.00 (versus an $82.04 close). Eli Lilly has a consensus price target of $97.53 and a 52-week range of $68.31 to $92.85.

ALSO READ: 6 Analyst Stock Picks With Massive Upside Targets

Ericsson (NASDAQ: ERIC) was downgraded to Underperform from Neutral at Credit Suisse. Ericsson’s ADSs closed at $9.69, with a consensus analyst target of $11.85 and a 52-week trading range of $9.06 to $13.14.

Gold Fields Inc. (NYSE: GFI) was downgraded to Sector Perform from Outperform RBC Capital Markets. The stock closed at $2.53, has a consensus analyst price target of $3.70 and has a 52-week range of $2.04 to $6.01.

JD.com Inc. (NASDAQ: JD) was reiterated as Buy with a $43.00 price target (versus a $30.68 close) at Jefferies. The firm met with its chief financial officer and thinks the fourth quarter is tracking well, with big financial and operational improvements in 2016. JD.com closed up 2.4% at $30.68 on Monday, against a consensus target price of $36.09 and in a 52-week range of $21.55 to $38.00.

Nokia Corp. (NYSE: NOK) was raised to Outperform from Neutral at Credit Suisse. Nokia closed at $7.21 and has a 52-week trading range of $5.71 to $8.37.

Rackspace Hosting, Inc. (NYSE: RAX) was raised to Outperform from Sector Perform and was given a $36.00 price target at RBC Capital Markets. Rackspace closed at $28.62. The consensus analyst price target is $39.00 and the 52-week range is $23.65 to $56.20.

TerraForm Power Inc. (NASDAQ: TERP) was raised to Outperform from Perform and was given a $10 price target (versus a $6.90 close) at Oppenheimer. TerraForm Power’s consensus price target is $23.94 and it has a 52-week range of $6.73 to $42.66.

ALSO READ: Huge PowerShares ETF Rebalance Means Massive Buying for 4 Biotech Stocks

Other key analyst upgrades, downgrades and initiations were seen in the following on Tuesday:

ABB Ltd. (NYSE: ABB) was started as Sell at Citigroup.

Aduro BioTech Inc. (NASDAQ: ADRO) was downgraded to Perform from Outperform at Oppenheimer.

CBOE Holding Inc. (NASDAQ: CBOE) was downgraded to Market Perform from Outperform at Raymond James.

Chimerix Inc. (NASDAQ: CMRX) was started as Neutral with a $50.00 fair value estimate (versus a $41.92 close) at Janney Capital Markets.

Conn’s Inc. (NASDAQ: CONN) was raised to Buy from Hold with a $35 price target (versus a $26.67 close) at Stifel.

Fidelity National Information Services Inc. (NYSE: FIS) was started as Neutral with a $70.00 price target (versus a $63.67 close) at Goldman Sachs.

Joy Global Inc. (NYSE: JOY) was downgraded to Underperform from Neutral and the price objective was slashed to $10 from $21 (versus a $15.35 close) at Bank of America Merrill Lynch.

Keysight Technologies Inc. (NYSE: KEYS) was started as Hold with a $30.00 price target (versus a $30.81 close) at Deutsche Bank.

Leucadia National Corp. (NYSE: LUK) was started with an Outperform rating and was given a $27 price target (versus a $17.68 close) at Oppenheimer.

Newmont Mining Corp. (NYSE: NEM) was downgraded to Neutral from Buy at Citigroup.

ALSO READ: Jefferies Has 4 Blue Chip High-Dividend Franchise Picks to Buy Now

Rexx Energy Corp. (NASDAQ: REXX) was downgraded to Sell from Hold and was given a $0.75 price target (versus a $1.37 close) at Stifel.

TG Therapeutics Inc. (NASDAQ: TGTX) was started as Outperform with a $29.00 price target (versus a $13.18 close) at FBR Capital Markets.

uniQure N.V. (NASDAQ: QURE) was started as Buy and was given a $40.00 fair value estimate (versus a $21.57 close) at Janney Capital Markets.

Xerox Corp. (NYSE: XRX) was started with a Neutral rating and was assigned a $10 price target (versus a $10.55 close) at Goldman Sachs.

Zendesk Inc. (NYSE: ZEN) was reiterated as Buy at Canaccord Genuity and it was still called a top small cap growth pick. That being said, its shares have risen from about $19 to $25 in a few weeks, and they feel the stock needs a pause to catch its breath through year-end.

In case you missed Monday’s top analyst upgrades and downgrades, they were in shares of Fitbit, General Electric, Lockheed Martin, Lululemon Athletica, Marriott International, Microsoft, Philip Morris, SLM and over a dozen more companies.

The post Top Analyst Upgrades and Downgrades: AbbVie, CDW, CSC, Eli Lilly, Ericsson, Gold Fields, JD.com, Nokia, Rackspace and Many More appeared first on 24/7 Wall St..

Leucadia National Corp. (NYSE: LUK) has bailed out battered foreign exchange broker FXCM Inc. (NYSE: FXCM) with a $300 million cash investment in exchange for $250 million two-year secured notes that carry a coupon of 10%. If FXCM is sold, Leucadia gets 75% of the proceeds.

For FXCM, it was either take the deal or call on its customers to cough up $225 million in cash in order to avoid breaching capital requirements. If clients couldn’t cover, FXCM had to.

FXCM was the hardest hit U.S. foreign exchange broker following the Swiss National Bank’s decision to remove the Swiss franc’s peg to the euro. The brokerage’s shares dropped to $1.49 in premarket trading Friday and were halted before the opening bell.

CNBC reported that another foreign exchange broker, Alpari UK, entered insolvency as a result of the the Swiss bank’s decision. A New Zealand brokerage, Excel Markets, also went broke.

Reuters reported exclusively Friday that investment bank Jefferies was talking with FXCM about a rescue package. Shares of  Leucadia, Jefferies’ parent, were halted at 12:25 p.m. ET on Friday. As of 3:35 p.m., shares have not been restarted.

ALSO READ: Interactive Brokers Outlines Exposure to Swiss Franc Losses

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Crimson Wine Group Ltd. (OTC: CWGL) is the newest company to hit the markets around the trade of wine, beer and spirits. This is actually a spin-off that was just completed from Leucadia National Corp. (NYSE: LUK), paid out to its holders as a dividend, and it was timed as part of the process of acquiring Jefferies Group Inc. (NYSE: JEF).

Crimson is a Napa-based player that produces premium, ultra-premium and luxury wines, and wine aficionados likely will have heard of the brands: Pine Ridge Vineyards, Archery Summit, Chamisal Vineyards and Seghesio Family Vineyards. As this is still an OTC company, we will only offer up what the companies have offered.

Our one comment is that this is unlikely to remain OTC for long. Companies generally try to avoid that stigma, and our take is that Leucadia conducted this spin-off in a low-profile and rapid manner because the company was too small to make much of a dent either way. Here is what Crimson’s SEC filing shows about its financial picture:

Revenues and other income for 2012 and 2011 include $9,640,000 and $14,592,000, respectively, of increased revenues at the winery operations; substantially all of the 2012 increase and $9,628,000 of the 2011 increase results from the acquisition of Seghesio Family Vineyards in the second quarter of 2011. The change in selling, general and other expenses for 2012 and 2011 as compared to the prior year also reflects $2,138,000 and $12,152,000, respectively, of greater costs at the winery operations. Selling, general and other expenses also include charges of $1,513,000 in 2010 at the winery operations to reduce the carrying amount of wine inventory.

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There is a nearly endless number of criteria that measure how well CEOs perform, whether they are paid fairly, and what metrics should be used for determining chief executive compensation. One yardstick that is never used but should be, is the simple ratio of market capitalization to pay. It takes into account the entire value of the company to shareholders and weighs it directly against annual compensation.

At the one end of the compensation to market cap ratio are relatively small companies that have very highly paid CEOs. At the other are chief executives at large companies who work for more modest sums and are either paid well for extraordinary financial results or have boards that believe that CEOs should not be paid like sultans

Read: America’s Least Valuable CEOs

Also Read: America’s Most Valuable CEOs

Every year, the media come out with lists of American public company CEOs who makes tens of millions of dollars. While some may have earned the money because of phenomenal results, others are paid well despite poor results. Our list of least valuable CEOs is based on chief executives who are paid handsomely, even though they run corporations with modest market caps and sales. Additionally, most of their companies have not done well, either financially or in terms of stock market performance.

Some of the companies on this list are run by founders or large shareholders. These people may well be in a position to have outsized influence over their own pay packages, which puts shareholders in an impossible position to effectively protest compensation. Other CEOs have been hired fairly recently to turn companies around. They have been paid well to take jobs in which they are expected to post great improvement, but they have not done so yet, and may never. .

24/7 Wall St. identified the least valuable CEOs based on executive pay relative to company market cap. We reviewed the market cap and CEO compensation for every S&P 500 company as of Dec. 31, 2011. If a company’s stock performance exceeded that of the S&P 500 Index between December 30th, 2011 and November 12th, 2012 it was excluded. CEOs who joined their companies or were promoted during the year in question have been included for the purpose of our measurements.

These are America’s least valuable CEOs.

10. Anthony Petrello
> Compensation to market cap: $3,208 / $1M market cap
> Compensation: $16 million
> Market Cap: $5 billion
> Company: Nabor Industries (NYSE: NBR)

Anthony Petrello was a lawyer with the firm Baker & McKenzie from 1979 to 1991. He became CEO of Nabor, a big land rig drilling contractor, in October of last year after two decades as president. Analysts have mentioned that Nabor CEO compensation has not been in line with the company’s performance for a number of years. Corporate governance officials revolted when Petrello’s predecessor, Eugene Isenberg, was offered a $100 million comp package as he left the company. The criticism was so severe that Isenberg turned down the package early this year. Petrello, who was Isenberg’s No. 2 until his promotion, may also have a tremendously large package, especially given the company’s size. But Nabor’s financial performance has been reasonably good recently. Revenue in 2011 was $6.1 billion and net income was $244 million. In the previous year, revenue was $4.1 billion, and net income was $95 million. These figures, however, have not been anywhere near expectations as evidenced by the roughly 40% drop in Nabor’s share price over the last two years. The S&P 500, during that time has increased by 12%.

9. Richard Kramer
> Compensation to market cap: $3,530 / $1M market cap
> Compensation: $12.2 billion
> Market Cap 12/31: $3.5 billion
> Company: Goodyear Tire & Rubber Co. (NYSE: GT)

Goodyear posted improved financial results in 2011. Revenue was $22.7 billion and net income was $321 million. This compares to revenue of $18.8 billion and a net loss of $216 million in 2010. Wall Street, however, wasn’t impressed and the company’s shares underperformed the S&P 500 over the last two years. Kramer became head of the huge tire company in April 2010. He had been an accountant and worked at PricewaterhouseCoopers previously. He joined Goodyear as vice president of the corporate finance division in 2000. Last year was not the only one in which Kramer might have been criticized by pay vigilantes. He made $10.1 million in 2010.

8. Gregory Cappelli
> Compensation to market cap: $3,674 / $1M market cap
> Compensation: $25.1 million
> Market Cap: $6.8 billion
> Company: Apollo Group (NASDAQ: APOL)

Education company Apollo was caught in the fallout of a government investigation into for-profit education companies which undermined its financial results recently. Most of the company’s revenue comes from its University of Phoenix operation. Apollo had 21,777 full time students as of the middle of last year. The company’s lead position in the sector helped it to grow revenue for several years, but in its most recent fiscal, revenue dropped to $4.25 billion from $4.71 billion the year before. Net income attributed to Apollo fell from $572 million to $423 million over the same period.

Apollo’s Achilles’ heel — over-reliance on government student loans — is particularly exposed. As one Morningstar analyst pointed out recently, “Regulatory concerns are high partly because of high post-graduation student debt loads. Tuition rates may be forced downward so programs can meet maximum debt/income ratios.” Investor anxiety over the effects of government regulation has pushed Apollo shares down 40% over the last two years. CEO Gregory Cappelli, however, does have a great advantage in his corner. Two board members are founder Dr. John G. Sperling, executive chairman of the board, and his son, Peter V. Sperling, vice chairman. They control the company through ownership of Class B Shares, and almost certainly have an outsized say about Cappelli’s package

Also Read: States with the Highest and Lowest Taxes

7. Rory Read
> Compensation to market cap: $4,148 / $1M market cap
> Compensation: $15.6 billion
> Market Cap: $3.8 billion
> Company: AMD (NYSE: AMD)

AMD, the No. 2 semiconductor company in the world after Intel, has been near death for years. Between price and research and development pressures from its larger competitor and a sharp drop in PCs and servers sales, AMD has almost no room to improve its financial situation. Recent rumors of a sale gave the stock a temporary lift, but when the company denied them, share price cratered. Last year, revenue ticked up to $6.6 billion from $6.5 billion the year before. Net income rose to $491 million from $471 million. With the shrinking share of PCs and the rapid growth of mobile devices such as tablets and smartphones, investors’ rapidly grew concerned about AMD’s future. AMD’s share price has dropped more than 70% in the last two years. Rory Read joined AMD as CEO in August 2011. He has previously worked at Chinese PC firm Lenovo as chief operating officer. His efforts to improve the fate of the company are almost certainly hopeless, but he is paid well while he waits for AMD to fall apart at the seams.

6. Kieran Gallahue
> Compensation to market cap: $4,419 / $1M market cap
> Compensation:  $25.2 million
> Market Cap: $5.7 billion
> Company: CareFusion (NYSE: CFN)

CareFusion makes and markets medical technology, including products for infection prevention, biopsies, respiratory care, and surgical supplies. It is a spin-out from huge medical supply firm Cardinal Health in August 2009. Several issues almost always turn investors against public companies. One is when they delay their SEC filings. CareFusion has yet to file its 10-K for its most recent full year results. The company says it is working on accounting charges, but has not said when the process will be complete. In the 10-K for the fiscal year that ended on June 30, 2011, CareFusion modest disappointing results. Revenue rose from $3.47 billion the year before to $3.53 billion. Net income rose from $194 million to $244 million. These results and those posted in subsequent quarters have been good enough so that CareFusion’s shares have matched the performance of the S&P 500 over the last two years. Kieran Gallahue became CEO in January 2011. With a pay package of $25.2 million, he is wildly well paid to run such a modest sized company.

5. Steven Fishman
> Compensation to market cap: $4,814 / $1M market cap
> Compensation: $11.9 million
> Market Cap: $2.5 billion
> Company: Big Lots (NYSE: BIG)

Big Lots’ is one of the largest close-out retailers based in the U.S. The company has just over 1,400 stores spread throughout America and Canada. Its stores are known for providing goods at extremely low prices, it competes in a portion of the retail market that often includes Walmart. Its shares have declined 10% over the last two years. According to the company’s most recent 10-K, revenue rose to $5.2 billion from $5 billion the year before. But net income fell from $223 million to $207 million. Steven Fishman joined Big Lots as CEO in July 2005. His board has consistently treated him generously. Over the last three years, Fishman’s pay has totaled $35 million.

4. Ian Cumming
> Compensation to market cap: $5,066 / $1M market cap
> Compensation: $28.2 million
> Market Cap: $5.6 billion
> Company: Leucadia National (NYSE: LUK)

Leucadia is often referred to as the poor man’s Berkshire Hathaway. It recently said it will buy the portion of investment bank Jefferies it does not already own. Once the transaction is completed, CEO Ian Cummings will stay, but the chief of Jefferies will take over as CEO of the combined operations. Joseph Steinberg and Cumming essentially control Leucadia. The firm’s shares declined more than 20% in the last two years compared to a 12% improvement in the S&P 500. Revenue was up slightly last year from $1.32 billion in 2010 to $1.57 billion in 2011. Much of the revenue came from the firm’s oil services, gaming entertainment operations, and from securities transactions. Because of an accounting change that involved an income tax provision, net income fell from $1.9 billion in 2010 to $25 million in 2011. The figure was also down from $550 million in 2009. Cumming has served as a director and chairman of the board since June 1978. Steinberg has been president since January 1979. Steinberg owns 10% of the firm’s shares and Cumming 9%, so it is not hard to see why compensation is so liberal. As CEO, Cumming’s pay package may be more visible but Steinberg made $28.2 million last year.

Also Read: Thirteen American Cities Going Broke

3. Dinesh Paliwal
> Compensation to market cap: $6,027 / $1M market cap
> Compensation: $16.1 million
> Market Cap: $2.7 billion
> Company: Harman International (NYSE: HAR)

Shares of Harman, the maker of audio and electronics entertainment products, have sold off 7% during the last two years. Paliwal did well last year, but he has a history of being generously rewarded by his board. Over the three years that ended in 2011 he made more than $42 million. Harman posted good results last year, although some of the growth had to do with a recent acquisition. Revenue rose to $4.36 billion in fiscal 2011 from $3.77 billion in fiscal 2010. Net income was $330 million, up from $136 million the previous year. Sales at Harman’s largest unit, infotainment, which made up 55% of total revenue, grew 15%. The division sells GPS and entertainment hardware, among other products, to car manufacturers such as BMW, Subaru, and Audi.

2. Ronald Johnson
> Compensation to market cap: $7,098 / $1M market cap
> Compensation: $53.3 million
> Market Cap: $7.5 billion
> Company: J.C. Penney (NYSE: JCP)

If there is a shortlist of CEOs at American publicly traded companies who have done an awful job, J.C. Penney’s CEO Ronald Johnson is at the top of it. His move from his role as the head of Apple’s retail operations to the “rescue” of J.C. Penney has been much discussed in the business news media. After his move, Johnson changed Penney’s discount strategy. Revenue then began to drop as much as 20% quarter over previous year’s quarter. Internet sales, critical to any retailer, have fallen even more. Shares are off by nearly 50% over the last two years. Many investors have completely given up on the company. Penney had 1,102 stores when it filed its most recent 10-K. That list of stores is being pruned as results worsen. Revenue was down 2.8% last year to $17.3 billion, but the rate of the drop has accelerated. It is a miracle that Johnson still has his job. But Penney does have a large shareholder, hedge fund Pershing Square, and if its founder William Ackman wants Johnson as CEO. It is unlikely Johnson will be leaving.

1. Michael Jeffries
> Compensation to market cap: $11,450 / $1M market cap
> Compensation: $48.1 million
> Market Cap: $4.2 billion
> Company: Abercrombie & Fitch (NYSE: ANF)

Abercrombie & Fitch posted a good quarter recently, but that was after a longer period in which the retailer suffered as its young, hip customers turned to other brands. Over the last two years, Abercrombie shares fell by 7%. The company and its sub-brands, which include Hollister and Abercrombie Kids, operate out of 1,045 locations. Abercrombie did well on the top line last year but not the bottom. Revenue reached $4.16 billion, up from $3.47 billion the year before. Net income fell from $150 million in 2010 to $128 million over the same period from 2010 to 2011. CEO Michael Jeffries has a long history with the company and is listed as a founder in the Abercrombie proxy. He has served as chairman since May 1998, and as chief executive officer since February 1992. Longevity has its advantages. Jeffries has made $107.6 million as the head of Abercrombie over the last three years.

Douglas A. McIntyre

Also Read: America’s Most Valuable CEOs

The post America’s Least Valuable CEOs appeared first on 24/7 Wall St..

U.S. equity markets opened higher this morning on a day when most government offices and banks are closed in observance of Veteran’s Day. Asian markets were muddled this morning as reports came out that Chinese exports grew more than 11% in October, but bank lending was down. Japan’s third quarter GDP declined, and the “one world, one economy” idea has virtually replaced the idea that emerging economies are somehow insulated from the travails of developed economies (more coverage here). In Europe, Greece faces a €5 billion payment this week and a bond sale set for tomorrow has only been subscribed to the tune of about €3.5 billion. Markets have swung both below and above the neutral line today, and closed essentially flat for the day.

The U.S. dollar index rose slightly today, now up 0.02% at 81.042. The GSCI commodity index is up 0.8% at 636.41, with commodities prices mostly lower today (more coverage here). WTI crude oil closed down 0.6% today, at $85.57 a barrel. Brent crude trades down about 0.6% at $108.92 a barrel. Natural gas is up 1.8% today at about $3.57 per thousand cubic feet. Gold closed unchanged today at $1,730.90 an ounce.

The unofficial closing bells put the DJIA down less than 2 points to 12,8114.16 (-0.01%), the NASDAQ fell less than 1 point (-0.02%) to 2,904.26, and the S&P 500 rose 0.01% or less than 1 point to 1380.00.

There were several analyst upgrades and downgrades today, including Garmin Ltd. (NASDAQ: GRMN) cut to ‘sell’ at Goldman Sachs; Chesapeake Energy Corp. (NYSE: CHK) maintained as ‘hold’ at Argus, but warns of possible ‘sell’ rating reinstatement; J.C. Penney Company Inc. (NYSE: JCP) cut to ‘underperform’ at Credit Suisse; The Walt Disney Co. (NYSE: DIS) raised to ‘buy’ at Citigroup; and Groupon Inc. (NASDAQ: GRPN) cut to ‘market perform’ at William Blair.

Earnings reports of interest since U.S. markets closed last Friday were few and have resulted in some price moves today, including these as of the last half hour of trading: Ceradyne Inc. (NASDAQ: CRDN) is up 0.03% at $34.98; and DR Horton Inc. (NYSE: DHI) is down 5.9% at $19.38.

After markets close today and before they open tomorrow morning we are scheduled to hear from Einstein Noah Restaurant Group Inc. (NASDAQ: BAGL), Jacobs Engineering Group Inc. (NYSE: JEC), Weatherford International Inc. (NYSE: WFT), Dick’s Sporting Goods Inc. (NYSE: DKS), Home Depot Inc. (NYSE: HD), Michael Kors Holdings Ltd. (NYSE: KORS), Saks Inc. (NYSE: SKS), and The TJX Companies Inc. (NYSE: TJX).

We also noted short interest changes through the end of October in semiconductors, solar stocks, biotech stocks, cult stocks, dividend stocks, and oil & gas stocks.

Some standouts from today include the following stocks:

Titanium Metals Corp. (NYSE: TIE) is up 42.4% at $16.48 after posting a new 52-week high of $16.56 earlier today. The producer of titanium melted and milled products is being acquired by Precision Castparts Corp. (NYSE: PCP) for $2.9 billion. More coverage here.

Jefferies Group Inc. (NYSE: JEF) is up 13.8% at $16.24. The investment banker is being acquired Leucadia National Corp. (NYSE: LUK) for around $3 billion. More coverage here.

Beazer Homes USA Inc. (NYSE: BZH) is down 17.9% at $13.66. The homebuilder reported a worse-than-expected loss this morning. More coverage here.

Stay tuned for Tuesday. Fed Vice-chair Janet Yellen is giving a speech. We have also noted the following events on the schedule (all times Eastern):

• 7:30 a.m. – National Federation of Independent Businesses small business optimism index
• 11:30 a.m. – 3- and 6-month Treasury bill auctions
• 2:00 a.m. – Treasury budget

Paul Ausick

The post 24/7 Wall St. Closing Bell — November 12, 2012: Markets Open Today, But Not Much Action (GRMN, CHK, JCP, DIS, GRPN, CRDN, DHI, BAGL, JEC, WFT, DKS, HD, KORS, SKS, TJX, TIE, PCP, JEF, LUK, BZH) appeared first on 24/7 Wall St..

In one of the odder acquisitions we’ve seen recently, diversified holding company Leucadia National Corp. (NYSE: LUK) today announced that it has agreed on a merger with investment bank Jefferies Group Inc. (NYSE: JEF). Leucadia, which already owns 28.6% of Jefferies, will pay for the deal with 0.81 shares of Leucadia stock for each share of Jefferies that it does not already own. That represents a premium of 24% to Friday’s closing price of Jefferies stock. At Friday’s close, Jefferies’ market cap was around $3.01 billion and Leucadia’s was near $5.33 billion.

Jefferies, which nearly collapsed as a result of the MF Global bankruptcy last year, was saved when Leucadia came to the bank’s rescue. Like MF Global, investors were worried about Jefferies’ exposure to European sovereign debt.

Leucadia will spin off its Crimson Wine Group in a tax-free distribution to its current shareholders before the completion of the merger with Jefferies in early 2013. Leucadia said the business has a book value of $197 million.

Jefferies will be Leucadia’s largest business and will continue to operate on its own:

Jefferies, which will be the largest business of Leucadia, will continue to operate as a full-service global investment banking firm in its current form. Jefferies will retain a credit rating that is separate from Leucadia’s. Jefferies’ existing long-term debt will remain outstanding and Jefferies intends to remain an SEC reporting company, regularly filing annual, quarterly, and periodic financial reports.

How long that will last is certainly open to question. Will Jefferies’ bankers be satisfied with getting Leucadia stock as part of their compensation packages? That doesn’t seem likely.

One plausible explanation for the deal is that Leucadia is protecting its already large investment in Jefferies. But is this good money after bad?

Leucadia stock is down about 2.7% this morning at $21.20, in a 52-week range of $19.58 to $29.79. Jefferies stock is up 13.4% at $16.22, in a 52-week range of $9.50 to $19.82.

Paul Ausick

The post Leucadia Adds Investment Bank to Its Stable (LUK, JEF) appeared first on 24/7 Wall St..

Betting on carbon capture has been hard to do, and it still may be a stretch for some investors who may have preferred to see smaller companies.  Today came the announcement from the Department of Energy that it is awarding some $612 million for carbon capture projects to continue testing large-scale carbon capture and storage from industrial sources.  We have found the three groups which are beneficiaries announced today…. Air Products & Chemicals, Inc. (NYSE: APD) and Valero Energy Corporation (NYSE: VLO) are one, Archer Daniels Midland Corporation (NYSE: ADM) is a second, and Leucadia National Corp. (NYSE: LUK) and Denbury Resources Inc. (NYSE: DNR) is a third (Denbury is a winner in two of these actually).  Unfortunately, these projects are going to require patience for the next phases…

Air Products & Chemicals, Inc. (NYSE: APD) is one beneficiary with the DOE share listed at $253 million, although Valero Energy Corporation (NYSE: VLO) is involved as well.  This one also includes Denbury Resources Inc. (NYSE: DNR).  Air Products will partner with Denbury Onshore LLC to capture and sequester 1 million tons of CO2 per year from existing steam-methane reformers in Port Arthur, Texas, starting in November 2012. As stated… “The CO2 will be delivered via a 12-mile connector pipeline to an existing Denbury interstate CO2 pipeline and sequestered via use for enhanced oil recovery in the West Hastings oilfield. The project team includes Air Products & Chemicals, Denbury Onshore LLC, the University of Texas Bureau of Economic Geology, and Valero Energy Corporation.”

Archer Daniels Midland Corporation (NYSE: ADM) was the second beneficiary, although this is smaller with a DOE share listed as $99 million.  The project will capture and sequester 1 million tons of CO2 per year from an existing ethanol plant in Illinois, starting in August 2012. As stated, “The CO2 will be sequestered in the Mt. Simon Sandstone, a well-characterized saline reservoir located about one mile from the plant. The project team includes Archer Daniels Midland, Schlumberger Carbon Services, and the Illinois State Geological Survey.” Schlumberger Ltd. (NYSE: SLB) is just too large to make note of for the size of this.

Leucadia National Corp. (NYSE: LUK) and Denbury Resources Inc. (NYSE: DNR) are listed as the third winners via Leucadia Energy, LLC and Denbury Onshore LLC with the DOE share being listed as $260 million.  It and Denbury Onshore LLC will capture and sequester 4.5 million tons of CO2 per year from a new methanol plant in Lake Charles, La.  As stated, “The CO2 will be delivered via a 12-mile connector pipeline to an existing Denbury interstate CO2 pipeline and sequestered via use for enhanced oil recovery in the West Hastings oilfield, starting in April 2014. The project team includes Leucadia Energy, Denbury, General Electric, Haldor Topsoe, Black & Veatch, Turner Industries, and The University of Texas Bureau of Economic Geology.”  General Electric Co. (NYSE: GE) is in this but is too large to make note of for this type of award.  Leucadia’s 2009 annual report noted regarding the Lake Charles project, “We have applied for U.S. Department of Energy (DOE) grants that will assist us with
working out a means to sequester the carbon dioxide (CO2) produced by the plant. We are in active negotiations with multiple parties for the sale of the plant’s output.”

Keep in mind that this is out to 2012 and is a continuation of smaller and previous pacts in what may total a $1.4 billion effort in total.

The full DOE report is here.

JON C. OGG

The post Big DOE Carbon Capture Winners (APD, VLO, ADM, LUK, DNR) appeared first on 24/7 Wall St..

The post Lumber Prices Have Crashed On Weak Outlook For Builders appeared first on 24/7 Wall St..

Mohnish Pabrai is often thought of as a Warren Buffett-like investor when it comes to some investment philosophies.  The fact that he has won the bidding for lunch with Warren Buffett has helped to add in that state of mind by the public.  But Pabrai is also a value investor in much of his efforts and investors in the past have looked at his holdings when doing research.  Today came his holdings on the as-of date of March 31, 2010 in a 13F filing as of worth a total of $332.8 million.
Air Transport Services Group, Inc. (NASDAQ: ATSG) 5,380,962 shares worth $18.02 million.

Berkshire Hathaway Inc. (NYSE: BRK-B) 319,851 shares worth almost $26 million.

Brookfield Properties Corporation (NYSE: BPO) 2,359,166 shares worth $36.2 million.

Goldman Sachs Group Inc. (NYSE: GS) 110,864 shares worth some $18.9 million.

Harvest Natural Resources Inc. (NYSE: HNR) 4,771,814 shares worth about $35.9 million.

Horsehead Holding Corp. (NASDAQ: ZINC) 1,358,498 shares worth $16 million.

Interactive Brokers Group, Inc. (NASDAQ: IBKR) 94,104 shares worth $1.5 million.

International Coal Group, Inc. (NYSE: ICO) 2,512,570 shares worth almost $11.5 million.

Leucadia National Corp. (NYSE: LUK) 791,074 shares worth $19.6 million.

Pinnacle Airlines Corp. (NASDAQ: PNCL) 2,002,902 shares worth $14.9 million.

Potash Corp. of Saskatchewan (NYSE: POT) 331,603 shares worth $39.5 million.

Teck Resources Ltd. (NYSE: TCK) 5,501 shares worth $245K…

Terex Corp. NYSE: TEX) 530,876 shares worth $12 million.

Wells Fargo & Co. (NYSE: WFC) 374,415 shares worth $11.6 million.

Other holdings are as follows:

• Capital Source Inc.  (?)
• Cresud S A  (CRESY)
• FAIRFAX FINL HLD SUB (FRFHF.PK)

JON C. OGG

The post Pabrai’s Newest Stocks (ATSG, BRK-B, BPO, GS, HNR, ZINC, IBKR, ICO, LUK, PNCL, POT, TCK, TEX, WFC) appeared first on 24/7 Wall St..

Leucadia National Corp. (NYSE: LUK) is generally touted as one of the baby Berkshires…. meaning it is treated along the same lines as Berkshire Hathaway Inc. (NYSE: BRK-B) and Warren Buffett.  The problem is that Leucadia has a far, far different mix of holdings.   AmeriCredit Corp. (NYSE: ACF) and Jefferies Group Inc. (NYSE: JEF) are its two giant public stakes, but there are some other interesting takes in here.

The public company stakes in the U.S. are as follows:

• AmeriCredit Corp. (NYSE: ACF) 33,900,440 shares.
• Capital Southwest Corporation (NASDAQ: CSWC) 19,776 shares.
• Endwave Corp. (NASDAQ: ENWV) 70,000 shares; shares up over 9% today.
• International Assets Holding Corporation (NASDAQ: IAAC) 1,384,985 shares.
• Jefferies Group Inc. (NYSE: JEF) 48,585,385 shares.
• Millennium India Acquisition Company Inc. (NASDAQ: SMCG) 120,000 shares; stock up over 30% on this today.
• TravelCenters of America LLC (NYSE: TA) 275,308 shares.

This is a very eclectic mix for a company often thought of as a mini-Berkshire or Buffett mirror.  If anything, this might be a more like “Buffett’s alter ego” on the surface.  The company has operations in manufacturing (Idaho Timber), telecom (STi Prepaid), land based contract oil and gas drilling Keen Energy), property management and services (ResortQuest International), gaming entertainment (Premier Entertainment Biloxi), real estate activities (various), medical product development (Sangart, Inc.-hemoglobin) and it even lists winery operations (Pine Ridge, Archery Summit, Chamisal Vineyards, and development project).

As far as what else is there, Lecadia has its hands in many operations.  It has the JHYH venture with Jefferies which makes markets in high yield and special situation securities and provides research coverage on these types of securities.

The company’s investment in Fortescue and its subsidiary, FMG Chichester Pty Ltd., consists of 247,986,000 common shares (about 8% o outstanding shares) and a $100,000,000 note of FMG that matures in August 2019.

Non-current available for sale investments include 5,600,000 common shares of Inmet Mining Corporation in Canada (“IMN-TSX”) with a cost of $78,000,000 and carrying values of $325,500,000.

This morning came a filing that was as follows: Asset Put Agreement by and among Berkadia III, LLC (now known as Berkadia Commercial Mortgage LLC), Capmark Finance Inc., Capmark Capital Inc., and Capmark Financial Group Inc. and, with respect to Sections 2.5, 10.5, 10.7, 10.11, 10.16 and 10.17 only, Leucadia National Corporation and Berkshire Hathaway Inc. dated as of September 2, 2009… FULL DETAILS

Leucadia shares are down almost 0.5% at $24.30 on only 150,000 shares right at Noon today.  The 52-week trading range is $18.00 to $28.37 and the 52-week trading range is $5.91 billion.  At the March 31 quarter, the total assets were listed as $6.988 billion versus total liabilities of $2.408 billion.

JON C. OGG

The post Leucadia Holdings More Like Buffett’s Alter Ego (LUK, BRK-B, ACF, CSWC, ENWV, IAAC, JEF, SMCG, TA) appeared first on 24/7 Wall St..

Warren Buffett is positioning Berkshire Hathaway Inc. (NYSE: BRK-A) to profit when the housing and property market returns to more normal levels.  Now, he is teaming up with what many investors consider a “Buffett rival.”  Berkshire Hathaway Inc. (NYSE: BRK-A) is teaming up with Leucadia National Corp. (NYSE: LUK) to acquire the North American mortgage and servicing operations of Capmark Financial Group Inc.  Interestingly enough, a company affiliated with Buffett and Berkshire Hathaway called HomeServices of America made a real estate firm acquisition in Chicago earlier this week.

The Capmark deal is said to be valued at roughly $490 million.  Some may question this, but many believe a return is taking shape of at least some normalcy in the housing market.  Capmark is said to be looking for a debt restructuring and also looking at options for its business holdings as it has discussed bankruptcy protection as a possibility.  Bloomberg has made a reminder that Capmark is owned by firms including KKR & Co. and Goldman Sachs Group Inc. (NYSE: GS).  Bloomberg reminded readers that Buffett agreed to buy a portfolio of loans on factory-built homes from CIT Group Inc. (NYSE: CIT) in 2008.

In the Koenig & Strey deal, that firm will retain its name and become a franchisee within Brookfield Residential Property Services’ North American real estate network of almost 30,000 real estate professionals.  Koenig & Strey has approximately 900 agents located in 21 offices serving Chicago and the surrounding area.  Its sales were $2.6 billion in 2008.  The acquisition is the 21st for HomeServices, and it now has more than 15,000 real estate professionals and 21 companies operating in 20 states.

What is interesting is that in Buffett’s latest quarterly holding, Berkshire Hathaway lightened up in shares of Home Depot Inc. (NYSE: HD).  This is even more puzzling when you consider that he maintained his stake in Lowe’s Companies (NYSE: LOW) as the same as the prior quarter.  Another play and big bet tied to housing is USG Corp. (NYSE: USG) that Buffett holds some 17 million shares in which may be under-counted considering a preferred holding.  Buffett’s full list of public stocks is here.

Neither Buffett nor Berkshire Hathaway Inc. are new to this notion of housing and doing business around the housing market.  Some Berkshire Hathaway companies held as independent subsidiaries are Acme Brick Company, Clayton Homes, HomeServices of America, and Johns Manville.  Buffett also has significant operations in insuring and reinsuring housing, and he is no stranger to furniture and furnishings companies with several operations in the Berkshire family.

You can join our open email distribution list which goes out several times per week if you wish to be notified by email of guru investor data on Buffett and other key investment gurus, as well as key analyst calls, merger related activity, IPO’s and secondary offerings, and top day trader alerts in the morning.

As we noted last night with the mega-cap stocks holding some $335 billion in raw cash, Berkshire Hathaway probably has $50 billion that can be used for deals in the near-term and intermediate-term.  The full details of the Berkshire-Leucadia deal with Capmark are in the SEC filing.

JON C. OGG
September 3, 2009

The post Buffett Gets Deeper Into Housing and Real Estate (BRK-A, LUK, GS, CIT, HD, LOW, USG) appeared first on 24/7 Wall St..

Reuters:   The sell-off in Chinese stocks may be overdone based on earnings.

Reuters:   A report blamed the SEC for not doing its job investigating Madoff.

Reuters:   The Fed says the risks to the American economy have dropped.

Reuters:   A Pfizer (PFE) whistleblower made more than $51 million.

Reuters:   YouTube (GOOG) may stream movie rentals from major studios.

Reuters:   Morgan Stanley (MS), Moody’s (MCO), and S&P (MHP) must defend fraud claims involving subprime mortgages.

Reuters:   AIG (AIG) board members are concerned about its CEO’s comments to the media.

Reuters:   BP (BP) made a huge crude discovery in the Gulf of Mexico.

Reuters:   Cerberus will ban withdrawals from its new fund.

Reuters:   Berkshire Hathaway (BRK.A) and Leucadia National (LUK) will buy Capmark Financial Group’s mortgage operations.

WSJ:   Brazilian beef giant JBS is negotiating a $2.5 billion deal for Pilgrim’s Pride.

WSJ:   The WTO is expected to rule that European governments illegally aided Airbus.

WSJ:  “Treasury backed away from a standoff over the independence of the watchdog appointed to scrutinize how last year’s $700 billion financial bailout is being spent.”

WSJ:   The pace of monthly job losses is slowing.

WSJ:   The CFTC and SEC are seeking common ground

WSJ:   GM believe that Opel will get aid from three countries in Europe.

WSJ:   Cisco (CSCO) and EMC (EMC) may form a joint venture capital unit.

WSJ:   Amazon (AMZN) has criticized a legal settlement between Google (GOOG) and book publishers.

WSJ:   Nokia (NOK) will sell a premium-priced netbook.

WSJ:   The WTO will hand Boeing (BA) a win over Airbus.

WSJ:   The former president of Monster (MNST) was sentenced to prison for fraud.

WSJ:   The recovery in housing will be uneven.

WSJ:   Diane Sawyer will succeed Charles Gibson as anchor of ABC News (DIS).

WSJ:   Las Vegas Sands (LVS) raised new capital to help its troubled balance sheet.

WSJ:   GM expects 40% growth in China this year.

WSJ:   Wal-Mart (WMT) will pay some workers with debit cards.

NYT:   Customers of AT&T (T) are angry over the effect the Apple (AAPL) iPhone has on the telecom company’s  network.

NYT:   As older Americans keep jobs, jobs for the young are harder to find.

NYT:   The Administration is proposing larger reserves for banks, which will hurt profits.

FT:   Twenty percent of US shoppers are using coupons.

Bloomberg:   Sony’s (SNE) music player outsold the Apple (AAPL) iPod in Japan last month.

Douglas A. McIntyre

The post Media Digest 9/3/2009 Reuters, WSJ, NYTimes, FT, Bloomberg appeared first on 24/7 Wall St..

Here comes another weekend, and here comes another round of questions about the fate of CIT Group, Inc. (NYSE: CIT).  While there were reports that Warren Buffett via Berkshire Hathaway Inc. (NYSE: BRK-A) and Leucadia National Corp. (NYSE: LUK) may have made offers for some CIT assets, it seems that Buffett is not the right fit.  In fact, he even laid out the case where a bank should own those assets.

As far as the gains for CIT today, these shares are up 15% at $0.85.  But this is more on CIT amending its debt offer for creditors and then on asset sales.  But back to Buffett…

Buffett told Fox Business News this morning that CIT serves a business function but its raw material — money — costs them far too much.  He then noted that the business has to be transferred to someone who has low funding costs.  He also noted CIT has been trying to find cheap funding but has failed to do so.

Buffett thinks that this business should go to essentially who gets government guaranteed money, and he noted how any bank with FDIC funding gets cheaper funds to borrow than Berkshire Hathaway.  He noted how some get money now at 1%, while CIT’s latest funding came around 13%.  As far as the business, Buffett thinks the CIT assets are not the problem, it its liabilities, and those assets need to end up at a place with a lower cost of borrowing.

We have our own take on this, and it we think it is not a Buffett or Berkshire Hathaway solution.  The obvious answer and solution is regional banks and some of the larger community banks that are closer to the bulk of the small and mid-sized CIT customers.  Those are the groups which can can absorb this business, but the issue is that it means there will be dozens or hundreds of lenders that ultimately replace CIT.  Investors love to look for “who wins if this group fails”….  In this case there is no single winner.

We would also go back to a prior notion that still holds true regardless of what Buffett or other might or might not be interested in.  The common stock of CIT Group is effectively nothing more than a long-term warrant on a very troubled company.  There are three alternative NYSE-listed securities, two preferred shares and one equity unit tied to senior notes, that at least give investors a higher spot in the food chain if CIT ends up in bankruptcy.  There is no assurance there will be much value left for them either, but you already know how much value a common shareholder has left after a bankruptcy.  Zero.

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JON C. OGG
JULY 24, 2009

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Jefferies Group, Inc. (NYSE: JEF) has posted some ugly earnings this morning and it has announced a financing package. 

Jefferies posted a net loss of $60.5 million, or -$0.43 EPS on a 52% drop in revenues to $201.2 million.  First Call had estimates of $0.12 EPS on $313.6 million.  We thought maybe that there was a charge or something in the number, but the quote from Jefferies CEO, Richard Handler says it all: "Despite this quarter’s brutal market conditions and disappointing results…."

The company has also announced that Leucadia National Corporation (NYSE: LUK) has entered into a financing pact with the brokerage and investment banking firm.  Under the agreement, Leucadia will purchase 26,585,310 shares of Jefferies’ common stock.  On a fully diluted basis, this translates to a 13.7% stake in Jefferies.

Unless the board of directors approves any sale differently, Leucadia has agreed to hold these shares for two years.  Leucadia will also agree not to take a stake larger than 30% of the broker and investment banker.

On a Pro forma basis for this share sale, Jefferies’ shareholders equity at March 31, 2008
would have been $433.6 million higher with a new reading of approximately $2.16 billion.

Here is where the deal gets interesting.  Jefferies will purchase 10 million shares of common stock in Leucadia in exchange for the 26,585,310 Jefferies shares and $100,021,353 in cash. But Leucadia will register these shares promptly for discretionary resale by Jefferies from time to time.  In the release Jefferies noted that its balance sheet and liquidity are solid, but they wanted to strengthen their balance sheet in light of recent industry events and to take advantage of the many opportunities currently in the market.

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Jefferies stock had already been cut in more than half, but that revenue shortfall is one of the wider ones we have seen from a broker or financial company this earnings season.  If the firm hadn’t announced this financing package, let’s just say this would have been far uglier of a pre-market reaction.

Shares are down over 4% at $14.30 in pre-market trading, and the 52-week trading range is $13.68 to $33.80.

Jon C. Ogg
April 21, 2008

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