Bill Herbert

Leucadia Sees Huge Increase in Book Value

I currently own a small position in LUK.

I view it as a good field bet on several industries at this price. Both JEF and ACF have done nicely, despite the tough economy. And their mining interests are undervalued, IMO.

They also have been punished due to the writedown of the tax loss CFs at the end of last year. This may reverse by early next year, at least in part. These things are almost always misread by investors, who see a big negative earnings number and conclude that there is some horrible problem with the company, when in fact it's just a forced accounting adjustment per FASB.

That said, they just came off a pretty bad year (and they have lots of company) in terms of actual performance, disregarding accounting adjustments. One thing though - the LUK management team is very seasoned and straightforward, a rarity in corporate America. They always publish a really detailed annual letter that "tells it like it is" and doesn't sugar-coat blunders or disappointing investments.

Check the website, and read the past letters - they are very good, and will show you that this is not a lightweight team, or just a bunch of gamblers with OPM. They eat their own cooking in a very big way, just like Buffett.

I am holding this for another 10% or so, and then will write some covered calls once the stock reaches about 25, which it should get to easily in the next month or so. If it gets called away, I have about a 40% gain in short order - if not, I just write calls on it until it does get called away.