Lamar Advertising (LAMR) is an outdoor advertising company with a large network of billboards (over 150,000). Fear that LAMR may default on its senior credit facility or may be unable to meet its obligation on its converts maturing 12/31/10 pushed down the prices of all of the company’s securities. This fear drove LAMR’s equity value down over 50% in 4Q08 while its senior subs and converts began trading in the high-60s to low-70s. The fear of default reached a high point during 4Q08 and the company felt compelled to include a supplemental indebtedness schedule in its press release for 3Q08 results to address a “certain amount of misunderstanding and misinterpretation with [LAMR's] credit agreements and [its] outstanding debt.”

As described on the 3Q earnings call, “There are three common misunderstandings in the investment community.” Two of these market misunderstandings pertain to whether the company will violate the debt-to-EBITDA covenant in the credit agreement controlling the senior credit facility (the “Credit Agreement”) and whether LAMR will be able to pay its debts as they come due. In the past month, a series of corporate events have transpired that support a scenario that could prove favorable to equity: LAMR survived any violation of the debt-to-EBITDA covenant and is able to pay off the converts, its nearest maturity debt obligations.

One of the interesting microcap ideas presented at the Value Investing Congress West in May was Canada-based Photochannel Networks, whose business is providing online digital photography solutions for retailers.  If you’ve ever electronically sent photos to a retail store for pick up, you may have used Photochannel technology.

Mohnish Pabrai- Pabrai Funds

Ken Shubin Stein, of Spencer Capital, laid out his philosophy, which includes:
• Looking for asymmetric payoffs (limited downside, with much upside)
• Bottom-up fundamental analysis
• A “scientific” research process
• Belief that volatility is the key to successful long term investing

Zeke Ashton, of Centaur Capital, opened with some observations of some of the things that we, as value investors, think we should not do. Among them:

The 3rd annual Value Investing Congress West kicked off Tuesday with an introduction from co-founder John L. Schwartz, MD. Each presenter discussed their investment philosophy, addressed current market issues, and then highlighted specific investment ideas.

From the Advanced Seminar on Value Investing, conducted by T2 Partners' Whitney Tilson and Glenn Tongue:

Noven Pharmaceuticals (Nasdaq: NOVN) recently made significant changes to its board of directors and senior management. The company hired a new CFO, accepted the resignation of its long time Chairman and CEO Robert C. Strauss, and appointed Wayne P. Yetter as its new Chairman. We applaud these actions and believe a tremendous amount of value will come from the changes.

Communicate.com (CMNN.OB) is a completely undiscovered e-commerce company whose assets are conservatively worth 50% more than the current market cap (and might be worth much more over the next 2-3 years). Given the size of the opportunities on the company’s plate, the talented new management team which has a proven track record for execution in the space, and the value of its assets we feel that it is currently the best risk/reward idea we own.

Larry Robbins of Glenview Capital gave a humorous and information-packed presentation. He said that there are two ways to make money: earnings growth or multiples growth. He said that for the first time he’s backing down from his usual aggressive style and cautioning investors not to bet on earnings growth.

Wow, some big developments that make me think MBIA (MBI) could be a zero even faster than I thought.

Steak N Shake (SNS) has 28,469,808 shares outstanding. The shares trade near a 52-week and multi-year (April 2003) low . On the most recent conference call, management acknowledged, “we have not been field focused for several years.”

What strikes me the most about the recent credit market crisis is how fast the world is trying to go hack to business as usual. In my view, the crisis wasn’t an accident. We didn’t get unlucky. The crisis came because there have been a lot of bad practices and a lot of bad ideas. Securitization is a mediocre idea. Re-securitization of already securitized assets into a CDO is a bad idea. Re-securitization of CDOs into CDO-squared is a really bad idea. So is funding a pool of long-term illiquid assets with very short-term funding in the so called asset backed commercial paper market. And as I will get to in a moment, it is a horrendous idea to delegate most of the responsibility for assessing credit risk to a group of credit rating agencies paid for by the issuers rather than the buyers of bonds.