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  • A Catalyst For WMI Holdings To Finally Begin Utilizing Their NOLs [View article]
    Answering my own question, the Series B Preferred will convert into 266.7 million shares @ $2.25 per share provided that WMIH trades above that price in the period immediately preceding the conversion. If the stock slumps between now and then, further dilution will occur depending on the 20-day average price.
    Apr 24, 2015. 12:03 PM | Likes Like |Link to Comment
  • A Catalyst For WMI Holdings To Finally Begin Utilizing Their NOLs [View article]
    Interesting idea. Thanks for writing it up. What determines whether the Series B Preferred is converted into 266.7 million shares @ $2.25 per share, as you state is likely, or as many as 342.9 million shares @ $1.75 per share?
    Apr 24, 2015. 10:58 AM | Likes Like |Link to Comment
  • Superior Business Model Gives Costco Competitive Advantage [View article]
    Two corrections:

    When a stock's price goes from $60 to $120, that is a 100% increase, not a 200% increase.

    If an Executive Membership costs $55 more per year than a regular membership ($110 versus $55), a member needs to spend at $2,750 per year ($229 per month) for the 2% rebate to cover the additional membership cost.
    Nov 5, 2014. 12:35 PM | Likes Like |Link to Comment
  • Important Events In Front Of Reading International Q2 Report [View article]
    In light of the red-hot NYC commercial real estate market, is there any reasonable basis on which to estimate the change in value of Cinema 123 since the offer/s that RDI rejected?
    Aug 28, 2014. 11:12 AM | 1 Like Like |Link to Comment
  • Important Events In Front Of Reading International Q2 Report [View article]
    Do you happen to know from whom Mark Cuban and PICO Holdings were able to buy their substantial Class B stakes?
    Aug 7, 2014. 02:20 PM | 1 Like Like |Link to Comment
  • Important Events In Front Of Reading International Q2 Report [View article]
    Another in a series of first-rate analyses and pertinent links that you have posted with respect to Reading. Thank you.
    Aug 6, 2014. 10:34 AM | 1 Like Like |Link to Comment
  • Despite Run, ALJ Regional Holding's Deal Making Offers Continued Upside [View article]
    Thanks for a well-researched and well-reasoned article. I have two questions:

    If ALJJ made such a "home run" with its acquisition of Faneuil, then the seller, controlled by Ronald Perelman, sold the company for far less than it should have. Is this likely? Wouldn't the seller have known more about Faneuil than we outside shareholders do after a couple of quarters? In other words, how confident should one be in extrapolating likely full-year profitability for Faneuil from the 5 1/2 months of operating results from the date of acquisition through the end of the first quarter?

    Secondly and separately, other than betting on an eventual housing recovery in Las Vegas, why do you think that ALJJ bought Carpets 'N More? There are a lot of better businesses in regions of the country that have suffered disproportionately from the housing bust.
    Jul 18, 2014. 06:08 PM | Likes Like |Link to Comment
  • Reading International: Index Fund Selling Presents Unique Liquidity Opportunity [View article]
    Thank you for your prompt and helpful reply.
    Jun 3, 2014. 12:14 AM | Likes Like |Link to Comment
  • Reading International: Index Fund Selling Presents Unique Liquidity Opportunity [View article]
    I would be curious to better understand what you think best explains the decline in the value of the Burwood parcel from the figures cited in your June 25, 2010 post, especially from the net present value estimated by RDI's conservative management at the May 2008 shareholder meeting.
    Jun 1, 2014. 02:32 PM | Likes Like |Link to Comment
  • Preferred Stocks With A Pop [View article]
    Considering that RMR is not publicly traded, you were very nimble "to get out on an upswing."
    Feb 19, 2014. 10:24 AM | Likes Like |Link to Comment
  • Thumbing Through the Daily Journal's 10-K [View article]
    I assume that you've seen DJCO's initial 13-F filing, which confirms your work more than three years ago figuring out the company's stakes in Wells Fargo and U.S. Bancorp. Very nicely done!
    Feb 11, 2014. 11:33 AM | 1 Like Like |Link to Comment
  • Munger's Gambit: The Daily Journal Corporation - Here's What You Need To Know [View article]
    "Currently priced at $125 per share against $97.56 of cash per share and 76.65 of book value- shareholders have the opportunity to purchase this company at a significant discount to its current assets." This is only true if you disregard the company's liabilities. Book value includes cash and cash equivalents, securities owned and ALL other assets minus total liabilities. Your recommendation appears to be based on a false premise.
    Sep 1, 2013. 02:59 PM | 2 Likes Like |Link to Comment
  • A 2-Step Method Identifies Underpriced Preferred Stocks [View article]
    It is naive or misleading to ignore yield-to-call or yield-to-worst just because one never knows for certain when a security will be called. Although I appreciate your point that it can be informative to track preferred yields with the same credit rating over time, I think that you should have provided additional information to your readers with respect to BBT.PB (BB&T Capital Trust VI 9.60% preferred), which you assert is the most undervalued preferred in your article above.

    BBT.PB closed today (May 8th) at 26.09. Because it pays dividends of $2.40 per year, the current yield is a seemingly attractive 9.20%. However, there is little doubt that BB&T, which does not need to pay 9.2% to borrow money, will call this security some time between the first possible opportunity (January 1, 2013) and the first date on which the security goes ex-dividend in 2013 (approximately January 26, 2013). I assume that BB&T will act logically and call the BBT.PB just before January 26, 2013.

    An investor who bought BBT.PB at 26.09 will receive two $0.60 dividends, since the preferred stock will go ex-dividend on or around July 26, 2012 and again on or around October 26, 2012. When the security is called around January 25, 2013, an investor will receive the par value of $25.00. Add in the dividends and an investor will receive $26.20 for each $26.09 he or she invests today. Ignoring transaction costs, that is a return of $0.11 divided by $26.09 or 0.42% for a holding period of approximately eight and one-half months or an annualized return of 0.6%. That is far from the current yield of 9.2% but it is the kind of return one would expect from a reasonably low-risk investment in a bank preferred with this duration.

    In short, the market is not stupid and this (and other) soon-to-be-called bank preferreds that are trading above par should be evaluated on a yield-to-call basis before investing. The only reason to buy BBT.PB is if you want to bet that BB&T will not call the security when it is able to next January. However, before you make that bet, ask yourself what you would do if you were the CFO of BB&T.

    I do not mean to sound overly critical. I appreciate and have benefited from your thoughtful approach and previous articles.
    May 8, 2012. 07:19 PM | Likes Like |Link to Comment
  • Some of Warren Lichtenstein's Favorite Stocks: Unisys, CNO and Nathan's [View article]
    What returns did Steel Partners achieve in 2009 and 2010? Does Steel Partners L.P. trade as a closed-end fund? If so, using what symbol and at what discount to NAV? For that matter, what is the fund's NAV? Does Lichtenstein put out a quarterly or annual letter to his limited partners?
    Jan 31, 2011. 08:47 AM | 2 Likes Like |Link to Comment
  • The Daily Journal: Equity Portfolio and Valuation [View article]
    Thank you for a well-researched and soundly written post. Although your conservatism in valuation is both welcome and appropriate, IMHO you have likely been too conservative in the following respects:

    1) The assumed discount rate of 10% may well be too high in light of current long-term interest rates, the stability of DJCO's revenues and earnings over a long period, the high quality of management and the low leverage employed by the company. Using a discount rate of 7% or 8% leads to a commensurately higher valuation.

    2) Since the future of Sustain remains extremely uncertain, an alternative approach would be to value DJCO based on its operating profits excluding income or losses from Sustain, then add to that figure the value of the company's investments, the book value of the company's investment in Sustain (This assumes that management has taken any necessary writedowns required by impairment of the software development and that future success or failure is unknown at this ttime but that Munger and Salzman do not have a history of spending money unwisely.), and mark up the resulting valuation by the difference between a conservative estimate of the value of DJCO's real estate and its depreciated carrying value.

    3) Whether or not you choose to follow the approach suggested above, I suggest that you discount the tax liabiility for the unrealized capital gains from DJCO's investments to present value. Note, for example, that Wesco Financial, also run by Munger, held Freddie Mac for many years and therefore was able to defer the large tax ultimately paid on its huge capital gain until the company sold its Freddie Mac stake. Therefore, the value to DJCO of having the use of an $11.55 million "tax float" for an indefinite period but, if history is any guide, likely seven to ten years at a minimum, would add another $3 or so to one's valuation of DJCO. All of this, of course, assumes that the stock prices of WFC and USB remain unchanged in perpetuity, which seems highly unlikely.

    Thanks again for a thoughtful analysis of both DJCO and WPO.
    Aug 23, 2010. 03:20 PM | Likes Like |Link to Comment