WWII 053: Michael F. Price the Consummate Value Investor, How to Withdraw Money from an Inherited IRA, Activists at $VRX
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Main Topic: Michael Price the Consummate Value Investor
This episode is about Michael F. Price, the guy I call the Consummate Value Investor. Michael started his career in finance in 1975 as a research assistant at Heine Securities. By 1988 he was the sole owner of the company. An expert value investor, Price increased the value of the mutual funds he managed to more than $17 billion before selling Heine Securities to Franklin Securities for $670 million in 1996.
Michael Price now runs MFP Investors, a New York-based hedge fund.
Seth Klarman counts Michael Price as one of his mentors.
For example, Price would consider purchasing a stock which is trading at 5x EBIDTA if he observes that a very similar company was bought for 10x EBITDA. He also carefully learns about the management of the company and determines whether they act on behalf of the interest of the shareholders without putting their personal motives first. Price further stresses the importance of determining the value of each segment of the company as separate entities. In short, Price evaluates a company by how much it would be worth if someone wanted to buy it today.
In accordance to his investment philosophy, Michael Price buys stocks of companies which are in trouble and selling their shares 30% to 40% below their estimated intrinsic value.
Here are some things I learned studying his 13F top 30 holdings:
Around 130 positions, consolidated. Widely diversified. Spot some spin-offs in the group: Crimson Wine Group spun off from Leucadia, and Keysight Technologies-spun off of Agilent Technologies.
Reduced BMC, Dolby Labs, Kearny Financial Corp, Boston Scientific Corp, Ally Financial, Heritage Oaks Bancorp,
Buying Intel Corp, Teva Pharma, Westlake Chemical Corp, Franklin Resources, Continental Resources, Crimson Wine Group, Keysight Technologies.
New positions since February last year, Taubman Centers, Inc., Cabela’s – merger arbitrage, Regions Financial Corp, Whitewave Foods, Arconic, Inc., KLX, Inc., Chubb Limited.
Disclosure: At the time this is released, I have a long position in Leucadia National
Ask JB: Why did General Motors stock decrease when it was announced they sold Opel for $2.2 billion?
JB Says: May have already been priced into the stock before the day of the sale. Another reason is that GM is actually paying Peugeot to take Open off its hands.
--GM ascribes $700mm in value to the PSA warrants received in the deal, but while those warrants (strike price: €1) have economic value, since they aren't exercisable for five years they have zero cash flow value.
--GM is contributing $3.2 billion to the pension funds that will be transferred to PSA in the deal. GM’s presentation notes a $0.4 billion “net”contribution, owing to the fact that the assets GM is transferring have a value of $2.8 billion. That value is meaningless to my cash valuation, however, so the relevant figure is (-$3.2 billion) not (-$0.4 billion).
--Opel’s financial services company is making a pre-closing dividend payment to GM Financial of $0.5 billion.
--GM Europe is incurring an additional $0.4 billion in debt to complete the transaction.
So plus 900 minus 3,200, plus 500, minus 400 equals (2.2B) outflow for GM.
So, the $2.2 billion reported positive value netted out from those four puts/takes actually amounts to a $2.2 billion initial cash outflow for GM.
submitted by menastreaker