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 is a link to the 13F for Michael Price for Q4 2016

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

If you really [want] to find value, you [must] do original work, digging through stuff no one else [wants] to look at. …The really important thing is to eliminate the Wall Street consensus, the Wall Street research. You need to understand where the company is in the world and what the competition is for the products, whether the products are any good, and whether or not the company has any pricing power or barriers to entry. … Think about the business, think about what you see without any input from Wall Street, do [your own] primary research.”
Michael Price
UI/UX Designer

Ask JB: Why did General Motors stock decrease when it was announced they sold Opel for $2.2 billion?

: [–]Lexlex_le_tirex 2 points 1 day ago

General Motors (GM) just sold Opel for $2.3 billion but their stocks went down by approximately 2%. What's happening? I thought they were supposed to go up

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.


Ask JB: I have recieved an inheritance IRA from my uncle when he passed away. I would like to close the account and take the cash out, but I'm not sure how. (self.personalfinance)

submitted by menastreaker

Hello everyone, thank you for taking the time to help me with this.

My uncle passed away last April and when he passed he left me with an inheritance IRA. The account used to have stock in it, but the company was bought out and all the shares have been turned into cash. I would like to take all the money out and close the account, but I'm unsure how to do that. Any help would be greatly appreciated!

Idk if it's relevant information, but the IRA is through Scottrade.

JB Says: You can go on Scottrade's website to find the form to request a distribution, or walk in to a Scottrade branch office and a professional will help you through the process. Keep in mind the Inherited IRA distributions will be taxable income to you, and may end up pushing you into a higher tax bracket. You will have multiple options to choose from depending on how soon you need the money, and how much.

Do you have a burning question on investing you would like answered? Click the button below to send it to me and I will answer it on the podcast!

Activist Investor Action Alert:

ValueAct Capital ups its stake in Valeant Pharmaceuticals ($VRX)

This first article is about a sale of almost a billion dollars worth of stock in Valeant by ValueAct in 2015


This next article is about how ValueAct is now increasing its position in Valeant, after the value of its original position falling from three billion dollars to about three hundred million.


Thoughts on this podcast? Disagree with me on some point? Something I missed? Leave a comment!

About the Author

Jeremy Scott Bailey is an investor, author, entrepreneur and host of the "What Works In Investing?" podcast now available on iTunes. He is founder and Chief Investment Officer of Burgeón Group, Inc. an investment advisory firm that provides portfolio management services to families and individuals.

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