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« May 2007 | Main | July 2007 »

June 30, 2007

Ontario Teachers Group Buys BCE

BCE Inc. (BCE/NYSE) announced today it agreed to be acquired by the investment arm of Ontario Teachers' Pension Plan, Providence Equity Partners and Madison Dearborn Partners, for $48.82 billion in cash.

Reports are that this is the biggest buyout in Canada's history and the telecommunications industry globally.

Under the deal, BCE's shares will be purchased for C$42.75 or $40.15, a 40% premium over the average first-quarter share price before it rose in late March amid rumors of a buyout. BCE was recommended on Controlled Greed.com in August 2006 at $23.01. This position stands to gain more than 75.5%, not including dividends, when the deal is completed.

I particularly like that the deal is for cash, instead of those messy cash-and-stock transactions.

You can read the Bloomberg report of the deal here.

CORRECTION: I forgot to factor in that I sold 25% of BCE at $36.31 in May. So anyone following this blog's moves stands to see the position gain 70.3%, non including dividends, when the deal is completed.

June 29, 2007

Barron's Online Interview with Greg Maffei

When portfolio holding Liberty Media spun itself into two tracking stocks (Liberty Capital and Liberty Interactive) I held both and consider them a single position in the portfolio. They've done well, and Barron's Online interviews Greg Maffei, Liberty Capital CEO.

An interesting bit from Maffei:

One of our investors said, you've reduced line items but there's still too many lines of business or partial investments. [T]here's more to be done. We do trade at a significant discount to net asset value by most third parties' reckoning. Most people think the discount arises from three sources.

One is a holding company discount that goes back to having too many line items and assets that are passive. Second is a tax discount, the assumption that we won't be able to get out of positions efficiently. And third, some people have talked about a tracker discount. I think the last is the smallest and most explainable over time. And we hopefully will continue to work on tax-efficiently getting out of positions and getting greater focus around things like DirecTV.

Emerging Market Stocks

Joe Kennedy famously quipped that he knew it was time to sell stocks when shoe-shine boys offered him stock tips.

Michael Sesit gets at the same sentiment in his today's Bloomberg column:

Hartnett relates a recent television commercial in which an 11-year-old recommends investing in hedge funds and a 9-year-old suggests emerging markets. Hartnett said to his wife: "What the hell does that mean? I'm an emerging-market bull.'' She replied: "It means you've got one more year.''

"My gut tells me she's probably right,'' Hartnett says. "Whenever an asset class becomes part of the mainstream conversation, you know the easy money has been made.''

UAW to Block GM Recovery?

I doubt it, though Bloomberg's Doron Levin makes some excellent points in his latest column.

But I am certain the UAW won't commit suicide over General Motors (GM/NYSE). The momentum is against them on this and the union leadership realizes this. So does the membership, which was evidenced when more GM workers than expected took advantage of buyouts some months ago.

The recent deal between the UAW and Delphi is the big move in this trend, of course (and the cause of the recent rise in GM's stock price). Yet my hunch is that the UAW is appreciative of Rick Wagoner -- and especially appreciative of his efforts staving off Carlos Ghosn coming on board.

If Ghosn gained power inside GM's boardroom, the company would have been much more ruthless in working with the union. The UAW knows this -- despite any public posturing that might appear in the lead up to negotiations later this year.

Okay, so I believe the union won't derail GM's recovery. What could?

Well, if we see a recession or market meltdown in the coming months, we could see the stock price suffer.

But then I'd hold the stock until the cycle turned again and the GM turnaround continues. I'm patient and, besides, GM ain't going nowhere.

Or, I should say GM ain't going away.

June 26, 2007

BCE: And Then There Were Three

Portfolio holding BCE Inc. (BCE/NYSE) has officially attracted three bids from investment groups that include Kohlberg Kravis Roberts and Cerberus Capital Management, in what may be Canada's biggest takeover.

But with Onex and Telus withdrawing from the bidding process, the chances of an all-out bidding war are reduced. By how much? Well, like everything else associated with value investing, time will tell.

Read the linked Bloomberg report, and you'll see that some believe BCE has been clumsy in the bidding process. Among the complaints is that not enough time has been given potential bidders, especially considering how big a company BCE is. So the possibility exists more time could be given, but with three players making offers I don't know how great the chances of that are.

We were fortunte to buy BCE at a good price -- US$23.01 per share -- last year. That should provide downside protection regardless of how tame this war proves to be.

Fairfax Financial Adds Chanos to Suit

Portfolio holding Fairfax Financial (FFH/NYSE) has added James Chanos to the list of defendants in its private lawsuit against short-sellers. The Financial Times reports (free link via MSN Money):

In an amended complaint filed late last week, Fairfax alleged that Mr Chanos's hedge fund, Kynikos Assoc, was part of a group of funds that used underhanded tactics to drive down its share price. The Securities and Exchange Commission has been looking into Fairfax's allegations.

The amended complaint includes statements from Spyro Contogouris, the operative allegedly at the heart of the campaign against the Canadian insurer, saying Mr Chanos employed him as a consultant. Mr Contogouris was indicted by a federal grand jury in March on four counts of wire fraud that are not related to the Fairfax case.

Mr Chanos said he had not yet read the complaint and therefore could not comment.

Regular readers know I am long Fairfax Financial. And that I have been dismissive of Chanos declaring Fairfax to be "a zero" -- especially when one of his supportive points in making that claim was that Prem Watsa has been referred to as the "Warren Buffett of Canada."

I further remind readers that I am not a lawyer and have no idea whether or not Fairfax's suit has merit. Though it surely looks like some folks were up to lots of sleazy activities. Whether or not these activities are illegal is the question we'll eventually see answered.

June 25, 2007

General Motors

With recent developments concerning the UAW-Delphi, General Motors (GM/NYSE) stock has been doing well.

I almost hate posting about that. Because, just like American football is a game of four quarters, value investing is a game lasting up to five years. And my GM investment is "new" enough to still blow the game in the 3rd or 4th quarter and leave me a loser.

Also, I first recommended GM stock on Controlled Greed.com at $26.75 per share in April 2005. But long time readers will recall me saying that I personally first bought the stock at $37 before launching this blog, so my personal average cost is in the low $30s. And every time I've noticed it getting higher than that something happens to send it back lower. ;-)

Let's hope that won't be the case this time.

Dragging the Kingdom into the 21st Century

Helen Power of the Sunday Telegraph profiles Prince Alwaleed of Saudi Arabia. I groan that some apparently call him the "Saudi Buffett" -- but that's probably the work of journalists trying to come up with a "hook" for their stories, and not HRH.

Much of the piece deals with the Prince floating his Kingdom Holding on the Riyadh stock exchange:

Insiders say his desire to drag the kingdom into the 21st century is the main driver for the Riyadh float, which is expected to give a big boost to the struggling local stock market. "He's really trying to take Saudi Arabia forward in the business sense. There's quite a lot of resistance and he's got his work cut out. There is a set of entrenched and conflicting interests in the kingdom," says one source.

Another interesting bit, proving just how important one good idea can be:

The Prince has many admirers. "He's clearly very smart and very driven. He's always been someone who is in a hurry and he's always recognised good opportunities," says one. But most of his fortune comes from just a single investment - his stake in Citi, bought in the early 1990s.

And as one source close to the prince says: "He could continue to earn money for the rest of his life and it wouldn't account for more than he earned from that [the Citi] investment."

June 22, 2007

David Webb

I first came across Hong Kong-based David Webb in Barron's some years back. The Spectator has a feature piece on the former investment banker/current shareholder rights crusader:

Yet despite taking on these powerful interests, Webb has not only survived but thrived. His investigations sometimes make him money: he’s a very astute stock-picker. A local fund manager calls him ‘Hong Kong’s pressure valve.... Without him this place would be even more of a banana republic.’ A more sober appraisal is provided by a senior figure in Hong Kong’s financial community with government links, who admits that while Webb complains a lot, ‘he usually has a good point. To be honest, Hong Kong could do with a few more David Webbs.’

You might check out his Webb-Site.com commentary. It's focused on the Honk Kong market -- but has plenty of interesting stuff even for those of us residing outside the former British colony.

June 21, 2007

Thanks, Geoff

Geoff Gannon at Gannon On Investing has posted The Eight Best Investing Blogs -- and this one makes the cut.

I find that particularly gratifying for two reasons.

First, because Geoff writes one of the best blogs around himself and his opinion matters.

Second, because his thoughts on this blog are spot-on. He "gets it", in other words:

This one, like a lot of my favorite blogs, is a little idiosyncratic – but that's what a blog is supposed to be, right? John writes a lot about the stocks in his portfolio. He also mentions articles that interest him. These articles might discuss a specific stock, a specific country, or a specific money manager. John's posts are short and insightful. He doesn't feel compelled to comment on the big stories of the day if he doesn't have anything insightful to say about them. I think that's a good attitude to have in an online environment that often seems to be nothing but a sea of echoes.

Be sure to visit Gannon On Investing to read Geoff's thoughts on the other seven blogs.

And you might want to read the 20 Questions interview I did with Geoff earlier this year.


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