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« July 2007 | Main | September 2007 »

August 30, 2007

Jim Grant in The New York Times: Keeping the Austrian Tradition Alive

In his post on Jim Grant's recent piece in The New York Times, Jeffrey Tucker of Mises.org writes perceptively:

What I find particularly striking is how Grant manages to write for this venue in a way that makes his analysis have the feel of being very mainstream, though its radicalism is just beneath the surface. Maybe the editors are too ill-read to know what's what or maybe he is just so darn talented that he can manage to pull it off in way that the editors are too impressed to say no. In any case, it is quite a prize for Austrians that the nation's leading newspaper has made an Austrian the official commentator on all issues of financial cycles. They keeping alive a tradition that began with Henry Hazlitt at the NYT and probably don't know it.

Mobius: Buying Stocks

Templeton's Mark Mobius says the global economy is "very healthy," according to Bloomberg. He also is reported as saying that losses from the US subprime mortgage downturn have "almost passed."


"We're pretty bullish,'' Mobius, whose Templeton Emerging Markets Investment Trust has beaten its benchmark over the past five years, said during an interview from Hong Kong. "Markets are probably going to surge ahead to new highs barring any other unforeseen circumstances.''

The fund manager said he has purchased shares of energy companies Sinopec Shanghai Petrochemical Co., PetroChina Co. and Petroleo Brasileiro SA during the market rout of the past month. South African shares and those of Chinese companies traded in Hong Kong are among the most attractive in emerging markets worldwide, he said. Mobius added that U.S. shares are "not very expensive.''

Is Mobius correct? I don't pretend to know and the big picture, top-down stuff is beyond me anyway. (Heck, the bottom-up stuff may be beyond me as well.) But Mobius is worthy of paying attention to -- and I'd rather spend time reading (or hearing) his thoughts than most talking heads.

I'll add that I agree with him that US stocks aren't very expensive as a group. And they're not cheap, either. Most tend to be fairly valued from what I can tell.

August 27, 2007

ArmorGroup in the Washington Post

Like Comcast (CMCSK/NASDAQ), ArmorGroup International (ARG/LN or AMGPF/OTC) is up since being purchased but has come down a bit from its highs.

This article from the Washington Post mentions ArmorGroup in its reporting on British security firms in Iraq. The piece does well in explaining why the Brits are good at handling security in foreign lands, and points out something I've always liked about ArmorGroup: the company is getting business from clients in "extractive" industries (and I think could be -- could be -- a play on any long term commodities boom).

The reporter's first two sentences -- "In the 1990s, there was the dot-com boom. Now, there's the Iraq bubble." -- is dated. The bubble for security firms in Iraq was in 2004. That's when ArmorGroup listed in London and the shares took off. When Iraq didn't pan out to be the easy money the anti-mercenary crowd claimed (and still claim it is) the stock crashed.

I bought ArmorGroup stock because it had a strong balance sheet, and its shares traded just under net tangible asset value. Investors sure didn't see easy money coming from Iraq then (and we shouldn't now).

Like any article on security firms in Iraq, you'll read about Tim Spicer of Aegis (a competitor of ArmorGroup). Spicer's autobiography, An Unorthodox Soldier, is mentioned. The book was written in 1999 and in some ways is dated. After all, it's written before the September 11 terrorist attacks and before Spicer launched Aegis. But in the end of the book he proves to be (IMHO) somewhat prescient about future events.

August 26, 2007

Comcast in Barron's

Comcast has been a nice performer since I first bought it. In fact, I eventually scaled back some of my position. The stock has come down some since then, but I'm still in the black. I own the Special Class A shares -- symbol CMCSK.

Jay Palmer has a positive piece on Comcast in this week's Barron's:

Says Tom Russo, who manages money for Lancaster, Pa.-based Gardner Russo & Gardner: "What excites me is that this company has so much money to spend on its own future. They will have $4 billion to spend between now and 2009 on operations that offer a very high return....The potential is staggering and largely ignored in the stock." But not by his firm, which owns 10 million shares.

August 25, 2007

"Hedge Fund Hit Man"

Some readers called my attention this Bloomberg story about Fairfax Financial (FFH/NYSE) and the legal action swirling around it and various short-sellers. It's a long article. So you might bookmark it for later if you can't read it now.

One item I found interesting is that Spyro Contogouris, the could-be "hedge fund hit man" in the Bloomberg article, has detected what he calls the "Friends of Fairfax" club:

Among the club members, according to Contogouris: Mason Hawkins, chief executive officer of Memphis, Tennessee-based Southeastern Asset Management Inc. Southeastern is Fairfax's largest shareholder, with 21.5 percent of the stock as of June. Lee Harper, a spokeswoman for Southeastern, didn't return telephone calls seeking comment.

The report didn't mention Peter Cundill, but last I heard various Cundill entities own almost as much Fairfax stock as Southeastern. In fact, a Dow Jones wire report on Fairfax sometime back said that Southeastern and Cundill together account for approximately 40% of Fairfax stock.

In posting about this legal action in the past, I've always stressed that I don't know the people involved and that I'm not a lawyer. I have no idea whether or not the legal action has merit.

What I can say and do say is this: I'm content to be a holder of Fairfax stock. And I'm happy to be on the same side of all this as Prem Watsa, Mason Hawkins and Peter Cundill. That and almost two dollars will buy you a grande coffee at my nearest Starbucks, but that's the way it is. :-)

August 24, 2007

Closed-End Fund Bargains

A while back, James Altucher wrote about bargains among closed-end funds in his Financial Times column. Now Thomas Anderson does the same in Kiplinger's. Among the funds he mentions are ones managed by value investors David Dreman and Mark Mobius.

An Investment Who's Who

This list by John Reese has some names known to most everyone, and a few less well known. Regular readers know I'd include John Templeton, Seth Klarman, Meryl Witmer, Peter Cundill, Mason Hawkins & Staley Cates, and Marty Whitman. You probably have some others you'd name.

But hey, that's the fun of anything to do with "lists". All are a bit different -- and that's what makes them fun and interesting.

August 22, 2007

Fairfax Set To Gain From Defaults

Angela Barnes of the Globe and Mail reports on Fairfax Financial (FFH/NYSE) potentially booking big gains on its holdings of credit default swaps (CDS):

Stephen Boland, who follows the Toronto-based firm for CIBC World Markets Inc., said in a recent report that he believes the market value of Fairfax's CDS positions, which soared in July, will continue to increase and that Fairfax could realize an even higher gain through the next quarter as credit conditions in the United States deteriorate.

And Mark Dwelle, an analyst with Ferris Baker Watts Inc., also has suggested that Fairfax could realize some upside from its derivative positions beyond the $23.50 a share he estimates the firm will earn this year.

"It could be a blowout quarter," Mr. MacKinnon said in a report yesterday. "We see lots of potential [earnings per share] upside for Fairfax - nearly $25 per share - if credit default swap spreads hold their current levels through" to the end of September, he added.

If you're a regular reader of Controlled Greed.com -- or just a longtime investor in Fairfax stock -- you know the company's shares are subject to significant price swings. That's because there's relatively little float and a lot of short interest.

And should the analysts prove correct about the company's credit default swaps, we'll see another big swing. To the upside.

Mobius on the Markets

I came across this short interview with Mark Mobius, Templeton's emerging markets guru. Asked if there are any "safe havens" found in emerging markets these days, he answers:

The best strategy here would be to remain diversified rather than pick one or two countries since it would be difficult to know which market will outperform. Thus, maintaining a diversified portfolio will allow an investor to better manage his/her risk levels. Also, value is the key. The best protection is to select companies that are selling at a discount to what they are really worth and companies with good managements capable of realizing the firm's intrinsic value.

That's also good advice for those of us investing mostly in developed markets.

Third Avenue's Wadhwaney: "Great Value" in Japan

Amit Wadhwaney has almost 15% of the Third Avenue International Value Fund invested in Japan, nearly triple the level of two years ago. Bloomberg reports:

"Japan presents great value for us in terms of the kind of things we can buy,'' said Wadhwaney, 53, in a telephone interview on Aug. 8. "We are not seeking to make a fast buck here.''

This bit from the end of the article will strike a chord in regular readers of Controlled Greed.com:

"Our patience allows us to do things that most people never do,'' Wadhwaney said. "We are quite happy to wait for things to turn around over a two- to five-year horizon.''


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