This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bet on the Horse and the Jockey

Editor's note: This was originally published on RealMoney. It is being republished as a bonus for TheStreet.com readers. To subscribe to RealMoney, click here.



One has to wonder if valuations really matter anymore. Mr. Market doesn't seem to care about whether a stock is trading at a P/E of 10, 7 or 4. If earnings continue to drop off a cliff, a price to earnings ratio doesn't do investors any good at all.

Yet fundamentals do ultimately matter. A company that can navigate through this environment with a lean operating structure and a strong balance sheet has a very good shot of surviving the storm. And as businesses shut down due to the difficult economy, those that endure could find themselves among a handful of participants in a particular industry.

However, fundamentals alone should no longer be enough for investors. Now more than ever, investors need to focus on the jockey steering the horse. This combination offers the greatest probability of not only getting through this economic catastrophe, but also a high chance of future stock price recovery.

Leucadia (LUK) is a quality horse and jockey bet. Chairman Ian Cumming owns nearly 10% of the shares. I wrote about Leucadia last week when shares were trading in the $13 to $14 range. Today the shares trade around $12 and not much has changed. The company reported a huge 2008 loss but that was due primarily to income tax expense. The company's mark-to-market losses on its securities were large, but that was expected given the market selloff.

But the company trades at a significant discount to the value of its assets even at today's prices. And the company has announced that it is now authorized to retire the company's outstanding indebtedness when management deems appropriate.

It's also interesting to note that some of Leucadia's biggest investments, iron ore miner Fortescue and farming company Cresud (CRESY), are commodity-related. These are the types of businesses you want to own when the dollars that our government is pumping out begin to have an inflationary effect.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs