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.
ATP Oil and Gas ( ATPG), once a market favorite, has been hit hard as oil prices have plummeted. The company has a market cap of $110 million, but debt of about $1.3 billion. However, over the last several months the company has announced asset monetization deals and most importantly, the deals have gone through. Proceeds have been used to pay down debt. The company is still run by the founder and insiders own over 20% of the stock. Last week during a company presentation, the company announced that it was seeking out other initiatives to help maximize the value of the company's assets. Several days later, the company announced a $150 partnership deal with a unit of General Electric ( GE). Yesterday
Mar. 2, the company announced it had earned $3.34 per share in 2008. The company replaced 214% of its 2008 production, an impressive metric by any standard in the oil industry. The market can't seem to get over the debt, but the biggest portion, $1.04 billion, is not due until 2014. The company is in fine shape to meet all debt covenants for 2009. Insiders haven't been selling at all and with 20% insider ownerships, the executives are behaving just as they should be -- like shareholders. Each share of stock today represents over seven barrels of proved and probable oil reserves. Finally, Goldman Sachs ( GS) has weathered the storm exceedingly well relative to peers. If we are going to blame the top brass at Citigroup ( C) and Bank of America ( BAC) for the disasters those banks are facing, then it's only fair to give Lloyd Blankenfien some credit for steering Goldman away from complete meltdown. It's been the only financial to raise outside capital from Warren Buffett. While book value has been a trap for the financial industry, Goldman's appears more solid than the rest. Even though it is now a bank holding company, Goldman uses mark-to-market to value its holdings and the valuations currently applied reflect the grave fears in the marketplace today.
According to a Fortune piece, a 10% bounce in Goldman's most "opaque" assets would shoot book value up to $102 vs. a stock price of $88 today. And several years down the road, if Goldman continues to grow its business at the expense of the fallen, it could easily again become the darling of the financial sector. Also, Goldman has indicated that it is very interested in paying back the government TARP money it has received. I doubt a company would consider making such a statement during this credit crunch if it wasn't comfortable with its capital position. This market is not for the faint of heart. Now more than ever, able and competent management must lead their respective company's out of this crisis. But the company must also be sound, because even a great jockey can't ride a dead horse. Please note that due to factors including low market capitalization and/or insufficient public float, we consider ATP to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices. This was originally published on RealMoney on Mar. 3, 2009. For more information about subscribing to RealMoney, please click here.