Feels Lousy, Sounds Frightening, but It's a Buying Opportunity

NEW YORK (TheStreet) -- "If you are in the investment business and have an I.Q. of 150, sell 30 points to someone else. What you need instead is an emotional stability and inner peace about your decisions," Warren Buffett opined at a Berkshire Hathaway shareholders' meeting in 2010.

Inner peace and emotional stability appeared to be in short supply on Wall Street the last couple of sessions. The keynote-of-the-day is more of the fiscal cliff paranoia that's taking the media by storm. This seems strangely familiar to me and smacks of all the fretting over the "debt ceiling" last year and the fallout from The Great Recession in 2010.

If you don't know what the fiscal cliff is all about then count yourself fortunate. All I can say is it's a perfect set-up for a really great stock market holiday sale-a-thon. If you've been faithful with your trailing stop orders you're likely to have the cash to do what every investors longs to do -- buy low!

If you're a bit squeamish about all this trauma-drama, why not look at a company that's been compared to Warren Buffett's Berkshire Hathaway ( BRK-A) yet doesn't cost more than $128,000-per-share.

Have you ever heard of Leucadia National ( LUK) which is a well-diversified holding company? How diversified? I was hoping you'd inquire.

LUK owns businesses that engage in beef processing, manufacturing, land based contract oil and gas drilling, gaming entertainment, real estate activities, medical product development and winery operations in the U.S. and internationally.

The company is also involved in remanufacturing, manufacturing, and/or distributing dimension lumber, home center boards for retailers, pine decking and other specialty wood products. LUK also has a stake in the manufacturing and marketing of lightweight plastic netting used in building and construction, erosion control, packaging, agricultural, carpet padding, filtration and consumer products.

LUK will directly benefit from the mega-billion dollar reconstruction efforts that are coming as a result of the horrendous destruction caused by Hurricane Sandy. Everyone seems to forget that between the insurance payouts and the federal government, there's going to be a post-destruction economic boom.

Its land based contract oil and gas drilling operations means LUK's holdings provide drilling services through 26 drilling rigs to independent oil and natural gas exploration and production companies in the mid-continent region of the U.S. That's an ongoing contractual source of revenue.

On top of all that, it agreed to purchase the rest of the shares of Jefferies Group ( JEF) that it doesn't already own. Now LUK will completely control a multi-billion dollar financial firm that operates as a securities and investment banking company in the Americas, Europe, and Asia.

The question might be asked, "Who'll be controlling who?" Even if the question doesn't make a lot of sense, it's interesting to note that JEF's Chairman and CEO Richard B. Handler will become the CEO of Leucadia after the deal closes in the first quarter of 2013. LUK CEO Ian Cummings will retire.

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Handler, who currently owns nearly 15 million shares of JEF, benefited immediately from LUK's buyout since the shares of JEF popped around 14%. In all fairness to Handler, JEF's shares had fallen nearly 30% from its 52-week high of $19.82, so he's just getting closer to even.

JEF is a profitable company with an almost 16% operating margin trailing 12 months and its revenue increased an impressive 60% as of their last quarter. They report earnings Dec.18. LUK is buying a financial services company that's selling right around book value and has more than $82 a share in cash.

The best way to learn more about Leucadia National is to drill down in its very simple, unremarkable web site.They're an opportunistic company that is currently selling below book value. Last quarter they figured out a way to report year-over-year revenue growth of an unbelievable 995%. I'm sure there's a delightful explanation.

The chart illustrates LUK's share price over the past 5 years. It includes a comparison to the company's price-to-book value ratio which is well below 1. LUK Price / Book Value Chart LUK Price / Book Value data by YCharts

LUK's share price is down more than 30% from its 52-week high of $29.79, and trades closer to its 52-week low. It pays shareholders a relatively small 25 cents a share annual dividend, a payout ratio of only 12%. Clearly it was saving its $1.16 billion in total cash for the JEF deal.

Since JEF pays its shareholders a 30 cents a share dividend, it may not be overly optimistic to anticipate a dividend increase for LUK's shareholders.

Keep in mind that Handler has ruled JEF for 11 years, and considering stock splits the value of its shares have increased almost 140% under his leadership. LUK has been purchasing JEF shares since 2008.

From numerous perspectives the buyout of JEF bodes well for LUK shareholders. The more cautious approach to accumulating LUK shares is to buy some now that the news is on the table and the stock market is in a swoon.

Then as the benefits or liabilities of the JEF deal become more apparent, consider another helping. Proceed with plenty of due diligence and consider that LUK's value is most likely greater than the sum of its many parts.

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At the time of publication the author held no positions in any of the stocks mentioned. Make smarter trading decisions and provide investment ideas that could help make you richer. Bryan Ashenberg does the dirty work so you don't have to.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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