Sunday, January 07, 2007

January Trades

Jan 9 2007
Buy 220 Muller Water Products (NYSE: MWA-B) $13.80

Friday, January 05, 2007

December Update

For the month of November, the portfolio was up 1.0% vs. S&P 500’s 1.4% increase.

December turned out to be an active month. We sold our position in Harrah's (NYSE: HET) which finally accepted a winning bid of $90. The trade resulted in an annualized return of about 30%. Not bad. We also took the opportunity to sell our position in Posco (NYSE: PKX) which had a great run. We maintained our exposure to the steel sector through Mittal (NYSE: MT) and Chaparral (Nasdaq: CHAP).

Our patience with Comcast (Nasdaq: CMCSA) is finally starting to pay off. The company is starting to fire on all cylinders and the cash machine should continue to hum. We are holding on to the rest of our position for now.

These trades raised enough cash for us to be able to increase our position in Intel (Nasdaq: INTC) which had drifted lower to attractive levels. We also increased our position in Western Union (NYSE: WU).

There are two new additions to the portfolio. We have been watching Leucadia National (NYSE: LUK) for some time. Ian Cumming's reputation speaks for itself. He is currently sitting on a sizable cash position. Plus, there are the billions in net operating losses which can be used to offset gains. Granted, they will eventually expire, but I am willing to give Cumming the benefit of doubt. I encourage you to read his letters to shareholders which are posted on Leucadia's web site. This is not unlike our investment in Eddie Lampert and Warren Buffett. Notice the stock is not followed by Wall Street. Just like we prefer.

The second newcomer is Expeditors International of Washington (Nasdaq: EXPD). As the year was winding down, transportation stocks were coming under pressure. In the low 40's, Expeditor seemed too good to pass on. It is about 28% below its recent peak. At first glance the stock may appear expensive. Even at these levels it commands a hefty forward P/E. But consider that this company is very well run, has consistently delivered stellar results and boasts fantastic return on capital. In the latest quarter, revenues grew by 20% while profits increased by 32%. It is a debt free, asset-light business which will do just fine even in a slowing economy. Furthermore, it's a nice way to play the globalization and outsourcing trends. Once again, I encourage you to browse the company's annual report, and if that is too boring, at least read the letter to shareholders to get a feel for the kind of company and management you are investing in. It is not every day that you see management and rank and file employees all contributing and financially benefiting from the profitable growth of their company. One more data point. A couple of days ago one of Expeditors' competitors, EGL Inc. (Nasdaq: EAGL), received a buy-out offer from its CEO (and largest shareholder) at a 27% premium to the stock price.