Are there other Buffett type opportunities?

[Sniper]

excerpt from a newsletter earlier this month...
(Cat, I thought you'd find this interesting)


LOOKING AT THE MINI-BERKSHIRE HATHAWAYS

There is no shortage of companies compared to BERKSHIRE HATHAWAY (BRK-B, $2,856.00, +22.00). Sometimes companies are deemed "mini-Berkshires" because they follow a similar tactic of assembling a wide variety of companies under one umbrella; sometimes they have a track record that is in the same stratosphere as Buffett's; and sometimes they are headed by well-regarded CEOs with a penchant for finding value in unloved stocks.

In all the examples at which we've looked, those being compared to Warren Buffett's company have fallen well short of the original. In some cases, those making the comparison are being too generous putting their candidate in the same category as Berkshire. Ed Lampert, who bought Kmart and turned it into SEARS HOLDING (SHLD, $122.87, +4.60), has been compared to Buffett for his investing style. Not to diminish what Mr. Lampert has accomplished, but he's no Warren Buffett, as the retail foray shows.

But just because a comparison to Berkshire (and/or Buffett) might be misplaced, that doesn't mean the companies can't be worthwhile investment opportunities. In August, we looked at DOVER (DOV, $39.24, +0.64), a well-run conglomerate we likened more to TYCO INTERNATIONAL (TYC, $26.20, +0.15) than Berkshire. Recently, a couple of other companies have caught our attention.

One is CENDANT (CD, $18.04, +0.73), where the strategy of combining travel businesses with hotels and the Avis car rental brand didn't work. The recently announced plan to split the company went over even worse, bringing the stock to lows not seen since 2003. Today's Cendant is up thanks to reinvigorated views that the split-up companies are worth far more than current market value. If market value was to move in line with Cendant's enterprise value, for instance, there could be as much as 18% upside from here. Whether it deserves to be valued like this is what demands further investigation.

LEUCADIA NATIONAL (LUK, $43.84, +0.89) is another company that's been compared to Berkshire, partly because of its long history of value investing and its impressive record. But where the two firms differ (besides size) is that Leucadia is more focused on finding beaten-up companies and then selling them, whereas Berkshire typically keeps them in the fold.

Leucadia popped up on our radar this week after announcing that it sold WiTel Communications to LEVEL 3 COMMUNICATIONS (LVLT, $2.77, unch.) for $680 million in cash and stock. WiTel was weighed heavily on Leucadia this spring when WiTel's biggest customer -- SBC COMMUNICATIONS (SBC, $23.91, +0.13) -- announced it would buy AT&T, (T, $19.83, +0.11), a move that will see AT&T take over much of the work WiTel now does for SBC. Leucadia began its comeback in May, and has now made up nearly all of its lost ground.

Leucadia's success will hinge on its ability to find value and make deals that it can turn into big returns. Like Buffett, the firm's managers are having a tough time finding worthwhile investments. But with an impressive double-digit annualized gain from 1978-2004, you have to believe that the firm has seen it all and that it will find a way to put its $1.5 billion to work in this market. This is an idea that deserves a closer look.

[buffett]

Those LUK guys are freakin' smart.

The Canadian company Fairfax Holdings is a BRK-like company, though it is cause for much debate in the value community. Mohnish Pabrai et al. thinks it's a great long, but Whitney Tilson et al. thinks it's a short.

[DesertCat]

I was looking at Leucadia right after they announced the deal. I really like the company, but can't get comfortable with a valuation model for them. They are probably too big for me to earn outsize returns. Of course now that I've written that they'll probably go up 10x over the next three years

A similar company I was looking at this week is FirstCity Financial. Waco based co. buys distressed debt at huge discounts. Management team has been doing it since before the S&L meltdown. Love the company, love the idea, can't value it. The closest I can come to a mental model is to say it's book value growth play. Today you are buying it at 1.3x book in hopes they continue to grow at 15% a year. But unless a lightning bolt hits me, it's another pass. If they were growing book 25%+ a year, then it would be more interesting.