The CEO of Jefferies Group, Richard Handler sold 2 million of his shares to Leucadia National Corporation (LUK). This is not that particularly noteworthy but it does illustrate the sort of advantage a firm like Leucadia has. Although the price looks around market price and anyone could have bought JEF shares in the public market, it is firms like LUK that often gets a call on deals when there is size to be offered.
Of course this sort of thing happens all the time between broker-dealers and mutual funds and other institutional investors.
But the difference is that people do know that LUK is a very smart, long term investor and not subject to the ups and downs of the market (like mutual funds and hedge funds that are whipsawed by redemptions etc...) so are very reliable investors.
The kind of calls that LUK gets, presumably on a daily basis, on deals and investment ideas will tend to be high quality ideas as compared to what a typical mutual fund manager might get.
This is also true of Berkshire Hathaway, of course. If you look at the history of their acquisitions, they have done deals that would have not come to any individual investor or even a large mutual fund or other institutional investor. This means they get a great opportunity at a very good price. For example, look at their most recent Bank of America deal. It is an incredibly attractive deal compared to what is available to the rest of us. BRK has done similar deals with GE, GS and others.
This is why it is such a great opportunity to be able to buy into organizations like this at book value or less: You don't just get the current collection of businesses at fair value, but you get all the future deals that come too and you have the smartest guys on the planet making the decisions. What's not to like about that?
You can also make the same argument about JPM and GS, which I have posted about recently. These guys will also get 'first look' or early looks into potential deals. JPM's purchase of Washington Mutual and Bear Stearns may not have been as good as it looked at first, but they were deals that only JPM could have closed. There will be more in the future.
GS too, gets to invest in all sorts of opportunities that most people will never get a chance to look at. I think they even own a stake in Facebook, for example.
Sometimes people lament the fact that they don't have any more cash to buy stocks to take advantage when the markets go wild like it is now. It is important to remember, though, that if an investor is 'fully' invested, that doesn't mean that the companies they own are.
LUK has more than a billion of cash and short term investments on it's balance sheet. GS has been pretty conservative in the past year or so in terms of using the balance sheet. They have said repeatedly on conference calls that this has simply been a function of waiting for the right opportunities to deploy their capital and it really doesn't have anything to do with new regulations.
BRK, of course, is generating cash every single day. So even if someone had 100% of their net worth invested in BRK, that doesn't mean they can't take advantage of this current panic in the markets, because BRK will do that. And who better to deploy the ever increasing free cash flow into attractively priced investments than that old man in Omaha?
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