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Leucadia (LUK)

Although first quarter was a challenge with lower trading revenues at its brokerage firm, the company said February and March numbers improved. And analysts are forecasting positive earnings of $0.13 per share for second quarter. As well, the company has a dividend yield of 1.72%, paid quarterly.

Leucadia (LUK)
From Internet Wealth Builder

Leucadia (LUK) is a 50/50 partner with Berkshire Hathaway in Berkadia, one of the largest U.S. commercial mortgage providers and servicers.

Leucadia’s problems have arisen from its ownership of mid-market investment bank Jefferies, which it bought in 2012 and whose management replaced the company founders. Jefferies’ capital markets and equity divisions have done well, but its fixed income operations, which have specialized in high yield debt and energy, have been badly hit by the blowout in spreads and the fall in the oil price.

While still profitable for the year to Nov. 30, Jefferies’ earnings were almost halved from the $258 million in 2014. Meanwhile Leucadia’s National Beef Processors, which handles 12.5% of U.S. beef at its facilities in Kansas, has been affected by the fall in the number of cattle slaughtered, as it is very sensitive to volume. That dropped from 28 million in 2008 to 23 million in 2015.

However, such deals as supplying U.S. retail foreign exchange broker FXCM with a $300 million loan at 10% to provide emergency capital when the Swiss National Bank unexpectedly allowed the Swiss franc to float in January 2015 show Leucadia has not lost its eye for opportunities.

FXCM has already repaid $105 million of the advance and another $33 million in fees and interest, and is aiming to have the remaining $195 million repaid by the end of the first quarter of 2016.

Leucadia reported net income of $55.6 million ($0.15 per share) for the fourth quarter (to Dec. 31) and $279.6 million ($0.74 per share) for the year. That compared to $204.3 million ($0.54 per share) for 2014.

Buy. The stock sells at a 28% discount to its book value of $20.97 and its major subsidiaries are poised for a recovery.

Gavin Graham in Gordon Pape’s Internet Wealth Builder,, 1-888-287-8229, March 13, 2016