Saturday, December 19, 2009
Daily Journal Corp (Stock code DJCO) seems to be selling very cheaply whether valued by itself or compared to other print businesses. What I find that really interests me is not the core print business but rather the equity portfolio which is on the books.
DJCO is an obscure and extremely small-cap stock. But behind it lies a one of the best investment managers as its largest owner and director - Mr. Charlie T. Munger. DJCO's core business is news prints and publications and are sold to more niche markets, like targeting in the area of law.
Some numbers at a glance. Market cap is $85 to $86 million. Earnings was about $8 million for the year ended Sep 2009. Free cash flow is about the same as reported earnings. Current assets = $72.5m, total liabilities = $31.1m. Of the $72.5m in current assets, $62.1m is cash, treasuries and marketable securities. And out of $62.1m, $54.1 is marketable securities ($47.9m is stock and rest is bonds).
The company, after deducting all liabilities and assuming all noncurrent assets of $10.15m is worthless, the net assets is still worth $41.4m ($72.5m - $31.1m). In other words, at the current market cap, the core business of the company is valued at less than 6 times its earnings ($85m - $41.4m / $8m profit).
As mentioned, what is interesting is the stock portfolio worth $47.9m as at end Sep 2009. The whole of 2008, DJCO actually did not own any stocks, most were invested in Treasuries worth of about $20m. During the period Jan 2009 to Mar 2009, DJCO sold the treasuries and bought mostly into stocks and some into bonds. The cost of stocks were $15.5m and bonds $4.9m. In a period of 6 months, the value has more than doubled from $20.4m to $54.1m. I don't think they achieved this due to luck but rather most likely due to the foresight of Mr. Munger that he recognized that the market is totally irrational at the time. For example, banks, even Wells Fargo, were selling for ONE time its pretax preprovision for credit losses income. That is how ridiculous it was in early Mar 2009.
However, DJCO does not disclose the stock they hold. But whatever they hold, I am highly certain it will be worth many times more the longer they hold to it. On top, investors get a rather cheap print business that is still holding out fine, though maybe a slowing and dying business in time to come.
Saturday, December 05, 2009
Too Big To Fail is surely the best investigative business book since Barbarian at the Gates or The Smartest Guy in the Room. Andrew Sorkin gave many new details and juicy insights into the events leading up to and during the crisis last Fall. One of which was the implied personal fortune of Warren Buffett.
On page 508, Buffett quoted, "I will be willing to personally buy $100 million of stock in this public offering (a Buffett's idea which subsequently led to the eventual PPIP)," which, he explained, "constitutes about 20 percent of my net worth outside of my Berkshire holdings." We can infer that he has a personal fortune of $500 million outside of his fortune in Berkshire.
And during last fall, his by-now famous co-op, Buy America: I am, revealed Buffett bought stocks for his personal account. One of which is Wells Fargo. He owns a personal stake of 2,240,000 shares which he most likely accumulated at a cost of about $56 to $60 million last fall. This constitutes about 12% of his personal fortune.
Disclosure: I own Wells Fargo.