Value Investing / Main Index / previous / next

January, 2002


While I am certainly no business, accounting, or stock analyst yet myself and would be hard pressed, for instance, to tell you exactly what EBITDA means or how it is derived for a particular asset (though working on this and similar kinds of stock research), I do a lot of reading and can recognize some of the names of the best investors and mutual fund managers. When several of them agree on good stocks currently available, I am impressed and find their recommendations worthy of purchase consideration, often with good results. Here are five that I have come across lately which are noted as being worthwhile investments by at least two or more analysts with excellent records for selecting good value equities. We expect that an equal purchase of all five should, over the next three-to-five years, prove more profitable than the major market averages but with lower overall risk.

Adelphia Communic. 'A' (ADLAC) (Recent price $28.31)
Down from a high in the mid-eighties, this stock is considered to have a price to true value of only about 56%. It is a cable company with great potential but a few problems that are scaring off some investors. These are anticipated to be essentially resolved by 2003. The stock looks good as a buy-out candidate or for price appreciation in its own right.

Berkshire Hathaway (BRK.A; BRK.B) (Recent Class B share price $2450)
Considered the premier investor in the world, Warren Buffett would have turned a $10,000 investment in his 1956 initial partnership into over $200,000,000 today, after fees and taxes, if all proceeds were reinvested into his Berkshire Hathaway company. With his co-manager, Charlie Munger, this team is most cited by value analysts as the one they would prefer to have manage their own money. Berkshire Hathaway is a reinsurance and holding company with many profitable subsidiary businesses, in addition to significant ownership of Coca-Cola, Gillette, The Washington Post, American Express, and Wells Fargo & Company. "Value Line" gives it an above average safety rating. Buffett typically keeps a reserve of several billion in cash or bonds to use when substantial market drops produce abundant new equity bargains.

Liberty Media 'A' (L) (Recent price $13.60)
Like Berkshire Hathaway, Liberty Media is a holding company with an excellent record of profitable purchases. Several stock analysts speak highly of it. As the name implies, it has several media and entertainment properties in its portfolio. At its recent price, it trades at about 54% of its true value. The company and its holdings are well led by manager John Malone. Its portfolio includes shares in AOL Time Warner, Sprint, News Corp, Discovery Communications, and USA Networks, among others. It has low debt relative to its assets.

Six Flags, Inc. (PKS) (Recent price $13.95)
Six flags is the Avis of theme park companies, in a strong second place behind Disney, but with more locations than Disney within reasonable driving distance, a plus when folks are considering security. It is also a well known name and a fun destination with which many families are already familiar. They are expanding internationally, putting more attractions into their parks, and spending a lot on advertising. Plus, they have good management. In short, though their share quote is recently relatively depressed, they have excellent prospects for growth and profit. The company's price to true value is only about 46%.

Washington Mutual (WM) (Recent price $31.49)
Value investors vary from moderately enthusiastic to wildly excited about Washington Mutual, considered by some to be the best and most solid U.S. financial company, at recent prices. It is a very low-cost Savings and Loan with wide distribution of branches and excellent management, but is selling for only about eight times earnings, less than half (about 44%) of the "Value Line" P/E (19.3). Its dividend yield (3.2%) is about twice that of the Standard and Poors 500. Since 1991 this company has achieved a P/E of at least 10 each year, representing about a 20% improvement in its present per share cost, if it simply achieves this historical minimum. But in recent years it has sold for an average of about 16 times earnings or, roughly, at a level twice its current price.


Larry is not a professional. Don't take him seriously!

Actually, the investment article provided here is for general information only and should not be considered as professional advice, a solicitation to buy or sell any security, or the Word of God. Investors are encouraged to do their own research while considering their personal goals and circumstances, or consult their own professional financial advisors, before making investment decisions. Neither Larry nor LARVALBUG will be liable for any losses sustained by any visitor to this site.

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)

Value Investing / Main Index / previous / next