Thursday, October 16, 2008

Whitman Sampler Of Value Stocks

Let's talk about some of your current favorite buys.

Toyota Industries

We have a big position in Toyota Industries. Nobody is thinking of what happens if Ford or General Motors or Chrysler stops making cars. What would happen to Toyota's market penetration? In any event, Toyota Industries is a large shareholder in Toyota Motors. At a recent price of $23, you are basically getting the value of Toyota Motors. Toyota affiliates have a market value of $8 to $9 a share, plus you get Toyota Industries' other magnificent worldwide operating businesses, which have operating income of $800 million to $900 million. In other words, you get a minimum of $20 of additional value for free, when you buy Toyota Industries at current prices. Total value is thus around $40, and the stock sells for $23.

Investor AB

This company is essentially a European private equity company, and the Swedish Wallenberg family controls it. In their last quarterly report, they claimed net asset --virtually debt-free, by the way--was 180 Swedish krona. Today, you can buy all the stock you want at $97. Over the years, they have grown that NAV by double digits, on average, each year. They own engineering and power company ABB, Swedish appliance maker Electrolux, and they are big in the medical sciences, including 11% of AstraZeneca.

Henderson Land

Henderson Land is our largest holding. It is the biggest land bank in Hong Kong, and it has a lot of office buildings. They have a huge presence in mainland China.They also control Hong Kong & China Gas and Miramar Hotels. Henderson has an NAV of 57 in Hong Kong dollars, but you can buy all the shares you want at 27 Hong Kong dollars today. The company also has American Depositary Shares (ADS) symbol HLDCY. NAV in real estate means a lot in for international accounting, because unlike GAAP, income-producing real estate is carried at NAV, not at depreciated historic cost as it is here. The reported NAV is 57; we think it is well over 60. Stock sells for 27.

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