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Jefferies Group, Inc. Message Board

  • widdy10023 widdy10023 Nov 12, 2012 7:48 AM Flag

    Leucadia buying Jeffries

    for about $17.66/share -- to close 1Q2013.

    Sentiment: Hold

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    • We declared victory and took off 1/2 of our $JEF position on this news at the open to mitigate event risk. But are holding the rest for a rise in $LUK, as we have long been attracted to the name, but so far without a position. Still, seeing this fall in $LUK as very overdone, and may buy back the value that we sold in $JEF directly in $LUK, after things have settled down.

      $JEF is definitely on an up swing with a strengthening income statement, and a desire to get more aggressive. Concerns on the balance sheet had the ratings firms spooked, and held $JEF back. Both are now fixed.

      Likewise $LUK has a strong balance sheet of turnaround companies, also with net strengthening income statements. But even so, it was possible that some of it's NOLs would expire worthless as they did not have enough earning to take advantage of them all. Now these NOLs will not only be used, they will be used sooner... increasing their value in tax avoidance.

      The one negative for $JEF owner is the perceived loss of the upside, but more the cut an effective div. But as the div taxes are seen to increase anyway, this is less impact that it would be otherwise be seen.

      For the cap gains, it is now all about $LUK. The classic P&F chart on $LUK is bullish with a price target of $48. But now one needs to adjust for the dilution, so roughly roughly it would be at ~$31 ( 48 / 1.546). And that is adding back factors for the positive news on the NOL side which $JEF brings to the story.

      $31 $LUK values $JEF at $25.11 or 56% above current price (~$16).

      Sentiment: Buy

      • 1 Reply to sandyeggojake
      • As an update, we have yet to add back to $LUK or $JEF, but may towards the end of today, depending on support. But we note signs of green shoots of support. For $JEF, technicals are but the tail of the dog. With the M&A, the important techncials are now for the dog that is $LUK. But we do note that $JEF has now testing the support of the prior swing high close at $14.47. Turning to $LUK, we note it bounced off the 52wk low to the penny, potentially setting the table for a nice double bottom.

 

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