FWIW- Chris Mayer, long term bull on LUK and C & S

*** Leucadia National

I'm recommending we part with longtime holding Leucadia National (LUK:nyse). This our holding company in the hands of those two uber-investors, Ian Cumming and Joe Steinberg.

I've been revisiting our holdings in a little more depth as we roll into earnings season. I'm always looking to trim what I view as the weaker holdings. I like to keep a tight list of best ideas, and this means constant evaluations of what's in the portfolio.

The main idea behind owning Leucadia is that we get the investing acumen of Cumming and Steinberg, who have a great track record dating to 1978. The stock is probably fairly valued somewhere around $25 per share, in my view. That's taking their public holdings -- such as Jefferies Group and Fortescue Metals -- at market value.

But part of what makes me want to sell is the fact that Cumming and Steinberg themselves are sellers of their stock. Cumming recently sold $22 million and Steinberg sold $25 million. Another director, who owns less than 1% of the company, is also selling shares. And Cumming, at least, is not done selling. He's announced he'll sell another million shares soon.

Insider selling is not a reason by itself to sell the stock. Both Cumming and Steinberg still own 21% of the company after the selling. The company is worth $6 billion today, so that puts the selling in perspective. It's not a lot.

But it is part of the bigger picture that's coming into focus on Leucadia. It's just another weight on the "sell" side of the scale. I've been a little nervous about the financial strength of Leucadia of late. When we bought it, Leucadia had $1.6 billion in cash with practically no debt. Today, the situation is reversed. The company has $1.7 billion in long-term debt and practically no cash.

So by my own CODE metrics, it's starting to slip. It's not cheap -- which is the "C" in the CODE -- but, rather, close to fairly valued. It no longer sports that excellent financial condition, which is the "E." And now the insiders are sellers after having not sold stock for over a year.

I also have to say that I am not enamored with its biggest holdings at the moment. I wouldn't buy Jefferies Group or AmeriCredit or Fortescue Metals (too leveraged). So far, I've trusted in the skills of Cumming and Steinberg. But again, this is just another item on the "sell" side of things.

We can always pick it up again should it become cheap or insiders starting picking up shares or they shore up that financial condition. In the meantime, I find it hard to envision big gains from the current setup and at the current price.

Leucadia has been an excellent investment for us. We more than doubled our money on the stock, scoring a 109% gain. We held onto half of the position and exit that half with a 14% gain.. All this from September 2005. We've owned the stock for just over four years. Considering that the market lost money over that time, we did very well owning LUK.

Recommendation: Sell Leucadia National (LUK:nyse).

Link below is not the original from Capital & Crisis. Found it on a blog...

http://74.125.93.132/search?q=cache:-AOF...