bud and luk

**yppsilence** Wed Nov 30, 2005 11:11 pm

bud and luk
From gurufocus, I saw some Buffett bought a lot of bud, Bruce Berkowitz got luk a lot. which one is better if I want to buy one of them? It seems that luk has pretty p/e as 3.8, with earning increasing 39% this year, while bud's higher, 17.45. however, bud is customer monoplay, and beer is some addict to people when they drink it often. Thank you.

**blast_investor** Wed Nov 30, 2005 11:50 pm

I do not like this LUK ( Leucadia National ) stock.

LUK stock is not very cheap. The reason you see PE below 5 is due to one time gain. One time gain should not be counted in valuation. The real pro forma PE is much higher, close to 20 by my quick calculation.

The business model of LUK is not very attractive either. BUD is a much better and safer stock than LUK.

**goog** Fri Dec 02, 2005 2:37 pm

Luk is pretty much like Buffet's Birkshire though the business focus has swithed largely from insurance. The track record of Luk is fantastic, about 33% annually since 1978 (much better than Birkshire). The two managers in LUK are large holders of this stock. Basically, I think people invest in Luk because they have confidence in the two managers.

**blast_investor** Fri Dec 02, 2005 4:16 pm

Goog, you are right. I made a mistake of treating it as a regular telecom company after I quickly looked at yahoo profile of LUK.

Here is a link I found on the business model of LUK and managers behind this stock:
http://www.kiplinger.com/personalfinance/columns/picks/archive/2005/pick1004.htm

Essentially, Investment into LUK is like investment into a closed end fund that focuses on distressed investing or value investing. The LUK past record was superb.

PE or cash flow etc metrics are not relevant for a stock like LUK. The only reasonable way to value this stock is to use Net Asset Value method. The stock may trade above or below its NAV. It is difficult to analyze that though.

For a quick study, Price to Book (PB) is closest metric to NAV. But still PB many times tends to under-report its true NAV for a stock like LUK.