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Leucadia National gets lower position in Fairholme Capital

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Fairholme Capital’s 3Q14 positions

In 3Q14, Fairholme Capital Management added a new position in Chesapeake Energy (CHK) and increased its stake in Sears Holdings Corporation (SHLD). During the third quarter, the fund sold its common equity positions in government-sponsored enterprises Fannie Mae (FNMA) and Freddie Mac (FMCC). It exited its stake in Genworth Financial (GNW) and reduced its positions in American International Group (AIG), St. Joe Company (JOE), Land’s End (LE), and Leucadia National Corporation (LUK).

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Fairholme Capital and Leucadia National

Fairholme Capital Management lowered its position in Leucadia National Corporation (LUK) by ~633,000 shares. Leucadia National now accounts for 4.6% of the fund’s size.

Overview of Leucadia National

Leucadia National Corporation (LUK) is a holding company that has diversified business interests through its subsidiaries. The company’s largest operating company is Jeffries, the global investment banking firm. Jeffries amalgamated with Leucadia in November 2012 in a deal valued at $3.8 billion. Leucadia’s other subsidiaries operate in businesses such as beef processing, manufacturing, real estate, oil and gas production and exploration, and asset management.

Due to its long-term value-oriented investment style and its interests in diversified businesses, Leucadia National is referred to as Baby Berkshire.

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Investing activities

Year-to-date, Leucadia has increased its oil and gas assets through a $106-million investment in Juneau Energy and a $239-million investment in the Bakken oil field. Investments in its asset management division totaled $487 million. Nearly all of it is linked to seed capital for asset management firms. The most notable is Folger Hill Asset Management. Leucadia strongly believes it can earn an incremental return on these investments.

In September 2014, Leucadia made a $71-million investment in a joint venture with Golden Queen Mining Co. and the Clay family in order to provide financial support for a gold and silver mining project on the outskirts of Mojave, a place in Kern County, California. The project is set to be commissioned in late 2015.

In 3Q14, Leucadia National also completed the sale of Premier Entertainment, LLC, which controls the gaming operations of the Hard Rock Hotel and Casino in Biloxi, Mississippi, for an aggregate cash consideration of $250 million.

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