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PORTFOLIO MANAGER’S REVIEW Edited by the Research Team of

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A Monthly Publication of BeyondProxy LLC www.manualofideas.com May 28, 2009

When asked how he became so successful, Buffett answered: “we read hundreds and hundreds of annual reports every year.”

With

John Mihaljevic, CFA Managing Editor, The Manual of Ideas [email protected]

“If our efforts can further the goals of our members by giving them a discernible edge over other market participants, we have succeeded.”

Top 5 Ideas In This Report

EchoStar Corporation (Nasdaq: SATS) ……………… p. 57

EMC Corporation (NYSE: EMC) …………………. p. 59

Republic Airways (Nasdaq: RJET) ………………. p. 62

Ticketmaster Entertainment (Nasdaq: TKTM) ……………… p. 64

WellCare Health Plans (NYSE: WCG) ………………… p. 68

Also Inside

Editor’s Commentary …………….. p. 4

Portfolios with “Signal Value” …. p. 5

Exclusive Interview: Zeke Ashton p. 27

Exclusive Interview: Igor Lotsvin p. 35

100 Superinvestor Stocks ……… p. 38

Value Investing Congress Notes p. 139

Essay: Want to Be Next Buffett? p. 153

About Portfolio Manager’s Review

Our goal is to bring you compelling investment ideas on the basis of intrinsic value versus market price.

John Mihaljevic, editor, is a fund manager, former banker and analyst. He is a member of Value Investors Club, an exclusive community of top money managers, and has won the Club’s prize for best investment idea. John is a trained capital allocator, having studied under Yale chief investment officer David Swensen and served as research assistant to Nobel laureate James Tobin. John holds a BA in Economics, summa cum laude, from Yale and is a CFA charterholder. He resides in New York City with his wife and two kids.

THE SUPERINVESTOR ISSUE

► Snapshot of 100 companies owned by superinvestors ► 30 companies profiled and analyzed

► Proprietary selection of Top 5 candidates for investment ► Plus: Latest holdings of top investors

► Plus: Exclusive Interviews with Zeke Ashton, Igor Lotsvin ► Plus: Notes from Value Investing Congress

Superinvestor companies mentioned in this issue include Alexander's, American Express, American Railcar, AmeriCredit, AmerisourceBergen,

Amylin Pharma, Apartment Investment, Ark Restaurants, Borders, Bristol Myers Squibb, Burlington Northern, Canadian Natural, Capital Southwest,

CarMax, Cemex, Chesapeake Energy, Coca-Cola, ConocoPhillips, Consolidated-Tomoka Land, Costco Wholesale, Coventry Health Care, Cresud, CSX, Ctrip.com International, Deckers Outdoor, Dell, Dillard's, DISH Network, Dr Pepper Snapple, Eaton, eBay, EchoStar, Einstein Noah Restaurant, EMC,

Facet Biotech, Fair Isaac, Fairfax Financial, Fidelity National Financial, General Dynamics, Goldman Sachs, Greenlight Capital Re, Harman International,

Harvest Natural, Health Net, Helix Energy Solutions, Hertz Global Holdings, Hess, Horsehead, Ingersoll-Rand, Intel, International Assets Holding, Iteris, Jefferies, Johnson & Johnson, Jones Apparel, Lab Corp. of America, Lear,

Leucadia National, M&T Bank, MasterCard, MEMC Electronic Materials, Moody's, Mosaic, PDL BioPharma, Pfizer, Potlatch, Precision Castparts,

Premier Exhibitions, Procter & Gamble, Republic Airways, RHI Entertainment, Rockwell Collins, Ryanair Holdings, Schlumberger, Sears Holdings, Spirit

AeroSystems, St. Joe, Strayer Education, Syneron Medical, SYSCO, TAL International, Target, Telemig Celular Participacoes, Ticketmaster, Trident Microsystems, tw telecom, U.S. Bancorp, United Parcel Service, UnitedHealth,

URS, USG, Visa, Waters, WellCare Health Plans, WellPoint, Wells Fargo, Wendy's Arby's, Winthrop Realty Trust, Yahoo!, Yum! Brands, and more.

(profiled companies are underlined)

Table of Contents

EDITOR’S COMMENTARY ............................................................................ 4

PORTFOLIOS WITH “SIGNAL VALUE” ....................................................... 5

BILL ACKMAN, PERSHING SQUARE ............................................................................................... 6 ZEKE ASHTON, CENTAUR ............................................................................................................ 7 BRUCE BERKOWITZ, FAIRHOLME .................................................................................................. 8 WARREN BUFFETT, BERKSHIRE HATHAWAY ................................................................................. 9 IAN CUMMING & JOE STEINBERG, LEUCADIA .............................................................................. 10 DAVID EINHORN, GREENLIGHT ................................................................................................... 11 BRIAN GAINES, SPRINGHOUSE ................................................................................................... 12 TOM GAYNER, MARKEL GAYNER ................................................................................................ 13 GLENN GREENBERG, CHIEFTAIN ................................................................................................ 14 MASON HAWKINS, SOUTHEASTERN ............................................................................................ 15 CHRIS HOHN, CHILDREN’S INVESTMENT FUND ........................................................................... 16 CARL ICAHN, ICAHN PARTNERS .................................................................................................. 17 SETH KLARMAN, BAUPOST ........................................................................................................ 18 EDDIE LAMPERT, RBS PARTNERS ............................................................................................. 19 DAN LOEB, THIRD POINT ........................................................................................................... 20 STEVE MANDEL, LONE PINE ...................................................................................................... 21 MOHNISH PABRAI, PABRAI FUNDS .............................................................................................. 22 RICH PZENA, PZENA INVESTMENT MANAGEMENT ....................................................................... 23 KEN SHUBIN STEIN, SPENCER CAPITAL ...................................................................................... 24 PREM WATSA, FAIRFAX ............................................................................................................. 25 MARTY WHITMAN, THIRD AVENUE .............................................................................................. 26

EXCLUSIVE INTERVIEW WITH ZEKE ASHTON ....................................... 27

EXCLUSIVE INTERVIEW WITH IGOR LOTSVIN ....................................... 35

SNAPSHOT OF 100 SUPERINVESTOR-OWNED COMPANIES ............... 38

IN ALPHABETICAL ORDER .......................................................................................................... 38 BY MARKET VALUE ................................................................................................................... 40 NET CASH AND OTHER METRICS ............................................................................................... 42 STOCK PRICE PERFORMANCE ................................................................................................... 44 FREE CASH FLOW ..................................................................................................................... 46 P/E MULTIPLES ......................................................................................................................... 47 HISTORICAL AND PROSPECTIVE EPS ......................................................................................... 48 LATEST QUARTERLY EPS SURPRISE ......................................................................................... 50 REVENUE AND EPS GROWTH .................................................................................................... 52 PERCENTILE RANK WITHIN INDUSTRY ......................................................................................... 54 INSIDER BUYING AND OWNERSHIP ............................................................................................. 55

TOP 5 SUPERINVESTOR SELECTIONS .................................................... 56

ECHOSTAR (SATS) – OWNED BY EINHORN, JOHN GRIFFIN ........................................................ 57 EMC CORPORATION (EMC) – OWNED BY ACKMAN, EINHORN .................................................... 59 REPUBLIC AIRWAYS (RJET) – OWNED BY EINHORN ................................................................... 62 TICKETMASTER ENTERTAINMENT (TKTM) – OWNED BY EINHORN, WEITZ ................................... 64 WELLCARE HEALTH PLANS (WCG) – OWNED BY BERKOWITZ .................................................... 68

NEW OR INCREASED SUPERINVESTOR HOLDINGS ............................. 70

AMERICAN EXPRESS (AXP) – OWNED BY BUFFETT, BERKOWITZ ................................................ 71 BURLINGTON NORTHERN SANTA FE (BNI) – OWNED BY BUFFETT, WATSA .................................. 74 EBAY (EBAY) – OWNED BY HAWKINS, MILLER ........................................................................... 77 FACET BIOTECH (FACT) – OWNED BY KLARMAN ....................................................................... 80 PDL BIOPHARMA (PDLI) – OWNED BY KLARMAN ....................................................................... 83 HARMAN INTERNATIONAL (HAR) – OWNED BY EINHORN ............................................................. 86 PREMIER EXHIBITIONS (PRXI) – OWNED BY SELLERS ................................................................ 89 SEARS HOLDINGS (SHLD) – OWNED BY LAMPERT, BERKOWITZ, MILLER .................................... 91 ST. JOE (JOE) – OWNED BY BERKOWITZ, WHITMAN .................................................................. 93 WATERS CORPORATION (WAT) – OWNED BY GREENBERG ........................................................ 96

© 2009 by BeyondProxy LLC. All rights reserved. www.manualofideas.com May 28, 2009 – of 156

UNCHANGED SUPERINVESTOR HOLDINGS ........................................... 99

AMERICREDIT (ACF) – OWNED BY CUMMING/STEINBERG, BERKOWITZ..................................... 100 CONSOLIDATED-TOMOKA LAND (CTO) – OWNED BY WINTERS, WHITMAN ................................. 103 HARVEST NATURAL RESOURCES (HNR) – OWNED BY PABRAI .................................................. 105 JEFFERIES GROUP (JEF) – OWNED BY CUMMING & STEINBERG ............................................... 108 LEUCADIA NATIONAL (LUK) – OWNED BY BERKOWITZ, PABRAI ................................................. 111 MEMC ELECTRONIC MATERIALS (WFR) – OWNED BY EINHORN .............................................. 114 PFIZER (PFE) – OWNED BY BERKOWITZ .................................................................................. 116 SYNERON MEDICAL (ELOS) – OWNED BY KLARMAN ................................................................ 120 TAL INTERNATIONAL (TAL) – OWNED BY BERKOWITZ .............................................................. 122 USG CORPORATION (USG) – OWNED BY BUFFETT, WATSA, WEITZ ......................................... 125 YAHOO! (YHOO) – OWNED BY ICAHN, ASHTON, MILLER .......................................................... 128

REDUCED OR ELIMINATED SUPERINVESTOR HOLDINGS ................. 130

AMERISOURCEBERGEN (ABC) – OWNED BY PZENA, ROBBINS .................................................. 131 ARK RESTAURANTS (ARKR) – OWNED BY RICHARDSON, GREENBLATT .................................... 133 DELL (DELL) – OWNED BY HAWKINS, GREENBERG, WATSA ..................................................... 135 URS CORPORATION (URS) – OWNED BY EINHORN ................................................................. 137

NOTES FROM VALUE INVESTING CONGRESS, MAY 5-6 .................... 139

ZEKE ASHTON, CENTAUR CAPITAL ........................................................................................... 139 JOHN BURBANK III, PASSPORT CAPITAL ................................................................................... 141 J. CARLO CANNELL, CANNELL CAPITAL .................................................................................... 142 DAVID CHU AND IGOR LOTSVIN, SOMA ASSET MANAGEMENT .................................................... 143 CHARLES DE VAULX, INTERNATIONAL VALUE ADVISERS ............................................................ 144 BRIAN GAINES, SPRINGHOUSE CAPITAL ................................................................................... 145 SCOTT KLEIN, BEACH POINT CAPITAL MANAGEMENT ................................................................ 146 DAVID NIERENBERG, D3 FAMILY OF FUNDS .............................................................................. 147 JED NUSSDORF, SOAPSTONE CAPITAL ..................................................................................... 148 DAVID RABINOWITZ, KIRKWOOD CAPITAL ................................................................................. 149 GUY SPIER, AQUAMARINE CAPITAL .......................................................................................... 150 WHITNEY TILSON AND GLENN TONGUE, T2 PARTNERS ............................................................. 151 WILLIAM WALLER AND JASON STOCK, M3 FUNDS ..................................................................... 152

ESSAY: WANT TO BE THE NEXT WARREN BUFFETT? ....................... 153

This report is printed on recycled paper that is FSC certified and endorsed by the Rainforest Alliance.


Editor’s Commentary In this issue of Portfolio Manager’s Review, we bring you some of the most interesting investment ideas of the world’s best value investors. In addition to our standard company profiles, we present several special features, including an exclusive interview with Zeke Ashton of Centaur Capital, an exclusive interview with Igor Lotsvin of Soma Asset Management, and exclusive notes from the recently concluded Value Investing Congress in Pasadena. If you enjoy seeing what other successful investors are up to, we believe you’re in for a treat. So sit back and enjoy!

We highlight the following five ideas in this Portfolio Manager’s Review:

EchoStar (Nasdaq: SATS) is an idea we have liked for several months, and the opportunity remains compelling. Not only does EchoStar have roughly one-half of its market value in net cash, but it is run by Charlie Ergen, one of the shrewdest executives at the intersection of media and technology. Ergen is likely to exploit industry weakness for the long-term benefit of EchoStar shareholders, as was evident by the recent opportunistic purchase of the debt of Sirius Satellite Radio. EchoStar’s set-top box business has significant value, as do the company’s satellite assets.

EMC Corporation (NYSE: EMC) is the leader in data storage systems and owns a majority stake in fast-growing software company VMware (NYSE: VMW). One-half of the earnings stream is recurring, and long-term growth is expected to benefit from continued proliferation of digital data worldwide. The shares trade at a low teens multiple of forward earnings, a bargain for a business of EMC’s quality. Activist investor Bill Ackman owns a large position in EMC.

Republic Airways (Nasdaq: RJET) operates in the dreaded airline industry but does so under long-term contracts with several major airlines. The contracts insulate Republic from some of the key risks of operating an airline and provide for steady free cash flow. Republic shares trade at a lowly 3x forward earnings, with trailing FCF actually exceeding recent market value. While the company has debt associated with owned aircraft, the strong FCF generation gives Republic significant flexibility.

Ticketmaster Entertainment (Nasdaq: TKTM) caught our eye because of the vocal opposition to the company’s pending merger with number-two player Live Nation (NYSE: LYV). It seems quite clear that Ticketmaster enjoys unique power in the live ticketing industry—some call it a monopolist. If the Live Nation merger proceeds as expected, Ticketmaster’s position in a growing marketplace will strengthen even further. Shares trade at less than 10x estimated 2009 earnings.

WellCare Health Plans (NYSE: WCG) is a non capital-intensive business in an industry with favorable long-term growth. The shares trade for less than net cash due to a criminal investigation into alleged Medicaid fraud. The company recently settled the investigation on favorable terms, making WellCare an enticing prospect.

Two other companies barely missed our Top 5 list: Pfizer (NYSE: PFE) trades at less than 10x this year’s projected earnings. While we do not believe the Wyeth merger adds to value, it does not appear to detract from the investment case either. Consolidated-Tomoka Land (NYSE: CTO) is an under-followed, non-leveraged owner of Florida real estate. Assets appear to be meaningfully understated.

Sincerely,

John Mihaljevic, CFA and The Manual of Ideas research team

U.S. Equities — Cheapness Snapshot1 % of U.S. stocks trading for less than…

All stocks

MV> $1bn

net net current assets 4% 0% net cash 5% 1% tangible book value 28% 12% 5x trailing EPS 4% 2% 1 As of May 15, 2009. Includes all stocks traded on U.S. stock exchanges (NYSE, Amex, Nasdaq, OTC) that have a market value of more than $1 million and have reported results for a period ending no earlier than nine months ago.

© 2009 by BeyondProxy LLC. All rights reserved. www.manualofideas.com May 2009 – of 156

Portfolios With “Signal Value”

Revealing the Top Ideas of Top Investors

“Signal value” as opposed to “noise.” We present the

holdings of some of the world’s top investors. We look for

investors who have amassed impressive track records over

long periods of time. We choose these investors carefully

to avoid the noise inherent in most 13F-HR filings.

Top investors included in this section:

William Ackman, Pershing Square

Zeke Ashton, Centaur

Bruce Berkowitz, Fairholme

Warren Buffett, Berkshire Hathaway

Ian Cumming & Joe Steinberg, Leucadia

David Einhorn, Greenlight

Glenn Greenberg, Chieftain

Brian Gaines, Springhouse

Tom Gayner, Markel Gayner

Mason Hawkins, Southeastern

Chris Hohn, Children’s Investment Fund

Carl Icahn, Icahn

Seth Klarman, Baupost

Eddie Lampert, RBS (ESL)

Dan Loeb, Third Point

Steve Mandel, Lone Pine

Mohnish Pabrai, Pabrai Funds

Rich Pzena, Pzena Investment

Kenneth Shubin Stein, Spencer

Prem Watsa, Fairfax

Marty Whitman, Third Avenue

Missing your favorite superinvestor? Let us know at [email protected].

MOI Signal Rank answers the question, “What are this

investor’s top ten ideas right now?” Rather than simply

presenting each investor’s largest holdings as of the recently

filed quarter end, the MOI’s proprietary methodology ranks

the companies in each investor’s portfolio based on the

investor’s current level of conviction in each holding, as

judged by the MOI.

Our proprietary methodology takes into account

a number of variables, including the size of a position in an

investor’s portfolio, the size of a position relative to the

market value of the corresponding company, the most recent

quarterly change in the number of shares owned, and the

change in the stock price of a position since the most recent

quarterly filing date.

For example, an investor might have the most

conviction in a position that is only the tenth-largest

position in such investor’s portfolio. This might be the case

if an investor invests in a small company, resulting in a

holding that is simply too small to rank highly based on size

alone. On the other hand, such a holding might represent

19.9% of the shares outstanding of the subject company,

suggesting a high level of conviction. Our estimate of the

conviction level would rise further if the subject company

has a 20% poison-pill threshold, thereby suggesting that the

investor has bought as much of the subject company as is

practically feasible.


Bill Ackman, Pershing Square Bill Ackman, managing member of Pershing Square Capital, is a value-oriented activist investor. He runs a concentrated portfolio with the largest ten equity investments accounting for the vast majority of his long book. Before the credit crunch developed into a full-blown economic crisis, Ackman made a strong case for why MBIA (MBI) and AMBAC (ABK) were overvalued and fundamentally more distressed than the market had judged at the time. On the long side, Ackman has approached large companies, including McDonald’s (MCD) and Target (TGT), with proposals for unlocking value. MOI Signal Rank™ – Top Current Ideas of Pershing Square

Market Price ($) Shares Owned Holdings

Value Latest Filing ∆ Since Latest ∆ Since as % of

Company Ticker ($mn) Date Date Filing Filing 12/31/08 Co. Fund

1 Apartment Investment AIV 938 7.77 5.48 42% 8,126,734 new position 7% 2%

2 EMC EMC 23,914 11.94 11.40 5% 58,619,033 0% 3% 24%

3 Yum! Brands YUM 14,849 33.16 27.48 21% 1,554,315 new position 0% 2%

4 Greenlight Capital Re GLRE 562 15.54 15.97 -3% 250,000 0% 1% 0%

5 General Growth Properties GGWPQ 328 1.04 0.71 46% 23,261,369 2% 7% 1%

6 Alexander’s ALX 1,246 250.25 170.38 47% 8,205 0% 0% 0%

7 Wendy’s / Arby’s WEN 2,038 4.24 5.03 -16% 32,324,580 -31% 7% 6%

8 Target TGT 30,468 40.37 34.39 17% 24,873,329 -57% 3% 31%

9 Visa V 54,597 65.07 55.60 17% 2,205,464 -69% 0% 4%

10 Borders Group BGP 125 2.18 0.63 246% 10,597,980 0% 18% 0%

Top Holdings of Pershing Square – By Dollar Value




1 Target TGT 30,468 40.37 34.39 17% 24,873,329 -57% 3% 31%

2 EMC EMC 23,914 11.94 11.40 5% 58,619,033 0% 3% 24%

3 Wendy’s / Arby’s WEN 2,038 4.24 5.03 -16% 32,324,580 -31% 7% 6%

4 Visa V 54,597 65.07 55.60 17% 2,205,464 -69% 0% 4%

5 Apartment Investment AIV 938 7.77 5.48 42% 8,126,734 new position 7% 2%

6 Yum! Brands YUM 14,849 33.16 27.48 21% 1,554,315 new position 0% 2%

7 General Growth Properties GGWPQ 328 1.04 0.71 46% 23,261,369 2% 7% 1%

8 Borders Group BGP 125 2.18 0.63 246% 10,597,980 0% 18% 0%

9 Greenlight Capital Re GLRE 562 15.54 15.97 -3% 250,000 0% 1% 0%

10 Alexander’s ALX 1,246 250.25 170.38 47% 8,205 0% 0% 0%

New Positions Sold Out Positions

Apartment Investment & Management Co (AIV)

Yum! Brands Inc (YUM)

Dr Pepper Snapple (DPS)

Sears Holdings (SHLD)

Portfolio Metrics Sector Weightings

Portfolio size $3 billion

Top 10 as % of portfolio 100%

Median market value $2 billion

Average market value $15 billion

Median price to earnings 15x

Median price to book 1.8x


Zeke Ashton, Centaur Zeke Ashton is founder and managing partner of Centaur Capital, a Dallas-based investment firm. He and co-portfolio manager Matthew Richey are the advisors to the Centaur family of private partnerships using a long/short equity strategy, and are the sub-advisors to the Tilson Dividend Fund, a mutual fund utilizing an income-oriented value investing strategy. MOI Signal Rank™ – Top Current Ideas of Centaur




1 Cisco Systems CSCO 104,599 17.92 16.77 7% 230,800 new position 0% 5%

2 Costco Wholesale COST 19,423 44.75 46.32 -3% 93,000 59% 0% 6%

3 Linn Energy LINE 2,012 16.70 14.90 12% 251,200 51% 0% 5%

4 Microsoft MSFT 179,952 20.22 18.37 10% 166,400 new position 0% 4%

5 Yahoo! YHOO 20,798 14.91 12.81 16% 269,900 new position 0% 5%

6 Crawford & Co CRD/A 193 3.28 4.23 -22% 302,600 new position 1% 2%

7 SPDR Gold Trust GLD 0 91.55 90.28 1% 19,200 new position 0% 2%

8 Lab Corp of America LH 6,678 61.66 58.49 5% 20,600 new position 0% 2%

9 Apple AAPL 109,212 122.42 105.12 16% 31,800 7% 0% 5%

10 AllianceBernstein AB 1,544 16.79 14.72 14% 156,000 >100% 0% 3%

Top Holdings of Centaur – By Dollar Value





2 Annaly Capital Management NLY 7,828 14.38 13.87 4% 306,400 -30% 0% 6%

3 Seabridge Gold SA 917 24.52 22.65 8% 181,500 -22% 0% 6%

4 Cisco Systems CSCO 104,599 17.92 16.77 7% 230,800 new position 0% 5%

5 Linn Energy LINE 2,012 16.70 14.90 12% 251,200 51% 0% 5%

6 Chipotle Mexican Grill CMG/B 2,215 65.03 57.31 13% 63,200 -4% 0% 5%

7 Yahoo! YHOO 20,798 14.91 12.81 16% 269,900 New 0% 5%

8 Apple AAPL 109,212 122.42 105.12 16% 31,800 7% 0% 5%

9 eBay EBAY 21,756 16.91 12.56 35% 250,300 -28% 0% 4%

10 Microsoft MSFT 179,952 20.22 18.37 10% 166,400 new position 0% 4%


Cisco Systems (CSCO)

Crawford & Co (CRD/A)

Lab Corp of America (LH)

Microsoft (MSFT)

SPDR Gold Trust (GLD)

Starbucks (SBUX)

Yahoo! (YHOO)

American Oriental (AOB)

Berkshire Hathaway (BRK/B)

Fairfax Financial (FFH)

Intel (INTC)

LoJack (LOJN)

Odyssey Re Holdings (ORH)

Spark Networks (LOV)

White Mountains (WTM)


Portfolio size $71 million







Bruce Berkowitz, Fairholme Bruce Berkowitz, manager of The Fairholme Fund, has been one of the most successful value-oriented investors of the past decade. From inception on December 29, 1999 through December 31, 2008, The Fairholme Fund has delivered a cumulative return, net of expenses, of 153.92%, versus a return of -27.83%, before expenses, for the S&P 500 Index. MOI Signal Rank™ – Top Current Ideas of Fairholme




1 Sears Holdings SHLD 6,271 49.87 45.71 9% 14,338,939 12% 12% 12%

2 Spirit Aerosystems SPR 1,825 13.21 9.97 32% 19,012,064 21% 18% 3%

3 St Joe JOE 2,207 23.30 16.74 39% 18,456,326 18% 20% 6%

4 American Express AXP 28,864 24.23 13.63 78% 23,813,050 76% 2% 6%

5 Hertz Global HTZ 2,338 7.01 3.93 78% 42,738,138 25% 13% 3%

6 AmeriCredit ACF 1,411 10.24 5.86 75% 32,307,322 0% 25% 3%

7 Leucadia National LUK 4,992 19.84 14.89 33% 18,249,025 2% 8% 5%

8 TAL International TAL 308 9.94 7.32 36% 2,436,697 0% 8% 0%

9 Markel MKL 2,817 280.96 283.88 -1% 750 0% 0% 0%

10 Bristol-Myers Squibb BMY 40,529 20.01 21.92 -9% 39,700 -18% 0% 0%

Top Holdings of Fairholme – By Dollar Value




1 Pfizer PFE 103,514 15.01 13.62 10% 88,241,991 -1% 1% 22%


3 Forest Laboratories FRX 7,012 22.91 21.96 4% 20,067,400 -2% 7% 8%

4 WellPoint WLP 22,710 46.88 37.97 23% 10,061,624 -16% 2% 7%


6 Northrop Grumman NOC 15,795 48.09 43.64 10% 7,319,676 -18% 2% 6%

7 Boeing BA 31,546 43.00 35.58 21% 8,722,727 -4% 1% 6%

8 St Joe JOE 2,207 23.30 16.74 39% 18,456,326 18% 20% 6%

9 UnitedHealth UNH 33,068 27.51 20.93 31% 13,158,010 -28% 1% 5%

10 Leucadia National LUK 4,992 19.84 14.89 33% 18,249,025 2% 8% 5%


None Berkshire Hathaway (BRK/B)

DISH Network (DISH)

Jefferies Group (JEF)

Mercury General (MCY)

Meritor Savings Bank (MSVP)

Mueller Water (MWA/B)


Portfolio size $5.5 billion


Median market value $4.7 billion

Average market value $23.5 billion




Warren Buffett, Berkshire Hathaway Warren Buffett has built an unparalleled investment track record over several decades, becoming widely regarded as the best investor of all time. Buffett has embraced a long term-oriented investment approach with an emphasis on investing in companies with durable competitive advantage, high returns on capital employed, and shareholder-friendly management. MOI Signal Rank™ – Top Current Ideas of Berkshire Hathaway


Value Latest Filing Since Latest Since as % of


1 Goldman Sachs GS 69,104 134.40 106.02 27% 43,478,260 n/a 9% 11%

2 Coca-Cola KO 103,943 44.96 43.95 2% 200,000,000 0% 9% 22%

3 Wesco Financial WSC 2,122 293.00 276.00 6% 5,703,087 0% 80% 4%

4 Procter & Gamble PG 148,067 50.67 47.09 8% 96,316,010 0% 3% 11%

5 Burlington Northern Santa Fe BNI 22,244 67.14 60.15 12% 76,777,029 0% 23% 11%

6 Moody’s MCO 6,694 28.40 22.92 24% 48,000,000 0% 20% 3%

7 Wells Fargo WFC 122,183 24.87 14.24 75% 302,609,212 4% 7% 11%


9 Johnson & Johnson JNJ 151,611 55.41 52.60 5% 32,508,891 14% 1% 4%

10 M&T Bank MTB 5,332 46.16 45.24 2% 6,715,060 0% 6% 1%

Top Holdings of Berkshire Hathaway – By Dollar Value




1 Coca-Cola KO 103,943 44.96 43.95 2% 200,000,000 0% 9% 22%


3 Goldman Sachs GS 69,104 134.40 106.02 27% 43,478,260 new position 9% 11%

4 Procter & Gamble PG 148,067 50.67 47.09 8% 96,316,010 0% 3% 11%

5 Wells Fargo WFC 122,183 24.87 14.24 75% 302,609,212 4% 7% 11%

6 Kraft Foods KFT 36,966 24.80 22.29 11% 138,272,500 0% 9% 8%

7 ConocoPhillips COP 66,285 43.93 39.16 12% 71,228,096 -11% 5% 7%


9 Johnson & Johnson JNJ 151,611 55.41 52.60 5% 32,508,891 14% 1% 4%

10 Wesco Financial WSC 2,122 293.00 276.00 6% 5,703,087 0% 80% 4%


None None









Ian Cumming & Joe Steinberg, Leucadia Chairman Cumming and President Steinberg describe their approach to managing a public investment vehicle in their 2008 letter: “We tend to be buyers of assets and companies that are troubled or out of favor and as a result are selling substantially below the values, which we believe, are there. From time to time, we sell parts of these operations when prices available in the market reach what we believe to be advantageous levels. While we are not perfect in executing this strategy, we are proud of our long-term track record. We are not income statement driven and do not run your company with an undue emphasis on either quarterly or annual earnings. We believe we are conservative in our accounting practices and policies and that our balance sheet is conservatively stated.” MOI Signal Rank™ – Top Current Ideas of Leucadia




1 Capital Southwest CSWC 270 69.55 76.39 -9% 19,776 0% 1% 0%

2 Jefferies Group JEF 3,156 18.42 13.80 33% 48,585,385 0% 29% 75%

3 International Assets Holding IAAC 133 14.96 10.19 47% 1,384,985 0% 15% 2%

4 AmeriCredit ACF 1,411 10.24 5.86 75% 32,940,440 1% 25% 22%

5 Cresud CRESY 439 8.59 7.26 18% 1,627,000 -52% 3% 1%

Top Holdings of Leucadia – By Dollar Value




1 Jefferies Group JEF 3,156 18.42 13.80 33% 48,585,385 0% 29% 75%

2 AmeriCredit ACF 1,411 10.24 5.86 75% 32,940,440 1% 25% 22%

3 International Assets Holding IAAC 133 14.96 10.19 47% 1,384,985 0% 15% 2%

4 Cresud CRESY 439 8.59 7.26 18% 1,627,000 -52% 3% 1%

5 Capital Southwest CSWC 270 69.55 76.39 -9% 19,776 0% 1% 0%


None GeoResources (GEOI)

Kewaunee Scientific (KEQU)




Median market value $400 million



Median price to book .7x


David Einhorn, Greenlight David Einhorn is the founder of Greenlight Capital, a value-oriented, research-driven investment firm with a market-beating long-term track record. He is also author of Fooling Some of the People All of the Time. MOI Signal Rank™ – Top Current Ideas of Greenlight




1 EMC EMC 23,914 11.94 11.40 5% 12,820,000 29% 1% 6%

2 SPDR Gold Trust GLD 33,123 91.55 90.28 1% 4,209,090 14% 1% 16%

3 Hess Corp HES 19,586 58.18 54.20 7% 1,300,000 new position 0% 3%

4 MEMC Electronic Materials WFR 3,585 15.84 16.49 -4% 7,287,698 0% 3% 5%

5 Pfizer PFE 103,514 15.01 13.62 10% 5,930,000 new position 0% 3%

6 Harman International HAR 974 16.51 13.53 22% 3,705,757 new position 6% 2%

7 Target TGT 30,468 40.37 34.39 17% 3,475,444 0% 0% 5%

8 MI Developments MIM 386 8.38 6.14 36% 5,655,235 5% 12% 1%

9 Republic Airways RJET 215 5.85 6.48 -10% 3,382,800 94% 10% 1%

10 Einstein Noah Restaurant BAGL 129 7.78 5.83 33% 10,733,469 0% 67% 3%

Top Holdings of Greenlight – By Dollar Value




1 SPDR Gold Trust GLD 33,123 91.55 90.28 1% 4,209,090 14% 1% 16%

2 URS URS 3,843 46.00 40.41 14% 4,434,924 -5% 5% 7%

3 EMC EMC 23,914 11.94 11.40 5% 12,820,000 29% 1% 6%

4 MEMC Electronic Materials WFR 3,585 15.84 16.49 -4% 7,287,698 0% 3% 5%

5 Target TGT 30,468 40.37 34.39 17% 3,475,444 0% 0% 5%

6 Gold Miners ETF GDX 4,294 37.65 36.88 2% 3,200,000 0% 3% 5%

7 Teradata TDC 3,701 20.60 16.22 27% 6,895,017 6% 4% 5%

8 Allegheny Energy AYE 4,681 25.78 23.17 11% 4,305,000 -4% 3% 4%


10 Hess HES 19,586 58.18 54.20 7% 1,300,000 new position 0% 3%


American Eagle (AEO)

BJ Services (BJS)

Con-way (CNW)

Discover Financial (DFS)

Everest Re (RE)

Foster Wheeler (FWLT)

Harman International (HAR)

Hess (HES)

IPC Holdings (IPCR)

Jones Apparel (JNY)

KKR Financial (KFN)

Liz Claiborne (LIZ)

Max Capital Group (MXGL)

Microsoft (MSFT)

Nike (NKE)

Pfizer (PFE)

Rohm and Haas (ROH)

Wyeth (WYE)

Liberty Media (LCAPA)

IAC/InterActiveCorp (IACI)

China Holdings (HOL)

Centerplate (CVP)

Atlas Pipeline Holdings (AHD)




Median market value $1.1 billion





Brian Gaines, Springhouse Prior to founding Springhouse in 2002, he worked for Gotham Capital. Mr. Gaines is also an adjunct professor at Columbia Business School. On the long side, Springhouse looks for investments that may result in up to 20% maximum loss over time and have 50% upside in a year (or some iteration of multi-years). Gaines typically seeks out 5-10 long ideas and aims to be 70%-90% invested on the long side. On the short side, Gaines invests 1-3% of the fund in each security. MOI Signal Rank™ – Top Current Ideas of Springhouse




1 Health Net HNT 1,750 16.28 14.48 12% 245,096 new position 0% 16%

2 Market Leader LEDR 47 1.95 1.46 34% 1,149,446 >100% 5% 8%

3 Specialty Underwriters’ Alliance SUAI 56 3.62 3.63 0% 117,355 new position 1% 2%

4 Coventry Health Care CVH 2,823 19.09 12.94 48% 321,627 35% 0% 19%

5 PRG-Schultz International PRGX 65 2.88 2.84 1% 463,201 >100% 2% 6%

6 ModusLink Global Solutions MLNK 185 4.18 2.59 61% 1,290,198 7% 3% 15%

7 ZipRealty ZIPR 59 2.99 2.92 2% 605,046 -5% 3% 8%

8 Penson Worldwide PNSN 277 11.09 6.43 72% 163,614 0% 1% 5%

9 Tree.com TREE 123 11.77 4.62 155% 175,581 -13% 2% 4%

Top Holdings of Springhouse – By Dollar Value




1 Coventry Health Care CVH 2,823 19.09 12.94 48% 321,627 35% 0% 19%

2 Health Net HNT 1,750 16.28 14.48 12% 245,096 new position 0% 16%

3 ModusLink Global Solutions MLNK 185 4.18 2.59 61% 1,290,198 7% 3% 15%

4 ZipRealty ZIPR 59 2.99 2.92 2% 605,046 -5% 3% 8%

5 Market Leader LEDR 47 1.95 1.46 34% 1,149,446 >100% 5% 8%

6 PRG-Schultz International PRGX 65 2.88 2.84 1% 463,201 >100% 2% 6%

7 Penson Worldwide PNSN 277 11.09 6.43 72% 163,614 0% 1% 5%

8 Tree.com TREE 123 11.77 4.62 155% 175,581 -13% 2% 4%

9 Specialty Underwriters’ Alliance SUAI 56 3.62 3.63 0% 117,355 new position 1% 2%


Health Net (HNT)

Specialty Underwriters (SUAI)

MF Global (MF)

Thinkorswim Group (SWIM)

UnitedHealth Group (UNH)





Average market value $500 million




Tom Gayner, Markel Gayner Tom Gayner has been President of Markel Gayner Asset Management since 1990 and Executive Vice President and Chief Investment Officer of Markel, a Richmond, Virginia-based international property and casualty insurance holding company, since 2004. Tom has been a disciplined steward of capital on behalf of Markel shareholders, and his long-term investment track record is one of the best in the business. For more information, visit www.markelcorp.com. MOI Signal Rank™ – Top Current Ideas of Markel Gayner




1 Fairfax Financial FFH 4,718 264.00 260.50 1% 279,459 0% 2% 7%

2 Berkshire Hathaway BRK/A 138,038 89,120.00 86,700.00 3% 898 0% 0% 8%

3 United Parcel Service UPS 52,605 51.99 49.22 6% 705,483 1% 0% 3%

4 Investors Title ITIC 66 28.99 28.99 0% 228,850 0% 10% 1%

5 Fidelity National Financial FNF 3,614 15.00 19.51 -23% 1,754,300 0% 1% 3%

6 Schlumberger SLB 64,522 52.05 40.62 28% 36,000 73% 0% 0%


8 Carmax KMX 2,294 10.53 12.44 -15% 5,339,906 0% 2% 7%

9 Sysco SYY 13,491 22.82 22.80 0% 776,698 0% 0% 2%

10 Intel INTC 86,791 15.19 15.03 1% 248,842 0% 0% 0%

Top Holdings of Markel Gayner – By Dollar Value




1 Berkshire Hathaway BRK/B 138,038 2,899.80 2,820.00 3% 31,443 0% 0% 9%


3 Fairfax Financial Holdings FFH 4,718 264.00 260.50 1% 279,459 0% 2% 7%

4 Carmax KMX 2,294 10.53 12.44 -15% 5,339,906 0% 2% 7%

5 Diageo DEO 32,888 52.35 44.75 17% 1,258,456 0% 0% 6%

6 Brookfield Asset Management BAM 10,061 17.18 13.78 25% 3,104,339 0% 1% 4%

7 Wal-Mart Stores WMT 192,122 48.15 52.10 -8% 817,225 0% 0% 4%

8 General Electric GE 138,088 12.86 10.11 27% 3,649,556 0% 0% 4%

9 United Parcel Service UPS 52,605 51.99 49.22 6% 705,483 1% 0% 3%

10 Fidelity National Financial FNF 3,614 15.00 19.51 -23% 1,754,300 0% 1% 3%


SL Green Realty Corp (SLG) Friedman Billings Ramsey (FBR)

Peyto Energy Trust (PEYUF)









Glenn Greenberg, Chieftain Chieftain Capital Management was founded in 1984 by Glenn Greenberg and John Shapiro. The firm runs a concentrated portfolio focused on companies with high returns on capital and sustainable competitive advantage. Chieftain’s long-term performance track record is believed to feature mid teens annualized investment returns. MOI Signal Rank™ – Top Current Ideas of Chieftain




1 US Bancorp USB 33,856 17.67 14.61 21% 12,386,850 new position 1% 10%

2 Waters WAT 4,263 43.48 36.95 18% 3,248,305 new position 3% 7%

3 General Dynamics GD 21,499 55.01 41.59 32% 718,300 new position 0% 2%

4 Rockwell Collins COL 5,952 38.22 32.64 17% 1,811,675 17% 1% 3%


6 Comcast CMCSK 42,064 13.50 12.87 5% 31,714,396 -19% 4% 23%

7 Lab Corp of America LH 6,858 61.66 58.49 5% 4,860,812 -21% 4% 16%

8 Dell DELL 21,325 10.98 9.48 16% 17,491,275 -7% 1% 9%

9 Ryanair Holdings RYAAY 8,302 27.79 23.11 20% 11,341,889 -12% 4% 15%

10 Precision Castparts PCP 10,865 77.31 59.90 29% 1,828,900 -8% 1% 6%

Top Holdings of Chieftain – By Dollar Value




1 Comcast CMCSK 42,064 13.50 12.87 5% 31,714,396 -19% 4% 23%

2 Lab Corp of America LH 6,858 61.66 58.49 5% 4,860,812 -21% 4% 16%

3 Ryanair Holdings RYAAY 8,302 27.79 23.11 20% 11,341,889 -12% 4% 15%

4 US Bancorp USB 33,856 17.67 14.61 21% 12,386,850 new position 1% 10%

5 Dell DELL 21,325 10.98 9.48 16% 17,491,275 -7% 1% 9%


7 Waters WAT 4,263 43.48 36.95 18% 3,248,305 new position 3% 7%

8 Precision Castparts PCP 10,865 77.31 59.90 29% 1,828,900 -8% 1% 6%

9 Rockwell Collins COL 5,952 38.22 32.64 17% 1,811,675 17% 1% 3%

10 General Dynamics GD 21,499 55.01 41.59 32% 718,300 new position 0% 2%


US Bancorp (USB)

Waters (WAT)

General Dynamics (GD)

America Movil (AMX)

Comcast (CMCSA)

Eaton (ETN)

Ingersoll-Rand (IR)









Mason Hawkins, Southeastern Mason Hawkins is chairman and CEO of Southeastern Asset Management, a firm he founded in 1975. Southeastern serves as investment adviser to the Longleaf Partners Funds, a family of value-oriented mutual funds. The firm has $22 billion of assets under management, including $13 billion in separately managed accounts. MOI Signal Rank™ – Top Current Ideas of Southeastern




1 Fairfax Financial FFH 4,718 264.00 260.50 1% 3,087,128 6% 18% 5%

2 tw telecom TWTC 1,689 11.07 8.75 27% 20,873,458 36% 14% 1%

3 Chesapeake Energy CHK 12,974 19.95 17.06 17% 72,431,465 11% 12% 7%

4 Walt Disney DIS 43,597 23.41 18.16 29% 47,519,594 6% 3% 5%

5 Fair Isaac FIC 805 16.59 14.07 18% 7,178,400 0% 15% 1%

6 eBay EBAY 21,666 16.91 12.56 35% 64,205,912 5% 5% 5%

7 Cemex CX 7,224 8.82 6.25 41% 106,388,425 9% 13% 4%

8 Ingersoll-Rand IR 6,510 20.55 13.80 49% 40,508,045 14% 13% 3%

9 Dillard’s DDS 561 7.51 5.70 32% 9,202,748 0% 13% 0%

10 Potlatch PCH 1,085 25.81 23.19 11% 2,930,000 95% 7% 0%

Top Holdings of Southeastern – By Dollar Value




1 Liberty Media Entertainment LMDIA 12,627 23.92 19.95 20% 94,095,643 -17% 19% 11%

2 Chesapeake Energy CHK 12,974 19.95 17.06 17% 72,431,465 11% 12% 7%

3 Walt Disney DIS 43,597 23.41 18.16 29% 47,519,594 6% 3% 5%

4 Yum! Brands YUM 14,849 33.16 27.48 21% 29,784,146 -6% 6% 5%

5 eBay EBAY 21,666 16.91 12.56 35% 64,205,912 5% 5% 5%

6 Fairfax Financial Holdings FFH 4,718 264.00 260.50 1% 3,087,128 6% 18% 5%

7 Dell DELL 21,325 10.98 9.48 16% 74,057,301 -49% 4% 4%

8 Cemex CX 7,224 8.82 6.25 41% 106,388,425 9% 13% 4%

9 DIRECTV Group DTV 24,967 24.23 22.79 6% 27,436,846 -15% 3% 4%

10 Marriott International MAR 7,609 21.57 16.36 32% 34,560,783 36% 10% 3%


None None









Chris Hohn, Children’s Investment Fund Chris Hohn is the founder of London-based The Children’s Investment Fund Management. TCI runs a concentrated portfolio that has historically been heavily weighted in industrials. Hohn has acquired a reputation as an aggressive shareholder activist, most notably forcing the resignation of the CEO of Deutsche Boerse after he refused to abandon a proposed takeover of the London Stock Exchange. Hohn also agitated for a sale of ABN Amro, ultimately pushing it into the hands of RBS. MOI Signal Rank™ – Top Current Ideas of Children’s Investment Fund




1 CSX CSX 10,554 27.67 25.85 7% 17,796,998 0% 4% 63%

2 Visa V 54,597 65.07 55.60 17% 4,812,736 -57% 1% 37%

Top Holdings of Children’s Investment Fund – By Dollar Value




1 CSX Corp CSX 10,554 27.67 25.85 7% 17,796,998 0% 4% 63%

2 Visa Inc V 54,597 65.07 55.60 17% 4,812,736 -57% 1% 37%


None CME Group (CME)

TransAlta (TAC)

Union Pacific (UNP)









Carl Icahn, Icahn Partners Carl Icahn is an activist investor with a long track record of success agitating for change at underperforming companies. Carl publishes an activist investing blog entitled The Icahn Report at www.icahnreport.com. MOI Signal Rank™ – Top Current Ideas of Icahn Partners




1 American Railcar Industries ARII 171 8.11 7.63 6% 11,564,145 77% 54% 3%

2 Icahn Enterprises IEP 2,047 27.27 26.00 5% 68,740,822 0% 92% 65%

3 Biogen Idec BIIB 14,139 49.07 52.42 -6% 3,215,051 0% 1% 6%

4 Yahoo! YHOO 20,589 14.91 12.81 16% 15,113,025 0% 1% 7%

5 Federal Mogul FDML 796 8.05 6.68 21% 75,241,924 0% 76% 18%

6 Guaranty Financial Group GFG 68 0.58 1.05 -45% 3,823,308 0% 4% 0%

7 Lions Gate Entertainment LGF 535 4.55 5.05 -10% 3,358,226 37% 3% 1%

8 Blockbuster BBI/B 185 0.47 0.45 4% 1,113,226 0% 2% 0%

9 Enzon Pharmaceuticals ENZN 297 6.54 6.07 8% 704,214 0% 2% 0%

Top Holdings of Icahn Partners – By Dollar Value




1 Icahn Enterprises IEP 2,047 27.27 26.00 5% 68,740,822 0% 92% 65%

2 Federal Mogul FDML 796 8.05 6.68 21% 75,241,924 0% 76% 18%

3 Yahoo! YHOO 20,589 14.91 12.81 16% 15,113,025 0% 1% 7%

4 Biogen Idec BIIB 14,139 49.07 52.42 -6% 3,215,051 0% 1% 6%

5 American Railcar Industries ARII 171 8.11 7.63 6% 11,564,145 77% 54% 3%

6 Lions Gate Entertainment LGF 535 4.55 5.05 -10% 3,358,226 37% 3% 1%

7 Enzon Pharmaceuticals ENZN 297 6.54 6.07 8% 704,214 0% 2% 0%

8 Guaranty Financial Group GFG 68 0.58 1.05 -45% 3,823,308 0% 4% 0%

9 Blockbuster BBI 185 0.82 0.72 14% 2,630,960 0% 2% 0%


None Cyberonics (CYBX)









Seth Klarman, Baupost Seth Klarman, founder and president of The Baupost Group, is the author of Margin of Safety and one of the most widely respected value-oriented investors. From inception in February 1983 through December 2008, The Baupost Group has delivered an annual compounded return of approximately 20%. MOI Signal Rank™ – Top Current Ideas of Baupost




1 Facet Biotech FACT 222 9.09 9.50 -4% 4,374,407 10% 18% 4%

2 Theravance THRX 842 13.42 17.00 -21% 9,033,741 0% 17% 13%

3 PDL BioPharma PDLI 812 6.85 7.08 -3% 15,559,608 8% 13% 9%

4 News NWS/A 24,191 8.60 6.62 30% 27,500,000 62% 2% 15%

5 BreitBurn Energy Partners BBEP 406 7.47 6.53 14% 8,495,939 4% 16% 5%

6 Exterran Holdings EXH 1,145 17.62 16.02 10% 4,928,925 0% 8% 7%

7 Liberty Media Entertainment LMDIA 12,627 23.92 19.95 20% 4,162,901 0% 1% 7%

8 Syneron Medical ELOS 210 7.13 5.93 20% 3,086,619 0% 11% 2%

9 Horizon Lines HRZ 145 5.00 3.03 65% 3,641,545 0% 12% 1%

10 Ituran Location and Control ITRN 167 7.50 7.59 -1% 1,721,066 41% 8% 1%

Top Holdings of Baupost – By Dollar Value




1 News Corp NWS/A 24,191 8.60 6.62 30% 27,500,000 62% 2% 15%

2 Theravance THRX 842 13.42 17.00 -21% 9,033,741 0% 17% 13%

3 PDL BioPharma PDLI 812 6.85 7.08 -3% 15,559,608 8% 13% 9%

4 Liberty Media Entertainment LMDIA 12,627 23.92 19.95 20% 4,162,901 0% 1% 7%

5 Exterran Holdings EXH 1,145 17.62 16.02 10% 4,928,925 0% 8% 7%

6 Linn Energy LINE 1,997 16.70 14.90 12% 4,000,000 -50% 4% 5%

7 BreitBurn Energy Partners BBEP 406 7.47 6.53 14% 8,495,939 4% 16% 5%

8 Facet Biotech FACT 222 9.09 9.50 -4% 4,374,407 10% 18% 4%

9 News Corp NWS 24,191 9.96 7.70 29% 5,390,600 0% 1% 4%

10 Domtar UFS 742 1.41 0.95 48% 40,585,858 21% 8% 3%


None Liberty Media (LCAPA)

IAC/InterActiveCorp (IACI)

China Holdings (HOL)

Centerplate (CVP)

Atlas Pipeline Holdings (AHD)









Eddie Lampert, RBS Partners Eddie Lampert, founder and managing member of ESL Investments, is a value investor who started out working under Bob Rubin at the arbitrage desk of Goldman Sachs. When he left Goldman to start ESL in 1988, he received the support of Texas investor Richard Rainwater. Lampert compounded ESL’s capital at rates of more than 25% per annum for many years. His largest investment was the much-publicized taking control of Kmart during Kmart’s bankruptcy process in 2002. Lampert engineered the merger of Kmart and Sears in 2004. He is currently chairman and chief capital allocator of the combined firm, Sears Holdings (SHLD). He also still manages his investment partnership, which holds a concentrated investment portfolio. MOI Signal Rank™ – Top Current Ideas of RBS Partners




1 AutoZone AZO 8,569 158.01 162.62 -3% 23,370,297 0% 43% 44%


3 AutoNation AN 2,738 15.97 13.88 15% 79,721,834 0% 45% 13%

4 Capital One Financial COF 11,102 24.54 12.24 100% 11,198,473 13% 3% 2%

5 CIT Group CIT 1,151 2.66 2.85 -7% 15,406,937 0% 4% 1%

6 Acxiom ACXM 730 9.94 7.40 34% 3,293,989 0% 4% 0%

7 Citigroup C 19,570 3.48 2.53 38% 19,083,800 0% 0% 1%

8 Home Depot HD 41,610 24.40 23.56 4% 17,775,486 -10% 1% 5%

9 SLM SLM 2,599 5.55 4.95 12% 5,518,100 -8% 1% 0%

10 KB Home KBH 1,393 15.56 13.18 18% 358,000 0% 0% 0%

Top Holdings of RBS Partners – By Dollar Value




1 AutoZone AZO 8,569 158.01 162.62 -3% 23,370,297 0% 43% 44%


3 AutoNation AN 2,738 15.97 13.88 15% 79,721,834 0% 45% 13%

4 Home Depot HD 41,610 24.40 23.56 4% 17,775,486 -10% 1% 5%

5 Capital One Financial COF 11,102 24.54 12.24 100% 11,198,473 13% 3% 2%

6 Citigroup C 19,570 3.48 2.53 38% 19,083,800 0% 0% 1%

7 CIT Group CIT 1,151 2.66 2.85 -7% 15,406,937 0% 4% 1%

8 SLM SLM 2,599 5.55 4.95 12% 5,518,100 -8% 1% 0%

9 Acxiom ACXM 730 9.94 7.40 34% 3,293,989 0% 4% 0%

10 Genworth Financial GNW 2,162 4.67 1.90 146% 11,524,359 0% 3% 0%


None None






Median price to earnings 15



Dan Loeb, Third Point Dan Loeb is the founder and managing member of long/short hedge fund Third Point. He is a well-known shareholder activist who has accumulated a respectable long-term investment track record. MOI Signal Rank™ – Top Current Ideas of Third Point




1 Wyeth WYE 59,477 44.30 43.04 3% 2,675,000 new position 0% 22%

2 Nabi Biopharmaceuticals NABI 128 2.40 3.70 -35% 6,890,000 0% 13% 5%

3 Depomed DEPO 103 2.06 2.36 -13% 7,050,000 0% 14% 3%


5 Victory Acquisition VRY 403 9.95 9.90 1% 2,611,700 0% 6% 5%

6 Trian Acquisition TUX 1,081 9.41 9.31 1% 2,750,000 0% 2% 5%

7 Liberty Acquisition Holdings LIA 1,151 8.91 8.78 1% 6,914,000 0% 5% 12%

8 Life Partners Holdings LPHI 227 15.35 17.06 -10% 40,000 new position 0% 0%

9 Schering-Plough SGP 38,478 23.35 23.55 -1% 250,000 new position 0% 1%

10 Triplecrown Acquisition TCW 655 9.46 9.37 1% 2,400,000 0% 3% 4%

Top Holdings of Third Point – By Dollar Value




1 Wyeth WYE 59,477 44.30 43.04 3% 2,675,000 new position 0% 22%

2 PHH PHH 910 16.61 14.05 18% 4,890,000 -6% 9% 13%

3 Liberty Acquisition Holdings LIA 1,151 8.91 8.78 1% 6,914,000 0% 5% 12%

4 Victory Acquisition VRY 403 9.95 9.90 1% 2,611,700 0% 6% 5%

5 Trian Acquisition TUX 1,081 9.41 9.31 1% 2,750,000 0% 2% 5%

6 Nabi Biopharmaceuticals NABI 128 2.40 3.70 -35% 6,890,000 0% 13% 5%

7 Triplecrown Acquisition TCW 655 9.46 9.37 1% 2,400,000 0% 3% 4%


9 Sapphire Industrials FYR 961 9.63 9.53 1% 2,000,000 0% 2% 4%

10 Depomed DEPO 103 2.06 2.36 -13% 7,050,000 0% 14% 3%


Amedisys Inc (AMED)

Legg Mason Inc (LM)

Life Partners Holdings Inc (LPHI)

Pfizer Inc (PFE)

Schering-Plough Corp (SGP)

Wyeth (WYE) DineEquity (DIN)

Energy XXI Bermuda (EXXI)

Epicor Software (EPIC)

EXCO Resources (XCO)

Potash (POT)

Rohm and Haas (ROH)

Telephone & Data (TDS)

Teradata (TDC)

TXCO Resources (TXCO)









Steve Mandel, Lone Pine Steve Mandel founded long/short hedge fund Lone Pine Capital in 1997. He previously worked for Julian Robertson’s Tiger Management, Goldman, Sachs and Mars and Company. MOI Signal Rank™ – Top Current Ideas of Lone Pine




1 Deckers Outdoor DECK 666 48.85 53.04 -8% 1,093,072 new position 8% 1%

2 Monsanto MON 49,134 89.95 83.10 8% 4,356,164 3% 1% 4%

3 Strayer Education STRA 2,710 192.60 179.87 7% 785,164 new position 6% 2%

4 Medco Health Solutions MHS 22,252 44.74 41.34 8% 5,949,700 new position 1% 3%

5 Visa V 54,597 65.07 55.60 17% 9,105,957 8% 2% 6%

6 JPMorgan Chase JPM 133,601 34.91 26.58 31% 15,599,128 26% 0% 5%

7 Philip Morris PM 83,210 43.17 35.58 21% 10,080,369 new position 1% 4%

8 Ctrip.com CTRP 2,450 37.02 27.40 35% 3,547,917 new position 5% 1%

9 Apollo Group APOL 10,322 63.70 78.33 -19% 1,888,980 new position 1% 2%

10 PepsiCo PEP 79,194 50.32 51.48 -2% 3,585,600 new position 0% 2%

Top Holdings of Lone Pine – By Dollar Value




1 QUALCOMM QCOM 67,078 40.72 38.91 5% 18,719,202 -8% 1% 8%

2 Visa V 54,597 65.07 55.60 17% 9,105,957 8% 2% 6%

3 America Movil AMX 58,973 35.23 27.08 30% 18,641,417 -22% 2% 6%

4 JPMorgan Chase JPM 133,601 34.91 26.58 31% 15,599,128 26% 0% 5%

5 Monsanto MON 49,134 89.95 83.10 8% 4,356,164 3% 1% 4%

6 Philip Morris PM 83,210 43.17 35.58 21% 10,080,369 new position 1% 4%

7 Mastercard MA 22,426 173.13 167.48 3% 2,102,320 -28% 2% 4%

8 Union Pacific UNP 23,138 46.58 41.11 13% 7,199,986 5% 1% 3%

9 Medco Health Solutions MHS 22,252 44.74 41.34 8% 5,949,700 new position 1% 3%

10 Google GOOG 122,426 390.00 348.06 12% 591,399 -30% 0% 2%


Apollo Group (APOL)

Coca-Cola (KO)

Ctrip.com (CTRP)

Deckers Outdoor (DECK)

Mead Johnson Nutrition (MJN)

Medco Health Solutions (MHS)

MSC Industrial Direct (MSM)

PepsiCo (PEP)

Philip Morris (PM)

SLM (SLM)

Strayer Education (STRA)

Urban Outfitters (URBN)

Abercrombie & Fitch (ANF)

Charles Schwab (SCHW)

Lorillard (LO)

Teradata (TDC)









Mohnish Pabrai, Pabrai Funds Mohnish Pabrai is founder and managing partner of Pabrai Investment Funds, a family of value-oriented investment partnerships with a fee structure similar to that of the Buffett Partnerships of the 1950s and ‘60s, i.e. no management fee and 25% performance fee above 6% annual hurdle rate. Pabrai Funds have a long-term track record vastly superior to that of the S&P 500 Index. Pabrai follows an investment strategy built upon the principles of Graham, Buffett and Greenblatt. MOI Signal Rank™ – Top Current Ideas of Pabrai Funds




1 Berkshire Hathaway BRK/B 138,038 2,899.80 2,820.00 3% 5,888 >100% 0% 12%

2 Cresud CRESY 439 8.59 7.26 18% 1,439,131 >100% 3% 8%

3 Ternium TX 3,051 15.41 6.85 125% 1,783,944 0% 1% 9%

4 Air Transport Services ATSG 59 0.87 0.76 14% 5,393,962 0% 9% 3%

5 Leucadia National LUK 4,992 19.84 14.89 33% 779,472 1% 0% 9%

6 Goldman Sachs GS 69,104 134.40 106.02 27% 110,864 0% 0% 9%

7 Fairfax Financial Holdings FFH 4,718 264.00 260.50 1% 46,032 -21% 0% 9%

8 Wells Fargo WFC 122,183 24.87 14.24 75% 371,001 new position 0% 4%

9 Horsehead Holding ZINC 213 6.35 5.50 15% 1,366,998 -22% 4% 6%

10 Potash POT 31,870 107.14 80.81 33% 154,140 -2% 0% 9%

Top Holdings of Pabrai Funds – By Dollar Value




1 Harvest Natural Resources HNR 169 4.81 3.39 42% 5,694,701 0% 17% 14%

2 Berkshire Hathaway BRK/B 138,038 2,899.80 2,820.00 3% 5,888 >100% 0% 12%

3 Potash POT 31,870 107.14 80.81 33% 154,140 -2% 0% 9%

4 Ternium TX 3,051 15.41 6.85 125% 1,783,944 0% 1% 9%

5 Fairfax Financial Holdings FFH 4,718 264.00 260.50 1% 46,032 -21% 0% 9%

6 Goldman Sachs GS 69,104 134.40 106.02 27% 110,864 0% 0% 9%


8 Cresud CRESY 439 8.59 7.26 18% 1,439,131 >100% 3% 8%

9 Horsehead Holding ZINC 213 6.35 5.50 15% 1,366,998 -22% 4% 6%

10 Teck Resources TCK 6,072 12.10 5.55 118% 1,009,501 3% 0% 4%


Wells Fargo (WFC) CompuCredit (CCRT)

CryptoLogic (CRYP)









Rich Pzena, Pzena Investment Management Rich Pzena founded Pzena Investment Management, a deep value investment firm, in 1995 with the backing of Joel Greenblatt. Pzena Investment Management went public in 1997 and trades under the symbol PZN. MOI Signal Rank™ – Top Current Ideas of Pzena Investment Management




1 Microsoft MSFT 178,528 20.22 18.37 10% 12,373,685 0% 0% 3%

2 Magna International MGA 3,574 30.88 26.75 15% 8,362,555 8% 7% 3%

3 Skechers U.S.A. SKX 430 9.28 6.67 39% 1,906,150 >100% 6% 0%

4 Boeing BA 31,546 43.00 35.58 21% 5,723,769 51% 1% 3%

5 Ciber CBR 223 3.20 2.73 17% 4,047,091 34% 6% 0%

6 Lowe’s LOW 27,819 18.45 18.25 1% 936,750 >100% 0% 0%

7 Charles River Labs CRL 1,866 28.01 27.21 3% 662,100 new position 1% 0%

8 TJX Cos TJX 11,084 26.84 25.64 5% 5,408,692 >100% 1% 2%

9 Lam Research LRCX 3,114 24.39 22.77 7% 402,615 new position 0% 0%

10 Zoran ZRAN 489 9.76 8.80 11% 362,132 new position 1% 0%

Top Holdings of Pzena Investment Management – By Dollar Value




1 JC Penney JCP 5,923 26.54 20.07 32% 14,737,775 -9% 7% 4%

2 Northrop Grumman NOC 15,795 48.09 43.64 10% 6,550,868 -7% 2% 4%

3 Microsoft MSFT 178,528 20.22 18.37 10% 12,373,685 0% 0% 3%


5 Sempra Energy SRE 10,949 44.25 46.24 -4% 4,751,472 -23% 2% 3%

6 Motorola MOT 13,250 5.91 4.23 40% 49,311,882 16% 2% 3%

7 Allstate ALL 13,543 24.30 19.15 27% 10,711,158 6% 2% 3%

8 Boeing BA 31,546 43.00 35.58 21% 5,723,769 51% 1% 3%

9 CA CA 9,480 18.04 17.61 2% 11,455,892 -36% 2% 3%

10 Omnicom Group OMC 9,717 30.97 23.40 32% 8,034,488 28% 3% 3%


Adaptec (ADPT)

Avon Products (AVP)

Baker Hughes (BHI)

Charles River Labs (CRL)

Coach (COH)

Heartland Payment (HPY)

Horizon Lines (HRZ)

Lam Research (LRCX)

Liz Claiborne (LIZ)

Mednax (MD)

Petroleo Brasileiro (PBR)

Time Warner Cable (TWC)

Valero Energy (VLO)

Zoran (ZRAN)

Amgen (AMGN)

Bowne & Co (BNE)

Computer Sciences (CSC)

Everest Re Group (RE)

Hanger Orthopedic (HGR)

Hasbro (HAS)

IDACORP (IDA)

Kimberly-Clark (KMB)

Kohl’s (KSS)

Milacron (MZIAQ)

National City (NCC)

Old Republic (ORI)

PharmaNet Development (PDGI)









Ken Shubin Stein, Spencer Capital Dr. Shubin Stein is the founder of Spencer Capital, a deep value-oriented investment management firm. MOI Signal Rank™ – Top Current Ideas of Spencer Capital






3 Consolidated-Tomoka Land CTO 166 29.41 29.70 -1% 11,539 new position 0% 0%

4 Digimarc DMRC 73 9.80 9.72 1% 10,933 new position 0% 0%

5 Contango Oil & Gas MCF 669 42.01 39.20 7% 13,000 new position 0% 1%

6 dELiA*s DLIA 59 2.03 1.67 22% 507,612 8% 2% 1%

7 Winthrop Realty Trust FUR 158 9.21 6.91 33% 89,019 89% 1% 1%

8 John Bean Technologies JBT 365 13.51 10.46 29% 126,143 0% 0% 2%

9 Ambassadors International AMIE 5 0.45 0.36 25% 252,524 39% 2% 0%

10 Wendy’s / Arby’s WEN 2,038 4.24 5.03 -16% 988,502 -18% 0% 7%

Top Holdings of Spencer Capital – By Dollar Value




1 Sears Holdings SHLD 6,271 49.87 45.71 9% 110,545 -6% 0% 7%

2 Wendy’s / Arby’s WEN 2,038 4.24 5.03 -16% 988,502 -18% 0% 7%


4 Brookfield Asset Management BAM 10,061 17.18 13.78 25% 259,280 -12% 0% 5%


6 American Express AXP 28,864 24.23 13.63 78% 151,980 -9% 0% 3%

7 Huntsman HUN 1,441 5.90 3.13 88% 510,000 28% 0% 2%

8 John Bean Technologies JBT 365 13.51 10.46 29% 126,143 0% 0% 2%

9 Crosstex Energy XTXI 149 3.02 1.64 84% 658,274 -36% 1% 2%

10 dELiA*s DLIA 59 2.03 1.67 22% 507,612 8% 2% 1%


Consolidated-Tomoka (CTO)

Contango Oil & Gas (MCF)

Digimarc (DMRC)

Wells Fargo (WFC)

EMC (EMC)

Mastech Holdings (MHH)









Prem Watsa, Fairfax Prem Watsa is the founder, chairman and CEO of Fairfax (FFH), a Canadian property/casualty insurance and reinsurance firm. While managing Fairfax’s investment portfolio over the past couple of decades, Watsa has built a reputation as an astute value investor. Some have called him “Warren Buffett of Canada.” In recent years, Watsa’s firm successfully defended itself against short sellers who allegedly conspired to drive down the price of Fairfax stock and hurt the company’s business. MOI Signal Rank™ – Top Current Ideas of Fairfax




1 US Bancorp USB 33,856 17.67 14.61 21% 15,837,500 >100% 1% 5%

2 Odyssey Re Holdings ORH 2,403 39.99 37.93 5% 42,399,400 0% 70% 36%

3 Wells Fargo WFC 122,183 24.87 14.24 75% 20,028,700 >100% 0% 6%

4 Overstock.com OSTK 254 10.82 9.15 18% 3,388,774 0% 15% 1%

5 International Coal Group ICO 433 2.68 1.61 66% 36,539,400 21% 24% 1%


7 BCE BCE 16,250 20.34 19.90 2% 3,180,000 new position 0% 1%

8 Berkshire Hathaway BRK/B 138,038 2,899.80 2,820.00 3% 120 new position 0% 0%

9 Baldwin & Lyons BWINB 290 18.91 18.92 0% 969,875 0% 8% 0%


Top Holdings of Fairfax – By Dollar Value




1 Odyssey Re Holdings ORH 2,403 39.99 37.93 5% 42,399,400 0% 70% 36%

2 Johnson & Johnson JNJ 151,611 55.41 52.60 5% 6,884,300 -10% 0% 8%

3 Wells Fargo WFC 122,183 24.87 14.24 75% 20,028,700 >100% 0% 6%

4 US Bancorp USB 33,856 17.67 14.61 21% 15,837,500 >100% 1% 5%

5 Dell DELL 21,325 10.98 9.48 16% 23,860,300 -10% 1% 5%

6 Pfizer PFE 103,514 15.01 13.62 10% 16,314,700 -9% 0% 5%

7 Kraft Foods KFT 36,966 24.80 22.29 11% 9,949,871 -9% 1% 5%


9 Level 3 Communications LVLT 1,758 1.05 0.92 14% 139,276,421 0% 9% 3%



BCE (BCE)

Berkshire Hathaway (BRK/B)

Leucadia National (LUK)

Methanex (MEOH)

Abbott Laboratories (ABT)

AstraZeneca (AZN)

Mohawk Industries (MHK)

Progressive (PGR)









Marty Whitman, Third Avenue Marty Whitman is founder of Third Avenue and portfolio manager of the Third Avenue Value Fund (TAVFX). He places heavy emphasis on balance sheet analysis as part of the investment process. MOI Signal Rank™ – Top Current Ideas of Third Avenue




1 Cavco Industries CVCO 161 23.65 23.60 0% 839,540 11% 13% 1%

2 Skyline SKY 173 20.51 19.01 8% 1,712,129 6% 20% 1%

3 Sycamore Networks SCMR 826 2.86 2.67 7% 44,790,880 5% 16% 3%

4 Cross Country Healthcare CCRN 243 7.76 6.55 18% 5,925,705 12% 19% 1%

5 Bristow Group BRS 744 25.55 21.43 19% 2,972,804 1% 10% 2%

6 Tejon Ranch TRC 424 24.81 20.67 20% 4,930,414 1% 29% 3%

7 POSCO PKX 28,343 80.70 66.83 21% 4,399,504 1% 1% 8%

8 Thomas Properties Group TPGI 60 1.45 1.18 23% 2,730,049 4% 11% 0%

9 Agriculture Total Return ETN JJA 49 43.02 38.74 11% 132,472 0% 11% 0%

10 Alexander & Baldwin ALEX 946 23.55 19.03 24% 3,077,423 new position 8% 2%

Top Holdings of Third Avenue – By Dollar Value




1 POSCO PKX 28,343 80.70 66.83 21% 4,399,504 1% 1% 8%

2 Brookfield Asset Management BAM 10,061 17.18 13.78 25% 21,308,240 -8% 4% 8%

3 Bank of New York Mellon BK 33,999 27.68 28.25 -2% 9,379,811 0% 1% 7%

4 Tellabs TLAB 1,916 4.86 4.58 6% 31,816,993 -2% 8% 4%

5 Cimarex Energy XEC 2,332 27.55 18.38 50% 7,669,005 10% 9% 4%

6 AVX AVX 1,679 9.60 9.08 6% 13,541,843 -14% 8% 3%

7 EnCana ECA 38,772 50.32 40.61 24% 2,985,694 22% 0% 3%

8 Covanta Holding CVA 2,468 15.76 13.09 20% 9,196,289 1% 6% 3%

9 Nabors Industries NBR 4,826 16.06 9.99 61% 12,018,000 1% 4% 3%

10 Sycamore Networks SCMR 826 2.86 2.67 7% 44,790,880 5% 16% 3%


Agrium (AGU)

Blockbuster (BBI)

ConocoPhillips (COP)

IAMGOLD (IAG)

JER Investors Trust (JERT)

Kimco Realty (KIM)

Lundin Mining (LUN)

Weyerhaeuser (WY)

Brookline Bancorp (BRKL)

Crystal River Capital (CYRV)

Fair Isaac (FIC)

IDT (IDT)

JER Investors Trust (JRT)

Leapfrog Enterprises (LF)

Legg Mason (LM)

Origen Financial (ORGN)

Phoenix Cos (PNX)

Suncor Energy (SU)









Exclusive Interview with Zeke Ashton

Zeke Ashton of Centaur Capital Partners spoke eloquently on the topic of value investing and risk management at the Value Investing Congress in Pasadena earlier this month. We found Zeke’s presentation enlightening and asked him to elaborate on some of his key points. A week or so ago, we conducted an exclusive interview with Zeke, and it’s our pleasure to bring it to you here.

Before we proceed to the interview, we should point out that Zeke’s approach to risk management has worked. In 2008, the Centaur Value Fund was down 6.9%, trouncing the 37.1% and 40.0% declines of the S&P 500 and Nasdaq Composite indexes. From inception in August 2002 through the end of 1Q09, the Centaur Value Fund gained 134.6%, net of fees and expenses, versus returns of 15.1% for the Nasdaq Composite and -0.3% for the S&P 500 Index.

MOI: You spoke recently on the topic of value investing and risk management. The “backdrop” was the somewhat surprising fact that a number of prominent value investors suffered debilitating losses in the market collapse of 2008 and early 2009. Adherence to “margin of safety” principles apparently didn’t help. Why?

Zeke Ashton: I think that is a very good question, and I don’t think there is any one easy answer. Part of it was simply because very few investors were prepared for such an extreme negative scenario as the one that ultimately played out. I know we didn’t foresee things deteriorating as much as they did. What transpired in late 2008 and early 2009 was so far outside of the range of experience for most people that it didn’t seem like a plausible scenario twelve months before. With perfect 20/20 hindsight, of course, it is easy to see the warning signs that were present, but most investors simply continued to do the things which had rewarded them in the past, not knowing that this time might be different.

We and many other value investors have historically been rewarded for buying in times of fear and uncertainty, as well as for purchasing stocks that were cheap relative to asset values or normalized earnings power. However, in 2008 it wasn’t enough to buy stocks that looked cheap based on low multiples to book value or normalized earnings. Many companies, particularly in the financial sector, won’t get the chance to recover to normalized earnings because they got wiped out or were forced to dilute their shareholders to the extent that the losses are effectively permanent. In the end, it appears to me that when faced with an extreme environment like 2008 and early 2009, there are really only two things that can save you: the luck or skill to see it coming and get out of the way, or a portfolio structure and risk management approach that is specifically designed to promote survival in a catastrophic scenario that you didn’t see coming. I feel very fortunate that we had a portfolio that was able to take some hits and survive to play another day.


MOI: You have stated that top-down risk management policies “can make the difference between survival and failure in a year like 2008.” What do those top-down policies look like at Centaur? What factors would cause them to differ from one investment manager to the next?

Zeke Ashton: Well, first of all I want to be clear that we didn’t get everything right, but I can think of a few specific policies that helped us in the past year. The first was to introduce sector risk limits when we noticed that we were coming up with a lot of retail long ideas in late 2007 and early 2008 as that sector became hated and feared. And though not all retail businesses or retail stocks behave the same way, we felt that it would be wise to limit the overall retail basket to no more than 20% of the portfolio. This was both to respect the uncertain economic environment and due to the fact that exposure to general discretionary consumer spending tends to show up in a lot of other sectors besides retail.

I am convinced that had we not set a hard limit, we ultimately could have justified owning a lot more retailers than we did and would have been hurt far worse in the sell-off that followed. Having a limit meant that when we wanted to buy Target at $40, for example, we had to replace something in our portfolio that we thought it was better than, which for us meant selling Sears Holdings at $90. It’s not important whether Sears ended up falling more than Target; what is important is that none of our retail stocks did particularly well and the decision to limit our exposure to the group allowed us to keep our overall losses to a bearable level. In turn, that enabled us to hold on to our positions long enough to see some of them eventually recover in price. We have now adopted 20% as our de-facto limit to any one sector, though we will likely modify that limit up or down for specific sectors over time as we gain more insights.

The second example was our decision way back in 2005 to limit our portfolio-wide exposure to stocks with limited liquidity. If it’s hard to get into or out of a stock without moving the price, we simply go smaller on the position size at the individual idea level. In addition, we have limited the percentage of our fund that can be in low-liquidity stocks to no more than 30%. This was helpful to us in mid-2008 when we identified new risk factors emerging and were able to exit some of our less liquid ideas in a timely manner and without hurting ourselves in the process.

As far as differences from one manager to another, clearly what might be appropriate for one manager or shop might not work for another. For example, a broad sector limit likely won’t be useful to a fund manager who specializes in only one or two sectors. The specialist manager will need to develop a risk management framework that is quite different from a generalist shop like Centaur. Risk management isn’t all about setting hard quantitative limits; each manager needs to consider the nuances of his or her strategy and investing process and implement whatever policies make the most sense. When it comes to risk management, I think the simpler the better.


MOI: Prior to 2008, many value investors did not give sufficient thought to portfolio management as a source of risk-adjusted outperformance. Thoughts on position sizing often referenced the so-called Kelly Formula, which seemed to justify taking very large positions. You have stated that, “Investors who rely on the Kelly Formula as intellectual support to take excessively sized bets will accelerate gambler’s ruin, not avoid it.” Is this because most investment managers must contend with the capital outflow risks of open-ended funds, or because the odds of success are more subjective in investing than in gambling?

Zeke Ashton: I think it’s both of those things. The Kelly Formula is a useful concept, and the book Fortune’s Formula by William Poundstone is one of the best financial books I’ve ever read from the standpoint of pure enjoyment. The idea of the formula is to find the optimum bet size to maximize gains and minimize the risk of going broke. But I think that the formula’s utility to stock market investors is limited due to the much higher level of complexity and uncertainty that exists in the real world.

In addition, as you point out, the Kelly Formula assumes that one has use of the full bankroll until it is exhausted. In the world I live in, investors get scared and will want their money back once they’ve reached a certain pain threshold, and I don’t know exactly where that threshold is. Obviously, the investor with truly permanent capital doesn’t have this problem, but as a professional investor with a fluid capital base, it is a limiting factor for me.

Finally, it is my understanding that Kelly assumes a series of bets with independent outcomes, and therefore fails to account for the correlation of positions inherent within a real life stock portfolio. There is an old saying in the financial markets that in times of extreme stress, the correlation of most investment assets gravitates to one, and I think we witnessed the closest thing possible to that in late 2008 and early 2009. All that said, my only point in mentioning the formula in my recent presentation was to voice my opinion that some people just got a little carried away with the ultra-concentration thing. The book and the Kelly Formula may have been a source of unintended encouragement in that regard.

MOI: Is there a danger of overreacting to what happened in 2008? After all, many value investors have achieved superior long-term performance because they have avoided the closet-indexing style of a large portion of the active management universe. How do you ensure that risk limits and diversification don’t become unnecessary drags on risk-adjusted performance?

Zeke Ashton: I think there is a danger to extracting lessons that would have been useful in pain avoidance during 2008 that may not be applicable going forward, and certainly could result in sub-optimal performance in the “normal” investing conditions that prevail 95% of the time. However, I don’t think it will cause an unacceptable drag on performance to establish reasonable total exposure and position size limits, appropriate sector limits, or to be prudent in terms of how much of one’s portfolio might be invested in illiquid assets.


Just as an example, we haven’t changed our portfolio structure much as a result of recent experience. It was pretty standard for us to have 50-60% of our assets invested in our top ten ideas prior to 2008, and we aren’t likely to change. In fact, we actually have a bit more than that invested in our top ten long ideas today. Around the edges, though, we might be a little more sensitive to nuances such as balance sheet risk at each idea than we were before, or to correlation amongst our top positions. But I don’t think 2008 has brought wholesale changes to our ways of thinking about portfolio risk management. It’s mostly been refinements based on having witnessed a real life stress test and learning what helped us and what we might have done better – without changing the philosophy and approach that define us as investors. The core elements of value investing will still always be about valuing businesses and assessing risk. The environment of 2008 and early 2009 served to shine a brighter spotlight on the risk assessment component of the game.

MOI: You have differentiated between the “home run” and “high probability” styles of value investing. Eddie Lampert has succeeded at home run investing, while Seth Klarman has excelled at high-probability investing. Assuming that each style represents a legitimate approach, what are the key differentiating qualities of a home run investor versus a high-probability investor? Why do you favor the high-probability approach?

Zeke Ashton: My categorization is a bit simplistic, but I do think some investors are naturally wired to take a high-percentage approach to beating the market through the accumulation of small advantages over time. Others are naturally more inclined to take the proverbial big swings in an attempt to hit the home runs that can really move the needle and drive outstanding performance. As you say, both are legitimate approaches to beating the market.

My preference for the high probability road is mostly because it’s more compatible with my personality and risk tolerance. I find it comforting to know that over a large enough sample of decisions, luck tends to even out and one is left with a track record that more or less reflects one’s skill level. For the same reason that a skilled sports team playing a less skilled team should prefer to play a seven game series rather than a one-game playoff, we want our results over time to reflect our skills and not our luck. We also have made enough mistakes to know that we are fallible. We don’t want one or two bad outcomes to define our results for any meaningful period of time.

I think it’s important to point out that one factor in favor of the high probability style for Centaur is that we have a co-portfolio management system. My business partner and co-manager Matthew Richey comes up with ideas that are independent of mine. Matthew would probably be fine with either the home run approach or the high probability approach, but since it is easier for him to adapt to the high probability approach than it is for me to adapt to the home run approach, that’s what we do. In addition, in 2006 we added a third analyst to our team, Bryan Adkins, and he produces a number of new actionable ideas for us to consider each year. So with three analysts actively hunting for bargains, chances are that we will dig up enough good ideas to populate a 20 or 25 stock portfolio. Our goal is to deploy capital when we see an idea that we think can allow us to produce a 20% IRR with acceptable risk. If each of us comes up with six new


compelling ideas per year, that’s eighteen ideas, not including any previous ideas that are still sitting in our portfolio. Many times, we have way more qualifying ideas than we have room in the portfolio, so new ideas often are competing with existing ideas for capital. I think that is a healthy dynamic.

I also happen to think that the high-probability style is better suited to managing other people’s capital than the home run style. For example, let us say you happen to be a young Eddie Lampert and 2008 was your first year as a fund manager. You have a five stock portfolio, and you are unlucky and have a -60% year. You probably don’t get a second year, unless you managed to convince your investors to give you a three or five year lock-up. On the other hand, let’s suppose you are a young Seth Klarman and your portfolio has enough ideas in it to allow your skill to work for you a bit more. You probably didn’t have a great year, but you also likely beat the market. So it’s not a great way to start, but you probably get a chance to stay in the game for another year or two. This is a critical difference — you can’t succeed in the long term if you don’t stay in the game.

MOI: Your insight into recourse versus non-recourse leverage in an investment portfolio is enlightening. How do you approach leverage in general and how much exposure to non-recourse leverage do you typically seek?

Zeke Ashton: Basically, my view is that there are two flavors of leverage, and one is vastly superior to the other. One can take recourse leverage by going on margin to buy a stock, but the downside is that with enough leverage, even a moderate and temporary decline in the stock price can produce a very significant loss, and a significant decline can wipe you out. The other kind is non-recourse leverage, where you get the benefits of the leverage if the stock goes up, but at some point the losses become non-recourse to you in the event the stock declines significantly. The way to get non-recourse leverage relatively cheaply is through in-the-money call options (we favor long-term options going out at least 15 months).

As an example, in the summer of 2008, we decided that American Express looked cheap at a price of about $37. Rather than buy the stock, we bought a long-dated $30 call option, for which we paid about $9. This means that our effective purchase price for the stock was $39 rather than $37. The incremental $2 was about 5.4% of the stock price, and represented both the cost of the leverage and the cost of the loss protection if the stock were to drop below $30. We felt it was unlikely that we would need significant loss protection below $30 at the time. Luckily for us, we later sold Amex to buy something else that we thought was cheaper. Subsequently, the stock plummeted to under $10. Had we not sold it, we would have lost the entire premium we paid for our Amex position but it would have been a fraction of the loss we would have suffered had we bought the common stock and ridden it down. We would have been stopped out below $30, with any losses beyond that point having no recourse to us.

This brings me to the second part of the question, which is how we size positions when we use options. Basically, we size the idea in such a way that we economically control the same number of shares we otherwise would control if we just bought the stock. As an example, let’s say we wanted a given stock to be


a 5% position. We would buy options on the exact number of shares that would otherwise comprise a 5% position if we bought the common. Now we have all the benefits of owning a 5% position if we are right, but we have limited the potential loss on the position to only a portion of that same 5% weighting if we are wrong.

At the portfolio level, we have a maximum long exposure of 125%, and we would consider our long exposure on the idea to be 5% whether we bought the common stock or we used the call options to control the identical number of shares. We don’t use options to increase our idea-level exposure, since that would simply offset the benefits of the non-recourse leverage by increasing the position size. But using options does in part allow us to consistently run a portfolio that has true economic exposure that is greater than 100% of our assets on the long side if we want to, funded in part by the leverage inherent in call options and in part by the float created by our short portfolio. And we can do so without being at the mercy of margin calls or worrying about suffering outsized losses.

MOI: When it comes to stock selection, what are the key criteria you look for in long positions versus short positions?

Zeke Ashton: I think we are similar to most other value investors in terms of what we are looking for — we are looking for dollar bills trading at a discount, like everyone else. We tend to emphasize finding undervalued businesses based on low multiples to free cash flow or book value since those lend themselves a bit easier to analysis. But we are flexible and are always looking for stocks that may not appear to be cheap statistically but are nevertheless trading at significant discounts to true underlying business or asset value. We very much prefer our ideas to take the form of high quality businesses with excellent management that can grow value over the longer term, but we will buy mediocre assets if the price is right. We think being generalists can be an advantage, as we have the flexibility to go digging for bargains in whatever sector we think might be most out of favor or neglected at any given time.

On the short side, we are looking for the polar opposite, though our short ideas tend to fall into a few broad categories. Businesses that chronically burn cash represent one category that has worked for us over time, as are those businesses that have taken on more debt than the cash produced by the business can support. Finally, we will short fad companies, companies that are aggressive with the accounting and thus over-stating their economic value, or even good companies that are simply egregiously overvalued. In general, we typically have anywhere between six and twelve individual shorts in our portfolio at any one time.

MOI: How do you generate investment ideas?

Zeke Ashton: We get ideas from all sorts of places. We used to get a sizable number of leads from statistical screening, and we still use screens, but we have found them in recent years to be more productive in sourcing short ideas rather than long ideas. Nevertheless, we still scan through lists of stocks that appear to be cheap from a statistical basis and occasionally we find a good one.

One of our major idea sources these days is from the inventory of the many ideas we’ve owned or researched at some point in the past – many times, after we’ve sold those stocks, the price will come back down to a level that


makes them very interesting again. Since we generally already know the company, it is just a matter of getting quickly up to speed with the latest developments to determine if it is actionable. We also find occasional ideas by doing industry overviews to get to know a number of players in a specific sector or niche that we think may be out of favor or neglected for some reason. Often we will find a gem or two. Finally, we get some ideas through our network of value investing contacts, and through a number of specialized research publications that we have found are compatible with our approach, of which your own publication would be one example. But no matter the source, the ideas are merely candidates until we’ve actually produced a piece of internal research that covers the bases and gives us confidence that we understand the business, can reasonably value it and also gauge the risks factors involved. And of course, the stock has to be cheap.

MOI: What is the single biggest mistake that keeps investors from reaching their goals?

Zeke Ashton: That’s a tough question. There are a probably an infinite number of ways one can screw things up. But I think one can capture a very large percentage of the possible mistakes under one broad roof by saying that a lack of a coherent investment strategy that makes sense and can be followed with discipline and perseverance is the biggest mistake investors make. Without an intelligent framework for making decisions, it’s awfully hard to succeed.

MOI: What books have you read in recent years that have stood out as valuable additions to your investment library?

Zeke Ashton: In my opinion, the most important investing book to come along in many years has been Fooling Some of the People All of the Time by David Einhorn. In writing a story about a “garden variety fraud” at a company called Allied Capital and his efforts to expose it, this book sheds a lot of light on the ugly realities of our financial regulatory system and how that system has become so terribly dysfunctional. The system is particularly unjust to short sellers who do the difficult and thankless work of uncovering fraud or excess risk at publicly traded companies. To those who wonder how a fraud on the scale of that perpetuated by Bernie Madoff could have gone undetected for so long, this book provides some answers. As an aside, it took a lot of courage for Mr. Einhorn to continue his struggle against Allied Capital and to publish this book, as the personal risks to his business and reputation were very real. For that, he has my respect and admiration.

The investing book I read most recently was More Mortgage Meltdown by Whitney Tilson and Glenn Tongue of T2 Partners. The book is a very readable and accessible discussion of how the mortgage crisis happened, and more importantly, offers some very good perspective on how the credit crisis may develop from here. In addition, there are a number of timely investment ideas presented in the form of detailed case studies that will be valuable for both beginner and advanced investors. I should disclose that Whitney and Glenn are friends of mine and that my firm manages the Tilson Dividend Fund through a joint venture with T2 Partners. So while I am no doubt a bit biased, I enjoyed the book and found it very stimulating food for thought.

MOI: Zeke, thank you very much for taking the time to interview with us.


About Zeke Ashton

Zeke Ashton is the managing partner of Centaur Capital Partners and manages the investments for the Centaur Value Fund. From November 1999 to July 2002, Mr. Ashton served as the general partner and portfolio manager of Centaur Investments LP, a private investment partnership and the predecessor entity to the Fund. From 1999 to 2001, Mr. Ashton was an investment analyst and writer for The Motley Fool, a media company that specializes in investing and personal finance. Mr. Ashton continues to write for The Motley Fool as a guest columnist.

About Centaur Capital

Centaur Capital Partners, LP is an asset management company and investment advisor based in Dallas, Texas. Centaur Capital Partners follows an investment philosophy based upon value principles, and selects stock investments based upon true business value as reflected by asset value, cash flow generation, management quality, and the competitive advantages of the underlying businesses when such stocks are available at compelling prices. Centaur Capital Partners is the General Partner and investment advisor to the Centaur Value Fund. The Centaur Value Fund is a long-biased, value-oriented private investment partnership open to accredited investors. The fund is limited to 99 partners. The Centaur Value Fund was launched on August 1, 2002. For more information, visit www.centaurcapital.com.


Exclusive Interview with Igor Lotsvin

Igor Lotsvin and David Chu of Soma Asset Management recently presented at the Value Investing Congress in Pasadena. Their talk was entitled, The U.S. Banking Sector: Chaos and Opportunity. Last week, we conducted an exclusive interview with Igor Lotsvin, and it’s our pleasure to bring it to you here.

Soma Asset Management benefited from its bearish outlook on credit in 2008, reporting a return of 26%, net of fees.

MOI: What was the impetus for starting Soma Asset Management and how would you describe the essence of your firm?

Igor Lotsvin: At the end of 2006 we noticed very rapid deterioration in the credit statistics of most consumer loans – residential housing, credit cards, auto loans, etc. This was surprising, as at the time, unemployment level was low and capital markets were flooded with abundant liquidity. As we further investigated various credit asset classes — leveraged loans, high yield, CDOs, etc. — we came to the conclusion that the world was in the middle of a credit bubble, not simply a housing bubble. The bubble began to burst in the weakest part of housing market – subprime, to be exact. But we felt that it would likely spread to all asset classes. At the time very few people shared our view, and David Chu and I decided to start our firm to effectuate that variant view.

We are value investors who pursue the most compelling risk-reward asymmetric opportunities across the entire capital structure. We can be invested in debt, loans, equity or options, depending on the risk-reward outlook. Moreover, we believe that capital markets are intricately and, over longer periods of time, always linked. Hence we try to find opportunities where we believe dislocations are temporary and markets converge.

Specifically we pursue three separate strategies – long/short across the capital structure, capital structure arbitrage, and distressed value investing.

MOI: What lessons have you and David learned running your own firm that you might not have learned in your previous role at Symphony Asset Management?

Igor Lotsvin: We have a much broader mandate at Soma than in a typical hedge fund. The ability to invest across the capital structure presents us with a unique vantage point into how different markets function and interact. Quite often, investors who are only limited to investing in equities, for example, miss the developments in credit markets completely and may miss the next big development.

MOI: You seek out investments with limited downside risk. How do you ascertain such risk?


Igor Lotsvin: We constantly and vigilantly manage risk. We use no leverage, we rarely have more than 50% net directional market exposure and don’t have more than 15% of capital in one particular industry. For long ideas, we look for situations that have a sustainable and quantifiable margin of safety and we control the risk of our short book by limiting position sizes.

MOI: Many bottom-up investors suffered steep losses in 2008, and one could make the case that ignoring macroeconomic variables is no longer an option for any professional investor. Your investment process produced an impressive +26% net result in 2008. Can you walk us through this process?

Igor Lotsvin: The world is undergoing a dramatic deleveraging phenomenon the likes of which this country has never seen, even during the times of the Great Depression. Take, for example, the housing market. During the Great Depression home prices in the United States dropped just over 15% over a seven-year period beginning in 1929. Today, U.S. home prices are already down over 30% from the peak of just three years ago and prices continue to collapse. By ignoring these big macro data points, bottom-up investors expose themselves to excessive risk in our opinion.

Since we have the ability to look across the entire set of market instruments, we noticed that housing-related instruments started to trade off as early as 2006 – this gave us insight to short banks through 2008. In general, we combine a big picture view with rigorous bottom-up research.

MOI: You articulated a strongly negative view of the banking sector at a time when Warren Buffett was quoted as saying that he would put his entire net worth into Wells Fargo if it traded under $9 per share again. Is Buffett simply taking a longer-term view of the banking sector or do you believe his assessment of Wells Fargo and other banks is fundamentally flawed?

Igor Lotsvin: Wells Fargo is very exposed to the most troubled housing market in the country – California. Unfortunately, the bank has also acquired Wachovia, which was notorious for issuing highly suspect option-ARM mortgages, which are coming for resets over the next several years. Our analysis leads us to believe that as home prices continue to fall, more and more borrowers who even have the ability to pay their mortgages will walk away from their homes – thus increasing losses for banks such as Wells Fargo.

MOI: The government seems to have thrown a wrench—or shall we say several wrenches—into the execution of a bearish investment strategy regarding financial stocks. From arbitrary limits on short selling to the arbitrary provisioning of bailout funds and to quantitative easing, regulators have created some execution risks for your strategy. How do you express your fundamental view while sidestepping these unique risks?

Igor Lotsvin: We control this risk by taking small individual positions, limiting overall fund exposure to financial stocks and taking positions in very long-dated put options. At some point, investors will have to face reality, all the government actions notwithstanding.


MOI: Your fund is active across the capital structure. Can you walk us through conceptually how you decide where to play? Do you typically invest in multiple securities of a specific company?

Igor Lotsvin: We first of all look at minimizing the downside. If we are not comfortable with the downside, we are likely to move on. We target high double-digit returns on our investments and then attempt to identify fulcrum securities in the capital structure of a company to effectuate the trade. For example, if we like the prospects of a company, we look to see if buying bank loans or high-yield bonds can accomplish our goals, before stepping down to equity levels. We can, from time to time, invest in multiple securities of a specific company – if we think it can be an arbitrage opportunity.

MOI: How do you generate new investment ideas? What are the key criteria you look for in long versus short investments?

Igor Lotsvin: All of our ideas our internally generated – we never use the sell side to come up with investment ideas. We frequently listen to conference calls or meet with management of companies.

MOI: What economic data resources would be most helpful to value investors who approach investments from the bottom up and prefer not to be “bothered” with macro analysis?

Igor Lotsvin: To get a quick check of how the economy is doing we tend to look at the transportation data – rail car shipments, air cargo levels, shipping prices, etc. This way you can get almost a real-time sense of how many products are actually getting shipped.

MOI: What is the single biggest mistake that keeps investors from reaching their goals?

Igor Lotsvin: Reacting to noise in the market and becoming emotional. Markets are often highly irrational over short periods of time – investors need to have their own assessment of a given situation and not be slaves to the market.

MOI: What books have helped you become a better investor?

Igor Lotsvin: Margin of Safety by Seth Klarman – easily the best book on value investing.

MOI: Igor, thank you for taking the time to interview with us.

About Igor Lotsvin

Prior to co-founding Soma, Igor Lotsvin was portfolio manager with Symphony Asset Management, a multi-strategy hedge fund and an asset management firm with over $7 billion in AUM. While at Symphony, Mr. Lotsvin was part of the portfolio management team working on the firm’s flagship long/short equity hedge funds (with over $1 billion in AUM) and was lead portfolio manager on several long-only strategies. Mr. Lotsvin was instrumental in building Symphony’s long-only strategies, having helped develop this business from concept to over $1.2 billion in AUM. For more info, visit www.somaasset.com.


Snapshot of 100 Superinvestor-Owned Companies In Alphabetical Order

Recent Market

Price Value

Company / Ticker Industry ($) ($mn) Superinvestor(s) Website

Alexander's / ALX Real Estate Operations 245.50 1,254 Ackman www.alx-inc.com/

American Express / AXP Consumer Financial Services 23.40 27,322 Buffett, Berkowitz www.americanexpress.com

American Railcar / ARII Railroads 8.40 179 Icahn www.americanrailcar.com/

AmeriCredit / ACF Consumer Financial Services 10.68 1,419 Cumming/Steinberg, Berkowitz www.americredit.com/

AmerisourceBergen / ABC Biotechnology & Drugs 36.58 5,523 Pzena www.amerisourcebergen.com/

Amylin Pharma / AMLN Biotechnology & Drugs 11.11 1,566 Icahn www.amylin.com/

Apartment Investment / AIV Real Estate Operations 8.91 1,043 Ackman www.aimco.com/

Ark Restaurants / ARKR Restaurants 12.46 44 Richardson, Greenblatt www.arkrestaurants.com/

Borders Group / BGP Retail (Specialty Non-Apparel) 2.31 137 Ackman www.borders.com/online/store/H

Bristol Myers Squibb / BMY Major Drugs 20.02 39,657 Berkowitz www.bms.com/

Burlington Northern / BNI Railroads 68.17 23,148 Buffett, Watsa www.bnsf.com/

Canadian Natural / CNQ Oil & Gas Operations 54.10 29,319 Berkowitz www.cnrl.com/

Capital Southwest / CSWC Misc. Financial Services 69.01 258 Whitman www.capitalsouthwest.com/

CarMax / KMX Retail (Specialty Non-Apparel) 9.91 2,185 Buffett www.carmax.com/

Cemex / CX Construction - Raw Materials 9.49 7,379 Hawkins www.cemex.com

Chesapeake Energy / CHK Oil & Gas Operations 20.50 12,837 Hawkins www.chk.com/

Coca-Cola Company / KO Beverages (Non-Alcoholic) 47.30 109,499 Buffett www.thecoca-colacompany.com/

ConocoPhillips / COP Oil & Gas - Integrated 44.38 65,751 Buffett www.conocophillips.com/

Consolidated-Tomoka / CTO Construction Services 30.77 176 Winters, Whitman, Shubin Stein www.consolidatedtomoka.com/

Costco Wholesale / COST Retail (Specialty Non-Apparel) 48.30 20,964 Gayner, Ashton www.costco.com/

Coventry Health Care / CVH Insurance (Accident & Health) 18.44 2,737 Gaines www.coventryhealthcare.com/

Cresud / CRESY Crops 9.23 438 Cumming/Steinberg, Pabrai www.cresud.com.ar/

CSX Corp. / CSX Railroads 28.16 11,024 Hohn www.csx.com/

Ctrip.com / CTRP Personal Services 37.04 2,474 Mandel www.ctrip.com/

Deckers Outdoor / DECK Footwear 50.21 659 Mandel www.deckers.com/

Dell / DELL Computer Hardware 10.85 21,169 Hawkins, Greenberg www.dell.com/

Dillard's / DDS Retail (Department & Discount) 9.45 697 Hawkins www.dillards.com/

DISH Network / DISH Broadcasting & Cable TV 16.82 7,514 Berkowitz www.dishnetwork.com/

Dr Pepper Snapple / DPS Beverages (Non-Alcoholic) 21.27 5,400 Ackman www.drpeppersnapplegroup.com/

Eaton Corp. / ETN Electronic Instruments & Contr. 44.15 7,311 Greenberg www.eaton.com/

eBay / EBAY Retail (Catalog & Mail Order) 17.36 22,335 Hawkins, Miller www.ebay.com/

EchoStar / SATS Broadcasting & Cable TV 15.91 1,380 Einhorn, J. Griffin www.echostar.com

Einstein Noah / BAGL Restaurants 7.96 128 Einhorn www.einsteinnoah.com/

EMC Corp. / EMC Computer Storage Devices 11.61 23,371 Ackman, Einhorn www.emc.com/

Facet Biotech / FACT Biotechnology & Drugs 9.31 229 Klarman www.facetbiotech.com

Fair Isaac Corp. / FIC Business Services 16.88 825 Hawkins www.fairisaac.com

Fairfax Financial / FFH Insurance (Property & Casualty 257.50 4,709 Gayner, Hawkins, Pabrai www.fairfax.ca/

Fidelity National / FNF Insurance (Property & Casualty 13.88 3,259 Gayner www.fnf.com/

General Dynamics / GD Aerospace and Defense 55.70 21,446 Greenberg www.generaldynamics.com/

Goldman Sachs / GS Investment Services 136.35 68,642 Buffett, Pabrai www2.goldmansachs.com/

Greenlight Re / GLRE Insurance (Property & Casualty 15.77 572 Loeb, J. Griffin, Ackman www.greenlightre.ky/

Harman International / HAR Audio & Video Equipment 16.89 991 Einhorn www.harman.com/

Harvest Natural / HNR Oil & Gas Operations 4.86 160 Pabrai www.harvestnr.com/

Health Net / HNT Insurance (Accident & Health) 15.30 1,589 Rosenstein, Gaines /www.healthnet.com/portal/home

Helix Energy / HLX Oil Well Services & Equipment 9.83 967 Einhorn www.HelixESG.com

Hertz Global / HTZ Rental & Leasing 6.26 2,027 Berkowitz www.hertz.com

Hess Corp. / HES Oil & Gas - Integrated 60.02 19,629 Einhorn www.hess.com/

Horsehead / ZINC Metal Mining 6.53 230 Pabrai www.horsehead.net

Ingersoll-Rand / IR Misc. Capital Goods 21.15 6,749 Hawkins, Buffett company.ingersollrand.com/

[Portfolio w 100 companies ● Top100_browser ● MOI_macros_100.xls, MOI100A, then MOI100B, then MOI100C, then MOI100D]


In Alphabetical Order (continued)

Recent Market

Price Value

Company / Ticker Industry ($) ($mn) Superinvestor(s) Website

Intel / INTC Semiconductors 15.05 84,054 Gayner www.intel.com/

International Assets / IAAC Investment Services 15.64 141 Cumming/Steinberg, Bares www.intlassets.com/

Iteris / ITI Communications Equipment 1.38 47 Riley www.iteris.com/

Jefferies Group / JEF Investment Services 20.06 3,432 Cumming/Steinberg www.jefferies.com

Johnson & Johnson / JNJ Major Drugs 54.77 150,922 Buffett, Watsa www.jnj.com/

Jones Apparel / JNY Apparel/Accessories 8.41 718 Einhorn www.jonesapparel.com/

Lab Corp. of America / LH Healthcare Facilities 59.81 6,477 Greenberg, Ashton /www.labcorp.com/

Lear Corp. / LEA Auto & Truck Parts 1.51 117 Pzena www.lear.com/

Leucadia National / LUK Conglomerates 19.54 4,660 Berkowitz, Pabrai, Shubin Stein www.leucadia.com/

M&T Bank / MTB Regional Banks 46.73 5,192 Buffett www.mtb.com/

MasterCard / MA Business Services 168.36 21,780 Mandel www.mastercard.com/

MEMC Electronic / WFR Semiconductors 17.06 3,813 Einhorn www.memc.com/

Moody's / MCO Business Services 27.89 6,574 Buffett www.moodys.com/

Mosaic Company / MOS Chemical Manufacturing 55.36 24,603 Burbank www.mosaicco.com/

PDL BioPharma / PDLI Biotechnology & Drugs 6.68 798 Klarman www.pdl.com/

Pfizer / PFE Major Drugs 14.96 100,950 Berkowitz www.pfizer.com/

Potlatch / PCH Paper & Paper Products 26.36 1,048 Berkowitz, Einhorn, Loeb, Watsa www.potlatchcorp.com/

Precision Castparts / PCP Construction - Supplies and Fi. 78.94 11,047 Mandel www.precast.com/

Premier Exhibitions / PRXI Recreational Activities 0.75 23 Sellers www.prxi.com

Procter & Gamble / PG Personal & Household Products 53.03 154,567 Buffett www.pg.com/en_US/

Republic Airways / RJET Airline 5.49 189 Einhorn www.republicairways.com/

RHI Entertainment / RHIE Motion Pictures 3.14 42 Klarman www.rhitv.com/

Rockwell Collins / COL Aerospace and Defense 40.42 6,402 Greenberg www.rockwellcollins.com/

Ryanair Holdings / RYAAY Airline 28.38 8,364 Greenberg www.ryanair.com

Schlumberger / SLB Oil Well Services & Equipment 51.75 61,914 Gayner www.slb.com/

Sears Holdings / SHLD Retail (Department & Discount) 55.40 6,687 Lampert, Berkowitz, Shubin Stein www.searsholdings.com/

Spirit AeroSystems / SPR Aerospace and Defense 13.26 1,859 Berkowitz www.spiritaero.com/

St. Joe Company / JOE Real Estate Operations 23.61 2,184 Berkowitz, Whitman www.joe.com/

Strayer Education / STRA Schools 188.32 2,639 Mandel

Syneron Medical / ELOS Medical Equipment & Supplies 7.09 195 Klarman www.syneron.com

SYSCO Corp. / SYY Retail (Grocery) 23.28 13,733 Gayner www.sysco.com

TAL International / TAL Rental & Leasing 10.30 323 Berkowitz www.talinternational.com

Target Corp. / TGT Retail (Department & Discount) 40.74 30,637 Ackman, Einhorn www.target.com/

Telemig Celular / TMB Communications Services 49.87 920 Greenblatt minas.vivo.com.br/

Ticketmaster / TKTM Retail (Catalog & Mail Order) 7.30 419 Einhorn www.ticketmaster.com

Trident Microsystems / TRID Semiconductors 1.72 108 Shubin Stein www.tridentmicro.com

tw telecom / TWTC Communications Services 11.16 1,664 Hawkins www.twtelecom.com/

U.S. Bancorp / USB Money Center Banks 17.83 31,359 Greenberg, Watsa www.usbank.com/

United Parcel Service / UPS Air Courier 49.65 49,404 Gayner www.ups.com/

UnitedHealth Group / UNH Insurance (Accident & Health) 26.30 31,284 Berkowitz www.unitedhealthgroup.com/main

URS Corp. / URS Construction Services 46.00 3,826 Einhorn www.urscorp.com/

USG Corp. / USG Construction - Raw Materials 11.85 1,176 Buffett, Watsa, Weitz www.usg.com/

Visa / V Consumer Financial Services 65.75 55,638 Ackman, Hohn, Mandel www.visa.com/

Waters Corp. / WAT Scientific & Technical Instrum. 43.19 4,164 Greenberg www.waters.com/

WellCare Health / WCG Insurance (Accident & Health) 18.91 798 Berkowitz www.wellcare.com/

WellPoint / WLP Insurance (Accident & Health) 44.75 21,688 Berkowitz www.wellpoint.com/

Wells Fargo / WFC Regional Banks 24.31 103,654 Buffett, Pabrai, Watsa /www.wellsfargo.com/

Wendy's Arby's / WEN Restaurants 4.20 2,241 Ackman, Shubin Stein www.wendysarbys.com/

Winthrop Realty Trust / FUR Real Estate Operations 9.69 153 Berkowitz, Shubin Stein www.winthropreit.com/

Yahoo! / YHOO Business Services 14.98 20,907 Icahn, Ashton, Miller www.yahoo.com

Yum! Brands / YUM Restaurants 33.85 15,625 Ackman, Hawkins www.yum.com/

[MFI100 ● Top100_browser ● MOI_macros_100.xls, MOI100A]


By Market Value Recent Market Enterprise

Price Value Value

Company / Ticker Industry ($) ($mn) ($mn) Superinvestor(s)

Procter & Gamble / PG Personal & Household Products 53.03 154,567 190,280 Buffett

Johnson & Johnson / JNJ Major Drugs 54.77 150,922 151,063 Buffett, Watsa

Coca-Cola Company / KO Beverages (Non-Alcoholic) 47.30 109,499 114,599 Buffett

Wells Fargo / WFC Regional Banks 24.31 103,654 297,872 Buffett, Pabrai, Watsa

Pfizer / PFE Major Drugs 14.96 100,950 94,851 Berkowitz

Intel / INTC Semiconductors 15.05 84,054 74,656 Gayner

Goldman Sachs / GS Investment Services 136.35 68,642 276,314 Buffett, Pabrai

ConocoPhillips / COP Oil & Gas - Integrated 44.38 65,751 94,328 Buffett

Schlumberger / SLB Oil Well Services & Equipment 51.75 61,914 63,894 Gayner

Visa / V Consumer Financial Services 65.75 55,638 52,205 Ackman, Hohn, Mandel

United Parcel Service / UPS Air Courier 49.65 49,404 57,141 Gayner

Bristol Myers Squibb / BMY Major Drugs 20.02 39,657 37,385 Berkowitz

U.S. Bancorp / USB Money Center Banks 17.83 31,359 97,976 Greenberg, Watsa

UnitedHealth Group / UNH Insurance (Accident & Health) 26.30 31,284 34,176 Berkowitz

Target Corp. / TGT Retail (Department & Discount) 40.74 30,637 48,035 Ackman, Einhorn

Canadian Natural / CNQ Oil & Gas Operations 54.10 29,319 40,578 Berkowitz

American Express / AXP Consumer Financial Services 23.40 27,322 70,180 Buffett, Berkowitz

Mosaic Company / MOS Chemical Manufacturing 55.36 24,603 23,462 Burbank

EMC Corp. / EMC Computer Storage Devices 11.61 23,371 19,137 Ackman, Einhorn

Burlington Northern / BNI Railroads 68.17 23,148 32,229 Buffett, Watsa

eBay / EBAY Retail (Catalog & Mail Order) 17.36 22,335 19,498 Hawkins, Miller

MasterCard / MA Business Services 168.36 21,780 19,523 Mandel

WellPoint / WLP Insurance (Accident & Health) 44.75 21,688 29,121 Berkowitz

General Dynamics / GD Aerospace and Defense 55.70 21,446 24,202 Greenberg

Dell / DELL Computer Hardware 10.85 21,169 14,088 Hawkins, Greenberg

Costco Wholesale / COST Retail (Specialty Non-Apparel) 48.30 20,964 20,053 Gayner, Ashton

Yahoo! / YHOO Business Services 14.98 20,907 17,461 Icahn, Ashton, Miller

Hess Corp. / HES Oil & Gas - Integrated 60.02 19,629 22,800 Einhorn

Yum! Brands / YUM Restaurants 33.85 15,625 18,878 Ackman, Hawkins

SYSCO Corp. / SYY Retail (Grocery) 23.28 13,733 15,303 Gayner

Chesapeake Energy / CHK Oil & Gas Operations 20.50 12,837 24,850 Hawkins

Precision Castparts / PCP Construction - Supplies and Fi. 78.94 11,047 11,081 Mandel

CSX Corp. / CSX Railroads 28.16 11,024 18,204 Hohn

Ryanair Holdings / RYAAY Airline 28.38 8,364 8,901 Greenberg

DISH Network / DISH Broadcasting & Cable TV 16.82 7,514 11,478 Berkowitz

Cemex / CX Construction - Raw Materials 9.49 7,379 21,209 Hawkins

Eaton Corp. / ETN Electronic Instruments & Contr. 44.15 7,311 11,064 Greenberg

Ingersoll-Rand / IR Misc. Capital Goods 21.15 6,749 11,407 Hawkins, Buffett

Sears Holdings / SHLD Retail (Department & Discount) 55.40 6,687 8,590 Lampert, Berkowitz, Shubin Stein

Moody's / MCO Business Services 27.89 6,574 7,636 Buffett

Lab Corp. of America / LH Healthcare Facilities 59.81 6,477 7,816 Greenberg, Ashton

Rockwell Collins / COL Aerospace and Defense 40.42 6,402 6,830 Greenberg

AmerisourceBergen / ABC Biotechnology & Drugs 36.58 5,523 6,028 Pzena

Dr Pepper Snapple / DPS Beverages (Non-Alcoholic) 21.27 5,400 8,547 Ackman

M&T Bank / MTB Regional Banks 46.73 5,192 16,439 Buffett

Fairfax Financial / FFH Insurance (Property & Casualty 257.50 4,709 5,056 Gayner, Hawkins, Pabrai

Leucadia National / LUK Conglomerates 19.54 4,660 6,235 Berkowitz, Pabrai, Shubin Stein

Waters Corp. / WAT Scientific & Technical Instrum. 43.19 4,164 4,321 Greenberg

URS Corp. / URS Construction Services 46.00 3,826 4,549 Einhorn

MEMC Electronic / WFR Semiconductors 17.06 3,813 2,835 Einhorn



By Market Value (continued)

Recent Market Enterprise

Price Value Value

Company / Ticker Industry ($) ($mn) ($mn) Superinvestor(s)

Jefferies Group / JEF Investment Services 20.06 3,432 3,930 Cumming/Steinberg

Fidelity National / FNF Insurance (Property & Casualty 13.88 3,259 4,241 Gayner

Coventry Health Care / CVH Insurance (Accident & Health) 18.44 2,737 2,838 Gaines

Strayer Education / STRA Schools 188.32 2,639 2,555 Mandel

Ctrip.com / CTRP Personal Services 37.04 2,474 2,273 Mandel

Wendy's Arby's / WEN Restaurants 4.20 2,241 3,228 Ackman, Shubin Stein

CarMax / KMX Retail (Specialty Non-Apparel) 9.91 2,185 2,381 Buffett

St. Joe Company / JOE Real Estate Operations 23.61 2,184 2,123 Berkowitz, Whitman

Hertz Global / HTZ Rental & Leasing 6.26 2,027 11,162 Berkowitz

Spirit AeroSystems / SPR Aerospace and Defense 13.26 1,859 2,406 Berkowitz

tw telecom / TWTC Communications Services 11.16 1,664 2,612 Hawkins

Health Net / HNT Insurance (Accident & Health) 15.30 1,589 1,481 Rosenstein, Gaines

Amylin Pharma / AMLN Biotechnology & Drugs 11.11 1,566 1,625 Icahn

AmeriCredit / ACF Consumer Financial Services 10.68 1,419 11,960 Cumming/Steinberg, Berkowitz

EchoStar / SATS Broadcasting & Cable TV 15.91 1,380 783 Einhorn, J. Griffin

Alexander's / ALX Real Estate Operations 245.50 1,254 2,058 Ackman

USG Corp. / USG Construction - Raw Materials 11.85 1,176 2,598 Buffett, Watsa, Weitz

Potlatch / PCH Paper & Paper Products 26.36 1,048 1,458 Berkowitz, Einhorn, Loeb, Watsa

Apartment Investment / AIV Real Estate Operations 8.91 1,043 8,382 Ackman

Harman International / HAR Audio & Video Equipment 16.89 991 1,319 Einhorn

Helix Energy / HLX Oil Well Services & Equipment 9.83 967 2,747 Einhorn

Telemig Celular / TMB Communications Services 49.87 920 692 Greenblatt

Fair Isaac Corp. / FIC Business Services 16.88 825 1,134 Hawkins

WellCare Health / WCG Insurance (Accident & Health) 18.91 798 -184 Berkowitz

PDL BioPharma / PDLI Biotechnology & Drugs 6.68 798 1,116 Klarman

Jones Apparel / JNY Apparel/Accessories 8.41 718 1,314 Einhorn

Dillard's / DDS Retail (Department & Discount) 9.45 697 1,773 Hawkins

Deckers Outdoor / DECK Footwear 50.21 659 429 Mandel

Greenlight Re / GLRE Insurance (Property & Casualty 15.77 572 515 Loeb, J. Griffin, Ackman

Cresud / CRESY Crops 9.23 438 747 Cumming/Steinberg, Pabrai

Ticketmaster / TKTM Retail (Catalog & Mail Order) 7.30 419 671 Einhorn

TAL International / TAL Rental & Leasing 10.30 323 1,603 Berkowitz

Capital Southwest / CSWC Misc. Financial Services 69.01 258 237 Whitman

Horsehead / ZINC Metal Mining 6.53 230 134 Pabrai

Facet Biotech / FACT Biotechnology & Drugs 9.31 229 -90 Klarman

Syneron Medical / ELOS Medical Equipment & Supplies 7.09 195 11 Klarman

Republic Airways / RJET Airline 5.49 189 2,339 Einhorn

American Railcar / ARII Railroads 8.40 179 161 Icahn

Consolidated-Tomoka / CTO Construction Services 30.77 176 187 Winters, Whitman, Shubin Stein

Harvest Natural / HNR Oil & Gas Operations 4.86 160 82 Pabrai

Winthrop Realty Trust / FUR Real Estate Operations 9.69 153 378 Berkowitz, Shubin Stein

International Assets / IAAC Investment Services 15.64 141 190 Cumming/Steinberg, Bares

Borders Group / BGP Retail (Specialty Non-Apparel) 2.31 137 420 Ackman

Einstein Noah / BAGL Restaurants 7.96 128 244 Einhorn

Lear Corp. / LEA Auto & Truck Parts 1.51 117 2,405 Pzena

Trident Microsystems / TRID Semiconductors 1.72 108 -94 Shubin Stein

Iteris / ITI Communications Equipment 1.38 47 49 Riley

Ark Restaurants / ARKR Restaurants 12.46 44 37 Richardson, Greenblatt

RHI Entertainment / RHIE Motion Pictures 3.14 42 610 Klarman

Premier Exhibitions / PRXI Recreational Activities 0.75 23 17 Sellers



Net Cash and Other Metrics (sorted by net cash to market value)

Recent EV / Price /

Price LTM Tangible Net Debt / Net Cash / Dividend

Company / Ticker ($) Revenue Book Equity MV Yield

Trident Microsystems / TRID 1.72 nm 0.6x nm 187% -

Facet Biotech / FACT 9.31 nm 0.6x nm 139% -

WellCare Health / WCG 18.91 nm 1.2x nm 123% -

Syneron Medical / ELOS 7.09 0.1x 0.8x nm 95% -

Harvest Natural / HNR 4.86 nm 0.6x nm 49% -

EchoStar / SATS 15.91 0.4x 0.7x nm 43% -

Horsehead / ZINC 6.53 0.3x 0.8x nm 42% -

Deckers Outdoor / DECK 50.21 0.6x 1.8x nm 35% -

Dell / DELL 10.85 0.2x 11.7x nm 33% -

MEMC Electronic / WFR 17.06 1.4x 1.9x nm 26% -

Premier Exhibitions / PRXI 0.75 0.3x 0.8x nm 25% -

Telemig Celular / TMB 49.87 0.8x 1.8x nm 25% 10.9%

EMC Corp. / EMC 11.61 1.3x 4.0x nm 18% -

Yahoo! / YHOO 14.98 2.4x 2.7x nm 16% -

Ark Restaurants / ARKR 12.46 0.3x 1.4x nm 16% -

eBay / EBAY 17.36 2.3x 6.1x nm 13% -

Intel / INTC 15.05 2.0x 2.4x nm 11% 3.7%

MasterCard / MA 168.36 3.9x 13.9x nm 10% 0.4%

American Railcar / ARII 8.40 0.2x 0.6x nm 10% 1.4%

Greenlight Re / GLRE 15.77 nm 1.1x nm 10% -

Capital Southwest / CSWC 69.01 34.8x 0.5x nm 8% 1.2%

Ctrip.com / CTRP 37.04 10.5x 8.2x nm 8% 0.6%

Health Net / HNT 15.30 0.1x 1.7x nm 7% -

Visa / V 65.75 8.3x 54.3x nm 6% 0.6%

Pfizer / PFE 14.96 2.0x 4.6x nm 6% 4.3%

Bristol Myers Squibb / BMY 20.02 1.8x 5.4x nm 6% 6.2%

Mosaic Company / MOS 55.36 2.4x 4.0x nm 5% 0.4%

Costco Wholesale / COST 48.30 0.3x 2.3x nm 4% 1.5%

Strayer Education / STRA 188.32 6.4x 18.4x nm 3% 1.1%

St. Joe Company / JOE 23.61 8.0x 2.2x nm 3% -

Johnson & Johnson / JNJ 54.77 2.4x 10.2x 0% 0% 3.6%

Precision Castparts / PCP 78.94 1.6x 5.4x 1% 0% 0.2%

Iteris / ITI 1.38 0.7x 2.4x 3% -3% -

Schlumberger / SLB 51.75 2.3x 5.3x 11% -3% 1.6%

Coventry Health Care / CVH 18.44 0.2x 9.9x 3% -4% -

Waters Corp. / WAT 43.19 2.7x 20.4x 24% -4% -

Amylin Pharma / AMLN 11.11 1.9x 3.0x 12% -4% -

Coca-Cola Company / KO 47.30 3.6x 13.2x 25% -5% 3.5%

Fairfax Financial / FFH 257.50 0.6x 1.0x 5% -5% 3.1%

Consolidated-Tomoka / CTO 30.77 9.1x 1.6x 9% -6% 1.3%

Ryanair Holdings / RYAAY 28.38 2.4x 2.4x 15% -6% -

Rockwell Collins / COL 40.42 1.4x 8.3x 26% -7% 2.4%

CarMax / KMX 9.91 0.3x 1.4x 12% -9% -

AmerisourceBergen / ABC 36.58 0.1x nm 18% -9% 0.7%

UnitedHealth Group / UNH 26.30 0.4x nm 14% -9% 0.1%

SYSCO Corp. / SYY 23.28 0.4x 7.5x 47% -11% 4.1%

General Dynamics / GD 55.70 0.8x nm 27% -13% 2.7%

Jefferies Group / JEF 20.06 2.3x 2.0x 24% -14% -

United Parcel Service / UPS 49.65 1.1x 11.5x >99% -16% 3.6%

Hess Corp. / HES 60.02 0.6x 1.8x 26% -16% 0.7%



Net Cash and Other Metrics (sorted by net cash to market value) (continued)

Recent EV / Price /

Price LTM Tangible Net Debt / Net Cash / Dividend

Company / Ticker ($) Revenue Book Equity MV Yield

Moody's / MCO 27.89 4.3x nm nm -16% 1.4%

URS Corp. / URS 46.00 0.5x 265.7x 20% -19% -

Lab Corp. of America / LH 59.81 1.7x nm 74% -21% -

Yum! Brands / YUM 33.85 1.7x nm >99% -21% 2.2%

Procter & Gamble / PG 53.03 2.3x nm 58% -22% 3.3%

Sears Holdings / SHLD 55.40 0.2x 1.3x 20% -28% -

Spirit AeroSystems / SPR 13.26 0.6x 1.4x 40% -29% -

Fidelity National / FNF 13.88 1.0x 5.8x 36% -30% 4.3%

Harman International / HAR 16.89 0.3x 1.3x 40% -33% 0.3%

Leucadia National / LUK 19.54 5.8x 1.8x 60% -34% -

International Assets / IAAC 15.64 0.0x 2.1x 61% -34% -

WellPoint / WLP 44.75 0.5x nm 35% -34% -

Fair Isaac Corp. / FIC 16.88 1.5x nm 55% -38% 0.5%

Canadian Natural / CNQ 54.10 3.3x 1.8x 70% -38% 0.7%

Potlatch / PCH 26.36 3.3x 5.1x >99% -39% 7.7%

Burlington Northern / BNI 68.17 1.8x 2.0x 80% -39% 2.3%

PDL BioPharma / PDLI 6.68 3.8x nm nm -40% 15.0%

ConocoPhillips / COP 44.38 0.4x 1.3x 52% -43% 4.2%

Wendy's Arby's / WEN 4.20 1.8x 21.0x 42% -44% 1.4%

Eaton Corp. / ETN 44.15 0.7x nm 62% -51% 4.5%

DISH Network / DISH 16.82 1.0x nm nm -53% -

Target Corp. / TGT 40.74 0.7x 2.2x >99% -57% 1.6%

tw telecom / TWTC 11.16 2.3x 7.2x >99% -57% -

Ticketmaster / TKTM 7.30 0.5x nm >99% -58% -

Dr Pepper Snapple / DPS 21.27 1.5x nm >99% -58% -

Alexander's / ALX 245.50 9.7x 5.5x >99% -64% -

CSX Corp. / CSX 28.16 1.6x 1.3x 88% -65% 3.1%

Ingersoll-Rand / IR 21.15 0.9x nm 73% -69% 3.4%

Cresud / CRESY 9.23 17.2x nm 69% -71% 1.3%

Jones Apparel / JNY 8.41 0.4x 1.7x 50% -83% 2.4%

Chesapeake Energy / CHK 20.50 2.1x 1.1x >99% -90% 1.5%

Einstein Noah / BAGL 7.96 0.6x nm nm -91% -

USG Corp. / USG 11.85 0.6x 0.9x 95% -121% -

Winthrop Realty Trust / FUR 9.69 8.3x 0.8x 84% -122% 10.3%

American Express / AXP 23.40 2.2x 2.2x >99% -145% 3.1%

Dillard's / DDS 9.45 0.3x 0.3x 48% -154% 1.7%

Wells Fargo / WFC 24.31 8.5x 2.7x >99% -158% 0.8%

Helix Energy / HLX 9.83 1.3x 1.0x >99% -181% -

U.S. Bancorp / USB 17.83 7.9x 3.8x >99% -187% 1.1%

Cemex / CX 9.49 1.2x 3.7x >99% -187% -

M&T Bank / MTB 46.73 5.0x 1.7x >99% -206% 6.0%

Borders Group / BGP 2.31 0.1x 0.5x >99% -206% -

Goldman Sachs / GS 136.35 >99x 1.6x >99% -278% 1.0%

TAL International / TAL 10.30 3.8x 1.1x >99% -396% 0.4%

Hertz Global / HTZ 6.26 1.3x nm >99% -451% -

Apartment Investment / AIV 8.91 5.7x 1.5x >99% -637% 4.5%

AmeriCredit / ACF 10.68 4.7x 0.7x >99% -743% -

Republic Airways / RJET 5.49 1.6x 0.4x >99% -1137% -

RHI Entertainment / RHIE 3.14 2.7x 0.5x >99% -1339% -

Lear Corp. / LEA 1.51 0.2x nm nm -1954% -



Stock Price Performance (sorted by price decline since December 31, 2008)

Recent to 52-Wk Price Performance

Price Low High Since Since Since

Company / Ticker ($) ($) ($) 12/31/08 12/29/06 12/31/04

RHI Entertainment / RHIE 3.14 -65% 410% -61% na na

Republic Airways / RJET 5.49 -23% 186% -49% -67% -59%

Deckers Outdoor / DECK 50.21 -26% 189% -37% -16% 7%

Capital Southwest / CSWC 69.01 -22% 113% -36% -45% -12%

Premier Exhibitions / PRXI 0.75 -44% 600% -34% -88% -12%

U.S. Bancorp / USB 17.83 -55% 137% -29% -51% -43%

TAL International / TAL 10.30 -47% 172% -27% -61% na

Apartment Investment / AIV 8.91 -49% 390% -23% -84% -77%

Fidelity National / FNF 13.88 -52% 65% -22% -42% na

American Railcar / ARII 8.40 -51% 175% -20% -75% na

Consolidated-Tomoka / CTO 30.77 -30% 77% -19% -58% -28%

M&T Bank / MTB 46.73 -38% 132% -19% -62% -57%

Fairfax Financial / FFH 257.50 -19% 38% -18% 30% 53%

Wells Fargo / WFC 24.31 -68% 84% -18% -32% -22%

Pfizer / PFE 14.96 -22% 35% -16% -42% -44%

Syneron Medical / ELOS 7.09 -36% 154% -15% -74% -77%

Wendy's Arby's / WEN 4.20 -37% 75% -15% -80% -67%

ConocoPhillips / COP 44.38 -23% 116% -14% -38% 2%

Procter & Gamble / PG 53.03 -17% 39% -14% -17% -4%

Bristol Myers Squibb / BMY 20.02 -20% 20% -14% -24% -22%

CSX Corp. / CSX 28.16 -26% 148% -13% -18% 41%

Strayer Education / STRA 188.32 -24% 27% -12% 78% 72%

Eaton Corp. / ETN 44.15 -32% 122% -11% -41% -39%

Iteris / ITI 1.38 -31% 125% -11% -43% -60%

Winthrop Realty Trust / FUR 9.69 -40% 133% -11% -72% -49%

United Parcel Service / UPS 49.65 -23% 45% -10% -34% -42%

Burlington Northern / BNI 68.17 -25% 68% -10% -8% 44%

Trident Microsystems / TRID 1.72 -29% 174% -9% -91% -79%

Johnson & Johnson / JNJ 54.77 -16% 33% -8% -17% -14%

Costco Wholesale / COST 48.30 -36% 55% -8% -9% 0%

Lab Corp. of America / LH 59.81 -12% 31% -7% -19% 20%

Alexander's / ALX 245.50 -49% 76% -4% -41% 14%

General Dynamics / GD 55.70 -37% 69% -3% -25% 7%

Facet Biotech / FACT 9.31 -37% 437% -3% na na

St. Joe Company / JOE 23.61 -38% 80% -3% -56% -63%

Ryanair Holdings / RYAAY 28.38 -45% 30% -2% -30% 39%

Leucadia National / LUK 19.54 -47% 180% -1% -31% -16%

UnitedHealth Group / UNH 26.30 -45% 35% -1% -51% -40%

Fair Isaac Corp. / FIC 16.88 -42% 65% 0% -58% -54%

Harman International / HAR 16.89 -46% 178% 1% -83% -87%

Potlatch / PCH 26.36 -36% 72% 1% -28% -37%

SYSCO Corp. / SYY 23.28 -17% 50% 1% -37% -39%

Amylin Pharma / AMLN 11.11 -50% 215% 2% -69% -52%

AmerisourceBergen / ABC 36.58 -27% 22% 3% -16% 28%

Intel / INTC 15.05 -20% 64% 3% -26% -36%

Cresud / CRESY 9.23 -51% 74% 3% -46% -38%

Rockwell Collins / COL 40.42 -32% 53% 3% -36% 2%

Cemex / CX 9.49 -58% 227% 4% -70% -43%

Coca-Cola Company / KO 47.30 -21% 25% 4% -2% 14%

Dell / DELL 10.85 -28% 140% 6% -57% -74%



Stock Price Performance (sorted by price decline since December 31, 2008) (continued)

Recent to 52-Wk Price Performance

Price Low High Since Since Since

Company / Ticker ($) ($) ($) 12/31/08 12/29/06 12/31/04

WellPoint / WLP 44.75 -39% 29% 6% -43% -22%

EchoStar / SATS 15.91 -20% 141% 7% na na

Lear Corp. / LEA 1.51 -82% >999% 7% -95% -98%

Yum! Brands / YUM 33.85 -36% 19% 7% 15% 43%

PDL BioPharma / PDLI 6.68 -22% 35% 8% -53% -55%

Ark Restaurants / ARKR 12.46 -36% 117% 9% -62% -68%

EMC Corp. / EMC 11.61 -29% 53% 11% -12% -22%

Hess Corp. / HES 60.02 -41% 117% 12% 21% 119%

URS Corp. / URS 46.00 -57% 7% 13% 7% 43%

Harvest Natural / HNR 4.86 -46% 149% 13% -54% -72%

Ticketmaster / TKTM 7.30 -54% 270% 14% na na

MasterCard / MA 168.36 -33% 90% 18% 71% na

Waters Corp. / WAT 43.19 -31% 64% 18% -12% -8%

Target Corp. / TGT 40.74 -39% 46% 18% -29% -22%

MEMC Electronic / WFR 17.06 -41% 312% 19% -56% 29%

Greenlight Re / GLRE 15.77 -45% 51% 21% na na

Ingersoll-Rand / IR 21.15 -46% 110% 22% -46% -47%

Schlumberger / SLB 51.75 -32% 116% 22% -18% 55%

Yahoo! / YHOO 14.98 -40% 85% 23% -41% -60%

Hertz Global / HTZ 6.26 -75% 116% 23% -64% na

Coventry Health Care / CVH 18.44 -57% 153% 24% -63% -48%

eBay / EBAY 17.36 -43% 78% 24% -42% -70%

Visa / V 65.75 -36% 34% 25% na na

CarMax / KMX 9.91 -42% 109% 26% -63% -36%

American Express / AXP 23.40 -59% 103% 26% -61% -53%

Chesapeake Energy / CHK 20.50 -52% 261% 27% -29% 24%

Spirit AeroSystems / SPR 13.26 -46% 127% 30% -60% na

Dr Pepper Snapple / DPS 21.27 -44% 26% 31% na na

tw telecom / TWTC 11.16 -61% 74% 32% -44% 156%

Precision Castparts / PCP 78.94 -40% 54% 33% 1% 140%

Canadian Natural / CNQ 54.10 -51% 102% 35% 2% 153%

Helix Energy / HLX 9.83 -78% 325% 36% -69% -52%

Einstein Noah / BAGL 7.96 -69% 89% 38% 6% 298%

Moody's / MCO 27.89 -45% 54% 39% -60% -36%

Horsehead / ZINC 6.53 -65% 128% 39% na na

AmeriCredit / ACF 10.68 -73% 40% 40% -58% -56%

Health Net / HNT 15.30 -52% 111% 40% -69% -47%

Sears Holdings / SHLD 55.40 -52% 96% 43% -67% -44%

Jefferies Group / JEF 20.06 -60% 45% 43% -25% 0%

Jones Apparel / JNY 8.41 -72% 163% 44% -75% -77%

WellCare Health / WCG 18.91 -68% 195% 47% -73% -42%

USG Corp. / USG 11.85 -65% 200% 47% -78% -71%

DISH Network / DISH 16.82 -50% 112% 52% -51% -44%

Ctrip.com / CTRP 37.04 -56% 62% 56% 19% 222%

Mosaic Company / MOS 55.36 -60% 195% 60% 159% 239%

Goldman Sachs / GS 136.35 -65% 39% 62% -32% 31%

Telemig Celular / TMB 49.87 -51% 23% 66% 30% 77%

International Assets / IAAC 15.64 -66% 141% 82% -46% 107%

Dillard's / DDS 9.45 -74% 77% 138% -73% -65%

Borders Group / BGP 2.31 -85% 247% 478% -90% -91%



Free Cash Flow (sorted by LTM free cash flow yield)

The following table shows companies with an LTM FCF yield of 5% or greater.

Market Enterprise LTM Tangible Tangible Price Value Value FCF LTM Book Value Book Value /

Company / Ticker ($) ($mn) ($mn) ($mn) FCF Yield ($mn) Market Value Borders Group / BGP 2.31 137 420 135 98% 262 191% Hertz Global / HTZ 6.26 2,027 11,162 1,774 88% (1,585) -78% AmeriCredit / ACF 10.68 1,419 11,960 1,193 84% 2,014 142% Republic Airways / RJET 5.49 189 2,339 116 61% 479 254% Ticketmaster / TKTM 7.30 419 671 250 60% (594) -142% Dillard's / DDS 9.45 697 1,773 210 30% 2,258 324% Coventry Health Care / CVH 18.44 2,737 2,838 730 27% 276 10% M&T Bank / MTB 46.73 5,192 16,439 1,281 25% 2,973 57% Cemex / CX 9.49 7,379 21,209 1,618 22% 2,005 27% U.S. Bancorp / USB 17.83 31,359 97,976 6,016 19% 8,167 26% Fair Isaac Corp. / FIC 16.88 825 1,134 157 19% (141) -17% International Assets / IAAC 15.64 141 190 25 18% 68 48% Telemig Celular / TMB 49.87 920 692 160 17% 497 54% PDL BioPharma / PDLI 6.68 798 1,116 135 17% (422) -53% American Express / AXP 23.40 27,322 70,180 4,450 16% 12,612 46% Pfizer / PFE 14.96 100,950 94,851 16,433 16% 21,781 22% Eaton Corp. / ETN 44.15 7,311 11,064 1,127 15% (1,574) -22% Iteris / ITI 1.38 47 49 7 15% 19 41% UnitedHealth Group / UNH 26.30 31,284 34,176 4,331 14% (1,003) -3% URS Corp. / URS 46.00 3,826 4,549 502 13% 14 0% WellCare Health / WCG 18.91 798 (184) 103 13% 649 81% Einstein Noah / BAGL 7.96 128 244 16 12% (80) -63% Winthrop Realty Trust / FUR 9.69 153 378 17 11% 198 129% Wells Fargo / WFC 24.31 103,654 297,872 11,394 11% 38,708 37% General Dynamics / GD 55.70 21,446 24,202 2,342 11% (2,864) -13% EMC Corp. / EMC 11.61 23,371 19,137 2,538 11% 5,794 25% WellPoint / WLP 44.75 21,688 29,121 2,351 11% (714) -3% Ingersoll-Rand / IR 21.15 6,749 11,407 724 11% (5,304) -79% Lab Corp. of America / LH 59.81 6,477 7,816 663 10% (1,158) -18% eBay / EBAY 17.36 22,335 19,498 2,262 10% 3,675 16% United Parcel Service / UPS 49.65 49,404 57,141 4,960 10% 4,307 9% AmerisourceBergen / ABC 36.58 5,523 6,028 526 10% (86) -2% CSX Corp. / CSX 28.16 11,024 18,204 1,026 9% 8,184 74% Greenlight Re / GLRE 15.77 572 515 53 9% 514 90% SYSCO Corp. / SYY 23.28 13,733 15,303 1,150 8% 1,839 13% Dr Pepper Snapple / DPS 21.27 5,400 8,547 444 8% (2,950) -55% Deckers Outdoor / DECK 50.21 659 429 53 8% 373 57% Waters Corp. / WAT 43.19 4,164 4,321 326 8% 204 5% Johnson & Johnson / JNJ 54.77 150,922 151,063 11,541 8% 14,868 10% Capital Southwest / CSWC 69.01 258 237 19 7% 478 185% Procter & Gamble / PG 53.03 154,567 190,280 11,190 7% (27,999) -18% Rockwell Collins / COL 40.42 6,402 6,830 453 7% 775 12% Moody's / MCO 27.89 6,574 7,636 464 7% (1,366) -21% Harvest Natural / HNR 4.86 160 82 11 7% 270 168% Dell / DELL 10.85 21,169 14,088 1,454 7% 1,810 9% Horsehead / ZINC 6.53 230 134 15 7% 272 118% Jones Apparel / JNY 8.41 718 1,314 46 6% 430 60% Bristol Myers Squibb / BMY 20.02 39,657 37,385 2,492 6% 7,403 19% Ark Restaurants / ARKR 12.46 44 37 3 6% 31 70% Harman International / HAR 16.89 991 1,319 52 5% 746 75% Target Corp. / TGT 40.74 30,637 48,035 1,552 5% 14,119 46% Mosaic Company / MOS 55.36 24,603 23,462 1,243 5% 6,115 25% Potlatch / PCH 26.36 1,048 1,458 53 5% 205 20% Syneron Medical / ELOS 7.09 195 11 10 5% 229 118% Coca-Cola Company / KO 47.30 109,499 114,599 5,275 5% 8,298 8% DISH Network / DISH 16.82 7,514 11,478 357 5% (3,063) -41% Goldman Sachs / GS 136.35 68,642 276,314 3,203 5% 41,908 61%

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P/E Multiples (sorted by P/E based on estimated EPS for next fiscal year)

The following table shows the 50 cheapest companies among the 100 companies shown in this report, as measured by next FY P/E.

Recent Market P/E (A) P/E (Estimated)

Price Value Last This Next In

Company / Ticker ($) ($mn) FY FY FY 2 Yrs

Republic Airways / RJET 5.49 189 2x 3x 3x na

PDL BioPharma / PDLI 6.68 798 5x 6x 5x 5x

Harvest Natural / HNR 4.86 160 nm 81x 6x na

Deckers Outdoor / DECK 50.21 659 9x 7x 6x 5x

Pfizer / PFE 14.96 100,950 13x 8x 7x 7x

Spirit AeroSystems / SPR 13.26 1,859 7x 6x 7x 7x

Einstein Noah / BAGL 7.96 128 6x 7x 7x 6x

TAL International / TAL 10.30 323 9x 7x 7x 7x

RHI Entertainment / RHIE 3.14 42 nm nm 7x 4x

Health Net / HNT 15.30 1,589 17x 7x 7x 6x

WellPoint / WLP 44.75 21,688 9x 8x 7x 6x

Ticketmaster / TKTM 7.30 419 nm 8x 7x 6x

DISH Network / DISH 16.82 7,514 8x 7x 7x 7x

ConocoPhillips / COP 44.38 65,751 nm 15x 8x 6x

Helix Energy / HLX 9.83 967 nm 10x 8x 4x

UnitedHealth Group / UNH 26.30 31,284 11x 9x 8x 7x

Coventry Health Care / CVH 18.44 2,737 7x 10x 8x 7x

Fidelity National / FNF 13.88 3,259 nm 9x 8x 7x

Ark Restaurants / ARKR 12.46 44 6x 9x 8x na

WellCare Health / WCG 18.91 798 nm 9x 9x 9x

Chesapeake Energy / CHK 20.50 12,837 18x 10x 9x 6x

General Dynamics / GD 55.70 21,446 9x 9x 9x 8x

CSX Corp. / CSX 28.16 11,024 8x 10x 9x 7x

Dell / DELL 10.85 21,169 9x 10x 9x 8x

Bristol Myers Squibb / BMY 20.02 39,657 13x 10x 9x 8x

Iteris / ITI 1.38 47 4x 14x 10x na

Mosaic Company / MOS 55.36 24,603 12x 13x 10x 8x

AmerisourceBergen / ABC 36.58 5,523 13x 11x 10x 9x

Precision Castparts / PCP 78.94 11,047 11x 10x 10x 10x

Rockwell Collins / COL 40.42 6,402 10x 11x 11x 10x

Lab Corp. of America / LH 59.81 6,477 14x 12x 11x 10x

Fair Isaac Corp. / FIC 16.88 825 10x 12x 11x 9x

Telemig Celular / TMB 49.87 920 9x 13x 11x 18x

Goldman Sachs / GS 136.35 68,642 nm 13x 11x 8x

Dr Pepper Snapple / DPS 21.27 5,400 nm 12x 11x 10x

eBay / EBAY 17.36 22,335 13x 12x 11x 10x

Johnson & Johnson / JNJ 54.77 150,922 12x 12x 11x 10x

Jones Apparel / JNY 8.41 718 nm 14x 12x 9x

Burlington Northern / BNI 68.17 23,148 11x 13x 12x 10x

Cemex / CX 9.49 7,379 5x 17x 12x 8x

U.S. Bancorp / USB 17.83 31,359 11x 20x 12x 7x

EMC Corp. / EMC 11.61 23,371 18x 15x 12x 11x

Waters Corp. / WAT 43.19 4,164 13x 13x 12x 11x

MEMC Electronic / WFR 17.06 3,813 10x 42x 13x 11x

Target Corp. / TGT 40.74 30,637 14x 14x 13x 11x

Ingersoll-Rand / IR 21.15 6,749 nm 15x 13x 10x

SYSCO Corp. / SYY 23.28 13,733 13x 13x 13x 12x

Procter & Gamble / PG 53.03 154,567 15x 13x 13x 12x

International Assets / IAAC 15.64 141 5x 12x 13x 11x

Wells Fargo / WFC 24.31 103,654 35x 17x 14x 7x



Historical and Prospective EPS (in alphabetical order)

Recent FY EPS (Actual) EPS (Estimated)

Price End 2 Yrs Last This Next In

Company / Ticker ($) Date Ago FY FY FY 2 Yrs

Alexander's / ALX 245.50 12/31/09 22.44 14.96 na na na

American Express / AXP 23.40 12/31/09 3.45 2.48 0.79 1.29 2.49

American Railcar / ARII 8.40 12/31/09 1.74 1.47 0.01 0.08 1.11

AmeriCredit / ACF 10.68 6/30/09 2.73 (0.60) (0.15) 0.08 0.40

AmerisourceBergen / ABC 36.58 9/30/09 2.53 2.89 3.26 3.59 3.94

Amylin Pharma / AMLN 11.11 12/31/09 (1.59) (2.30) (1.32) (0.61) 0.12

Apartment Investment / AIV 8.91 12/31/09 (0.85) (1.51) (1.23) (1.22) (1.17)

Ark Restaurants / ARKR 12.46 9/30/09 2.21 1.93 1.33 1.49 na

Borders Group / BGP 2.31 1/31/10 (0.34) (3.07) (0.45) (0.28) 0.00

Bristol Myers Squibb / BMY 20.02 12/31/09 0.88 1.58 1.93 2.17 2.40

Burlington Northern / BNI 68.17 12/31/09 5.10 6.08 5.16 5.80 6.66

Canadian Natural / CNQ 54.10 12/31/09 3.70 (1.63) na na na

Capital Southwest / CSWC 69.01 3/31/10 42.94 (35.74) na na na

CarMax / KMX 9.91 2/28/10 0.83 0.27 0.24 0.50 0.98

Cemex / CX 9.49 12/31/09 2.65 2.02 0.55 0.79 1.18

Chesapeake Energy / CHK 20.50 12/31/09 2.62 1.14 2.07 2.37 3.23

Coca-Cola Company / KO 47.30 12/31/09 2.57 2.49 3.05 3.33 3.65

ConocoPhillips / COP 44.38 12/31/09 7.22 (11.16) 3.06 5.81 7.64

Consolidated-Tomoka / CTO 30.77 12/31/09 2.36 0.84 0.26 0.88 0.86

Costco Wholesale / COST 48.30 8/31/09 2.37 2.89 2.49 2.70 3.00

Coventry Health Care / CVH 18.44 12/31/09 3.98 2.54 1.81 2.26 2.58

Cresud / CRESY 9.23 6/30/09 0.43 0.16 0.11 0.13 0.49

CSX Corp. / CSX 28.16 12/31/09 2.74 3.34 2.86 3.20 3.84

Ctrip.com / CTRP 37.04 12/31/09 0.86 0.95 1.12 1.43 1.86

Deckers Outdoor / DECK 50.21 12/31/09 5.06 5.60 7.33 7.81 9.69

Dell / DELL 10.85 1/31/10 1.31 1.25 1.05 1.22 1.29

Dillard's / DDS 9.45 1/31/10 0.68 (3.25) (0.39) (0.64) 0.29

DISH Network / DISH 16.82 12/31/09 1.68 1.98 2.36 2.26 2.25

Dr Pepper Snapple / DPS 21.27 12/31/09 1.96 (1.23) 1.75 1.90 2.06

Eaton Corp. / ETN 44.15 12/31/09 6.38 6.50 2.04 3.14 3.82

eBay / EBAY 17.36 12/31/09 0.25 1.36 1.47 1.55 1.77

EchoStar / SATS 15.91 12/31/09 (0.95) (10.57) 0.04 0.20 0.32

Einstein Noah / BAGL 7.96 12/31/09 0.88 1.29 1.10 1.16 1.25

EMC Corp. / EMC 11.61 12/31/09 0.77 0.65 0.78 0.95 1.07

Facet Biotech / FACT 9.31 12/31/09 (9.51) (6.77) (4.82) (4.27) (3.99)

Fair Isaac Corp. / FIC 16.88 9/30/09 1.94 1.64 1.37 1.53 1.90

Fairfax Financial / FFH 257.50 12/31/09 58.54 80.71 na na na

Fidelity National / FNF 13.88 12/31/09 0.59 (0.85) 1.59 1.70 1.96

General Dynamics / GD 55.70 12/31/09 5.10 6.21 6.14 6.43 6.98

Goldman Sachs / GS 136.35 12/31/09 4.47 (2.15) 10.59 12.29 16.52

Greenlight Re / GLRE 15.77 12/31/09 1.15 (3.36) na na na

Harman International / HAR 16.89 6/30/09 4.72 1.73 (1.02) (0.25) 2.50

Harvest Natural / HNR 4.86 12/31/09 1.58 (0.63) 0.06 0.78 na

Health Net / HNT 15.30 12/31/09 1.70 0.88 2.14 2.18 2.38

Helix Energy / HLX 9.83 12/31/09 3.34 (6.99) 1.01 1.26 2.37

Hertz Global / HTZ 6.26 12/31/09 0.81 (3.74) (0.21) (0.01) (0.12)

Hess Corp. / HES 60.02 12/31/09 5.74 7.24 0.13 2.53 4.38

Horsehead / ZINC 6.53 12/31/09 2.85 1.12 (0.86) 0.00 na

Ingersoll-Rand / IR 21.15 12/31/09 2.48 (8.54) 1.43 1.62 2.10

Intel / INTC 15.05 12/31/09 1.18 0.92 0.54 0.87 1.15



Historical and Prospective EPS (in alphabetical order) (continued)

Recent FY EPS (Actual) EPS (Estimated)

Price End 2 Yrs Last This Next In

Company / Ticker ($) Date Ago FY FY FY 2 Yrs

International Assets / IAAC 15.64 9/30/09 (0.53) 2.95 1.29 1.17 1.47

Iteris / ITI 1.38 3/31/09 0.09 0.35 0.10 0.14 na

Jefferies Group / JEF 20.06 12/31/09 0.97 (3.23) 0.57 0.74 0.70

Johnson & Johnson / JNJ 54.77 12/31/09 3.63 4.57 4.51 4.87 5.37

Jones Apparel / JNY 8.41 12/31/09 0.45 (9.24) 0.61 0.72 0.93

Lab Corp. of America / LH 59.81 12/31/09 3.93 4.15 4.89 5.43 6.01

Lear Corp. / LEA 1.51 12/31/09 3.09 (8.93) (5.07) (0.89) (0.78)

Leucadia National / LUK 19.54 12/31/09 2.09 (11.19) na na na

M&T Bank / MTB 46.73 12/31/09 5.95 5.01 2.29 3.34 5.95

MasterCard / MA 168.36 12/31/09 8.00 (1.95) 10.44 12.27 13.53

MEMC Electronic / WFR 17.06 12/31/09 3.56 1.69 0.41 1.32 1.57

Moody's / MCO 27.89 12/31/09 2.58 1.87 1.52 1.75 2.10

Mosaic Company / MOS 55.36 5/31/09 0.95 4.67 4.24 5.61 6.78

PDL BioPharma / PDLI 6.68 12/31/09 1.34 1.48 1.16 1.29 1.40

Pfizer / PFE 14.96 12/31/09 1.18 1.19 1.95 2.26 2.21

Potlatch / PCH 26.36 12/31/09 1.84 1.73 0.98 1.05 1.38

Precision Castparts / PCP 78.94 3/31/10 6.84 7.38 7.52 7.72 7.69

Premier Exhibitions / PRXI 0.75 2/28/09 0.37 (0.34) (0.14) na na

Procter & Gamble / PG 53.03 6/30/09 3.04 3.64 4.23 3.97 4.39

Republic Airways / RJET 5.49 12/31/09 2.02 2.42 1.95 2.07 na

RHI Entertainment / RHIE 3.14 12/31/09 (1.67) (4.33) (0.55) 0.45 0.80

Rockwell Collins / COL 40.42 9/30/09 3.45 4.16 3.81 3.71 4.07

Ryanair Holdings / RYAAY 28.38 3/31/09 1.91 1.75 0.54 1.99 2.52

Schlumberger / SLB 51.75 12/31/09 4.20 4.42 2.57 2.44 3.57

Sears Holdings / SHLD 55.40 1/31/10 5.70 0.42 0.01 0.44 0.33

Spirit AeroSystems / SPR 13.26 12/31/09 2.13 1.91 2.21 2.00 1.94

St. Joe Company / JOE 23.61 12/31/09 0.15 (0.39) (0.26) (0.04) na

Strayer Education / STRA 188.32 12/31/09 4.47 5.67 7.30 8.97 10.86

Syneron Medical / ELOS 7.09 12/31/09 1.12 0.20 (0.77) (0.05) na

SYSCO Corp. / SYY 23.28 6/30/09 1.60 1.81 1.73 1.78 2.00

TAL International / TAL 10.30 12/31/09 1.16 1.09 1.41 1.48 1.56

Target Corp. / TGT 40.74 1/31/10 3.35 2.86 2.81 3.13 3.60

Telemig Celular / TMB 49.87 12/31/09 4.02 5.76 3.83 4.52 2.80

Ticketmaster / TKTM 7.30 12/31/09 2.35 (17.84) 0.91 1.00 1.25

Trident Microsystems / TRID 1.72 6/30/09 0.48 0.16 (0.63) (0.81) na

tw telecom / TWTC 11.16 12/31/09 (0.28) 0.06 0.11 0.29 0.48

U.S. Bancorp / USB 17.83 12/31/09 2.43 1.61 0.90 1.48 2.38

United Parcel Service / UPS 49.65 12/31/09 0.36 2.94 2.35 2.88 3.38

UnitedHealth Group / UNH 26.30 12/31/09 3.42 2.40 3.06 3.27 3.56

URS Corp. / URS 46.00 12/31/09 2.35 2.66 3.02 3.35 3.77

USG Corp. / USG 11.85 12/31/09 0.78 (4.67) (1.51) (1.10) 0.29

Visa / V 65.75 9/30/09 (1.34) 0.91 2.80 3.33 3.82

Waters Corp. / WAT 43.19 12/31/09 2.62 3.21 3.22 3.51 3.80

WellCare Health / WCG 18.91 12/31/09 5.16 (0.89) 2.14 2.22 2.15

WellPoint / WLP 44.75 12/31/09 5.56 4.76 5.63 6.18 6.91

Wells Fargo / WFC 24.31 12/31/09 2.38 0.70 1.44 1.80 3.44

Wendy's Arby's / WEN 4.20 12/31/09 0.16 (2.60) 0.20 0.29 0.39

Winthrop Realty Trust / FUR 9.69 12/31/09 0.11 (4.72) na na na

Yahoo! / YHOO 14.98 12/31/09 0.47 0.29 0.36 0.42 0.50

Yum! Brands / YUM 33.85 12/31/09 1.68 1.96 2.11 2.35 2.64



Latest Quarterly EPS Surprise (sorted by magnitude of surprise)

Recent Market Date of Latest EPS Surprise

Price Value Latest Date EPS EPS %

Company / Ticker ($) ($mn) Quarter (Actual) (Estimated) Diff.

Sears Holdings / SHLD 55.40 6,687 4/30/09 5/21/09 0.38 (0.88) nm

Jefferies Group / JEF 20.06 3,432 3/31/09 4/21/09 0.19 (0.08) nm

Dillard's / DDS 9.45 697 4/30/09 5/14/09 0.09 (0.18) nm

AmeriCredit / ACF 10.68 1,419 3/31/09 4/23/09 0.07 (0.30) nm

tw telecom / TWTC 11.16 1,664 3/31/09 5/11/09 0.02 (0.02) nm

MEMC Electronic / WFR 17.06 3,813 3/31/09 4/23/09 0.01 (0.03) nm

Cemex / CX 9.49 7,379 3/31/09 4/30/09 0.00 (0.01) nm

Goldman Sachs / GS 136.35 68,642 3/31/09 4/13/09 3.39 1.64 >99%

American Express / AXP 23.40 27,322 3/31/09 4/23/09 0.32 0.12 >99%

Jones Apparel / JNY 8.41 718 3/31/09 4/29/09 0.28 0.10 >99%

CarMax / KMX 9.91 2,185 2/28/09 4/2/09 0.17 0.02 >99%

American Railcar / ARII 8.40 179 3/31/09 5/6/09 0.13 0.05 >99%

Intel / INTC 15.05 84,054 3/31/09 4/14/09 0.11 0.03 >99%

EchoStar / SATS 15.91 1,380 3/31/09 5/11/09 (0.01) 0.04 <-99%

Premier Exhibitions / PRXI 0.75 23 2/28/09 1/6/09 (0.06) 0.04 <-99%

Fidelity National / FNF 13.88 3,259 3/31/09 4/27/09 (0.06) 0.12 <-99%

Ark Restaurants / ARKR 12.46 44 3/31/09 5/11/09 (0.11) 0.03 <-99%

WellCare Health / WCG 18.91 798 3/31/09 5/11/09 0.29 0.18 61%

Helix Energy / HLX 9.83 967 3/31/09 5/5/09 0.22 0.15 47%

URS Corp. / URS 46.00 3,826 3/31/09 5/13/09 0.92 0.63 46%

Deckers Outdoor / DECK 50.21 659 3/31/09 4/23/09 0.93 0.64 45%

International Assets / IAAC 15.64 141 3/31/09 5/11/09 0.44 0.32 38%

Wells Fargo / WFC 24.31 103,654 3/31/09 4/22/09 0.56 0.41 37%

ConocoPhillips / COP 44.38 65,751 3/31/09 4/23/09 0.52 0.40 30%

WellPoint / WLP 44.75 21,688 3/31/09 4/22/09 1.62 1.25 30%

Waters Corp. / WAT 43.19 4,164 3/31/09 4/28/09 0.74 0.58 28%

Dr Pepper Snapple / DPS 21.27 5,400 3/31/09 5/13/09 0.37 0.29 28%

Potlatch / PCH 26.36 1,048 3/31/09 4/28/09 0.72 0.58 24%

Ctrip.com / CTRP 37.04 2,474 3/31/09 5/11/09 0.26 0.21 24%

Ticketmaster / TKTM 7.30 419 3/31/09 5/12/09 0.21 0.17 24%

DISH Network / DISH 16.82 7,514 3/31/09 5/11/09 0.70 0.57 23%

CSX Corp. / CSX 28.16 11,024 3/31/09 4/14/09 0.62 0.51 22%

Moody's / MCO 27.89 6,574 3/31/09 4/29/09 0.41 0.34 21%

Yum! Brands / YUM 33.85 15,625 3/31/09 4/22/09 0.48 0.40 20%

Coventry Health Care / CVH 18.44 2,737 3/31/09 4/28/09 0.30 0.25 20%

U.S. Bancorp / USB 17.83 31,359 3/31/09 4/21/09 0.24 0.20 20%

Fair Isaac Corp. / FIC 16.88 825 3/31/09 4/22/09 0.37 0.31 19%

UnitedHealth Group / UNH 26.30 31,284 3/31/09 4/21/09 0.81 0.68 19%

Burlington Northern / BNI 68.17 23,148 3/31/09 4/23/09 1.13 0.96 18%

Health Net / HNT 15.30 1,589 3/31/09 5/5/09 0.41 0.35 17%

TAL International / TAL 10.30 323 3/31/09 5/6/09 0.42 0.36 17%

Target Corp. / TGT 40.74 30,637 4/30/09 5/20/09 0.69 0.60 15%

eBay / EBAY 17.36 22,335 3/31/09 4/22/09 0.39 0.34 15%

Visa / V 65.75 55,638 3/31/09 4/29/09 0.73 0.64 14%

Spirit AeroSystems / SPR 13.26 1,859 3/31/09 4/30/09 0.45 0.40 13%

Dell / DELL 10.85 21,169 1/31/09 2/26/09 0.29 0.26 12%

Borders Group / BGP 2.31 137 1/31/09 3/31/09 1.05 0.95 11%

Pfizer / PFE 14.96 100,950 3/31/09 4/28/09 0.54 0.49 10%

MasterCard / MA 168.36 21,780 3/31/09 5/1/09 2.80 2.61 7%

Schlumberger / SLB 51.75 61,914 3/31/09 4/24/09 0.78 0.73 7%



Latest Quarterly EPS Surprise (sorted by magnitude of surprise) (continued)

Recent Market Date of Latest EPS Surprise

Price Value Latest Date EPS EPS %

Company / Ticker ($) ($mn) Quarter (Actual) (Estimated) Diff.

AmerisourceBergen / ABC 36.58 5,523 3/31/09 4/23/09 0.95 0.89 7%

General Dynamics / GD 55.70 21,446 3/31/09 4/29/09 1.54 1.46 5%

Rockwell Collins / COL 40.42 6,402 3/31/09 4/28/09 1.03 0.98 5%

Strayer Education / STRA 188.32 2,639 3/31/09 4/30/09 2.07 1.97 5%

Procter & Gamble / PG 53.03 154,567 3/31/09 4/30/09 0.84 0.80 5%

Lab Corp. of America / LH 59.81 6,477 3/31/09 4/23/09 1.22 1.17 4%

Johnson & Johnson / JNJ 54.77 150,922 3/31/09 4/14/09 1.26 1.22 3%

Coca-Cola Company / KO 47.30 109,499 3/31/09 4/21/09 0.65 0.65 0%

Bristol Myers Squibb / BMY 20.02 39,657 3/31/09 4/28/09 0.48 0.48 0%

SYSCO Corp. / SYY 23.28 13,733 3/31/09 5/4/09 0.38 0.38 0%

EMC Corp. / EMC 11.61 23,371 3/31/09 4/23/09 0.16 0.16 0%

Yahoo! / YHOO 14.98 20,907 3/31/09 4/21/09 0.08 0.08 0%

Iteris / ITI 1.38 47 12/31/08 1/29/09 0.02 0.02 0%

USG Corp. / USG 11.85 1,176 3/31/09 4/21/09 (0.42) (0.73) nm

Hess Corp. / HES 60.02 19,629 3/31/09 4/29/09 (0.09) (0.27) nm

Facet Biotech / FACT 9.31 229 3/31/09 5/5/09 (1.22) (1.37) nm

Ryanair Holdings / RYAAY 28.38 8,364 12/31/08 2/2/09 (0.45) (0.59) nm

Apartment Investment / AIV 8.91 1,043 3/31/09 5/1/09 (0.33) (0.46) nm

Ingersoll-Rand / IR 21.15 6,749 3/31/09 4/22/09 (0.04) (0.13) nm

Eaton Corp. / ETN 44.15 7,311 3/31/09 4/20/09 (0.22) (0.25) nm

Amylin Pharma / AMLN 11.11 1,566 3/31/09 4/16/09 (0.34) (0.35) nm

Precision Castparts / PCP 78.94 11,047 3/31/09 5/5/09 1.87 1.88 -1%

Chesapeake Energy / CHK 20.50 12,837 3/31/09 5/4/09 0.46 0.48 -4%

PDL BioPharma / PDLI 6.68 798 3/31/09 5/7/09 0.23 0.24 -4%

Costco Wholesale / COST 48.30 20,964 2/28/09 3/4/09 0.55 0.59 -7%

United Parcel Service / UPS 49.65 49,404 3/31/09 4/23/09 0.52 0.56 -7%

Republic Airways / RJET 5.49 189 3/31/09 5/4/09 0.45 0.49 -8%

M&T Bank / MTB 46.73 5,192 3/31/09 4/21/09 0.49 0.71 -31%

Telemig Celular / TMB 49.87 920 12/31/08 2/13/09 1.11 1.87 -41%

Mosaic Company / MOS 55.36 24,603 2/28/09 4/7/09 0.13 0.23 -43%

Einstein Noah / BAGL 7.96 128 3/31/09 5/7/09 0.11 0.25 -56%

Wendy's Arby's / WEN 4.20 2,241 3/31/09 5/7/09 0.01 0.03 -67%

Consolidated-Tomoka / CTO 30.77 176 3/31/09 4/16/09 0.06 0.28 -79%

Trident Microsystems / TRID 1.72 108 3/31/09 4/28/09 (0.23) (0.21) nm

Hertz Global / HTZ 6.26 2,027 3/31/09 4/28/09 (0.25) (0.22) nm

St. Joe Company / JOE 23.61 2,184 3/31/09 5/5/09 (0.13) (0.02) nm

Syneron Medical / ELOS 7.09 195 3/31/09 5/14/09 (0.30) (0.18) nm

Harvest Natural / HNR 4.86 160 3/31/09 5/8/09 (0.15) (0.02) nm

Horsehead / ZINC 6.53 230 3/31/09 5/7/09 (0.42) (0.20) nm

Lear Corp. / LEA 1.51 117 3/31/09 5/14/09 (1.95) (1.73) nm

Harman International / HAR 16.89 991 3/31/09 4/29/09 (0.84) (0.44) nm

RHI Entertainment / RHIE 3.14 42 3/31/09 5/6/09 (0.94) (0.41) nm

Alexander's / ALX 245.50 1,254 3/31/09 na na na nm

Canadian Natural / CNQ 54.10 29,319 3/31/09 na na na nm

Capital Southwest / CSWC 69.01 258 12/31/08 na na na nm

Fairfax Financial / FFH 257.50 4,709 3/31/09 na na na nm

Greenlight Re / GLRE 15.77 572 3/31/09 na na na nm

Leucadia National / LUK 19.54 4,660 3/31/09 na na na nm

Winthrop Realty Trust / FUR 9.69 153 3/31/09 na na na nm

Cresud / CRESY 9.23 438 9/30/08 11/11/08 (0.23) na nm



Revenue and EPS Growth (sorted by LTM revenue growth)

Revenue Growth EPS Growth

5-Year Last FY LTM Last FY This FY Next FY LTGR

Company / Ticker CAGR (Actual) (Estimated) (Estimated) (Estimated)

Potlatch / PCH -18% 4% >99% -6% -43% 7% 3%

International Assets / IAAC >99% >99% >99% nm -56% -9% na

Cresud / CRESY 18% 47% >99% -63% -31% 18% na

Capital Southwest / CSWC 11% -3% 99% nm nm nm na

Wendy's Arby's / WEN 44% 44% 89% nm nm 45% 14%

Apartment Investment / AIV 2% 6% 65% nm nm nm 3%

URS Corp. / URS 24% 87% 59% 13% 14% 11% 11%

Ingersoll-Rand / IR 10% 51% 56% nm nm 13% 8%

Chesapeake Energy / CHK 47% 49% 53% -56% 82% 14% 8%

Deckers Outdoor / DECK 42% 54% 53% 11% 31% 7% 22%

Mosaic Company / MOS 43% 70% 52% >99% -9% 32% 11%

PDL BioPharma / PDLI 35% 31% 42% 10% -22% 11% 26%

Visa / V nm 74% 38% nm >99% 19% 20%

Strayer Education / STRA 22% 25% 27% 27% 29% 23% 20%

EchoStar / SATS 17% 39% 26% nm nm >99% 5%

Helix Energy / HLX 40% 22% 25% nm nm 25% na

Coventry Health Care / CVH 21% 21% 19% -36% -29% 25% 13%

Ctrip.com / CTRP 54% 24% 18% 10% 18% 28% 18%

Ryanair Holdings / RYAAY 26% 21% 18% -8% -69% >99% 20%

WellCare Health / WCG 44% 21% 17% nm nm 4% 11%

Ticketmaster / TKTM nm 17% 15% nm nm 10% na

TAL International / TAL 5% 22% 15% -6% 29% 5% 14%

MasterCard / MA 17% 23% 15% nm nm 18% 17%

Wells Fargo / WFC 12% -1% 13% -71% >99% 25% 11%

American Railcar / ARII 30% 16% 13% -16% nm >99% -1%

Schlumberger / SLB 22% 16% 11% 5% -42% -5% 2%

Iteris / ITI 10% 12% 10% >99% -71% 40% 35%

Eaton Corp. / ETN 14% 18% 10% 2% -69% 54% 7%

General Dynamics / GD 12% 8% 9% 22% -1% 5% 9%

Lab Corp. of America / LH 9% 11% 9% 6% 18% 11% 13%

Bristol Myers Squibb / BMY 2% 13% 9% 80% 22% 12% 8%

UnitedHealth Group / UNH 23% 8% 8% -30% 28% 7% 10%

Costco Wholesale / COST 11% 13% 7% 22% -14% 8% 12%

Facet Biotech / FACT 12% -31% 7% nm nm nm na

Fairfax Financial / FFH 7% 7% 7% 38% nm nm na

Health Net / HNT 7% 9% 7% -48% >99% 2% 10%

tw telecom / TWTC 12% 7% 6% nm 83% >99% 19%

ConocoPhillips / COP 19% 27% 6% nm nm 90% -1%

EMC Corp. / EMC 19% 12% 6% -16% 20% 22% 10%

Canadian Natural / CNQ 22% 27% 6% nm nm nm na

Hess Corp. / HES 23% 29% 6% 26% -98% >99% 7%

Republic Airways / RJET 25% 14% 6% 20% -19% 6% 16%

Coca-Cola Company / KO 9% 11% 5% -3% 22% 9% 7%

Burlington Northern / BNI 14% 14% 5% 19% -15% 12% 7%

CSX Corp. / CSX 8% 12% 5% 22% -14% 12% 10%

Yum! Brands / YUM 6% 8% 5% 17% 8% 11% 12%

Amylin Pharma / AMLN 58% 8% 4% nm nm nm na

DISH Network / DISH 15% 5% 3% 18% 19% -4% 2%

eBay / EBAY 32% 11% 3% >99% 8% 5% 10%

AmerisourceBergen / ABC 7% 7% 3% 14% 13% 10% 12%



Revenue and EPS Growth (sorted by LTM revenue growth) (continued)

Revenue Growth EPS Growth

5-Year Last FY LTM Last FY This FY Next FY LTGR

Company / Ticker CAGR (Actual) (Estimated) (Estimated) (Estimated)

Alexander's / ALX 19% 1% 2% -33% nm nm na

Procter & Gamble / PG 14% 9% 2% 20% 16% -6% 10%

Waters Corp. / WAT 10% 7% 2% 23% 0% 9% 12%

Target Corp. / TGT 9% 2% 1% -15% -2% 11% 14%

SYSCO Corp. / SYY 7% 7% 1% 13% -4% 3% 12%

Precision Castparts / PCP 29% 1% 1% 8% 2% 3% 14%

Rockwell Collins / COL 13% 8% 1% 21% -8% -3% 18%

Johnson & Johnson / JNJ 9% 4% 1% 26% -1% 8% 8%

Einstein Noah / BAGL 2% 3% 0% 47% -15% 5% 14%

Harvest Natural / HNR -100% -100% 0% nm nm >99% na

Dell / DELL 8% 0% 0% -5% -16% 16% 12%

Ark Restaurants / ARKR 4% 6% 0% -13% -31% 12% na

Dr Pepper Snapple / DPS nm 0% -1% nm nm 9% 1%

Pfizer / PFE 2% 0% -1% 1% 64% 16% -2%

WellPoint / WLP 30% 0% -1% -14% 18% 10% 11%

United Parcel Service / UPS 9% 4% -1% >99% -20% 23% 9%

Yahoo! / YHOO 35% 3% -2% -38% 24% 17% 16%

Winthrop Realty Trust / FUR 80% -11% -3% nm nm nm na

Jones Apparel / JNY -4% -6% -6% nm nm 18% 11%

Dillard's / DDS -2% -5% -7% nm nm nm 6%

American Express / AXP 10% 1% -7% -28% -68% 63% 10%

Spirit AeroSystems / SPR nm -2% -8% -10% 16% -10% 12%

U.S. Bancorp / USB 6% -5% -8% -34% -44% 64% 7%

Sears Holdings / SHLD 15% -8% -9% -93% -98% >99% 10%

Hertz Global / HTZ 8% -2% -9% nm nm nm 9%

Borders Group / BGP -3% -9% -9% nm nm nm na

Intel / INTC 5% -2% -11% -22% -41% 61% 10%

Fair Isaac Corp. / FIC 3% -5% -12% -15% -16% 12% 5%

RHI Entertainment / RHIE nm -2% -12% nm nm nm na

Premier Exhibitions / PRXI 79% -12% -12% nm nm nm na

MEMC Electronic / WFR 21% 4% -13% -53% -76% >99% 16%

Fidelity National / FNF -6% -22% -14% nm nm 7% 12%

M&T Bank / MTB 9% -8% -15% -16% -54% 46% 4%

CarMax / KMX 9% -15% -15% -67% -11% >99% 15%

AmeriCredit / ACF 21% 9% -16% nm nm nm 13%

USG Corp. / USG 5% -11% -16% nm nm nm na

Harman International / HAR 13% 16% -17% -63% nm nm 16%

Moody's / MCO 7% -22% -18% -28% -19% 15% 10%

Leucadia National / LUK 28% -6% -22% nm nm nm na

Lear Corp. / LEA -3% -15% -23% nm nm nm 6%

Horsehead / ZINC 19% -18% -28% -61% nm nm na

Jefferies Group / JEF 13% -38% -32% nm nm 30% 13%

Telemig Celular / TMB 10% 32% -35% 43% -34% 18% na

Syneron Medical / ELOS 27% -18% -35% -82% nm nm na

Cemex / CX 26% 16% -43% -24% -73% 44% 28%

Consolidated-Tomoka / CTO -10% -52% -47% -64% -69% >99% na

St. Joe Company / JOE -17% -30% -58% nm nm nm 15%

Goldman Sachs / GS -48% -98% -63% nm nm 16% 11%

Trident Microsystems / TRID 37% -5% -65% -67% nm nm 15%

Greenlight Re / GLRE nm -100% -69% nm nm nm na



Percentile Rank within Industry (sorted by LTM EBIT margin rank)

The following table shows 50 companies of the 100 superinvestor companies included in this report. The companies were selected on the basis of their respective industry percentile rank, which was determined based on LTM EBIT margin.

Market Percentile Rank within Industry

Value Revenue Growth EPS Growth LTM EBIT

Company / Ticker ($mn) 5-Year LTM LTM Estimated Margin

Alexander's / ALX 1,254 68 50 63 na 98

PDL BioPharma / PDLI 798 84 84 99 95 97

Canadian Natural / CNQ 29,319 72 57 78 na 93

M&T Bank / MTB 5,192 43 21 39 9 91

Moody's / MCO 6,574 37 18 43 35 89

Consolidated-Tomoka / CTO 176 7 5 32 na 88

MEMC Electronic / WFR 3,813 71 23 41 77 87

Strayer Education / STRA 2,639 72 78 54 88 86

U.S. Bancorp / USB 31,359 33 30 37 20 86

Fairfax Financial / FFH 4,709 36 59 73 na 85

Visa / V 55,638 na 83 97 85 85

Wells Fargo / WFC 103,654 53 67 32 43 85

Ctrip.com / CTRP 2,474 92 72 63 83 85

Mosaic Company / MOS 24,603 88 86 93 44 84

Johnson & Johnson / JNJ 150,922 42 47 66 25 83

Coca-Cola Company / KO 109,499 42 56 51 23 83

Bristol Myers Squibb / BMY 39,657 22 62 95 24 83

Schlumberger / SLB 61,914 72 65 52 6 82

Waters Corp. / WAT 4,164 47 49 68 49 82

CSX Corp. / CSX 11,024 40 55 51 35 82

eBay / EBAY 22,335 82 52 98 41 81

Burlington Northern / BNI 23,148 57 55 50 20 80

Telemig Celular / TMB 920 45 8 42 na 80

Rockwell Collins / COL 6,402 56 47 65 82 80

Pfizer / PFE 100,950 21 43 63 4 80

TAL International / TAL 323 31 70 94 63 80

Intel / INTC 84,054 29 27 42 41 80

Lab Corp. of America / LH 6,477 42 63 60 58 78

DISH Network / DISH 7,514 60 52 64 7 78

Deckers Outdoor / DECK 659 88 86 63 90 76

Republic Airways / RJET 189 76 56 50 75 76

Fair Isaac Corp. / FIC 825 26 24 60 12 76

Yum! Brands / YUM 15,625 34 55 61 50 73

General Dynamics / GD 21,446 53 63 66 31 72

Cemex / CX 7,379 77 6 32 95 70

Spirit AeroSystems / SPR 1,859 na 30 46 49 69

EMC Corp. / EMC 23,371 68 58 47 41 69

Iteris / ITI 47 44 64 85 98 68

Apartment Investment / AIV 1,043 23 88 na 8 68

United Parcel Service / UPS 49,404 43 42 99 30 67

American Express / AXP 27,322 47 32 37 34 66

Hess Corp. / HES 19,629 74 57 42 20 66

tw telecom / TWTC 1,664 50 58 94 84 65

UnitedHealth Group / UNH 31,284 74 61 42 34 62

American Railcar / ARII 179 81 67 43 4 62

Horsehead / ZINC 230 68 11 29 na 62

WellPoint / WLP 21,688 81 42 50 44 61

Einstein Noah / BAGL 128 21 46 70 63 61

Eaton Corp. / ETN 7,311 57 63 42 22 61



Insider Buying and Ownership (sorted by # of buys minus # of sells)

Market Recent Last Six Months

Value Price YTD Insider Insider Insider

Company / Ticker ($mn) ($) Change Ownership Buys Sales

Wells Fargo / WFC 103,654 24.31 -18% 0% 11 -

Visa / V 55,638 65.75 25% 47% 9 1

Helix Energy / HLX 967 9.83 36% 6% 8 -

Iteris / ITI 47 1.38 -11% 10% 8 -

Alexander's / ALX 1,254 245.50 -4% 28% 7 2

Wendy's Arby's / WEN 2,241 4.20 -15% 31% 4 -

RHI Entertainment / RHIE 42 3.14 -61% 40% 4 -

Greenlight Re / GLRE 572 15.77 21% 19% 6 3

International Assets / IAAC 141 15.64 82% 49% 3 -

American Express / AXP 27,322 23.40 26% 0% 3 -

Capital Southwest / CSWC 258 69.01 -36% 20% 2 -

Burlington Northern / BNI 23,148 68.17 -10% 0% 3 1

Deckers Outdoor / DECK 659 50.21 -37% 4% 2 -

Potlatch / PCH 1,048 26.36 1% 2% 2 -

Coca-Cola Company / KO 109,499 47.30 4% 5% 2 -

Yahoo! / YHOO 20,907 14.98 23% 15% 4 2

AmeriCredit / ACF 1,419 10.68 40% 3% 2 -

Winthrop Realty Trust / FUR 153 9.69 -11% 18% 1 -

Borders Group / BGP 137 2.31 478% 1% 2 1

DISH Network / DISH 7,514 16.82 52% 75% 1 -

Bristol Myers Squibb / BMY 39,657 20.02 -14% 0% 3 2

Jones Apparel / JNY 718 8.41 44% 2% 2 1

U.S. Bancorp / USB 31,359 17.83 -29% 0% 4 3

PDL BioPharma / PDLI 798 6.68 8% 1% 1 -

Mosaic Company / MOS 24,603 55.36 60% 65% 1 -

Dillard's / DDS 697 9.45 138% 10% 1 -

Consolidated-Tomoka / CTO 176 30.77 -19% 0% 1 -

EchoStar / SATS 1,380 15.91 7% 80% 1 -

Premier Exhibitions / PRXI 23 0.75 -34% 13% 1 -

Ark Restaurants / ARKR 44 12.46 9% 40% 3 2

Eaton Corp. / ETN 7,311 44.15 -11% 1% 1 -

Horsehead / ZINC 230 6.53 39% 0% 1 -

UnitedHealth Group / UNH 31,284 26.30 -1% 1% 1 1



Top 5 Superinvestor Selections

We highlight the following companies:

EchoStar Corporation (SATS) – Owned By Einhorn, John Griffin

EMC Corporation (EMC) – Owned By Ackman, Einhorn

Republic Airways (RJET) – Owned By Einhorn

Ticketmaster Entertainment (TKTM) – Owned By Einhorn, Weitz

WellCare Health Plans (WCG) – Owned By Berkowitz


EchoStar (SATS) – Owned By Einhorn, John Griffin Englewood, CO, 303-723-1000

Services: Broadcasting & Cable TV http://www.echostar.com

Trading Data Consensus EPS Estimates Valuation

Price: $15.91 (as of 5/22/09) Month # of P/E FYE 12/31/08 n/m

52-week range: $12.78 - $38.32 Latest Ago Ests P/E FYE 12/31/09 397.8x

Market value: $1.4 billion This quarter $0.03 $0.00 2 P/E FYE 12/31/10 79.6x

Enterprise value: $783 million Next quarter -0.05 -0.04 1 P/E FYE 12/31/11 49.7x

Shares out: 86.8 million FYE 12/31/09 0.04 0.04 1 EV / LTM revenue 0.4x

Ownership Data FYE 12/31/10 0.20 0.27 2 EV / LTM EBITDA -2.0x

Insider ownership: 80% FYE 12/31/11 0.32 0.38 2 EV / LTM EBIT n/m

Insider buys (last six months): 1 LT EPS growth 5.0% 5.0% 1 P / tangible book 0.7x

Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria

Institutional ownership: 43% Date Actual Estimate LTM EBIT yield -84%

# of institutional owners: 298 5/11/09 -$0.01 $0.04 LTM pre-tax ROC -45%

Operating Performance and Financial Position

($ millions, except Fiscal Years Ended LTME FQE FQE

per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 1,038 977 1,720 1,514 1,525 1,544 2,151 2,076 555 480

Gross profit 103 90 69 75 85 90 435 415 120 100

EBIT (9) 2 (41) (33) (38) (86) (641) (657) 14 (2)

Net income (97) 4 (43) (45) (34) (85) (944) (950) 6 (1)

Diluted EPS (2.32) 0.10 (1.03) (1.07) (0.38) (0.95) (10.57) (10.63) 0.06 (0.01)

Cash from ops (79) (14) (36) (88) 113 157 (8) 36

Capex 6 18 33 144 230 203 62 35

Free cash flow (85) (33) (69) (232) (117) (46) (69) 1

Cash & investments 106 324 532 829 930 1,343 930

Total current assets 127 348 611 1,229 1,353 1,987 1,353

Intangible assets 13 12 320 185 177 454 177

Total assets 229 518 1,261 2,904 3,002 4,265 3,002

Short-term debt 0 0 1 53 51 52 51

Total current liabilities 12 15 50 369 375 550 375

Long-term debt 0 0 2 294 282 335 282

Total liabilities 12 15 53 678 707 1,019 707

Preferred stock 0 0 0 0 0 0 0

Common equity 217 502 1,208 2,226 2,295 3,246 2,295

EBIT/capital employed -94% -66% -53% -85% -45% n/m n/m

Ten-Year Stock Price Performance and Trading Volume Dynamics

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BUSINESS OVERVIEW EchoStar was spun off from DISH Network in early 2008. The company operates a digital set-top box business and is developing a fixed satellite services business using its fleet of owned and leased in-orbit satellites.

EchoStar owns most of the real estate it uses. The assets are located primarily in the Western U.S. and include the headquarters in Englewood, CO (476,000 sq ft), engineering offices, digital broadcast centers, and call and data centers. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007 2008 1Q09 % of revenue by customer: DISH Network 86% 84% 84% 87% 87% Bell TV 11% 12% 11% 8% 8% Other 3% 3% 6% 5% 5% Revenue growth by customer: DISH Network -16% -1% 0% 44% -11% Bell TV 38% 8% -12% 10% 6% Other -13% 12% 70% 29% -54% Total revenue -12% 1% 1% 39% -14% % of revenue by geography: U.S. 96% 95% 93% 97% 98% Europe 4% 5% 7% 3% 2%

INVESTMENT HIGHLIGHTS

Post-spinoff EchoStar well-positioned to pursue new customers. Set-top box buyers may have perceived EchoStar as a competitor when it was owned by DISH Network. Some may still hesitate to partner with the company due to Charlie Ergen’s continuing control of both EchoStar and DISH.

High-ROIC, non capital-intensive set-top box business. Growing market acceptance of HDTV is driving demand for set-top boxes, which account for the vast majority of EchoStar’s revenue.

Cost-plus deal with DISH Network, driving equipment gross margin of 14% in 2008. This below-market margin may expand over time.

Potential replacement cycle, as HDTV requires advanced compression and security in set-top boxes.

Regulatory changes benefit EchoStar: (1) It has entered millions of homes with digital converter devices that help consumers meet a digital broadcast mandate. (2) An FCC mandate that cable providers use removable modules for conditional access security improves EchoStar’s ability to compete.

Growing international sales of set-top boxes. Global markets offer the “best opportunities” for new customer acquisition. EchoStar sees strong demand for direct-to-home satellite service in countries without extensive cable infrastructure.

Capable, interested management led by Charlie Ergen (54). Ergen co-founded DISH Network in 1980. He still serves as chairman and CEO of both DISH and EchoStar. Ergen owns 50% of EchoStar.

$500 million buyback commenced in 3Q08. Shares trade at 0.4x EV to trailing revenue and

0.7x tangible book value. INVESTMENT RISKS & CONCERNS

DISH accounted for 87% of revenue in 2007 — concentration risk mitigated by Ergen’s control.

Set-top box competition from Motorola, Pace and Cisco/SFA. Barriers include long-term deals and the fact that some competitors own the conditional access technology deployed by their customers.

Fixed satellite services competition from Intelsat, SES Americom and Telesat Canada.

Tivo case. In January 2008, an appeals court upheld a jury verdict that EchoStar infringed a Tivo patent. The company has appealed to the Supreme Court.

Does not carry insurance for in-orbit satellites. Technology obsolesce risks. If viewers become

able to use PCs, TVs or network-based DVRs instead of set-top boxes, sales might decline.

Dependent on competitiveness of satellite TV versus cable TV and alternatives, at least for now.

Cross officerships with DISH. EchoStar has a management services deal in place with DISH.

COMPARABLE PUBLIC COMPANY ANALYSIS

MV

($mn) EV

($mn) EV / Rev.

P / Tang. Book

This FY P/E

Next FY P/E

CSCO 103,250 80,020 2.1x 4.5x 14x 14x

MOT 13,530 11,600 .4x 2.4x n/m 27x

SATS 1,380 780 .4x .7x 398x 80x

MAJOR HOLDERS There are 42 million Class A shares out (one vote per share) and 48 million Class B shares out (ten votes per share).

Charlie Ergen 50% (80% voting power) │ Other insiders 5% │ MSD 4% │ Greenlight 3% │ Blue Ridge 3% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE With roughly one-half of market value in cash, Charlie Ergen at the helm and a $500 million buyback in place, the risk-reward tradeoff is compelling. On the surface, customer concentration is a big risk, as is exposure to cash-strapped U.S. consumers. It is understandable that DISH holders may not be keen on owning the SATS spinoff, particularly if they never intended to invest in a niche technology/satellite company. However, the shares appear meaningfully undervalued. We view share buybacks as highly accretive to intrinsic value per share.


EMC Corporation (EMC) – Owned By Ackman, Einhorn Hopkinton, MA, 508-435-1000

Technology: Computer Storage Devices, Member of S&P 500 http://www.emc.com


Price: $11.61 (as of 5/22/09) Month # of P/E FYE 12/31/08 17.9x



Enterprise value: $19.1 billion Next quarter 0.20 0.22 23 P/E FYE 12/31/11 10.9x

Shares out: 2,013.0 million FYE 12/31/09 0.78 0.85 24 EV / LTM revenue 1.3x

Ownership Data FYE 12/31/10 0.95 1.00 23 EV / LTM EBITDA n/a

Insider ownership: 0% FYE 12/31/11 1.07 1.14 2 EV / LTM EBIT 12.6x



Institutional ownership: 78% Date Actual Estimate LTM EBIT yield 8%

# of institutional owners: 1874 4/23/09 $0.16 $0.16 LTM pre-tax ROC >100%



per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 5,438 6,237 8,230 9,664 11,155 13,230 14,876 14,557 3,470 3,151

Gross profit 2,057 2,842 4,215 5,193 5,913 7,211 8,222 7,996 1,909 1,683

EBIT (503) 401 1,044 1,481 1,208 1,739 1,569 1,514 315 260

Net income (119) 496 871 1,133 1,228 1,666 1,346 1,289 252 194

Diluted EPS (0.05) 0.22 0.36 0.47 0.54 0.77 0.65 0.63 0.12 0.10

Cash from ops 1,446 1,521 2,102 2,216 2,140 3,127 3,565 3,511 918 864

Capex 518 482 538 768 911 931 991 973 201 183

Free cash flow 928 1,039 1,565 1,448 1,229 2,196 2,574 2,538 718 681

Cash & investments 2,551 2,798 2,714 3,938 3,350 6,127 6,807 7,252 5,614 7,252

Total current assets 4,217 4,687 4,831 6,574 6,521 10,053 10,665 10,596 9,310 10,596

Intangible assets 275 3,187 3,784 4,447 7,021 7,472 7,842 7,781 7,714 7,781

Total assets 9,590 14,093 15,423 16,790 18,566 22,285 23,875 23,902 22,216 23,902

Short-term debt 28 7 0 0 0 0 0 0 0 0

Total current liabilities 2,042 2,547 2,949 3,674 3,662 4,408 5,218 4,891 4,323 4,891

Long-term debt 0 130 129 127 3,450 3,450 3,450 3,018 3,450 3,018

Total liabilities 2,364 3,208 3,900 4,725 8,241 9,763 10,833 10,327 9,842 10,327

Preferred stock 0 0 0 0 0 0 0 0 0 0

Common equity 7,226 10,885 11,523 12,065 10,326 12,521 13,042 13,575 12,374 13,575

EBIT/capital employed -39% 36% >100% >100% >100% >100% >100% >100% n/m n/m


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BUSINESS OVERVIEW EMC provides data storage hardware, software and services.

Information Infrastructure helps customers store and protect electronic data. It consists of three segments: storage, content management and archiving, and RSA Security.

Virtual Infrastructure includes EMC’s 84% stake in VMware (NYSE: VMW), the leader in virtualization software. INVESTMENT HIGHLIGHTS

Leading data storage provider, selling hardware, software and services. While sales of Symmetrix and Clariion boxes have historically driven EMC’s growth, management has emphasized software sales growth in recent years, including via M&A.

Digital data created and replicated to grow from 173 exabytes in 2006 to 1,773 exabytes by 2011 worldwide,* driving continued demand for storage.

Well-positioned to benefit from major IT trends via technology assets in information infrastructure, virtualization (VMware) and cloud computing.

$213 million Iomega acquisition, closed in 2Q08, expands EMC’s reach in consumer and SMB. The company announced several tuck-in deals in 2008.

Repurchased $1.5 billion of stock in 2007, $3.7 billion in 2006 and $1.0 billion in 2005.

Shares trade at 18% trailing FCF yield, 12x next year’s EPS and 1.3x EV to trailing revenue.

INVESTMENT RISKS & CONCERNS

Exposed to IT spending cuts by large enterprises, including financial firms such as Goldman Sachs.

Technology evolution; competitive market. EMC has had to evolve over the years, seeking to grow its software business to offset margin pressure on the hardware side. EMC competes against giants such as IBM and HP as well as data storage startups.

VMware may be less valuable than its market cap suggests, with threats looming from Microsoft et al.


MV

($mn) EV

($mn) EV / Rev.

P / Tang. Book

This FY P/E

Next FY P/E

IBM 134,640 153,320 1.5x n/m 11x 10x

HPQ 81,820 87,580 .7x 190x 9x 8x

EMC 23,370 19,140 1.3x 4.0x 15x 12x

MAJOR HOLDERS Insiders 1% │ Capital World 8% │ Barclays 4% │ State Street 3% │ Pershing Square 3% │ Greenlight 1% * Source: IDC.

SELECTED OPERATING DATA FYE December 31 2005 2006 2007 2008 1Q09 % of revenue by type: Hardware 46% 46% 44% 42% } 54% Software – EMC 23% 22% 21% 17% Software – VMware 3% 4% 7% 8% 8% Services 27% 28% 29% 32% 38% Revenue growth by type:Hardware 16% 15% 12% 9% } -16% Software – EMC1 11% 9% 13% -6% Software – VMware1 61% 72% 83% 30% -12% Services 22% 16% 24% 26% 5% Total revenue 17% 15% 19% 12% -9% % of revenue by segment:Storage 91% 86% 80% 78% 75% Content management 5% 6% 6% 5% 6% RSA Security 0% 1% 4% 4% 5% VMware 4% 6% 10% 13% 15% Revenue growth by segment:Storage 15% 9% 10% 10% -13% Content management 22% 42% 13% 2% -6% RSA Security n/m n/m 246% 11% 6% VMware 78% 83% 86% 42% 7% Gross margin by segment:Storage 54% 52% 52% 51% 48% Content management 70% 69% 68% 61% 59% RSA Security n/a 75% 73% 71% 69% VMware 90% 89% 88% 86% 86% Corporate and other -2% -3% -3% -2% -2% Total gross margin 54% 53% 55% 55% 53% EBIT margin by major segment: EMC 17% 17% 17% 17% 12% VMware 34% 28% 24% 28% 31% Corporate and other -2% -5% -4% -5% -6% Special items -1% -2% -0% -2% 0% Total EBIT margin 15% 11% 13% 11% 8% Selected items as % of revenue: D&A 7% 7% 7% 7% 8% Capex 6% 6% 5% 5% 3% Capitalized software 2% 2% 2% 2% 3% M&A, net of cash2 7% 23% 4% 5% 0% % of revenue by geography: U.S. 57% 57% 56% 54% 52% EMEA 28% 29% 30% 31% 31% Asia 11% 10% 11% 11% 12% Americas ex. U.S. 4% 4% 4% 5% 5% Dell as % of revenue 12% 15% 14% 12% <10% ROE 11% 15% 11% 1% Equity to assets (avg) 63% 56% 55% 56% shares out (avg) -6% -6% -4% -4%

1 Software license revenue only. Software maintenance is included in services. 2 Net of Cisco’s $150 million investment in VMware in 2007.

RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE EMC is a technology juggernaut with one of the best sales forces in the business and defensible leadership in data storage. The acquisition and subsequent IPO of VMware at multiples of EMC’s purchase price attests to the shrewdness of EMC’s management. While we ascribe high probability to EMC maintaining its leadership position, we caution that a large portion of the company’s profits still comes from sales of hardware boxes, which are highly sensitive to corporate IT spending.


…additional insight into EMC: SLIDES FROM COMPANY PRESENTATIONS, JANUARY–MAY 2009


Republic Airways (RJET) – Owned By Einhorn Indianapolis, IN, 317-484-6000

Transportation: Airline http://www.rjet.com




Market value: $189 million This quarter $0.51 $0.61 5 P/E FYE 12/31/10 2.7x

Enterprise value: $2.3 billion Next quarter 0.48 0.55 4 P/E FYE 12/31/11 n/a


Ownership Data FYE 12/31/10 2.07 2.29 4 EV / LTM EBITDA 6.3x

Insider ownership: 1% FYE 12/31/11 n/a n/a n/a EV / LTM EBIT 10.0x




# of institutional owners: 306 5/4/09 $0.45 $0.49 LTM pre-tax ROC 9%



per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 356 492 646 905 1,143 1,293 1,480 1,441 364 325

Gross profit 162 239 300 442 576 687 789 791 196 198

EBIT 30 83 91 159 213 230 255 234 66 45

Net income 7 36 39 61 80 83 85 67 20 2

Diluted EPS 0.35 1.73 1.63 1.66 1.82 2.02 2.42 1.93 0.55 0.06

Cash from ops 43 92 117 171 229 281 242 232 66 56

Capex 26 37 64 179 89 100 128 116 31 19

Free cash flow 17 55 52 (8) 140 181 115 116 35 37

Cash & investments 3 23 46 162 196 164 130 118 150 118

Total current assets 33 64 83 216 263 254 371 310 245 310

Intangible assets 13 13 13 13 13 13 13 0 13 0

Total assets 390 670 1,172 2,036 2,358 2,773 3,237 3,240 2,913 3,240

Short-term debt 55 48 47 74 87 132 196 155 124 155

Total current liabilities 94 102 117 159 203 277 356 313 284 313

Long-term debt 224 438 804 1,340 1,482 1,782 2,082 2,113 1,891 2,113

Total liabilities 355 597 997 1,611 1,850 2,347 2,761 2,760 2,471 2,760


Common equity 30 72 175 425 509 426 476 479 442 479

EBIT/capital employed 10% 20% 12% 12% 12% 11% 10% 9% n/m n/m


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Apr 09Apr 08Apr 07Apr 06Apr 05


BUSINESS OVERVIEW Republic owns three regional airlines: Chautauqua Airlines, Shuttle America and Republic Airline. The company offers scheduled passenger service on ~1,250 flights per day to 109 cities in 35 states, Canada, Mexico, and Jamaica. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007 2008 1Q09 Number of aircraft in operation: Owned 90 109 131 149 149 Leased 52 62 88 79 79 % of revenue by network carrier: US Airways 21% 24% 22% 25% 29% United 32% 30% 24% 21% 24% Delta 34% 35% 33% 29% 21% Continental 0% 0% 10% 12% 11% American 13% 11% 9% 10% 9% Frontier, Midwest etc. 0% 0% 2% 3% 6% Selected growth metrics: Revenue 40% 26% 13% 14% -11% Headcount 33% 21% 26% -3% n/a Passengers carried 34% 39% 29% 16% 0% Rev passenger miles1 47% 47% 29% 13% -2% Available seat miles2 42% 40% 26% 15% 3% Pass. load factor3 4% 6% 3% -2% -4% Rev. per seat mile4 -1% -9% -10% 0% -13% Avg trip length (miles) 10% 6% 0% -3% -5% Selected items as a % of total revenue: EBIT6 18% 19% 18% 17% 18% Net income6 7% 7% 6% 6% 5% D&A 7% 8% 8% 9% 11% Capex5 14% 8% 8% 9% 6% shares out 54% 18% -4% -14% -1%

Source: Company filings, Manual of Ideas analysis. 1 Passengers carried multiplied by miles flown. 2 Passenger seats available multiplied by miles flown. 3 Revenue passenger miles divided by available seat miles. 4 Total airline operating revenues divided by available seat miles. 5 Higher capex due to purchase of commuter slots and 35 Embraer jets. 6 Q1 2009 EBIT and net margin exclude impairment of goodwill.


Long term, fixed-fee contractual relationships with seven major network partners. These contracts eliminate Republic’s exposure to fluctuations in fuel prices, fare competition and passenger volumes. The code-share agreements expire in 2012-2019. The business model benefits from high switching costs.

Diversified customer base, as compared to other regional airlines. Republic derives roughly one-quarter of revenue from each of Delta, US Airways, United, and others (Continental, American, etc.).

Growth could come from (1) trend toward larger, higher-margin aircraft (70+ seats vs. 35-50 seats); (2) market share gains due to Republic’s lowest cost structure among regional airlines; and (3) potential replacement of hub model with point-to-point.

Regional airline service revenue increased 4% to $290 million in Q1 (even as total revenue fell 11% due to lower pass-through revenue). A mix shift toward larger aircraft benefited service revenue.

Bryan Bedford (47) became CEO in 1999 and chairman in 2001. He has 20+ years of experience in the regional airline industry, having previously served as CEO of Mesaba Holdings.

Shares trade at 3x next FY EPS, 0.4x tang. book.

INVESTMENT RISKS & CONCERNS $2.3 billion of debt and $118 million of cash as of

March 31. More than $1 billion of contractual obligations, consisting of long-term debt and operating leases, come due in the next three years.

Vulnerable to weak financial position of network partners. If any of the company’s carrier partners file for bankruptcy, fixed-fee code-share agreements can be terminated or renegotiated at lower levels.

Loaned $25 million to US Airways in March, bringing the total loaned amount to $35 million.

Frontier went bankrupt in April 2008. Frontier’s rejection of the airline services agreement resulted in an unsecured claim of $150 million. Republic has provided $40 million in DIP financing to Frontier.

Helped recapitalize Mokulele in Q1 by converting $3 million of an $8 million loan and injecting $3 million of cash in exchange for 50% of Mokulele.


MV

($mn) EV

($mn) EV / Rev.

P / T. Book

This FY P/E

Next FY P/E

SKYW 590 1,700 .5x .5x 10x 6x

PNCL 40 640 .7x 2.6x 3x 3x

MESA 20 460 .4x .2x n/a n/a

XJT 20 -20 n/m .1x n/a n/a

RJET 190 2,340 1.6x .4x 3x 3x

MAJOR HOLDERS CEO Bedford 3% │ Other insiders 2% │Dimensional 10% │ Greenlight 10% │ Royal 6% │ Wexford 5% │ Barclays 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE Republic’s contracts with major airlines transfer many of the risks of operating an airline, such as fuel price volatility, to Republic’s partners. This insulates the company from the normal ups and downs of the airline business, but Republic remains exposed to conditions of severe distress. If airline partners go bankrupt, services agreements can be canceled or renegotiated, and Republic’s receivables may become impaired. The question is whether the current valuation compensates investors for the risks inherent in the airline industry — David Einhorn apparently believes the answer is yes. Republic reported trailing FCF of $274 million, exceeding market value. While the balance sheet is leveraged, the cash generation is impressive.


Ticketmaster Entertainment (TKTM) – Owned By Einhorn, Weitz West Hollywood, CA, 310-360-3300

Services: Retail (Catalog & Mail Order), Member of S&P SmallCap 600 http://www.ticketmaster.com





Enterprise value: $671 million Next quarter 0.17 0.17 1 P/E FYE 12/31/11 5.8x




Insider buys (last six months): 0 LT EPS growth n/a n/a n/a P / tangible book n/m



# of institutional owners: 380 5/12/09 $0.21 $0.17 LTM pre-tax ROC n/m



per share data) 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 929 1,063 1,241 1,455 1,479 349 374

Gross profit 368 426 474 528 540 128 141

EBIT 166 225 216 (967) (988) 47 25

Net income 118 177 169 (1,006) (1,031) 33 7

Diluted EPS 1.63 2.45 2.35 (17.84) (18.12) 0.58 0.12

Cash from ops 268 231 212 195 303 66 173

Capex 37 39 48 51 52 10 11

Free cash flow 231 191 165 144 250 56 162

Cash & investments 318 568 466 624 502 624

Total current assets 470 793 679 880 808 880

Intangible assets 1,162 1,183 786 770 1,642 770

Total assets 1,816 2,307 1,707 1,892 2,810 1,892

Short-term debt 0 0 0 0 0 0

Total current liabilities 410 523 516 692 657 692

Long-term debt 0 0 865 865 0 865

Total liabilities 458 567 1,530 1,703 761 1,703

Preferred stock 0 0 10 11 0 11

Common equity 1,358 1,739 167 177 2,049 177

EBIT/capital employed n/m n/m n/m n/m n/m n/m


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BUSINESS OVERVIEW Ticketmaster is an entertainment ticketing and marketing company. The company operates in 20 countries, providing ticket sale, resale, marketing and distribution through ticketmaster.com, 7,100 independent sales outlets and 17 call centers. Ticketmaster was spun off InterActiveCorp in an IPO in August 2008. Ticketmaster was established in 1976. TOP INTERNET TICKET SELLERS

Top Primary Sellers Score Top Secondary Sellers Score 1 Ticketmaster.com 1 65 StubHub.com 3 31 2 LiveNation.com 2 15 TicketsNow.com 1 10 3 ETix.com 3 TicketLiquidator.com 7 4 TicketWeb.com 1 3 TicketCity.com 5 5 Telecharge.com 3 CoasttoCoastTickets.com 3

Source: TicketNews.com. Score is based primarily on website traffic. 1 Owned by Ticketmaster. 2 To merge with Ticketmaster. 3 Owned by eBay.


#1 seller of live event tickets. Ticketmaster.com is a large e-commerce website, ranking as the 708th most-visited site in the U.S.* Ticketmaster brands sold 141 million tickets worth $8.9 billion in 2008.

Sold tickets for 10,000 clients worldwide in 2008, including venues, promoters, sports leagues and museums across multiple live event categories, providing exclusive ticketing services.

Owns majority stake in Front Line Management, a leading artist management firm, with 200 artists on its rosters and 80 managers serving artists.

Pending Live Nation merger seeks to combine the #1 and #2 ticket sellers. Live Nation is the largest concert promoter and owns, operates or leases 85 entertainment venues, making a combined entity dominant across the live music value chain. The “merger of equals” calls for Ticketmaster holders to receive 1.384 LYV shares per TKTM share, giving each group roughly 50% of the combined company. Synergies are projected at $40 million annually.

Q1 organic ticket sales up slightly when adjusted for loss of Live Nation (deal that expired at yearend 2008 accounted for 9% of 2008 ticketing revenue). Adjusted EBITDA fell 17% to $59 million in Q1.

Shares trade at 7x ‘10E EPS, .5x LTM revenue. COMPARABLE PUBLIC COMPANY ANALYSIS

MV

($mn) EV

($mn) EV / Rev.

P / T. Book

This FY P/E

Next FY P/E

LYV 450 930 .2x n/m n/m 268x

TKTM 420 670 .5x n/m 8x 7x

* According to Alexa.com, as of May 5, 2009.

SELECTED OPERATING DATA FYE December 31 2006 2007 2008 1Q09 % of revenue by segment:Ticketing 100% 100% 97% 91% Artist services 0% 0% 3% 9% % of revenue by geography:U.S. 71% 66% 69% 70% Canada 7% 8% 7%

} 30% U.K. 10% 11% 10% All other countries 12% 15% 14% Revenue growth by geography and other growth data:Domestic 12% 7% 23% 0% International 20% 40% 6% -8% Total revenue 14% 17% 17% 7% Gross value of tickets sold n/a n/a 6% -7% Number of tickets sold 7% 11% 0% -6% Avg revenue per ticket 6% 5% 13% 4% Selected items as % of revenue: Gross profit 40% 38% 36% 38% SG&A 13% 16% 20% 24% EBIT 21% 17% 10% 7% D&A 6% 5% 6% 7% Capex 4% 4% 3% 3% % of tickets sold by category: Concert n/a 52% 50% 49% Arts and theater n/a 17% 20% 16% Sports n/a 18% 16% 21% Family and other n/a 13% 14% 14% Tangible equity to assets (avg) 64% 42% -3% -56% shares out (avg) n/a 0% 0% 2%

Source: Gridstone Research, Company filings, Manual of Ideas analysis.


Strong resistance to Live Nation merger.** Many prominent artists and legislators have opposed the deal on the grounds that it would create a monopoly in live music event promotion and ticketing. In March, the companies received a “second request” from the DOJ under Hart-Scott-Rodino. Management expects the deal to close in 2H09.

Dependent on discretionary consumer spending. MAJOR HOLDERS CEO % │ Other insiders % │ Greenlight 8% │ Jennison 7% │ Fine 5% │ Barclays 4% │ Citadel 3% │ Weitz 2% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? * See AAI white paper at www.manualofideas.com/files/content/tktm.pdf

THE BOTTOM LINE Ticketmaster may be as close to a “toll bridge” as it gets in the fast-changing online world. The company dominates ticketing and promotion of concerts and sporting events. The pending merger with #2 ticket seller and #1 concert promoter Live Nation (LYV), which operates many top venues, would extend Ticketmaster’s power across the live music value chain. The fact that industry resistance to the merger has been unprecedented is telling. The shares are cheap are deserve consideration. f


…additional insight into TKTM: SELECTED SLIDES FROM COMPANY PRESENTATION, DECEMBER 2008


SELECTED SLIDES FROM TICKETMASTER/LIVENATION DEAL PRESENTATION, FEBRUARY 10, 2009


WellCare Health Plans (WCG) – Owned By Berkowitz Tampa, FL, 813-290-6200

Financial: Insurance (Accident & Health), Member of S&P MidCap 400 http://www.wellcare.com





Enterprise value: -$184 million Next quarter 0.62 0.73 8 P/E FYE 12/31/11 8.8x

Shares out: 42.2 million FYE 12/31/09 2.14 2.26 9 EV / LTM revenue n/m

Ownership Data FYE 12/31/10 2.22 2.12 10 EV / LTM EBITDA n/m








per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 922 1,046 1,382 1,865 3,636 5,391 6,522 6,680 1,637 1,795

Gross profit 145 185 259 360 729 1,177 992 995 239 242

EBIT 37 41 69 78 201 378 (53) (94) 3 (37)

Net income 30 18 42 47 121 216 (37) (75) 1 (37)

Diluted EPS 1.32 0.60 1.34 1.21 2.98 5.16 (0.89) (1.81) 0.03 (0.89)

Cash from ops 67 123 49 81 508 278 296 124 67 (106)

Capex 2 3 9 29 32 23 20 21 4 5

Free cash flow 65 120 40 53 476 255 277 103 63 (111)

Cash & investments 147 237 398 422 965 1,008 1,182 1,135 1,234 1,135



Total assets 410 497 803 896 1,664 2,083 2,204 2,202 2,217 2,202

Short-term debt 72 48 2 27 2 155 153 152 154 152


Long-term debt 85 88 182 156 154 0 0 0 0 0

Total liabilities 335 398 502 536 1,127 1,275 1,398 1,427 1,404 1,427


Common equity 75 100 302 361 537 808 806 774 813 774

EBIT/capital employed n/m n/m n/m n/m n/m n/m n/m n/m n/m n/m


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BUSINESS OVERVIEW WellCare provides managed healthcare services exclusively for government-sponsored programs, focusing on Medicaid and Medicare. The company serves 2.5 million members. SELECTED OPERATING DATA 1

FYE December 31 2005 2006 2007 2008 1Q09 % of revenue by type: Medicaid 72% 52% 50% 46% 45% Medicare 27% 46% 48% 54% 55% Premium revenue 99% 99% 98% 99% 100% Investment and other 1% 1% 2% 1% 0% Revenue growth by type: Medicaid 29% 42% 41% 11% 10% Medicare 51% 233% 56% 34% 11% Premium revenue 34% 94% 48% 22% 11% Medical benefit ratio 82% 81% 81% 84% 88% Gross margin by segment: Medicaid 19% 18% 21% 15% 15% Medicare 18% 20% 21% 14% 12% Selected items as % of revenue: SG&A 14% 14% 14% 14% 15% Pre-tax income 4% 6% 7% 0% 1% Net income 3% 3% 4% 0% 1% D&A 0% 0% 0% 0% 0% Capex 2% 1% 0% 0% 0% % of Medicaid revenue by state: Florida 65% 46% 34% 33% 31% Georgia <10% 26% 40% 41% 40% CMS % of Medicare 2 100% 100% 100% 100% 100% Tang. equity to assets 22% 23% 32% 33% 31% shares out 2% 4% 2% 1% 1%

1 The company restated financials for 2004, 2005, 2006 and 1H07. It filed a 10-K for 2007 on January 28, 2009 and a 10-K for 2008 on March 16, 2009. 2 Medicare revenue is sourced exclusively from the federal Centers for Medicare & Medicaid Services (CMS).


Focused on Medicaid and Medicare. WellCare was formed in 2002 when it acquired its Florida, New York and Connecticut health plans.

Settled Florida criminal investigation in May, entering into a deferred prosecution agreement and agreeing to pay $80 million. The U.S. Attorney is likely to seek dismissal of charges in 24-36 months. The favorable resolution removes a key risk.

Settled informal SEC investigation in May, agreeing to pay $11 million. Another $39 million remains reserved for any future settlements.

Cut workforce by 9% in May, in part due to 2010 withdrawal from Medicare private fee-for-service.

MAJOR HOLDERS CEO Schiesser 1% │ Chairman Berg 1% │ Other insiders 1% │ Fairholme 19% │ RenTech 5% │ Times Square 5%

Charles Berg joined as executive chairman in January 2008. He was previously CEO of Oxford, which he turned around and sold to UnitedHealth.

Heath Schiesser became CEO in January 2008. He was previously SVP of marketing and sales. He has a large options package struck at $40 per share.

Thomas Tran joined as CFO in July 2008. He was previously CFO of CareGuide and Uniprise.

Rex Adams joined as COO in September 2008. He was previously CEO of AT&T East.

Bruce Berkowitz in April 2008: “I have only one nightmare… I wake up and see the headline, ‘UnitedHealth buys WellCare for $75/share.’” Mohnish Pabrai echoed this sentiment in late 2008, estimating intrinsic value at $93-108 per share.

Shares trade at 9x ‘10E EPS and 1.2x tang. book. INVESTMENT RISKS & CONCERNS

Has not enrolled new Medicare members since March due to a sanction by the federal Centers for Medicare & Medicaid Services (CMS). The company is working to address CMS concerns, but there is no timetable on when the ban may be lifted.

Decision to exit private fee-for-service program to impact Medicare revenue in 2010. The program has not met WellCare’s profitability requirements.

Florida settlement leaves open possibility of criminal prosecution, if WellCare violates terms of a DPA. The company has been alleged to have defrauded the State of Florida Medicaid program.


MV

($mn) EV

($mn) EV / Rev.

P / T. Book

This FY P/E

Next FY P/E

UNH 31,280 34,170 .4x n/m 9x 8x

WLP 21,690 29,120 .5x n/m 8x 7x

CVH 2,740 2,840 .2x 9.9x 10x 8x

AGP 1,530 970 .2x 2.3x 10x 10x

CNC 770 650 .2x 2.7x 9x 8x

WCG 800 -180 n/m 1.2x 9x 9x


THE BOTTOM LINE WellCare is recovering from a “blowup” in October 2007, when the company’s offices were raided as part of a criminal investigation into alleged overcharging of the Florida Medicaid program. A settlement of the government investigation in May 2009 removes a key risk to the investment thesis and leaves the company with net cash in excess of recent market value. Longer term, WellCare may find itself the target of a larger player, such as UnitedHealth or WellPoint. We believe the market’s valuation of the shares fails to reflect recent positive developments, making this a compelling opportunity.


New or Increased Superinvestor Holdings

We profile the following companies:

American Express (AXP) – Owned By Buffett, Berkowitz

Burlington Northern Santa Fe (BNI) – Owned By Buffett, Watsa

eBay (EBAY) – Owned By Hawkins, Miller

Facet Biotech (FACT) – Owned By Klarman

PDL BioPharma (PDLI) – Owned By Klarman

Harman International (HAR) – Owned By Einhorn

Premier Exhibitions (PRXI) – Owned By Sellers

Sears Holdings (SHLD) – Owned By Lampert, Berkowitz, Miller

St. Joe (JOE) – Owned By Berkowitz, Whitman

Waters Corporation (WAT) – Owned By Greenberg


American Express (AXP) – Owned By Buffett, Berkowitz New York, NY, 212-640-2000

Financial: Consumer Financial Services, Member of S&P 500 https://home.americanexpress.com/















per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 23,807 19,549 21,897 24,404 27,692 31,540 31,920 30,190 8,211 6,481

EBIT 3,727 3,415 3,831 4,053 5,152 5,694 3,581 5,803 1,461 544

Net income 2,671 2,987 3,445 3,734 3,707 4,012 2,699 2,069 985 361

Diluted EPS 2.01 1.80 2.09 2.43 2.93 3.45 2.48 1.89 0.89 0.32

Cash from ops 8,500 2,538 9,143 8,045 9,112 8,491 8,666 5,319 4,535 1,188

Capex 670 888 616 584 832 938 977 869 196 88

Free cash flow 7,830 1,650 8,527 7,461 8,280 7,553 7,689 4,450 4,339 1,100



Intangible assets 0 0 0 0 1,625 1,712 3,018 0 0 0

Total assets 157,253 174,547 194,216 113,960 128,329 149,743 126,074 121,183 135,288 121,183

Short-term debt 21,103 19,046 14,316 15,633 15,236 17,761 8,993 2,867 18,994 2,867


Long-term debt 16,819 20,654 32,676 30,781 42,747 55,285 60,041 57,620 55,534 57,620


Preferred stock 0 0 0 0 0 0 0 3,168 0 3,168

Common equity 13,861 15,323 16,020 10,549 10,511 11,029 11,841 12,612 11,511 12,612

EBIT/capital employed 27% 23% 31% 41% 45% 37% 25% n/m n/m n/m


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BUSINESS OVERVIEW Founded in 1850, American Express is a global payments and travel company. It operates in two groups:

Global Consumer (67% of revenue) includes proprietary consumer cards, customer service, small-business services, prepaid products, and consumer travel. Sub-segments are U.S. Card Services and International Card Services.

Global Business-to-Business (29% of revenue) includes the merchant business, network services, commercial card, and business travel. Sub-segments are Global Commercial Services and Global Network & Merchant Services.

AXP became a bank holding company last November. INVESTMENT HIGHLIGHTS

Premium brand in payments industry, focused on prime customers. Since launching the American Express card in 1958, the company has built a brand that today encompasses 70+ million cardmembers.

“Spend-centric” business model. AmEx focuses primarily on member spending and secondarily on finance charges. Spending per cardmember is higher than at Visa or Mastercard, enabling AmEx to charge a higher discount rate. This allows AmEx to offer rewards to cardmembers and marketing programs to merchants, which help boost spending.

Targeting long-term revenue growth in high single digits, EPS growth in mid teens, and ROE in the mid thirties. Management has articulated the goal of growing revenue, net of interest expense, by at least 8%, and EPS by 12%-15%, “on average and over time.” The company targets 33-36% ROE.

Ken Chenault has been chairman/CEO since 2001. Improved liquidity by raising $6 billion from new

retail CD program and $3 billion from the Treasury. Shares trade at 2.2x tangible book, 30x 2009E

EPS and 18x 2010E EPS. INVESTMENT RISKS & CONCERNS

Operating environment “among the harshest we have seen in decades.” The company has fallen short of its prior forecast of 4-6% EPS growth, but has remained profitable throughout the downturn.

Maintains “cautious” outlook for ‘09 and expects cardmember spending to “remain soft with past-due loans and write-offs rising from current levels.” Q1 average basic cardmember spending fell 18% y-y.

MAJOR HOLDERS Insiders 1% │ BRK 13% │ Davis 6% │ Fairholme 2%

SELECTED OPERATING DATA FYE December 31 2005 2006 2007 2008 1Q09 % of net revenue by type: Discount revenue 51% 52% 53% 53% 52% Net card fees 9% 8% 7% 8% 9% Travel commissions/fees 8% 7% 7% 7% 6% Other commissions/fees 9% 9% 9% 8% 8% Net securitization income 6% 6% 5% 4% 2% Other revenue 6% 7% 6% 8% 8% Interest income: lending 15% 18% 22% 22% 22% Interest income: other 5% 5% 5% 4% 3% Interest cost: lending -4% -5% -6% -4% -2% Interest cost: cards etc. -5% -6% -8% -9% -7% % of net revenue by segment: U.S. card services 49% 50% 51% 49% 52% International card 17% 16% 16% 17% 17% Commercial services 17% 16% 15% 17% 16% Network and merchant 13% 13% 14% 14% 14% Corporate and other 5% 5% 4% 3% 1% Net income margin by segment: U.S. card services 16% 17% 13% 6% -1% International card 8% 9% 7% 7% 4% Commercial services 12% 12% 13% 11% 9% Network and merchant 20% 23% 26% 24% 28% Combined net margin 14% 14% 15% 10% 7% Returns on segment capital: U.S. card services 41% 47% 40% 17% 6% International card 16% 18% 15% 17% 12% Commercial services 28% 26% 25% 15% 13% Network and merchant 49% 60% 91% 76% 71% % of net revenue by geography: U.S. 69% 69% 70% 68% n/a Europe 13% 13% 13% 13% n/a Asia Pacific 8% 8% 8% 9% n/a Other 10% 10% 9% 10% n/a % of pretax income by geography: U.S. 84% 84% 85% 87% n/a Europe 6% 6% 7% 5% n/a Asia Pacific 3% 3% 3% 3% n/a Other 8% 8% 5% 5% n/a


Price ($)

Market Value ($mn)

Price to Tangible

Book

This FY P/E

Next FY P/E

FY End Date

V 65.80 55,640 54.3x 24x 20x Sep-30

MA 168.40 21,780 13.9x 16x 14x Dec-31

DFS 8.40 4,030 .7x n/m n/m Nov-30

AXP 23.40 27,322 2.2x 30x 18x Dec-31


THE BOTTOM LINE American Express is a quintessential Buffett company—a high-ROIC business with a wide, defensible moat and favorable long-term growth prospects. The crisis has created an opportunity to buy this business materially below replacement value, though shares have rebounded recently to 2.2x tangible book. The company appears likely to survive the economic downturn without material dilution of equity holders. AmEx’s long-term earning power and competitive position have not been impaired. As a result, the shares deserve consideration even after their recent rebound in price.


…additional insight into AXP: SLIDES FROM COMPANY PRESENTATION, MAY 19, 2009


Burlington Northern Santa Fe (BNI) – Owned By Buffett, Watsa Fort Worth, TX, 800-795-2673

Transportation: Railroads, Member of S&P 500 http://www.bnsf.com















per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 8,979 9,413 10,946 12,987 14,985 15,802 18,018 17,181 4,261 3,424

Gross profit 2,587 2,575 2,698 4,038 4,697 4,779 5,309 6,206 1,478 1,263

EBIT 1,656 1,665 1,686 2,927 3,521 3,486 3,912 3,706 875 669

Net income 760 816 791 1,534 1,889 1,829 2,115 1,953 455 293

Diluted EPS 2.00 2.09 2.10 4.02 5.11 5.10 6.08 5.65 1.30 0.86

Cash from ops 2,106 2,285 2,377 2,706 3,189 3,492 3,977 3,796 915 734

Capex 1,358 1,726 1,527 1,750 2,014 2,248 3,116 3,223 641 748

Free cash flow 748 559 850 956 1,175 1,244 861 573 274 (14)


Total current assets 791 870 1,615 1,880 2,181 2,181 2,665 2,722 2,672 2,722


Total assets 25,767 26,947 28,925 30,304 31,797 33,583 36,403 36,963 34,552 36,963

Short-term debt 173 244 465 456 473 411 456 275 619 275


Long-term debt 6,641 6,440 6,051 6,698 6,912 7,735 9,099 9,416 8,025 9,416



Common equity 7,932 8,495 9,311 9,508 10,528 11,144 11,131 11,414 11,200 11,414



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BUSINESS OVERVIEW Burlington Northern provides freight rail transportation of coal and consumer, industrial and agricultural products. PRIMARY ROUTES*

* Includes trackage rights. Source: Company.


One of North America’s largest rail networks, with 32,000 route miles in 28 states and Canada.

Balanced revenue base, with four major sources of freight revenue: intermodal, industrial products, coal, and agricultural products.

Competitive advantage versus trucking. The company’s intermodal transport lags the delivery time of trucking slightly but offers big cost savings.

Strong intermodal franchise, with one-third of revenue from consumer products transportation, which interfaces with other types of transportation.

Balanced agri business, with 26% and 8% of segment sales from corn and ethanol, respectively.

May benefit from higher infrastructure spending under Obama, particularly in industrial products.

Shares trade at 2% trailing FCF yield, 1.8x LTM revenue, and 12x next year’s earnings.


Q1 revenue down 17%, net income down 36%. Industrial franchise exposed to housing slump, as

26% and 37% of segment revenue comes from building and construction products, respectively.

Nearly one-half of consumer products revenue relates to imports, exposing the company to a decline in Americans’ appetite for imports.

Affected by coal market dynamics. Declines in coal shipments hurt BNI. Coal is expected to remain strategic to U.S. electric power generation. The EIA expects coal supply to increase one-third from 2007 to 2030 to more than 1.5 billion tons.

MAJOR HOLDERS Insiders 1% │ Berkshire Hathaway 23% │ Cap Re 7% │ Barclays 3% │ State Street 3% │ Vanguard 3%

SELECTED OPERATING DATA FYE December 31 2006 2007 2008 1Q09 % of revenue by business group: Freight: consumer 37% 36% 34% 30% Freight: industrial 24% 23% 22% 20% Freight: coal 19% 21% 22% 27% Freight: agricultural 16% 17% 19% 19% Other 3% 3% 3% 3% Revenue growth by business group: Freight: consumer 15% 1% 7% -24% Freight: industrial 15% 3% 9% -23% Freight: coal 19% 12% 21% 1% Freight: agricultural 14% 12% 26% -22% revenue 15% 5% 14% -17% units 6% -3% -3% -14% avg revenue per unit 9% 9% 18% -4% Selected operating metrics: Locomotives 6,330 6,400 6,510 n/a Freight cars 85,121 85,338 82,555 n/a Track miles of rail laid 854 994 933 217 Track miled resurfaced 12,588 11,687 13,005 2,351 Productivity 1 27,092 27,222 27,360 6,421 Cars/units ('000) 10,637 10,318 9,994 2,128 RTN (billions) 648 658 664 149 Freight rev. / '000 RTN $22.45 $23.34 $26.34 $22.85 Selected items as % of revenue: Compensation/benefits 25% 24% 22% 25% Fuel 18% 20% 26% 17% Purchased services 13% 13% 12% 14% Equipment rents 6% 6% 5% 6% Materials and other 6% 7% 6% 6% Total opex ex. D&A 69% 70% 71% 68% D&A 8% 8% 8% 11% Maintenance capex 10% 11% 11% 12% Expansion capex 3% 4% 1% 1% ROE 19% 17% 19% 3% Equity to total assets 32% 33% 32% 31% Net debt to total capital 3 52% 52% 44% 44% diluted shares out (avg) -3% -3% -3% -3%

1 Calculated as thousand gross ton miles divided by avg number of employees. 2 RTN = revenue ton miles. 3 Net debt to capital, adjusted for long-term operating leases and other items.


MV

($mn) EV

($mn) EV / Rev.

P / T. Book

This FY P/E

Next FY P/E

UNP 23,270 31,000 1.8x 1.5x 12x 10x

NSC 12,920 18,970 1.9x 1.3x 11x 10x

CP 6,320 10,110 2.3x 1.2x n/a n/a

BNI 23,150 32,230 1.9x 2.0x 13x 12x


THE BOTTOM LINE Burlington Northern is Buffett’s chosen “vehicle” in the railroad industry. The latter has outperformed trucking due to high gas prices, elevated coal and agri commodity prices and greater scrutiny of emissions. BNI has historically posted returns on invested capital of ~10% and returns on equity of 15-20%. While these returns are quite acceptable, we are skeptical that capital-intensive railroad businesses will be able to reinvest capital at high rates over the long term. We would become interested in BNI only if market value declined below tangible book value (adjusted for the fair value of real estate).


…additional insight into BNI: SLIDES FROM COMPANY PRESENTATION, MAY 14, 2009


eBay (EBAY) – Owned By Hawkins, Miller San Jose, CA, 408-376-7400

Services: Retail (Catalog & Mail Order), Member of S&P 500 http://www.ebay.com















per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 1,214 2,165 3,271 4,552 5,970 7,672 8,541 8,370 2,192 2,021

Gross profit 1,000 1,749 2,657 3,734 4,713 5,909 6,313 6,094 1,667 1,447

EBIT 350 628 1,059 1,442 1,423 613 2,076 1,946 553 423

Net income 250 442 778 1,082 1,126 348 1,780 1,677 460 357

Diluted EPS 0.21 0.34 0.57 0.78 0.79 0.25 1.36 1.29 0.34 0.28

Cash from ops 480 874 1,285 2,010 2,248 2,641 2,882 2,784 766 669

Capex 139 365 293 338 515 454 566 522 135 91

Free cash flow 341 509 993 1,672 1,732 2,187 2,316 2,262 632 578



Intangible assets 1,736 1,993 3,073 6,943 7,227 6,853 7,762 7,441 7,160 7,441

Total assets 4,040 5,820 7,991 11,789 13,494 15,366 15,592 15,128 15,046 15,128

Short-term debt 3 3 124 0 0 200 1,000 400 0 400

Total current liabilities 386 647 1,085 1,485 2,518 3,100 3,705 3,160 3,080 3,160

Long-term debt 14 125 0 0 0 0 0 0 0 0

Total liabilities 484 924 1,263 1,741 2,589 3,661 4,509 4,012 3,685 4,012


Common equity 3,557 4,896 6,728 10,048 10,905 11,705 11,084 11,116 11,361 11,116

EBIT/capital employed >100% >100% >100% >100% >100% >100% >100% >100% n/m n/m


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BUSINESS OVERVIEW eBay enables person-to-person ecommerce and provides technology-driven services. It operates in three segments: Marketplaces facilitates commerce through eBay.com and other online platforms, including classifieds sites, Half.com, Rent.com, Shopping.com, and StubHub. Payments consists of payment platform PayPal. Communications consists of VoIP service provider Skype. Seasonality is strongest in Q4. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007 2008 1Q09 % of revenue by segment: Marketplaces 77% 73% 70% 65% 61% Payments 23% 24% 25% 28% 32% Communications 1% 3% 5% 6% 8% Revenue growth by segment: Marketplaces 36% 24% 24% 4% -5% Payments 47% 40% 34% 25% 42% Communications nm 686% 96% 44% 71% total revenue 39% 31% 29% 11% 10% EBIT margin by segment: Marketplaces 43% 42% 44% 44% n/a Payments 29% 23% 20% 20% n/a Communications -4% -14% 12% 21% n/a Corporate and other1 -8% -12% -10% -11% n/a Total EBIT margin1 32% 24% 26% 24% 21% % of revenue by geography: U.S. 54% 52% 49% 46% 48% Germany 16% 15% 13% 14%

}52% U.K. 13% 13% 14% 13% Rest of world 17% 20% 24% 27% Marketplaces segment: active users 28% 14% 2% 4% 2% merchandise volume 30% 18% 13% 1% -20% Payments segment: active accounts 39% 20% 16% 23% 21% net payment volume 45% 37% 33% 27% 10% Communications segment: registered users n/m 129% 61% 47% 43%

1 Excludes $1.4 billion goodwill impairment in 2007.


Online auctions leader; operates market-leading eBay website, with 14% share of global ecommerce and 85 million active users. The company enjoys high barriers to entry due to network effects.

PayPal payment volume and revenue up 27% and 28%, respectively, in 2008. Recent merchant services deals include Walmart.com, American Eagle and OfficeMax. PayPal accounts for more than 8% of global ecommerce payments.

Skype has grown to 443 million registered users, up 43% y-y at the end of Q1. SkypeOut minutes * increased 65% in Q1 while revenue rose 71%.

* Represents billable minutes, i.e., minutes that Skype users were connected with Skype’s VoIP product to traditional fixed-line and mobile telephones.

Acquisitions of Bill Me Later and two websites in Denmark for $1.3 billion last October suggest M&A appetite, despite perception eBay may have overpaid in the $2.6 billion acquisition of Skype in 2005. Acquisitions include Shopping.com for $634 million in 2005 and PayPal for $1.5 billion in 2002.

John Donahoe succeeded long-time CEO Meg Whitman in 2008. Donahoe previously served as president of eBay Marketplaces for three years. Prior to eBay, he was a managing director at Bain.

Repurchased $5.3 billion of stock since program inception in 3Q06, including $2.2 billion in 2008.

Stock price implies 10% trailing FCF yield, 11x 2010E earnings, and 2.3x LTM revenue.


Guiding for revenue decline of 7-16% and non-GAAP EPS decline of 16-21% in 2Q09, with expected revenue of $1.85-2.05 billion, GAAP EPS of $0.23-0.26 and non-GAAP EPS of $0.34-0.36.

Core eBay.com marketplace may have reached slow-growth phase, with Marketplaces revenue up only 4% to $5.6 billion in 2008 on a 1% increase in gross merchandise volume to $60 billion. Interestingly, revenue equals 10% of gross volume, not an insignificant “toll” levied on eBay users.

Sensitive to consumer spending, as most items bought and sold on eBay are discretionary items. PayPal fees correlate with ecommerce spending.


MV

($mn) EV

($mn) EV / Rev.

P / Tang. Book

This FY P/E

Next FY P/E

GOOG 124,320 106,540 4.8x 5.2x 19x 16x

AMZN 32,500 29,840 1.5x 13.1x 46x 37x

YHOO 20,910 17,460 2.5x 2.7x 42x 36x

EBAY 22,340 19,500 2.3x 6.1x 12x 11x

MAJOR HOLDERS CEO Donahoe <1% │ Other insiders 16% │ Morgan Stanley 6% │ Southeastern 5% │ Dodge & Cox 4% │ Legg 2% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE eBay has grown over the years to include not only the flagship ecommerce community but also online payments and communications innovators PayPal and Skype. Merchandise volume growth has acquired a cyclical component as the company has grown larger, with volume stagnating recently due to the weak economy. Despite the slowdown in growth, however, eBay remains a business with high returns on capital and high barriers to entry. We consider the shares attractive.


…additional insight into EBAY: SLIDES FROM COMPANY PRESENTATION, MAY 5, 2009


Facet Biotech (FACT) – Owned By Klarman Redwood, CA, 650-454-1000

Health Care: Biotechnology & Drugs http://www.facetbiotech.com



52-week range: $5.86 - $50.00 Latest Ago Ests P/E FYE 12/31/09 n/m

Market value: $229 million This quarter -$1.22 -$1.17 1 P/E FYE 12/31/10 n/m

Enterprise value: -$90 million Next quarter -1.20 -1.30 1 P/E FYE 12/31/11 n/m

Shares out: 24.5 million FYE 12/31/09 -4.82 -4.68 1 EV / LTM revenue n/m

Ownership Data FYE 12/31/10 -4.27 -4.80 1 EV / LTM EBITDA n/a

Insider ownership: 1% FYE 12/31/11 -3.99 -4.55 1 EV / LTM EBIT n/m

Insider buys (last six months): 0 LT EPS growth n/a n/a n/a P / tangible book 0.6x



# of institutional owners: 308 5/5/09 -$1.22 -$1.37 LTM pre-tax ROC -172%



per share data) 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 10 11 30 51 27 18 24 5 10

Gross profit 0 0 0 0 0 0 0 0 0

EBIT (182) (139) (168) (187) (226) (160) (175) (13) (29)

Net income (181) (137) (166) (187) (227) (162) (177) (13) (29)

Diluted EPS (7.56) (5.74) (6.95) (7.81) (9.51) (6.77) (7.40) (0.55) (1.22)

Cash from ops (92) (123) (182) (165) (128) (57) (20)

Capex 41 32 92 4 3 1 0

Free cash flow (133) (155) (274) (169) (131) (58) (20)

Cash & investments 0 0 398 344 0 344

Total current assets 8 30 417 364 22 364

Intangible assets 11 9 7 7 9 7

Total assets 327 369 538 515 166 515

Short-term debt 1 1 1 1 1 1

Total current liabilities 60 49 22 29 43 29

Long-term debt 25 26 25 25 26 25

Total liabilities 123 106 102 107 101 107

Preferred stock 0 0 0 0 0 0

Common equity 204 263 435 407 65 407

EBIT/capital employed -78% -83% -78% -172% n/m n/m


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BUSINESS OVERVIEW Facet Biotech develops oncology therapeutics, focusing on tumor biology and antibody engineering. The company has four antibodies in the clinical stage of development. It also has several investigational compounds for the treatment of cancer and immunologic disease in various stages of development with partners Biogen and BMS. SELECTED OPERATING DATA

FYE December 31 2006 2007 2008 1Q09 Revenue growth 72% -48% -32% 105% Selected items as a % of revenue: R&D 390% 731% 828% 251% SG&A 71% 169% 254% 107% EBIT -363% -845% -876% -301% D&A 58% 113% 111% 41% Capex 62% 346% 21% 1% % of revenue by geography: U.S. 40% 72% 100% n/a Europe 60% 28% 0% n/a % of revenue by major customer: Biogen Idec 35% 65% 47% 21% BMS <10% <10% 35% 54% Roche 60% 27% <10% <10% EKR Therapeutics <10% <10% <10% 18% diluted shares out (avg) 0% 0% 0% 0%

Source: Gridstone Research, Company filings, Manual of Ideas analysis.


Spun-off from PDL BioPharma in December. PDL contributed $405 million or $17 per Facet share in cash to the company. Facet believes it has sufficient resources to fund expenses through 2012.

Products in development include two Phase 2 drugs, Daclizumab for multiple sclerosis and Volociximab for solid tumors (partner: Biogen) and two Phase 1 drugs, Elotuzumab for multiple myeloma (partner: BMS) and PDL192 for solid tumors. The collaboration agreement with Biogen includes co-promotion rights, while under the BMS deal, Facet is entitled to royalties based on net sales.

Revenue rose 105% to $9.6 million in Q1, driven primarily by revenue from the BMS collaboration.

New business strategy: focus research efforts in oncology, advance existing pipeline, expand the pipeline, and refine protein engineering platform.

Restructuring underway. Facet intends to cut employees from 372 at yearend 2008 to 200 by 3Q09, a 46% reduction. Facet is also consolidating operations into one of two leased facilities.

CEO Faheem Hasnain (50) previously served as President and CEO of PDL. Before PDL, he was an EVP at Biogen, president of oncology therapeutics at BMS and VP of ebusiness at GlaxoSmithKline.

Net cash of $352 million and “net net” current assets of $257 million at the end of the first quarter.

Net cash equals 139% of market value. INVESTMENT RISKS & CONCERNS

Cash-burning operations. The company used $20 million of cash in operating activities in 1Q09, down from cash usage of $57 million in 1Q08, as revenue rose from $4.7 million in 1Q08 to $9.6 million in 1Q09. Headcount declined y-y.

Customer concentration. The company sourced 82% of revenue from Biogen and BMS in 2008.

Results volatile due to dependence on deals with other drug companies. Revenue fell 48% in 2007 and 32% in 2008, as termination of a collaboration agreement with Roche in 2005 resulted in the elimination of royalties on sales of Zenapax.

Drug development pipeline may not produce marketable products, potentially leaving shareholders with little value. Facet is expected to consume much of its cash in R&D efforts.

Shareholder Roderick Wong’s demand for a $15 per-share cash dividend and sale of assets was rebuffed by the company. While we generally favor companies paying out excess cash, a liquidation of Facet may have shortchanged shareholders, as the company owns material drug development assets.


MV

($mn) EV

($mn) EV / Rev.

P / Tang. Book

This FY P/E

Next FY P/E

RHHBY 114,720 99,620 2.4x 4.4x n/a n/a

ABT 67,910 77,920 2.6x 296x 12x 11x

BMY 39,660 37,390 1.8x 5.4x 10x 9x

LLY 39,460 44,430 2.2x 10.2x 8x 8x

FACT 230 -90 n/m .6x n/m n/m

MAJOR HOLDERS CEO Hasnain <1% │ Other insiders 1% │ Baupost 18%* │ Iridian 13% │ Barclays 4% │ BVF 4% │ Visium 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? * To view Seth Klarman’s thesis on Facet, visit the following webpage and fast-forward to 26 minutes and 30 seconds into the presentation: www.bengrahaminvesting.ca/Resources/Video_Presentations/Klarman.htm

THE BOTTOM LINE In March, large shareholder Seth Klarman articulated the downside protection afforded investors by stating that Facet “has about $16-$17 per share in cash… So you could clearly liquidate that, stop all discovery activities and probably mail out $10 or $12 or $14 per share back to the holders.” As there are no plans to liquidate Facet and cash is being consumed in drug development, investors must assess the company’s pipeline in order to judge the intrinsic value of the shares.


…additional insight into FACT: SLIDES FROM COMPANY PRESENTATION, JANUARY 2009


PDL BioPharma (PDLI) – Owned By Klarman Fremont, CA, 510-574-1400

Health Care: Biotechnology & Drugs http://www.pdl.com









Insider buys (last six months): 1 LT EPS growth 26.0% 26.0% 1 P / tangible book n/m






per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 46 67 85 128 187 225 294 307 50 63

Gross profit 0 0 0 0 0 0 0 0 0 0

EBIT (31) (130) 73 110 155 184 243 263 38 58

Net income (15) (130) (53) (167) (130) (21) 68 202 (62) 38

Diluted EPS (0.16) (1.40) 0.74 0.89 1.20 1.34 1.48 1.35 0.29 0.23

Cash from ops (5) (24) (27) 32 79 67 80 137 (29) 28

Capex 35 171 96 41 55 95 3 2 1 0

Free cash flow (40) (194) (123) (10) 24 (28) 77 135 (30) 28




Total assets 718 742 714 1,163 1,142 1,192 191 219 1,118 219

Short-term debt 1 1 1 1 1 1 0 0 1 0


Long-term debt 158 259 258 507 537 535 511 511 532 511

Total liabilities 173 294 301 637 674 685 544 641 639 641


Common equity 545 448 413 526 468 508 (353) (422) 479 (422)

EBIT/capital employed -49% -132% 43% 45% 59% 49% 93% n/m n/m n/m


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BUSINESS OVERVIEW PDL BioPharma manages a portfolio of antibody humanization patents and royalty assets. PDL receives ongoing royalties from biotech and pharma companies for the following nine products: Avastin, Herceptin, Xolair, Raptiva, Lucentis, Synagis, Tysabri, Mylotarg, and Actemra. SELECTED OPERATING DATA1

FYE December 31 2006 2007 2008 1Q09 Selected items as % of revenue: Gross profit 100% 100% 100% 100% EBIT 83% 82% 82% 93% D&A 16% 14% 7% 1% Capex 19% 42% 1% 0% % of revenue by geography:

2

U.S. 81% 80% 78% n/a Europe 18% 20% 22% n/a Revenue growth by geography and other metrics:

2

U.S. 20% 18% 28% n/a Europe 12% 32% 41% n/a Other -9% -1% 68% n/a Total revenue 53% 20% 31% 25% Headcount -20% -60% -97% n/a % of revenue by major customer: Genentech 80% 79% 77% 60% MedImmune 18% 16% 14% 27% diluted shares out (avg) 35% 1% 19% 3%

Source: Gridstone Research, Company filings, Manual of Ideas analysis. 1 Data adjusted for Facet Biotech spin-off in December 2008. 2 2006 numbers based on pre-spinoff data.

INVESTMENT HIGHLIGHTS Transformed into “royalty stream” during 2008.

PDL divested its commercial and manufacturing operations for $507 million in May 2008, paying out a special dividend of $4.25 per share. The company spun-off its Facet Biotech (FACT) drug discovery business last December and reduced headcount by 97%. Headquarters moved from California to Nevada to reduce the tax rate.

Seeking to maximize value of patent portfolio. Revenue increased 31% in 2008, and management projects 5-11% growth to $310-325 million in 2009. Opex is expected to be $12-15 million, down 70+% from 2008. Pre-tax profit should improve by as much as 25% to $284-306 million this year.

New management led by CEO John McLaughlin, a biotech and medical device entrepreneur. He gained experience managing patent portfolios in his role as general counsel of Genentech from 1987-97.

Evaluated opportunities to monetize patents, but abandoned effort last November. PDL may revisit this monetization option in the future.

Approved $1 per-share cash dividend in 2009, $0.50 of which is expected to be paid in October. PDL intends to distribute income, net of opex, debt service and income taxes, to shareholders.

Litigation has strengthened patent portfolio. Courts have upheld the company’s patents in disputes with Genentech, Alexion and MedImmune.

Shares trade at 17% trailing FCF yield, 6x 2009E EPS, and 3.8x trailing revenue.


Core Queen et al. patents expire in 2013-14. Upon expiration, PDL will no longer receive royalty revenue from licensees. Unless PDL develops other sources of revenue, sales will implode after 2014.

Genentech and MedImmune accounted for 77% and 14% of revenue, respectively, in 2008. Other customers include Elan, Wyeth and Chugai.

Product concentration, with sales of Avastin, Herceptin and Synagis accounting for 26%, 35% and 15% of royalty revenue in 2008.

$500 million convert due 2012 and 2023, with conversion prices of $11 and $8 per share, respectively. The 2023 notes are putable in 2010.

MedImmune filed suit against PDL in December, claiming it owes no royalties for sales of Synagis. A favorable outcome for MedImmune could result in a recoupment of payments previously made to PDL.


MV

($mn) EV

($mn) EV / Rev.

P / T. Book

This FY P/E

Next FY P/E

AMGN 49,910 50,940 3.5x 8.7x 11x 10x

MEDX 850 670 13.1x 4.1x n/m n/m

SGEN 790 660 17.7x 7.3x n/m n/m

PDLI 800 1,120 3.7x n/m 6x 5x

MAJOR HOLDERS CEO McLaughlin <1% │ Other insiders <1% │ Iridian 17% │ Baupost 13% │ RenTech 5% │ AXA 5% │ Barclays 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE PDL manages a lucrative patent portfolio and receives royalty revenue primarily from Genentech and MedImmune. The company sold its commercial and manufacturing operations and spun-off the cash-intensive R&D division as Facet Biotech (FACT) in 2008. The goal moving forward is to minimize opex and distribute excess cash to shareholders. Assuming the company can generate FCF of roughly $200 million per year through the expiration of the core Queen patents in 2013-14, shareholders may receive $800+ million over 5-6 years, net of debt. Even if the company is worth little following the expiration of the Queen patents, PDL investors should not suffer material downside. However, meaningful upside appears likely only if the company will continue to have value beyond 2014. The latter may be impossible to predict at this point.


…additional insight into PDLI: SLIDES FROM COMPANY PRESENTATION, MARCH 2009


Harman International (HAR) – Owned By Einhorn Washington, DC, 202-393-1101

Consumer Cyclical: Audio & Video Equipment, Member of S&P 500 http://www.harman.com





Enterprise value: $1.3 billion Next quarter -0.29 -0.14 4 P/E FYE 6/30/11 6.8x

Shares out: 58.7 million FYE 6/30/09 -1.02 -0.38 4 EV / LTM revenue 0.4x

Ownership Data FYE 6/30/10 -0.25 0.41 4 EV / LTM EBITDA n/a








per share data) 6/30/02 6/30/03 6/30/04 6/30/05 6/30/06 6/30/07 6/30/08 3/31/09 3/31/08 3/31/09

Revenue 1,826 2,229 2,711 3,031 3,248 3,551 4,113 3,291 1,033 598

Gross profit 500 651 889 1,032 1,153 1,211 1,109 815 261 113

EBIT 103 167 255 351 397 386 139 (384) (7) (93)

Net income 58 105 158 233 255 314 108 (329) (3) (67)

Diluted EPS 0.85 1.55 2.27 3.31 3.75 4.72 1.73 (5.61) (0.06) (1.14)

Cash from ops 190 250 483 420 400 215 317 159 117 (28)

Capex 125 115 136 172 131 175 139 107 28 16

Free cash flow 65 135 347 247 270 41 178 52 89 (44)


Total current assets 877 968 1,204 1,183 1,268 1,233 1,439 1,337 1,387 1,337


Total assets 1,480 1,704 1,989 2,187 2,376 2,509 2,827 2,278 2,753 2,278

Short-term debt 4 5 7 3 18 19 1 1 1 1


Long-term debt 470 498 388 331 180 58 427 662 463 662

Total liabilities 954 1,048 1,114 1,126 1,148 1,015 1,487 1,452 1,454 1,452


Common equity 527 656 875 1,061 1,228 1,494 1,340 826 1,299 826

EBIT/capital employed 16% 24% 38% 56% 62% 50% 15% -40% n/m n/m


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BUSINESS OVERVIEW Harman provides high fidelity audio products and electronic systems. The company operates in three segments:

Automotive provides audio, electronic and infotainment systems to be installed as original equipment by auto makers.

Consumer provides audio, video and electronics for home, mobile and multimedia. Products are sold through retailers such as Circuit City, Best Buy, MediaMarkt and Fnac.

Professional provides loudspeakers and electronic systems used by audio professionals in concert halls, stadiums, airports, houses of worship, and theme attractions. INVESTMENT HIGHLIGHTS

Owns renowned brands JBL, Infinity, Harman/ Kardon, Mark Levinson, and Becker. It is a leader in integrated infotainment for the auto industry.

Growth opportunities exist in all three segments: (1) automotive: potential to increase number of models offering Harman systems and to increase per-vehicle content of premium branded audio; (2) consumer: may benefit from convergence of home and multimedia technologies (offers branded accessories for iPod and iPhone); (3) professional: proprietary HiQnet system protocol incentivizes users to purchase complete compatible systems.

Targeting $400 million of annualized savings by FY11, of which $150 million have been realized. Total after-tax savings would amount to $4/share.

Mid-Infotainment system launch expected in fall 2009, ahead of original target. The company has been gaining share via new product introductions. China capacity has been doubled with a new plant.

Dinesh Paliwal (50) became chairman and CEO in July 2008. He was previously CEO of ABB North America. Herbert Parker (50) joined as CFO in June 2008. He was previously also at ABB N.A.

According to Greenlight Capital, Harman “could earn over $2 per share within the next couple of years, and much more in a normal environment.”

Shares trade at .3x LTM revenue, 1.3x tang. book. INVESTMENT RISKS & CONCERNS

Weak end markets in CQ1 2009, with global, U.S., European and China/India auto production down 38%, 56%, 41%, and 17%, respectively. Consumer and professional markets are also weak.

Debt of $662 million, partially offset by cash of $334 million. Debt appears manageable, as earliest maturity not until the end of 2011. $400 million convert carries 1.25% coupon and matures in 2012.

SELECTED OPERATING DATA

FYE June 30 2006 2007 2008 YTD

3/31/09 % of revenue by segment:Automotive 69% 70% 72% 70% Professional 16% 16% 15% 16% Consumer 15% 14% 13% 14% Revenue growth by segment:Automotive 5% 11% 19% -28% Professional 6% 8% 9% -20% Consumer 18% 1% 7% -28% Total revenue 7% 9% 16% -27% Headcount 4% 4% 0% -14% EBIT margin by segment: Automotive 15% 14% 5% -4% Professional 11% 14% 16% 12% Consumer 10% 3% -1% -11% Unallocated and other -2% -1% -2% -2% Total EBIT margin 12% 11% 4% -4% Selected items as % of revenue: Gross profit 35% 34% 27% 24% SG&A 23% 23% 24% 28% EBIT 12% 11% 3% -19% D&A 4% 4% 4% 5% Capex 4% 5% 3% 3% % of revenue by geography: Germany 44% 45% 42% n/a Other Europe 18% 18% 16% n/a U.S. 22% 21% 23% n/a Other regions 17% 16% 18% n/a % of revenue by major customer: Daimler and Chrysler 1 23% 23% 18% 16% Audi / VW 9% 10% 11% 15% BMW 10% <10% <10% 14% Return on tangible equity 33% 32% 11% -8% Tang. equity to assets (avg) 41% 47% 44% 36% shares out (avg) -1% -1% -6% -6%

Source: Gridstone Research, Company filings, Manual of Ideas analysis. 1 Standalone Chrysler accounted for 7% of revenue YTD 3/31/09.

Customer concentration. Daimler made a strategic

decision in 2006-07 to move to dual sourcing, causing Harman’s share of Mercedes business to decline in FY08 and again in FY09. The business should stabilize at a “substantial” level in FY10.

CEO received total comp of $17 million in FY08. MAJOR HOLDERS Insiders 1% │ Cap Re 12% │ Cap World 9% │ Greenlight 6% │ Relational 6% │ T Rowe 6% │ Elm Ridge 3% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE Harman occupies a strong competitive position in high-end audio products primarily for automotive applications. When the auto industry return to “normal,” Harman appears likely to reestablish profitability of several dollars per share. However, we view future earning power as too uncertain to warrant a meaningful multiple of projected earnings. We note that David Einhorn’s Greenlight Capital established its position at $11.07 per share, significantly below the recent market price. f


…additional insight into HAR: OVERVIEW OF FACILITIES USED IN COURSE OF BUSINESS

Seg- Size Utilized

Location ments1 (Sq. Ft.) Util. Sq. Ft.

Owned Properties – U.S.

Elkhart, IN P 223,000 86% 191,780

Martinsville, IN A 221,000 40% 88,400

Franklin, KY A 152,000 96% 145,920

Washington, MO A 101,000 100% 101,000

697,000 76% 527,100

Owned Properties – International

Suzhou, China A 145,000 50% 72,500

Chateau du Loir, France A, C 221,000 75% 165,750

Ittersbach, Germany A 565,000 100% 565,000

Straubing, Germany A 235,000 100% 235,000

Worth-Schaidt, Germany A 204,000 100% 204,000

Szekesfehervar, Hungary A 117,000 100% 117,000

1,487,000 91% 1,359,250

Total Owned Properties 2,184,000 86% 1,886,350

Leased Properties – U.S.

Moreno, CA C, P 301,000 100% 301,000

Northridge, CA A, C, P 589,000 82% 482,980

Rancho Cucamonga, CA P 212,000 100% 212,000

Atlanta, GA C 635,000 100% 635,000

Sandy, UT P 127,000 100% 127,000

1,864,000 94% 1,757,980

Leased Properties – International

Vienna, Austria P 193,000 100% 193,000

Juarez, Mexico A 109,000 100% 109,000

Tijuana, Mexico C, P 198,000 78% 154,440

Regensdorf, Switzerland P 108,000 93% 100,440

Bridgend, U.K. A 168,000 100% 168,000

Potters Bar, U.K. P 160,000 100% 160,000

936,000 95% 884,880

Total Leased Properties 2,800,000 94% 2,642,860

Source: Harman 10-K, Manual of Ideas analysis. 1 A = automotive, C = consumer, P = professional.

SLIDES FROM COMPANY PRESENTATION, APRIL 29, 2009


Premier Exhibitions (PRXI) – Owned By Sellers Atlanta, GA, 404-842-2600

Services: Recreational Activities http://www.prxi.com




Market value: $23 million This quarter -$0.08 -$0.08 2 P/E FYE 2/28/10 n/a

Enterprise value: $17 million Next quarter n/a n/a n/a P/E FYE 2/28/11 n/a


Ownership Data FYE 2/28/10 n/a n/a n/a EV / LTM EBITDA -1.9x

Insider ownership: 13% FYE 2/28/11 n/a n/a n/a EV / LTM EBIT n/m




# of institutional owners: 53 1/6/09 -$0.06 $0.04 LTM pre-tax ROC -88%



per share data) 2/28/03 2/29/04 2/28/05 2/28/06 2/28/07 2/29/08 2/28/09 2/28/09 2/29/08 2/28/09

Revenue 3 3 7 13 30 62 54 54 17 10

Gross profit 3 3 4 10 22 41 23 23 9 3

EBIT (1) (1) (2) 3 12 18 (14) (14) 1 (11)

Net income (1) (1) (2) 5 7 12 (10) (10) 1 (8)

Diluted EPS (0.04) (0.06) (0.12) 0.19 0.24 0.37 (0.34) (0.34) 0.02 (0.28)

Cash from ops 3 (1) (0) 2 12 17 2 2 1 3

Capex 1 1 1 4 3 8 14 14 2 3

Free cash flow 2 (1) (1) (2) 9 9 (12) (12) (1) 1




Total assets 8 7 10 22 35 51 54 54 51 54

Short-term debt 0 0 0 1 0 0 0 0 0 0


Long-term debt 0 0 0 0 0 0 0 0 0 0



Common equity 7 6 7 20 33 47 39 39 47 39

EBIT/capital employed n/m n/m n/m 79% >100% >100% -87% -88% n/m n/m


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BUSINESS OVERVIEW Premier develops touring, museum-quality exhibitions presented in museums, exhibition centers, and other venues. The exhibitions, including Bodies…The Exhibition and Titanic: The Artifact Exhibition, have attracted 20 million visitors. Since 1994, Premier subsidiary RMS Titanic has been Salvor-in-Possession of the wreck of the Titanic, as ordered by a federal district court. RMS has conducted multiple expeditions, recovering 5,500 artifacts.

Revenue sources include exhibition ticket sales, merchandise sales, licensing activities, and sponsorship agreements. SELECTED OPERATING DATA

FYE February 28 2006 2007 2008 2009 % of revenue by theme: Bodies 37% 72% 81% 67% Titanic and other 63% 28% 19% 33% % of revenue by type: Exhibition 94% 96% 96% 87% Merchandise and other 1 6% 4% 4% 13% % of revenue by geography: U.S. 80% 96% 79% 83% International 20% 4% 21% 17%

1 FY09 increase due to acquisition of MGR Entertainment in March 2008.


Bodies attended by more than five million visitors since FY05, including in New York, Las Vegas, San Diego, Prague, and Sao Paulo. In FY08, Premier presented 15 separate human anatomy exhibitions at 28 venues. The exhibitions include displays of dissected human bodies kept from decaying through a process known as plastination. The 2005 acquisition of Exhibitions International gave Premier multi-year licenses and exhibition rights to multiple human anatomy exhibitions.

Exclusive right to recover objects from the Titanic due to Salvor-in-Possession status. Public interest in the Titanic story remains strong 96 years after she set sail, and Premier’s Titanic exhibitions have attracted audiences in 60+ venues worldwide. In 1993, Premier acquired Titanic Ventures, which started exploring the Titanic wreck site in 1987.

New exhibitions in pipeline. The exhibitions will be conducted under long-term licensing deals and may open in late FY09. Sports Immortals will present sports memorabilia consisting of one million artifacts from great athletes. Dialog in the Dark will “provide insight and experience to the paradox of learning to ‘see’ without the use of sight.”

Underperforming CEO Geller was forced out in January. Four Sellers affiliates have joined the Board, with Chris Davino as interim CEO.

John Stone (42) joined as CFO in May, having previously served as CFO of S-1 Corp. (SONE).

Sellers Capital’s 16% ownership to increase to 46% due to $12 million investment in May. Sellers is receiving a note that is expected to be converted into stock at $0.75 per share upon shareholder approval of the transaction.

Shares trade at 0.3x trailing revenue and 0.8x tangible book value.


Performing “well below” expectations, with sharp declines in per-venue gross margin, sharp rise in opex and weak international results from Bodies.

May not retain Titanic Salvor-in-Possession rights indefinitely. While the U.S. Court of Appeals for the Fourth Circuit in 2006 recognized Premier’s exclusive right to recover objects from the Titanic site, the same court left Premier with non-exclusive rights to photograph and film the wreck site. In order for Premier to maintain Salvor-in-Possession status, it “must maintain a presence over the wreck site as interpreted by the courts.” In addition, an international treaty that does not recognize Premier’s Salvor-in-Possession rights was signed by the U.K. in 2003 and the U.S. in 2004. The treaty has yet to take effect, however, as the U.S. has not enacted implementing legislation.

Bodies comprised 67% of revenue in FY09. In May 2008, Premier settled an NYAG inquiry into the sourcing of specimens, allowing the company to operate Bodies without interruption.

MAJOR HOLDERS Non-Sellers insiders 3% │ Mark Sellers 16%* │ Tricadia 7% │ Morgan Stanley 5% │ Charter Oak 2% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? * To increase to 46% due to $12 million direct investment by Sellers in May.

THE BOTTOM LINE Premier’s revenue exploded in recent years due to the success of the Bodies exhibitions. The company misstepped, however, allowing costs to get out of hand. With control of the Board in the hands of 16% shareholder Mark Sellers, execution should improve. While the company may not remain salvor-in-possession of the Titanic wreck site, it owns 2,000 recovered artifacts, appraised at $46 million but on the books for only $3 million. In May, Mark Sellers agreed to provide $12 million in financing to Premier in the form of a note that converts into common stock at $0.75 per share (no warrant coverage). Sellers’s renewed commitment to Premier is positive for shareholders. The shares look compelling at $0.75 per share or lower.


Sears Holdings (SHLD) – Owned By Lampert, Berkowitz, Miller Hoffman Estates, IL, 847-286-2500

Services: Retail (Department & Discount), Member of S&P 500 http://www.searsholdings.com




Market value: $6.7 billion This quarter -$0.14 -$0.14 6 P/E FYE 1/31/11 125.9x








# of institutional owners: 611 5/21/09 $0.38 -$0.88 LTM pre-tax ROC 4%



per share data) 1/29/03 1/28/04 1/26/05 1/28/06 2/3/07 2/2/08 1/31/09 5/2/09 5/3/08 5/2/09

Revenue 29,352 23,253 19,843 49,455 53,016 50,703 46,770 45,757 11,068 10,055

Gross profit 4,510 5,407 4,901 13,712 15,192 14,065 12,652 12,502 3,023 2,873

EBIT (2,674) (308) 1,821 2,123 2,529 1,586 302 438 (8) 128

Net income (3,219) (628) 1,106 857 1,492 826 53 200 (56) 26

Diluted EPS (5.47) (3.12) 11.00 6.17 9.58 5.70 0.42 1.15 (0.43) 0.21

Cash from ops 88 1,312 1,068 2,193 1,428 1,547 992 n/a (517) n/a

Capex 252 112 230 552 508 570 497 n/a 178 n/a

Free cash flow (164) 1,200 838 1,641 920 977 495 n/a (695) n/a

Cash & investments 613 2,088 3,435 4,440 3,839 1,622 1,173 1,141 1,413 1,141


Intangible assets 0 0 0 5,132 5,129 5,039 4,675 4,656 5,011 4,656

Total assets 11,238 6,074 8,651 30,573 29,906 27,397 25,342 25,748 27,338 25,748

Short-term debt 0 4 45 748 705 404 787 930 1,219 930


Long-term debt 1,269 450 366 3,268 2,843 2,606 2,132 2,114 2,289 2,114



Common equity (301) 2,209 4,469 11,611 12,706 10,667 9,380 9,730 10,896 9,730

EBIT/capital employed -32% -6% 81% 32% 23% 14% 3% 4% n/m n/m


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BUSINESS OVERVIEW Sears Holdings is a broadline retailer with 2,297 full-line and 1,233 specialty stores in the U.S., operating through Kmart and Sears, and 388 full-line and specialty stores in Canada operating through 73%-owned Sears Canada. Seasonality is strongest in Q4, which accounts for 30-33% of revenue.

Sears Holdings was formed in 2005 through the merger of Kmart and Sears, each with origins dating to the late 1800s. SELECTED OPERATING DATA

FYE January 31 2006 2007 2008 2009 Stores (period end): Kmart 1,416 1,388 1,382 1,368 Sears Domestic – full-line 924 935 935 929 Sears Domestic – specialty 1,128 1,095 1,150 1,233 Sears Canada – full-line 123 123 121 122 Sears Canada – specialty 252 250 259 266 Selected growth rates: Stores – Kmart n/a -2% 0% -1% Stores – Sears Domestic n/a -1% 3% 4% Stores – Sears Canada n/a -1% 2% 2% U.S. same store sales -5% -4% -4% -8% Revenue n/m 7% -4% -8% % of revenue by segment: Kmart 39% 35% 34% 35% Sears Domestic 52% 55% 55% 54% Sears Canada1 9% 10% 11% 11% Gross margin by segment: Kmart 24% 25% 23% 23% Sears Domestic 30% 31% 30% 29% Sears Canada 32% 30% 31% 31% Total gross margin 28% 29% 28% 27% EBIT margin by segment: Kmart 4% 5% 2% 1% Sears Domestic 2 4% 5% 3% 0% Sears Canada 10% 5% 7% 7% Total EBIT margin 4% 5% 3% 1% D&A as % of revenue 2% 2% 2% 2% Capex as % of revenue 1% 1% 1% 1% Equity to assets (tangible) 26% 31% 25% 23% diluted shares out (avg) n/m 1% -7% -14%

1 Includes total revenue of Sears Canada (Sears Holdings owns 73%). 2 Excludes $339 million impairment change in year ended January 31, 2009.


Fourth-largest U.S. broadline retailer, with leadership in home appliances. Owned brands include Kenmore, Craftsman, DieHard, Lands’ End, and Joe Boxer. The company is also the exclusive retailer of Martha Stewart Everyday products.

Controlled by chairman Eddie Lampert, who built a track record at ESL Investments featuring annualized returns of >20% prior to seizing control of Kmart in a bankruptcy reorg process in 2003.

54% of company beneficially owned by Lampert and other insiders, with an additional 12% and 6% held by Fairholme and Legg Mason, respectively.

Large real estate ownership, with carrying value not reflective of fair value. Sears owns ~800 stores with ~100 million in owned square footage.

Adjusted EBITDA of $359 million in Q ended May 2, up from $208 million a year earlier. Sears Domestic EBITDA margin rose from 1.9% to 4.8%, while Kmart gross margin rose from 0.3% to 1.3%.

Repurchased 2.9 million shares at $41 in CQ4; $506 million remained authorized as of January 7.

Shares trade at 1.3x tangible book value and 0.2x trailing revenue.


Same-store sales fell 8% in FY08, with SSS down 6% at Kmart and down 10% at Sears Domestic (no disclosure of Sears Canada SSS). 1Q09 SSS fell 7% (-2% at Kmart, -12% at Sears Domestic).

Market share losses have continued despite attempts at changing store formats, rebranding locations, and improving merchandising.

Inventory of $9.5 billion versus tangible book of $4.7 billion as of May 2, exposing shareholders to the risk of obsolescence. Some have accused Sears of reluctance to mark down slow-moving inventory.


MV

($mn) EV

($mn) EV / Rev.

P / Tang. Book

This FY P/E

Next FY P/E

WMT 192,710 229,300 .6x 4.1x 14x 13x

HD 38,780 48,000 .7x 2.3x 16x 15x

TGT 30,640 48,040 .7x 2.2x 14x 13x

LOW 28,550 32,480 .7x 1.5x 16x 14x

COST 20,960 20,050 .3x 2.3x 19x 18x

BBY 14,640 16,090 .4x 7.5x 13x 12x

KSS 12,480 13,660 .8x 1.9x 16x 14x

JCP 5,590 6,960 .4x 1.3x 34x 21x

SHLD 6,690 8,590 .2x 1.3x n/m n/m

MAJOR HOLDERS Chairman Eddie Lampert and affiliates 54% │ Fairholme 12% │ Legg Mason 6% │ State Street 4% │ Clearbridge 3% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE The value of Sears resides primarily in the owned real estate and chairman Eddie Lampert’s ability to allocate capital. Conservative investors may choose to assess the value of the retail business assuming a liquidation scenario. Even if one adopts a pessimistic view of the retail operation, Sears shares appear undervalued. With Lampert at the helm, the real estate assets spanning ~100 million square feet will likely be monetized in a value-maximizing way over time.


St. Joe (JOE) – Owned By Berkowitz, Whitman Jacksonville, FL, 904-301-4200

Services: Real Estate Operations http://www.joe.com




Market value: $2.2 billion This quarter -$0.06 -$0.01 3 P/E FYE 12/31/10 n/m

Enterprise value: $2.1 billion Next quarter -0.04 0.00 3 P/E FYE 12/31/11 n/a

Shares out: 92.5 million FYE 12/31/09 -0.26 0.02 3 EV / LTM revenue 12.6x

Ownership Data FYE 12/31/10 -0.04 0.15 3 EV / LTM EBITDA -19.2x





# of institutional owners: 456 5/5/09 -$0.13 -$0.02 LTM pre-tax ROC n/m



per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 626 679 838 718 525 377 264 169 117 22

Gross profit 239 262 282 292 214 166 144 66 83 5

EBIT 108 140 138 167 63 23 (56) (127) 51 (20)

Net income 174 76 90 127 51 39 (36) (80) 32 (12)

Diluted EPS 1.85 1.09 1.09 1.42 0.46 0.15 (0.39) (0.86) 0.40 (0.13)

Cash from ops 106 137 128 192 (144) (209) 49 76 (31) (4)

Capex 17 7 10 20 14 6 2 4 1 3

Free cash flow 90 130 118 172 (158) (215) 46 72 (32) (6)




Total assets 1,170 1,276 1,404 1,592 1,560 1,264 1,218 1,207 1,632 1,207

Short-term debt 0 0 0 0 0 0 0 0 0 0


Long-term debt 321 382 421 554 627 541 50 49 289 49

Total liabilities 690 788 908 1,103 1,099 784 230 228 537 228


Common equity 480 487 495 489 461 480 989 980 1,096 980

EBIT/capital employed n/m n/m n/m n/m n/m >100% n/m n/m n/m n/m


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BUSINESS OVERVIEW St. Joe develops residential, commercial and industrial real estate and sells rural land in Florida. The company also has timber interests. It operates in four segments:

Residential Real Estate sells developed home-sites and parcels of entitled and undeveloped land.

Commercial R.E. sells developed and undeveloped land.

Rural Land sells parcels of the company’s timberlands.

Forestry produces and sells pine pulpwood and timber. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007 2008 % of revenue by type: Real estate sales 90% 87% 82% 74% Rental revenues 1% 1% 1% 1% Timber sales 3% 5% 7% 10% Other revenues1 6% 7% 10% 16% % of revenue by segment: Residential real estate 78% 68% 43% 27% Commercial real estate 9% 10% 8% 2% Rural land sales 10% 17% 43% 61% Forestry 3% 5% 7% 10% Revenue growth by segment: Residential real estate -10% -36% -55% -56% Commercial real estate -41% -21% -45% -86% Rural land sales 1% 31% 79% 1% Forestry -38% 11% 6% 3% Total revenue growth -14% -27% -28% -30% Pre-tax income margin by segment: Residential real estate 26% 7% -27% -163% Commercial real estate 33% 46% 53% -58% Rural land sales 73% 81% 62% 82% Forestry 18% 22% 1% 14% Other -8% -14% -14% -30% Total pre-tax income margin 23% 10% 5% -24% % of total assets by segment: Residential real estate 42% 54% 71% 67% Commercial real estate 32% 25% 6% 5% Rural land sales 2% 2% 1% 1% Forestry 9% 10% 7% 5% Corporate 14% 10% 15% 21%

1 Primarily revenue from club operations and brokerage fees.


Largest private landowner in Florida and one of few companies with ability to do large-scale real estate development. St. Joe operates primarily in Northwest Florida and owns 700,000 acres, 44% of which are within ten miles of the Gulf of Mexico. According St. Joe, the cost basis in most of the land is “very low.” The carrying value of operating and development property is $258 million and $654 million, respectively, as of March 31.*

* St. Joe also lists $8 million of investment property and $35 million of total accumulated depreciation, resulting in net real estate of $888 million.

Strategy: secure land-use entitlements to reposition timberland for other uses, improve infrastructure, develop community amenities, and undertake strategic land planning (e.g., creative parceling).

Exited homebuilding in 2006-07 to focus on development. St. Joe is divesting non-core assets, reducing capex and using strategic partners (e.g., new management agreements for golf courses, two marinas, WaterColor, SummerCamp, WaterSound).

Panama City Airport project broke ground in 2007. While it has run into resistance from various groups, the airport appears likely to open in 2010.

46,200 residential units, 14 million commercial square feet in entitlements pipeline as of yearend 2007, in addition to 633 acres zoned for commercial uses. These entitlements are on 45,000 acres.

Wm. Britton Greene became CEO in May 2008 after serving as COO. Former CEO Peter Rummell retained his position as chairman.

Issued $580 million of equity at $35 per share in 2008, paying off most debt. To meet liquidity needs, St. Joe had previously sold its office buildings for $378 million and >100K acres of rural land to boost liquidity in 2007. Dividends were stopped in 4Q07.

Shares trade at 2.2x tangible book and a 3% trailing FCF yield.


Florida has experienced “dramatic slowdown” in residential real estate since mid-2005, with market conditions materially impacting St. Joe’s sales.

Questions regarding land quality. David Einhorn pointed out in 2007 that after taxes and selling expenses, St. Joe might capture only one-half of the gross sales price per acre. Einhorn also argued that some of the land is swamp land and that tourists want to be “on the ocean” rather than “within ten miles” of it. Einhorn also argued that investors had failed to discount their assumptions to the present.

MAJOR HOLDERS Insiders 3% │ Fairholme 20% │ T Rowe 14% │ Janus 12% │ Royce 4% │ Vanguard 4% │ Third Avenue 3% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE St. Joe bulls focus on the company’s ownership of 700,000 acres of Florida land, implying an attractive enterprise valuation per acre. However, large tracts of St. Joe’s land have sold for as little as $2,000 per acre, and it is unclear what the average selling price of the remaining land might be. Northwest Florida is clearly less attractive as a tourist destination than other parts of Florida, and an airport may not change this dynamic. St. Joe is a great inflation hedge, but that may be about it.


…additional insight into JOE: SLIDES FROM COMPANY PRESENTATION, MAY 12, 2009


Waters Corporation (WAT) – Owned By Greenberg Milford, MA, 508-478-2000

Technology: Scientific & Technical Instruments, Member of S&P 500 http://www.waters.com















per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 4/4/09 3/29/08 4/4/09

Revenue 890 958 1,105 1,158 1,280 1,473 1,575 1,537 372 333

Gross profit 517 560 650 680 744 842 914 903 216 206

EBIT 196 219 285 283 295 349 390 387 88 86

Net income 148 171 224 202 222 268 323 327 69 73

Diluted EPS 1.12 1.34 1.82 1.74 2.13 2.62 3.21 3.29 0.67 0.75

Cash from ops 219 157 259 298 264 371 418 403 96 81

Capex 38 35 66 51 51 60 69 77 14 22

Free cash flow 181 122 193 247 212 310 349 326 82 59


Total current assets 658 718 974 913 1,000 1,237 956 963 1,322 963


Total assets 1,015 1,131 1,460 1,429 1,617 1,881 1,623 1,675 1,974 1,675

Short-term debt 8 121 207 326 404 384 36 88 279 88


Long-term debt 0 125 250 500 500 500 500 500 650 500

Total liabilities 350 540 782 1,145 1,255 1,295 962 1,009 1,357 1,009


Common equity 665 591 679 284 362 586 661 666 617 666

EBIT/capital employed >100% >100% >100% 100% 93% 89% 89% 86% n/m n/m


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BUSINESS OVERVIEW Waters provides analytical instruments in two segments: The Waters Division provides liquid chromatography and mass spectrometry instrument systems.* The TA Division provides thermal analysis, rheometry and calorimetry instruments. INVESTMENT HIGHLIGHTS

Participates in $30 billion analytical instrument market. The Waters Division serves the $5 billion biochem and chemical analysis industry while the TA Division targets a $300-400 million market.

Growth supported by evolving regulations regarding the use of analytical instruments in drug development and quality control testing.

59% of revenue from pharma/biotech industry, with another 27% of revenue from industrial, food and environmental customers in 2008.

Recurring revenue from chromatography chemicals and service businesses. Instrument product revenue fluctuates with customer demand.

Outlook “cautiously optimistic,” with 2009E organic sales growth of -4% to 1% and EPS of $2.95-3.30. FCF is projected to be $300 million.

Doug Berthiaume (60) has served as CEO since 1994 and chairman since 1996. He was previously president of Millipore’s Waters Chromatography Division, which the company acquired in 1994.

Approved $500 million buyback in February. Waters bought back $235 million, $201 million and $249 million of stock in 2006, ‘07 and ‘08. The firm has cut the share count by one-third since ‘03.

Shares trade at 8% trailing FCF yield and 12x next year’s consensus earnings estimate.


Product revenue declined 16% in Q1, with total revenue down 10% to $333 million. Adverse foreign currency translation shaved 5% off growth.

Waters Division competitors include Agilent, Life Tech, Thermo Fisher, Varian, and Shimadzu.

TA Division competitors include PerkinElmer, Mettler-Toledo, Netsche, and Thermo Fisher.

MAJOR HOLDERS CEO Berthiaume 4% │ Other insiders 1% │ MFS 10% │ FMR 6% │ T Rowe 5% │ Vanguard 5% │ Chieftain 3% * Liquid chromatography is a lab technique used to separate mixtures that have been dissolved in a solvent, while mass spectrometry is an analytical technique for the determination of the elemental composition of a sample. The techniques have uses in drug discovery and manufacturing.

SELECTED OPERATING DATA FYE December 31 2005 2006 2007 2008 1Q09 % of revenue by segment: Waters Division 90% 91% 90% 89% 90% TA Division 10% 9% 10% 11% 10% Revenue growth by segment & other metrics: Waters Division 4% 11% 14% 7% -11% TA Division 8% 9% 25% 10% -8% Total revenue 5% 11% 15% 7% -10% Headcount 5% 4% 6% 2% n/a % of revenue by type: Instrum. & software 59% 59% 59% 57% 51% Chemistry 13% 14% 15% 15% 18% Service 28% 27% 26% 28% 32% Revenue growth by type: Instrum. & software 2% 11% 14% 4% -20% Chemistry 8% 18% 24% 9% 0% Service 9% 6% 12% 13% 4% % of revenue by geography: U.S. 34% 32% 32% 30% n/a Europe 34% 34% 35% 35% n/a Japan 12% 11% 9% 10% n/a Asia 13% 16% 17% 19% n/a Revenue growth by geography: U.S. 2% 4% 17% 1% n/a Europe 3% 12% 17% 7% n/a Japan 7% 2% -1% 13% n/a Asia 12% 34% 20% 18% n/a Selected items as a % of revenue: Gross profit 59% 58% 57% 58% 62% SG&A 28% 28% 27% 27% 30% R&D 6% 6% 5% 5% 6% EBIT 24% 23% 24% 25% 26% D&A 4% 4% 4% 4% 4% Capex 4% 4% 4% 4% 7% Equity to assets 16% -2% 8% 16% 16% Shares out (avg) 1 -5% -10% -2% -1% -2%

Source: Company filings, Manual of Ideas analysis. 1 The company boosted debt by $250 million in 2005 to buy back stock.


MV

($mn) EV

($mn) EV / Rev.

P / Tang. Book

This FY P/E

Next FY P/E

GE 138,720 595,870 3.3x 24.7x 13x 14x

TMO 15,170 15,640 1.5x 154x 13x 11x

LIFE 6,520 9,630 4.7x n/m 14x 13x

A 6,070 6,810 1.3x 3.7x 28x 14x

WAT 4,160 4,320 2.8x 20.4x 13x 12x


THE BOTTOM LINE Waters provides analytical instruments to the pharmaceutical and industrial markets, with strong share in segments of the $30 billion analytical instrument market. Free cash flow has tended to exceed net income due to ongoing amortization of intangible assets. The company has consistently used cash to repurchase shares, reducing the share count by one-third since 2003. Product revenue fell 16% in Q1, reflecting lower demand in the company’s core end markets. The shares do not appear sufficiently cheap on an FCF basis to warrant serious consideration. We also note that the CEO sold $500K of stock in May.


…additional insight into WAT: SLIDES FROM COMPANY PRESENTATION, MAY 13, 2009


Unchanged Superinvestor Holdings


AmeriCredit (ACF) – Owned By Cumming/Steinberg, Berkowitz

Consolidated-Tomoka Land (CTO) – Owned By Winters, Whitman

Harvest Natural Resources (HNR) – Owned By Pabrai

Jefferies Group (JEF) – Owned By Cumming/Steinberg

Leucadia National (LUK) – Owned By Berkowitz, Pabrai

MEMC Electronic Materials (WFR) – Owned By Einhorn

Pfizer (PFE) – Owned By Berkowitz

Syneron Medical (ELOS) – Owned By Klarman

TAL International (TAL) – Owned By Berkowitz

USG Corporation (USG) – Owned By Buffett, Watsa, Weitz

Yahoo! (YHOO) – Owned By Icahn, Ashton, Miller


AmeriCredit (ACF) – Owned By Cumming/Steinberg, Berkowitz Fort Worth, TX, 817-302-7000

Financial: Consumer Financial Services, Member of S&P MidCap 400 http://www.americredit.com




Market value: $1.4 billion This quarter $0.04 -$0.19 7 P/E FYE 6/30/10 133.5x



Ownership Data FYE 6/30/10 0.08 -0.43 7 EV / LTM EBITDA 15.2x








per share data) 6/30/02 6/30/03 6/30/04 6/30/05 6/30/06 6/30/07 6/30/08 3/31/09 3/31/08 3/31/09

Revenue 1,137 981 1,216 1,451 1,811 2,340 2,543 2,173 639 481

EBIT 512 35 365 452 485 532 (92) 727 61 20

Net income 315 21 227 286 306 360 (69) (169) 38 10

Diluted EPS 3.50 0.15 1.37 1.73 2.08 2.73 (0.60) (1.47) 0.30 0.07

Cash from ops (375) 2,176 505 614 961 1,079 1,260 1,200 325 266

Capex 12 41 5 8 6 40 207 7 21 (1)

Free cash flow (386) 2,135 500 606 956 1,039 1,053 1,193 304 267




Total assets 4,217 8,108 8,825 10,947 13,068 17,811 16,547 12,988 17,619 12,988

Short-term debt 1,752 5,457 6,099 8,157 10,625 14,481 13,349 10,085 14,301 10,085


Long-term debt 418 378 366 367 200 950 950 578 950 578



Common equity 1,427 1,881 2,125 2,122 2,009 2,075 1,897 2,014 1,986 2,014

EBIT/capital employed 29% 1% 7% 7% 5% 4% -1% 6% n/m n/m


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BUSINESS OVERVIEW AmeriCredit provides auto financing indirectly through U.S. auto dealers on a non-exclusive basis. The company has $15 billion in managed auto receivables. Of the contracts purchased from 18,000 dealers in FY08, 89% were originated by manufacturer-franchised dealers and 81% related to used vehicles. AmeriCredit was founded in 1992. SELECTED OPERATING DATA

FYE June 30 2006 2007 2008 1H09 Branch count 79 65 24 n/a Producing dealers 17,111 19,114 17,872 n/a Origination volume 1 6,208 8,455 6,294 900 Loans securitized 1 5,000 7,660 4,634 1,289 Managed auto receivables (period average): Owned receivables 1 9,993 13,621 16,059 14,045 Serviced receivables 1 1,223 106 7 0 Total portfolio 1 11,217 13,727 16,066 7,114 Net margin - on book 13.2% 11.7% 10.6% 9.6% Return on equity 15.3% 18.8% n/m n/m Delinquent loans as % of total managed receivables (period end): 31 to 60 days 5.1% 4.7% 6.0% 7.8% Greater than 60 days 2.1% 2.1% 2.9% 4.2% In repossession 0.3% 0.3% 0.3% 0.3% Total delinquencies 7.5% 7.1% 9.2% 12.3% Net charge-offs 1 579 643 1,000 591 Charge-offs/ portfolio 2 5.2% 4.7% 6.2% 8.3% Net recoveries 3 48% 49% 45% 39% Loan loss allowance 1, 4 679 820 951 923 Allowance/ receivables 5 5.8% 5.2% 6.3% 7.1%

1 U.S. dollars in millions. 2 Net charge-offs as an annualized percentage of average gross receivables. 3 Net recoveries as a percentage of gross repossession charge-offs. 4 Allowance for loan losses and nonaccretable acquisition fees (on book). 5 Allowance for loan losses and nonaccretable acquisition fees (on book) as a percentage of finance receivables owned.


Conserving liquidity, working to emerge from current crisis with franchise value intact. The revised operating plan calls for funding far fewer originations (less than $1.2 billion, down from $6 billion in FY08). The company increased the minimum credit score required for new loans, closed locations, cut the number of dealers from whom it buys loans, and reduced headcount. It has discontinued originations in Canada and in direct lending, leasing and specialty prime platforms.

Repurchased six million shares for $128 million in FY08 ($22 per share), 13 million shares for $324 million in FY07 ($24 per share), and 21 million shares for $528 million in FY06 ($25 per share).

Chairman Clifton Morris (72), CEO Dan Berce (54) and CFO Chris Choate (45) have worked together since before the early-1990s recession.

Shares trade at 0.7x tangible book value.


Lost $19 million pre-tax in nine months ended March 31, including $10 million of charges. The loan loss allowance increased to 7.7% at March 31, from 7.1% at December 31. Originations were $210 million in 3Q09, compared to $1.3 billion in 3Q08.

Adverse impacts on liquidity in FY09, including higher credit enhancement levels in securitizations caused by a reduction in excess spread and, to a lesser extent, credit deterioration in the loan portfolio. Capital market disruptions are making securitizations more expensive. Finally, the company is receiving less cash from securitization trusts due to weaker credit performance.

Exposure to consumers with weak credit. The company maintains a “significant share” of the sub-prime auto finance market and has participated in prime and near-prime to a “more limited extent.”

Tangible book of $2 billion versus tangible assets of $13 billion at March 31. Net finance receivables amount to $11 billion, while on-balance-sheet securitization notes payable amount to $8 billion (maturity dates range from 2011-2014).

Other risks include dependence on third parties, as discussed on the next page.


Price ($)

Market Value ($mn)

Price to Tangible

Book

This FY P/E

Next FY P/E

FY End Date

COF 21.90 8,680 .8x n/m n/m Dec-31

CACC 20.50 630 1.7x n/a n/a Dec-31

NICK 5.30 60 .7x n/a n/a Mar-31

CPSS 0.90 20 .2x n/m n/a Dec-31

ACF 10.70 1,419 .7x n/m 134x Dec-31

MAJOR HOLDERS Insiders 4% │ Leucadia 25% │ Fairholme 24% │ Columbia Wanger 8% │ Yacktman 6% │ Barclays 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? 1 Provisions for loan losses, recorded in the income statement, affect loan loss allowance, which reduces net finance receivables on balance sheet.

THE BOTTOM LINE As a subprime auto lender, AmeriCredit has been in the proverbial eye of the storm. While the firm has strong management, a strong franchise and disciplined underwriting, it almost bankrupted because of dependence on credit enhancement and financing from third parties. Capital infusions by top shareholders Leucadia and Fairholme have given the company more control over its own destiny by shoring up the balance sheet and allowing AmeriCredit to operate with less dependence on third parties. The shares have appreciated markedly and no longer appear compelling.


…additional insight into ACF: SLIDES FROM COMPANY PRESENTATION, MAY 2009


Consolidated-Tomoka Land (CTO) – Owned By Winters, Whitman Daytona Beach, FL, 386-274-2202

Capital Goods: Construction Services http://www.consolidatedtomoka.com





Enterprise value: $187 million Next quarter 0.07 0.15 1 P/E FYE 12/31/11 35.8x

Shares out: 5.7 million FYE 12/31/09 0.26 n/a 1 EV / LTM revenue 9.1x









per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 29 35 43 45 44 43 21 21 4 4

Gross profit 18 26 29 31 28 28 11 11 1 2

EBIT 15 21 24 23 22 21 8 8 0 1

Net income 9 13 15 15 14 14 5 5 0 0

Diluted EPS 1.65 2.33 2.57 2.58 2.46 2.36 0.84 0.87 0.03 0.06

Cash from ops 15 23 33 31 9 17 4 5 (2) (1)

Capex 4 17 22 36 17 6 19 17 3 1

Free cash flow 11 6 11 (5) (8) 12 (15) (12) (5) (2)




Total assets 74 98 119 143 154 172 173 174 169 174

Short-term debt 0 10 9 7 7 0 0 0 0 0


Long-term debt 9 0 0 0 0 7 9 11 7 11



Common equity 53 66 80 95 103 117 118 118 116 118



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BUSINESS OVERVIEW Consolidated-Tomoka Land operates in three segments:

Real Estate includes land sales and development, agricultural operations, and leasing properties for oil and mineral exploration, primarily in Volusia County, Florida.

Income Properties consist of properties leased to parties such as CVS and Walgreens on a triple-net and double-net basis. The properties are located primarily in Florida and Georgia.

Golf Operations relate to two golf courses and facilities in Daytona Beach, Florida, including an LPGA golf course. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007 2008 1Q09 % of revenue by segment: Real estate1 72% 66% 60% 22% 0% Income properties 15% 19% 20% 45% 61% Golf 11% 12% 12% 23% 37% Corporate and other 3% 3% 8% 10% 2% Revenue growth by segment and other metrics: Real estate -2% -10% -10% -82% -92% Income properties 42% 24% 7% 6% 8% Golf 5% 8% -1% -9% 3% Total revenue 4% -3% -1% -52% -2% Headcount 25% 25% -32% -12% n/a EBIT margin by segment: Real estate 80% 75% 73% 65% n/m Income properties 82% 82% 80% 79% 79% Golf -27% -28% -34% -39% -10% Selected items as a % of total revenue: Gross profit 69% 65% 64% 51% 40% SG&A 18% 16% 14% 14% 27% EBIT 51% 49% 49% 38% 13% D&A 4% 5% 6% 13% 18% Capex 76% 37% 13% 88% 30% Tang. equity to assets 66% 66% 66% 67% n/a shares out. 0% 0% 1% 0% 0%

Source: Company filings, Manual of Ideas analysis. 1No real estate sales occurred during the first quarter.


Owns 11,200 acres in Florida, with 10,200 acres (including commercial/retail sites) located within the city limits of Daytona Beach. The properties are situated near Interstate-4 and Interstate-95.

Business strategy since 2000: sell agricultural land that qualifies for income tax deferral, use proceeds to buy income-producing properties. The company has invested $120 million in 26 income properties through this approach and expects annual lease revenue from these properties to be $9 million.

William McMunn (62) became CEO in 2001. He joined the company in 1990 as president of the Indigo Development subsidiary. He has thirty years of experience in central Florida real estate.

Income properties segment produces predictable revenue, with segment revenue up 6% in 2008 to $9.2 million and up 8% in 1Q09 to $2.3 million.

Tenants include CVS (13% of 2008 revenue), Walgreens (11%), Barnes & Noble, Lowe’s, Dick’s Sporting Goods, Northern Tool, and Best Buy (the latter recently occupied 30,000 sq. ft. in Georgia).

Strong balance sheet, with only $11 million of debt versus $150+ million of real estate book value.

Approved $8 million share repurchase in 4Q08, but repurchased only $100K of stock by May 1.

Shares trade at 1.6x tangible book value and 35x 2010E earnings.


Revenue down 52% in 2008 to $21 million, with real estate segment sales down 82%. Golf operations remain unprofitable.

Real estate ownership concentrated in Florida, a state in which prices have declined faster than the national average. According to the Case-Shiller Home Price Index, housing prices in the Tampa area have recently declined at a 23% annual rate. Prices are down 39% since the peak reached in June 2006.

Corporate governance issues. David Winters is seeking to elect three directors. Winters also wants the company to declassify the board, separate the positions of chairman and CEO, and set the number of directors at eleven (versus nine currently).


MV

($mn) EV

($mn) EV / Rev.

P / T. Book

This FY P/E

Next FY P/E

JOE 2,180 2,120 12.5x 2.2x n/m n/m

TRC 420 380 9.8x 2.4x 67x 60x

FOR 410 750 4.9x .9x n/m 115x

STRS 50 70 3.0x .3x n/a n/a

CTO 180 190 9.3x 1.6x 118x 35x

MAJOR HOLDERS CEO McMunn 1% │ Other insiders 1% │ Wintergreen 26% │ Third Avenue 10% │ Barclays 5% │ Morgan Stanley 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE Consolidated-Tomoka is a Florida real estate developer that has remained profitable throughout the meltdown. This has been largely due to the income properties segment, which generated revenue of $9 million and EBIT of $7 million in 2008. In addition, the company’s 10,700 acres of real estate in Daytona Beach appear to be carried on the books at a fraction of their value. The company has sold land at prices ranging from $17,800 to $114,000 per acre in recent years. Assuming a value of $15,000 per acre, the land would be worth more than $150 million, making this an interesting asset and income opportunity.


Harvest Natural Resources (HNR) – Owned By Pabrai Houston, TX, 281-899-5700

Energy: Oil & Gas Operations http://www.harvestnr.com




Market value: $160 million This quarter $0.02 n/a 1 P/E FYE 12/31/10 6.2x

Enterprise value: $82 million Next quarter 0.07 n/a 1 P/E FYE 12/31/11 n/a

Shares out: 33.0 million FYE 12/31/09 0.06 0.15 1 EV / LTM revenue #DIV/0!









per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 127 106 186 237 60 11 0 0 0 0

Gross profit 0 0 0 0 0 0 0 0 0 0

EBIT 35 34 88 105 1 (20) 0 (54) (8) 0

Net income 100 27 34 39 (63) 60 (22) (27) 1 (5)

Diluted EPS 2.78 0.74 0.90 1.01 (1.68) 1.58 (0.63) (0.83) 0.03 (0.15)

Cash from ops 43 39 74 115 (24) (21) 50 41 0 (9)

Capex 43 61 39 16 2 1 26 30 3 7

Free cash flow (1) (22) 35 99 (26) (21) 24 11 (3) (16)




Total assets 335 374 368 401 468 417 362 358 414 358

Short-term debt 2 6 12 6 38 9 0 0 9 0


Long-term debt 105 97 0 0 67 0 0 0 0 0



Common equity 171 200 243 298 281 317 273 270 319 270

EBIT/capital employed 23% 20% 45% 55% 1% -278% 0% -604% n/m n/m


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BUSINESS OVERVIEW Harvest is an oil and gas firm. It has acquired and developed interests in Venezuela, originally through a subsidiary and subsequently through a 40% equity affiliate, Petrodelta.

The company also holds interests in the U.S. Gulf Coast region through an Area of Mutual Intent agreement with a third party, the Antelope project in the Western U.S. through a Joint Exploration and Development Agreement, and exploration acreage offshore of China, offshore of Gabon and mainly onshore West Sulawesi in Indonesia. INVESTMENT HIGHLIGHTS

Owns 32% of Petrodelta, giving Harvest net proved reserves of 43 MMBoe, 2P reserves of 70 MMBoe and 3P reserves of 132 MMBoe. Petrodelta operates properties in eastern Venezuela including large proven oil fields and properties with large development and exploration opportunities.

Pursuing technically-based exploration, leveraging the experience of Harvest’s technical, business development and operating staffs.

Owns 49% of Fusion Geophysical, which specializes in geophysics and reservoir engineering. Harvest paid $2 million for an additional 4% stake in Fusion, which had sales of $13 million in 2008. Harvest was 26% of Fusion’s revenue last year.

$97 million of cash and no debt at yearend 2008, with cash deposited in U.S. banks.

Repurchased $29 million of stock in 2008 and $33 million in 2007, reducing share count from 38 million in March 2007 to 33 million in March 2009.

Trades at enterprise value of $82 million, or EV to boe of $1.20, based on 2P reserves.


Only producing asset is in Venezuela. Harvest owns 80% of HNR Finance, which owns 40% of Petrodelta. Government entity PDVSA owns the remaining 60% of Petrodelta. While the “worst case scenario” appears to have already occurred, with PDVSA taking majority control of Harvest’s assets, it is not inconceivable that Harvest’s 32% economic interest could be diluted further in the future.

Spent $27 million on exploration expense and dry hole costs in 2008, with additional investments expected this year. Cash may dwindle over time.

MAJOR HOLDERS CEO 1% │ Insiders 6% │ Pabrai 17% │ Cumberland 9%

SELECTED OPERATING DATA FYE December 31 2006 2007 2008 Selected GAAP income statement data ($mn):1 Revenue 60 11 0 G&A expense 26 29 27 DD&A expense 15 0 0 Dry hole costs 0 0 11 Exploration expense 0 1 16 EBIT 1 (20) (54) Net income from affiliates 0 55 35 GAAP net income by geography ($mn): Venezuela (47) 80 33 Indonesia 0 (0) (9) U.S. and other (16) (20) (46) Net income (63) 60 (21) Venezuela – Key Petrodelta operating metrics:2 Crude oil sales ('000 Bbls) 5,211 5,374 5,505 Natural gas sales ('000 Mcf) 11,519 13,456 10,700 Avg oil sales price ($ per Bbl) 50.98 58.61 83.22 Avg gas sales price ($ per Mcf) 1.54 1.54 1.54 Avg opex ($ per Boe) 3.19 2.80 7.26 Acquisition costs by geography ($mn): Venezuela 0 1 8 Indonesia 0 0 0 U.S. 0 0 13 Gabon 0 0 6 China 0 0 0 Exploration costs by geography ($mn): Venezuela 0 0 0 Indonesia 0 0 8 U.S. 1 0 14 Gabon 0 0 3 China 0 0 0 Assets by geography (period end) ($mn): Venezuela 352 307 232 Indonesia 0 0 2 U.S. and other 156 127 152 Intersegment eliminations (40) (16) (23) Total assets 468 417 362 Shareholders’ equity ($mn) 281 317 273 Equity as % of assets 60% 76% 75% Net cash ($mn) 132 118 97 shares out (avg) 1% -2% -7%

Source: Gridstone Research, Company filings, Manual of Ideas analysis. 1 GAAP revenue declined from $237 million in 2005 to $60 million in 2006, $11 million in 2007 and zero in 2008 due to the conversion of the company’s Venezuelan subsidiary into a mixed company, with state-owned PDVSA as the majority owner. Harvest now reports income from Venezuela on one line of the income statement as “net income from unconsolidated affiliates.” 2 Figures include 100% of the production of Petrodelta, of which Harvest owns 32%. 2006 data is for the nine months ended December 31, 2006.


THE BOTTOM LINE Harvest’s valuation affords investors many ways to win and few to lose. We expect Harvest’s 32% interest in Venezuelan firm Petrodelta—and the associated 70 MMBoe of 2P reserves—to drive major increases in shareholder value over time. Unless the company’s exploration projects deplete the company’s cash balance while achieving zero production success, it is difficult to conceive that shareholders’ investment will be impaired. Meanwhile, if exploration adds value to the company’s already considerable assets, Harvest could become a multi-bagger from the recent market price. f


…additional insight into HNR: SELECTED SLIDES FROM COMPANY PRESENTATION AT HOWARD WEIL ENERGY CONFERENCE, MARCH 26, 2009


Jefferies Group (JEF) – Owned By Cumming & Steinberg New York, NY, 212-284-2550

Financial: Investment Services, Member of S&P MidCap 400 http://www.jefferies.com












# of institutional owners: 433 4/21/09 $0.19 -$0.08 LTM pre-tax ROC n/m



per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 755 927 1,199 1,498 1,963 2,719 1,683 1,692 397 406

Gross profit 620 781 1,005 1,158 1,395 1,496 952 1,091 188 327

EBIT 104 145 227 268 349 246 (949) (752) (132) 49

Net income 63 84 131 157 206 145 (536) (437) (64) 38

Diluted EPS 0.57 0.71 1.03 1.16 1.41 0.97 (3.23) (2.42) (0.45) 0.19

Cash from ops (126) 222 (276) 213 (270) (430) 353 (156) (113) (623)

Capex 17 16 17 27 39 77 36 24 18 6

Free cash flow (143) 206 (293) 186 (309) (507) 317 (180) (131) (628)

Cash & investments 329 291 838 885 1,021 863 1,917 1,625 1,610 1,625



Total assets 6,899 10,992 13,825 12,781 17,826 29,794 19,979 21,292 23,671 21,292

Short-term debt 12 0 70 0 340 608 221 248 458 248


Long-term debt 453 443 789 780 1,294 1,889 1,889 1,874 1,890 1,874



Common equity 629 838 1,039 1,287 1,581 1,762 2,121 2,069 1,730 2,069



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BUSINESS OVERVIEW Jefferies is a 2,500-person full-service investment bank and institutional securities firm. Its primary operating subsidiary was founded in 1962. Jefferies operates in two segments:

Capital Markets includes trading and investment banking. It provides the research, sales, trading and origination effort for various fixed income, equity and advisory products.

Asset Management is primarily comprised of activities related to the company’s private investment funds. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007 2008 % of revenue, net of interest expense, by type: Commissions 20% 19% 23% 44% Principal transactions 29% 32% 25% 8% I-banking -- capital markets 18% 16% 25%

42% I-banking – advisory 23% 21% 23% Asset management income 7% 8% 2% -5% Interest 25% 36% 75% 74% Interest expense -24% -35% -73% -65% Other 2% 2% 2% 3% Growth of revenue, net of interest expense, by type: Commissions -5% 14% 27% 25% Principal transactions -2% 34% -17% -79% I-banking -- capital markets 29% 4% 68%

-43% I-banking – advisory 51% 13% 17% Asset management income 1% 34% -79% n/m Interest 126% 74% 122% -36% Interest expense 109% 72% 128% -43% Total revenue, net of interest 14% 21% 8% 18% % of revenue by geography: U.S. and Americas 95% 92% 87% n/a Europe 4% 8% 12% n/a Asia and Middle East 1% 0% 1% n/a % of trading and other revenue by asset class: Equity 71% 69% 78% 88% Fixed income and commodities 29% 31% 22% 12% Selected items as % of revenue, net of interest expense: Compensation and benefits 56% 54% 60% 150% Other non-interest expenses 22% 22% 24% 44% Pre-tax income 22% 24% 16% -94% Net income 13% 14% 9% -53% Return on equity 12% 12% 7% <0% Fixed charge coverage ratio1 5.5x 4.5x 3.0x n/m AUM (period end) 4,031 5,282 5,775 n/a Change (y-y) 23% 31% 9% n/a

1 Computed by dividing (a) pre-tax income from continuing operations plus fixed charges by (b) fixed charges. Fixed charges consist of interest expense on long-term debt and the portion of operating lease rental expense representative of the interest factor (deemed to be one-third of operating lease rentals).


Integrated, full-service brokerage firm, yet not part of Wall Street’s “bulge bracket” firms. The company has 2,100 employees (down from 2,600) in 25 cities in the U.S., Europe, India, and China.

Strategically focused on mid-sized growth companies, both in trading and investment banking. A stated priority is to increase share of sales and trading of securities in which the company deals.

40%-owned by employees and 30%-owned by “strategic partner” Leucadia, improving alignment of interests between firm and holders.

Diversified revenue; grew i-banking franchise across industry verticals. Sales and trading was 78% of revenue in 2000 and 49% in 2007.

First-class equity-linked franchise. Jefferies is a top trader in the secondary convertibles market.

Grown via M&A, including Putnam Lovell (July 2007), European M&A advisory LongAcre (June 2007) and technology i-bank Broadview (2003).

Shares trade at 2.0x tangible book value and 27x estimated 2010 earnings.


Scarcity of deals likely to impact results until equity and debt markets stabilize.

Claims “strong and liquid capital position,” despite $2 billion of equity vs. $22 billion of total liabilities. While this represents a lower leverage ratio than that of many competitors, it is quite high in absolute terms in a period of industry distress. Jefferies maintains investment-grade credit ratings.

Future regulation could make brokerage firm models fundamentally less attractive.

Exposed to counterparty credit risks in normal course of operations, including in derivatives deals.


Price ($)

Market Value ($mn)

Price to Tangible

Book

This FY P/E

Next FY P/E

FY End Date

RJF 16.00 1,960 1.1x 18x 13x Sep-30

SF 42.10 1,150 2.4x 20x 15x Dec-31

KBW 25.80 900 2.2x 42x 22x Dec-31

PJC 29.10 570 1.0x n/m 31x Dec-31

TWPG 5.00 160 1.2x n/m n/m Dec-31

JMP 6.70 140 1.3x 37x 16x Dec-31

COWN 4.80 70 .5x n/m 14x Dec-31

JEF 20.10 3,432 2.0x 35x 27x Dec-31

MAJOR HOLDERS Insiders 11% │ Leucadia 28% │ Marsico 6% │ Advisory Research 4% │ Barclays 4% │ Earnest 3% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE Jefferies has executed well over the past decade, growing into a national player in sales and trading, equity research and investment banking. The company has managed to avoid severe distress, although results have certainly suffered and are likely to remain weak for some time to come. While we view Jefferies as a survivor, we do not find the shares compelling.


…additional insight into JEF: SLIDES FROM COMPANY PRESENTATION, MAY 2009


Leucadia National (LUK) – Owned By Berkowitz, Pabrai New York, NY, 212-460-1900

Conglomerates: Conglomerates, Member of S&P 500 http://www.leucadia.com



52-week range: $10.26 - $54.73 Latest Ago Ests P/E FYE 1/0/00 n/a

Market value: $4.7 billion This quarter n/a n/a n/a P/E FYE 12/30/00 n/a

Enterprise value: $6.2 billion Next quarter n/a n/a n/a P/E FYE 12/30/01 n/a

Shares out: 238.5 million FYE 1/0/00 n/a n/a n/a EV / LTM revenue 6.2x

Ownership Data FYE 12/30/00 n/a n/a n/a EV / LTM EBITDA -29.1x





# of institutional owners: 701 n/a n/a n/a LTM pre-tax ROC -52%



per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 235 314 380 690 863 1,155 1,081 1,006 325 250

Gross profit 201 213 335 408 476 401 185 150 92 57

EBIT (39) (8) 107 135 134 (57) (367) (272) (33) (82)

Net income 162 97 146 1,636 189 484 (2,535) (2,580) (96) (140)

Diluted EPS 0.92 0.55 0.90 5.34 0.60 2.09 (11.19) (11.19) (0.43) (0.59)

Cash from ops 99 (23) 68 321 92 (18) 9 (11) (46) (66)

Capex 38 154 120 162 111 135 184 149 45 10

Free cash flow 61 (177) (52) 159 (19) (154) (175) (160) (92) (76)

Cash & investments 1,044 929 1,362 1,711 1,191 1,440 604 499 626 499

Total current assets 1,638 1,350 2,060 2,229 1,366 1,720 867 778 935 778


Total assets 2,542 4,397 4,800 5,261 5,304 8,127 5,199 5,113 7,930 5,113

Short-term debt 0 24 65 176 185 132 249 273 154 273


Long-term debt 233 1,155 1,067 987 975 2,004 1,833 1,800 2,029 1,800


Preferred stock 48 0 0 0 0 0 0 0 0 0

Common equity 1,487 2,134 2,259 3,662 3,893 5,571 2,677 2,645 5,348 2,645

EBIT/capital employed -35% -1% 13% 32% 37% -16% -77% -52% n/m n/m


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BUSINESS OVERVIEW Leucadia pursues a value-oriented, long-term investment approach. Leucadia owns controlling stakes in firms engaged in manufacturing, telecom, property management, gaming, real estate, medical products, and wineries. Leucadia also has investments accounted for under the equity method. SELECTED STRATEGIC INVESTMENTS

Company – Business Overview Comments STi Prepaid – International prepaid phone cards

Acquired for $122 million in March 2007

ResortQuest – vacation property management

Acquired for $12 million in June 2007

Idaho Timber – lumber manufacturing

Acquired in May 2005

Premier Entertainment Biloxi – Hard Rock Hotel & Casino Biloxi

Damaged by Katrina; opened in June 2007

Sangart – medical product R&D Acquired in 2005 Pine Ridge – winery in Napa n/a Archery Summit – winery in Willamette Valley

n/a

Jefferies High Yield Holdings – brokerage JV with Jefferies

Acquired in April 2007

Goober Drilling (50%, debt) – land-based contract drilling

Investment includes $171 million loan

Cobre Las Cruces (30% stake) – copper mining in Spain

Sold 70% for 12% of Inmet in 2005.

Fortescue (Australia: FMG) – iron ore mining (equity & debt)

$452 million total cash investment / 2006-07


Chairman Ian Cumming and president Joe Steinberg have one of the best investment track records, compounding Leucadia’s equity and share price at 22% and 26% per year from 1979-2007.

Equity has grown from a deficit of $8 million in 1978 (prior to current management), to equity of $3 billion at yearend 2008. This increase occurred despite a dividend of $812 million in 1999.

Public company investments have rebounded since March 31, with AmeriCredit up from $5.86 per share on March 31 to $11.26 per share on May 27, and Jefferies shares up from $13.80 to $19.97.

Shares trade at 1.8x tangible book value. COMPARABLE PUBLIC COMPANY ANALYSIS

MV

($mn) EV

($mn) EV / Rev.

P / Tang. Book

This FY P/E

Next FY P/E

BRK.A 138,410 150,670 1.4x 2.0x 16x 13x

FFH 4,710 5,060 .6x 1.0x n/a n/a

MKL 2,730 2,820 1.5x 1.5x 14x 13x

GLRE 570 510 11.8x 1.1x n/a n/a

LUK 4,660 6,230 6.2x 1.8x n/a n/a

SELECTED OPERATING DATA FYE December 31 2005 2006 2007 2008 Revenue growth 82% 25% 34% -6% % of revenue by segment: Idaho Timber 35% 40% 25% 22% Conwed Plastics 14% 12% 9% 10% Telecommunications 0% 0% 31% 42% Property management 0% 0% 7% 13% Gaming entertainment 0% 0% 3% 11% Other 13% 15% 6% 6% Corporate 39% 33% 18% -4% Pre-tax margin, before equity in income of associated firms:Idaho Timber 3% 3% 3% 0% Conwed Plastics 15% 17% 17% 13% Telecommunications n/m n/m 5% 3% Property management n/m n/m -8% -1% Gaming entertainment n/m n/m -24% 1% Total pre-tax margin 19% 16% -5% -34% Selected items as % of total assets (period end): Long-term investments 18% 27% 32% 23% Investment in associated firms 7% 14% 15% 45% Deferred tax asset (gross) 23% 21% 21% 3% Other long-term assets 10% 13% 13% 28% Debt 22% 21% 24% 47% Other liabilities 10% 7% 12% 12% Shareholders' equity 68% 71% 63% 61%


Leveraged balance sheet, with gross debt of $2+ billion. While we have little doubt Leucadia will manage to service the debt load, it severely restricts Cumming and Steinberg’s ability to make new investments at a time that provides manifold opportunities for shrewd long-term investors.

Investment losses continued in Q1, with losses related to associated companies, net of tax, of $83 million in Q1, versus a $539 million loss in FY08.

$2 billion NOL may not be utilized. Leucadia increased the NOL valuation allowance in 2008, virtually eliminating deferred tax assets.

Concentrated investment portfolio, with significant mark-to-market volatility and illiquidity.

MAJOR HOLDERS Joe Steinberg 13% │ Ian Cumming 12% │ Morgan Stanley 8% │ Fairholme 8% │ Barclays 3% │ Pabrai <1% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE Leucadia’s portfolio is going through perhaps the most difficult period since present management took over in the late 1970s. Book value declined sharply over the past two quarters due to investment losses and a writedown of deferred tax assets. While Leucadia should still deliver above-average performance in the long term, we find better value in other investment vehicles, including Greenlight Capital Re and Berkshire-Hathaway.


…additional insight into LUK: SUPERINVESTOR INSIGHT INTO LEUCADIA

Bruce Berkowitz, interview with Robert Huebscher (www.advisorperspectives.com) on December 24, 2008: “We place a significant amount of weight on the past record of management, along with analyzing holdings on a

quarterly and annual basis. Mostly, this represents the style of investing where we respect the people running the company. We have studied Leucadia and their management over a 20 year period. There are no surprises.”

“Their management is honest, decent, and does not have an oversized ego. They have a better track record than Berkshire Hathaway and they take their fiduciary roles very seriously. Moreover, whereas [BRK] is built to last for a very long time horizon, Leucadia has value even over shorter time periods. When the CEO, Ian Cumming, and the president, Joseph Steinberg, retire, they'll probably give all the money to their shareholders and call it a day.”

PERFORMANCE TRACK RECORD, 1978-2008


MEMC Electronic Materials (WFR) – Owned By Einhorn St. Peters, MO, 636-474-5000

Technology: Semiconductors, Member of S&P 500 http://www.memc.com















per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 687 781 1,028 1,107 1,541 1,922 2,005 1,717 501 214

Gross profit 174 233 370 367 689 1,001 1,005 765 259 20

EBIT 65 143 199 257 558 850 853 608 218 (26)

Net income (22) 117 226 249 369 826 387 431 (42) 2

Diluted EPS (0.17) 0.53 1.02 1.10 1.61 3.56 1.69 1.89 (0.18) 0.01

Cash from ops 76 99 258 321 528 917 641 429 197 (15)

Capex 22 67 146 163 148 276 303 275 82 53

Free cash flow 54 31 112 158 379 641 337 154 115 (68)

Cash & investments 166 131 92 154 586 1,316 1,137 1,008 1,285 1,008

Total current assets 364 365 409 436 900 1,590 1,454 1,333 1,564 1,333


Total assets 632 727 1,028 1,148 1,766 2,887 2,937 2,800 2,864 2,800

Short-term debt 124 72 43 18 5 5 6 6 6 6


Long-term debt 161 59 116 35 29 26 26 24 29 24



Common equity (25) 194 443 711 1,167 2,035 2,082 2,046 1,978 2,046

EBIT/capital employed 29% 52% 45% 46% 90% >100% >100% 72% n/m n/m


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BUSINESS OVERVIEW MEMC provides silicon wafers for semiconductor and solar applications. It has global R&D and manufacturing facilities. Customers include semi device and solar cell makers. MEMC sells wafers from 100-300mm and intermediate products such as polysilicon and silane gas. The company has 200+ U.S. and 450+ foreign patents. Samsung and Yingli Green Energy each accounted for 10%+ of revenue in 2007.

Texas Pacific Group acquired the company from E.ON in 2001 and sold its stake in several transactions through 2007. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007 2008 Change in wafer ASPs -3% 10% -41% -43% % of revenue by product type: Wafers 90% 81% 78% 81% Excess polysilicon raw material 10% 19% 22% 19% % of revenue by geography: U.S. 31% 34% 24% 24% China 3% 14% 21% 19% Korea 17% 12% 16% 14% Taiwan 20% 18% 17% 25% Other 29% 22% 22% 18%


18% CAGR in silicon wafer shipments from 1990-2007, driven by growth in semiconductor units and solar megawatts. The wafer market is expected to grow from $10 billion (80/20 semi/solar split) in 2005 to $32 billion (45/55) in 2010. Semi devices and solar cells are made from wafers.

Capital-intensive business. MEMC operates several production facilities with 8,000MT of targeted annual polysilicon capacity. Net PP&E was $976 million as of September 30. Capex was $276 million in 2007 and $303 million in 2008.

Wafer volume drives revenue growth, with volume increases driven by new wafers and higher shipments of existing wafers. Prices declined 41% in 2007 due to a mix shift, with new 156mm wafers depressing the average price, while existing wafers and intermediate products realized higher prices.

Strong balance sheet, with $900+ million of net cash and short-term investments as of March 31.

Repurchased four million shares for $270 million since May 2007 on total authorization of $1 billion.

Shares trade at 1.9x tangible book value, 13x next year’s earnings and 4% trailing FCF yield.

MAJOR HOLDERS Insiders <1% │ Fidelity 14% │ Barclays 5% │ Vanguard 4% │ Greenlight 3% │ State Street 3% │ T Rowe 3%

INVESTMENT RISKS & CONCERNS 2Q09 outlook: “Wafer demand for semiconductor

applications, which showed significant weakness for most of the first quarter, has begun to show some signs of improvement in the early part of the second quarter, although still far below levels seen in the recent past. Wafer pricing for semiconductor and solar applications, however, remains weak, and factory utilization rates, while improving, remain below normal operating levels. Due to limited demand visibility amid the current macroeconomic environment, the company is not providing a revenue or margin outlook at this time.”

Q1 revenue of $214 million declined 50% sequentially from Q4. As a result of lower pricing and additional underutilization charges, gross margin for the quarter was 9%, significantly below the company’s previous outlook of gross margin declining to the 20% range.

Nabeel Gareeb resigned as CEO last October after six years with MEMC. Former Cypress EVP Ahmad Chatila is set to become CEO on March 2.

Unanticipated events can affect production. In 2Q08, a premature failure of a heat-exchanger at the Merano, Italy facility reduced polysilicon output by 5%, causing 2Q08 results to miss guidance.

Competitors include Shin-Etsu Handotai, SUMCO, Siltronic, BP Solar, Evergreen Solar, Kyocera, REC Group, Sanyo, Sharp, and SolarWorld.


MV

($mn) EV

($mn) EV / Rev.

P / Tang. Book

This FY P/E

Next FY P/E

FSLR 16,190 15,610 10.6x 9.7x 27x 22x

BRCM 10,930 8,970 2.0x 4.8x 33x 21x

MRVL 6,780 5,860 2.0x 4.5x 34x 20x

SPWRA 2,290 2,610 1.9x 2.6x 24x 13x

STP 1,950 3,040 1.7x 2.0x 36x 16x

WFR 3,810 2,830 1.6x 1.9x 42x 13x


THE BOTTOM LINE MEMC is a technology company tapping into long-term semiconductor industry growth and global adoption of solar cells. Shares have declined as the outlook for semi cap equipment makers has deteriorated and management has slashed guidance (the CEO resigned in late October). We believe momentum-oriented investors have overreacted to the slowdown in growth. While semi cap equipment is highly cyclical, solar represents a secular growth opportunity, one the market is ignoring. The shares are too cheap to ignore on a normalized earnings basis, in our view.


Pfizer (PFE) – Owned By Berkowitz New York, NY, 212-573-2323

Health Care: Major Drugs, Member of S&P 500 http://www.pfizer.com









Insider buys (last six months): 0 LT EPS growth -1.7% 0.8% 3 P / tangible book 4.6x






per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/29/09 3/30/08 3/29/09

Revenue 32,294 44,736 48,988 47,405 48,371 48,418 48,296 47,315 11,848 10,867

Gross profit 28,280 35,147 42,597 40,173 40,731 37,179 40,184 39,857 10,000 9,535

EBIT 11,766 3,246 13,403 10,800 13,028 9,278 9,694 9,013 3,557 3,803

Net income 9,126 3,906 11,353 8,079 19,332 8,140 8,101 8,046 2,784 2,729

Diluted EPS 1.47 0.22 1.44 1.03 1.52 1.18 1.19 1.18 0.41 0.40

Cash from ops 10,183 11,727 16,340 14,733 17,594 13,353 18,238 18,114 3,271 3,147

Capex 2,286 3,417 2,928 2,537 2,203 1,991 1,911 1,681 483 253

Free cash flow 7,897 8,310 13,412 12,196 15,391 11,362 16,327 16,433 2,788 2,894




Total assets 46,356 116,775 123,078 116,970 115,546 115,268 111,148 122,932 118,550 122,932

Short-term debt 8,669 8,818 11,266 11,589 2,434 5,825 9,320 7,613 8,909 7,613


Long-term debt 3,140 5,755 7,279 6,347 5,546 7,314 7,963 21,064 8,143 21,064


Preferred stock 0 219 193 169 141 93 73 69 86 69

Common equity 19,950 65,158 68,085 65,595 71,217 64,917 57,483 60,186 67,331 60,186



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BUSINESS OVERVIEW Pfizer is a leading research-based global pharma company. INVESTMENT HIGHLIGHTS

Top holding of Fairholme at 19% of the portfolio. Bruce Berkowitz likes the “quality balance sheet of a company producing vital products.”

Shares trade at 8x 2009E EPS and 7x 2010 EPS. Trailing FCF was $16 billion, implying a 16% yield.


Lipitor patent expiration in June 2011. The best-selling drug accounted for 28% of pharma revenue in 2008. Replacing this high-margin revenue stream is a top priority and may prove challenging. Lipitor sales declined 2% in 2008 on competitive pressures.

Guiding for revenue of $44-46 billion (down 5-9%) and adjusted EPS of $1.85-1.95 (down 19-24%) in 2009. Guidance excludes Wyeth.

Will $68 billion cash-and-stock merger with Wyeth add value? Pfizer announced the deal on January 26 and expects to close it at the end of Q3 or during Q4 2009. Pfizer targets $4 billion in synergies (half from SG&A, half from R&D and manufacturing). Pfizer’s goal of operating cash flow of $20+ billion in 2012 may prove optimistic.

M&A strategy presents integration risks.* Pharmaceutical spending growth is “very low

right now [as of 3/30]. It’s at the lowest it’s been in 50 years due to patent expirations and slow growth of new products,” according to CEO Jeff Kindler.

Insurers giving preferential treatment to generic drugs is “ongoing challenge,” according to Kindler.


MV

($mn) EV

($mn) EV / Rev.

P / Tang. Book

This FY P/E

Next FY P/E

JNJ 150,920 151,060 2.4x 10.2x 12x 11x

NVS 90,690 94,300 2.2x 3.5x 11x 10x

MRK 55,180 49,340 2.1x 3.2x 8x 8x

GSK 85,950 100,900 2.5x n/m 9x 9x

SNY 83,390 85,810 2.1x 42.5x 7x 7x

PFE 100,950 94,850 2.0x 4.6x 8x 7x

* In addition to Wyeth, recent deals include Esperion (acquired in 2004, sold for loss in 2008); anti-infective biopharma firm Vicuron (2005); Exubera (inhaled insulin therapy) rights from Sanofi-Aventis (acquired in 2006, written off in 2007, resulting in $2.8 billion charge); central-nervous-system firm Rinat (2006); DNA-based vaccine developer PowderMed (2006); and Coley, CovX, Encysive and Serenex (2008). In 2006, Pfizer sold its consumer healthcare business to Johnson & Johnson for $17 billion.

SELECTED OPERATING DATA FYE December 31 2006 2007 2008 1Q09 % of revenue by segment: Pharmaceutical 93% 92% 91% 93% Animal health 5% 5% 6% 5% Corporate and other 2% 3% 3% 2% % of revenue by geography: U.S. 53% 48% 42% 46% Europe 25% 28% 31% n/a Japan and Asia 12% 13% 15% n/a Canada, Latin America, other 9% 11% 12% n/a Revenue growth by geography:U.S. 4% -10% -12% -10% Europe -15% 12% 10% n/a Japan and Asia -1% 10% 10% n/a Canada, Latin America, other 90% 16% 12% n/a Total revenue 2% 0% 0% -8% % of pharmaceutical revenue by therapeutic area:1 Cardiovascular and metabolic 44% 42% 41% 39% Central nervous system 13% 12% 14% 14% Arthritis and pain 6% 7% 7% 7% Infectious and respiratory 8% 8% 9% 9% Urology 6% 7% 7% 8% Oncology 5% 6% 6% 5% Ophthalmology 3% 4% 4% 4% Endocrine 2% 2% 3% 2% All other 9% 9% 5% 5% Alliance revenues 3% 4% 5% 6% EBIT margin by segment: Pharmaceutical 48% 47% 49% Animal health 20% 23% 27% Corporate and other -19% -25% -27% Total EBIT margin 27% 19% 20% D&A as % of revenue 11% 11% 11% Capex as % of revenue 4% 4% 4% R&D as % of revenue 17% 17% 18% Gross margin 84% 77% 83% Return on tangible equity 87% 33% 39% Tangible equity to assets (avg) 32% 34% 29% shares out (avg) -2% -5% -3% 0%

Source: Gridstone Research, Company filings, Manual of Ideas analysis. 1 Top drug by therapeutic area (% of therapeutic area sales in 2008): Cardiovascular and metabolic: Lipitor (69%); Central nervous system: Lyrica (43%); Arthritis and pain: Celebrex (80%); Infectious and respiratory: Zyvox (28%); Urology: Viagra (60%); Oncology: Sutent (33%); Ophthalmology: Xalatan/Xalacom (98%); Endocrine: Genotropin (78%).

MAJOR HOLDERS CEO % │ Other insiders % │ Barclays 4% │ State Street 4% │ Vanguard 3% │ Fairholme 1% │ GMO 1% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE Pfizer is a leading pharma company facing a number of issues, chief among which is the expiration of a key Lipitor patent in 2011 (Lipitor accounted for 26% of revenue in 2008). The pending $68 billion cash and stock merger with Wyeth should help replace the high-margin Lipitor revenue and improve the drug pipeline. While risks remain, not the least of which is the pending integration of Wyeth, Pfizer shares appear to be too cheap to ignore at a 16% trailing FCF and 8x 2009E EPS. f


…additional insight into PFE: SLIDES FROM COMPANY PRESENTATION, MAY 19, 2009


SLIDES FROM COMPANY PRESENTATION ON ACQUISITION OF WYETH, JANUARY 26, 2009


Syneron Medical (ELOS) – Owned By Klarman Yokneam Illit, Israel, 972-4-909-6200

Health Care: Medical Equipment & Supplies http://international.syneron.com





Enterprise value: $11 million Next quarter -0.17 -0.05 3 P/E FYE 12/31/11 n/a


Ownership Data FYE 12/31/10 -0.05 0.30 3 EV / LTM EBITDA n/a








per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 12 35 58 87 117 141 115 93 34 12

Gross profit 10 31 51 76 99 114 85 66 26 7

EBIT 2 8 26 39 35 25 (2) (14) 6 (8)

Net income 2 9 27 41 40 31 6 (11) 8 (8)

Diluted EPS 0.10 0.42 1.14 1.48 1.44 1.12 0.20 (0.40) 0.30 (0.30)

Cash from ops 2 14 23 31 37 48 20 11 9 (1)

Capex 0 0 1 1 1 2 1 1 0 0

Free cash flow 2 14 22 30 36 46 19 10 8 (1)




Total assets 9 27 110 170 225 269 281 267 277 267

Short-term debt 0 0 0 0 0 0 0 0 0 0


Long-term debt 0 0 0 0 0 0 0 0 0 0



Common equity 5 13 94 145 194 231 243 236 239 236

EBIT/capital employed >100% n/m n/m >100% >100% 98% -8% -69% n/m n/m


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BUSINESS OVERVIEW Syneron provides aesthetic medical products based on proprietary Electro-Optical Synergy (Elos) technology, which uses electrical and optical energy. The products are sold to physicians and target non-invasive procedures, including hair removal, wrinkle reduction, treatment of superficial vascular and pigmented lesions, and treatment of leg veins. Syneron has an installed base of 10,000 products. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007 2008 % of revenue by geography:2 North America 62% 57% 57% 52% Other 38% 43% 43% 48% Revenue growth by geography: North America 67% 22% 21% -25% Europe 30% 53% 20% -9% Total revenue growth 51% 34% 21% -18% % of revenue by type: Product 93% 94% 91% 98% Service1 7% 6% 9% 2%

1 Despite the decrease in service revenue in 2008, the company expects service revenue to increase over time as the installed base grows. 2 In 2007, 57% of revenue came from North America, 23% from Europe, 16% from Asia Pacific, and 4% from Israel and other countries.


20% global share in aesthetic medical products, a market with favorable long-term trends. Syneron focuses on the growth segments of aesthetic medicine of body shaping and skin rejuvenation.

Innovative Elos technology. Approaches that rely solely on optical energy limit the safety and efficacy of many procedures due to limited skin penetration and unwanted epidermal absorption. Elos makes it easier to target the tissue to be treated, and boosts safety through tracking of skin temperature.

Positive acceptance of minimally invasive LipoLite laser-assisted lipolysis product, which was launched in February. Syneron delivered the first units in Q2, with volume shipments in Q3.

Adding recurring revenue stream to equipment sales model. The LipoLite Energy Access Program charges physicians a subscription fee for laser-assisted lipolysis treatment. The initial impact will be “reduced upfront sales and lower gross margins.”

Louis Scafuri (57) became CEO in February. He replaced Doron Gerstel, who had been CEO since 2007. Scafuri was at GE Marquette Medical from 1983-1999, where his positions included president and COO. He was subsequently a private investor. Fabian Tenenbaum (34) became CFO in 2007. He was previously a vice president of a private firm.

Signed development and supply deal with P&G in 2007, with goal of commercializing home-use devices and topical skin compositions.

Repurchased $9 million of stock in 2007-08. $215 million of net cash and liquid investments. Shares trade at 0.8x tangible book value.


Revenue down 65% to $12 million in 1Q09. The aesthetic sector been “impacted by an acute drop in both doctors’ confidence and credit availability” over the past few quarters.

Cut 20% of workforce in 4Q08 and closed offices in Canada, Europe and Chicago. Syneron expects to save 20% on opex in 2009 compared to 2008.

Gross margin in high 70s, roughly 20 points above industry average, may not be sustained. Competitors include public companies Candela, Cutera, Cynosure, Thermage, and Palomar Medical, and private companies Lumenis Sciton, Reliant Technologies, UltraShape, and Alma Lasers.

Subject to regulation. Before a new device can be marketed in U.S., it must receive 510(k) clearance, which lasts 3-12 months. Syneron must also comply with the FDA’s Quality System Regulation, which covers aspects of bringing products to market.

CEO Gerstel, CFO Tenenbaum own <1% of Syneron, while chairman Eckhouse owns 9%.


MV

($mn) EV

($mn) EV / Rev.

P / T. Book

This FY P/E

Next FY P/E

PMTI 180 70 .9x 1.2x n/m 45x

CYNO 90 20 .2x .7x n/m n/m

CUTR 90 0 n/m .8x n/m 237x

CLZR 20 -10 n/m .3x n/m n/a

ELOS 190 10 .1x .8x n/m n/m

MAJOR HOLDERS Chairman Eckhouse 9% │ CEO, CFO and other insiders <1% │ Baupost 11% │ FMR 7% │ RenTech 5% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE Syneron offers products in the market for aesthetic medical procedures, which should grow over time. While the recent drop-off in revenue has been severe, investors may be ignoring Syneron’s long-term earning power, including recurring revenue opportunities and a potentially meaningful partnership with P&G. The company has $215 million in net cash and investments, providing strong downside protection.


TAL International (TAL) – Owned By Berkowitz Purchase, NY, 914-251-9000

Services: Rental & Leasing http://www.talinternational.com















per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 328 326 313 320 306 343 420 419 101 100

Gross profit 262 276 277 272 258 271 307 310 73 76

EBIT (44) 7 32 17 66 60 55 194 (6) 26

Net income (63) 6 12 (10) 42 39 36 56 (4) 17

Diluted EPS (0.83) 0.18 0.36 (0.31) 1.26 1.16 1.09 1.72 (0.12) 0.52

Cash from ops 123 118 132 145 174 166 201 223 34 56

Capex 78 95 291 186 253 393 493 465 71 42

Free cash flow 46 24 (160) (41) (79) (227) (292) (241) (37) 14

Cash & investments 3 16 27 44 53 41 34 76 34

Total current assets 0 0 0 0 0 0 0 0 0

Intangible assets 0 74 72 72 72 72 72 72 72

Total assets 1,054 1,320 1,304 1,456 1,706 1,956 1,909 1,838 1,909

Short-term debt 0 0 0 0 19 95 0 0 0

Total current liabilities 0 0 0 0 0 0 0 0 0

Long-term debt 0 1,072 163 958 1,175 1,351 1,313 1,230 1,313

Total liabilities 953 1,119 924 1,057 1,312 1,591 1,536 1,468 1,536

Preferred stock 0 204 0 0 0 0 0 0 0

Common equity 101 (3) 380 399 394 365 373 370 373

EBIT/capital employed 1% 3% 2% 6% 5% 4% 14% n/m n/m


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BUSINESS OVERVIEW TAL International leases and manages intermodal containers and chassis. The company operates in two segments: Equipment Leasing and Equipment Trading. TAL offers leasing services through 20 offices in 11 countries and 185 third-party container depot facilities in 37 countries. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007 2008 1Q09 % of revenue by segment: Equipment leasing 93% 92% 85% 77% 84% Equipment trading 8% 8% 14% 23% 16% Revenue growth by segmen & other growth metrics: Equipment leasing 1% -5% 4% 11% 7% Equipment trading 114% -2% 108% 94% -29% Total revenue 2% -4% 12% 22% -1% Headcount 0% -1% 3% 3% n/a % of pre-tax income by segment: Equipment leasing 17% 27% 29% 30% 24% Equipment trading 10% 7% 9% 9% 4% % of revenue by geography: U.S. 10% 10% 10% 11% 11% Asia 45% 47% 47% 45% 38% Europe 40% 37% 35% 35% 43% Other 6% 7% 8% 8% 8% Revenue growth by geography: U.S. -4% 0% 10% 36% 13% Asia 6% -1% 14% 17% -21% Europe -1% -12% 8% 23% 24% Other 11% 9% 30% 32% 0% % of total fleet by unit type: Dry containers 85% 86% 84% 85% n/a Ref. containers 6% 5% 5% 5% n/a Special containers 7% 7% 7% 7% n/a Other 2% 2% 3% 4% n/a Selected items as a % of total revenue: Gross profit 86% 84% 79% 73% 75% Pre-tax income1 17% 25% 26% 26% 21% D&A 36% 34% 30% 26% 29% Capex2 46% 62% 97% 107% 24% shares out (avg) 47% 121% 1% -2% -4%

Source: Company filings, Manual of Ideas analysis. 1 Pre-tax income excludes unrealized gains/losses on interest rate swaps, gain/loss on debt extinguishment, and write-off of deferred financing costs.


Competes in the $250 billion container shipping industry. Worldwide containerized cargo has grown every year from 1981 through 2008, achieving a CAGR of ~10% during that period. Growth is expected to be negative in 2009.

Recurring revenue from equipment leasing, which contributed 77% of revenue in 2008. TAL provides equipment under three types of leases: 1) long-term leases, 2) finance leases and 3) service leases. Long-term and finance leases are the most predictable source of revenue. 54% of the lease fleet is on long-term leases, with 9% on finance leases.

Brian Sondey (41) became CEO in 2004, having worked for Transamerica, the former parent of TAL International. His experience includes consulting at BCG and investment banking at J.P. Morgan.

Repurchased $8 million of stock in 1Q09, but cut the dividend by 98% in February to build equity.

Shares trade at 7x forward earnings, 5x trailing EBITDA and 1.1x tangible book.


Revenue down 1% in 1Q09 to $100 million. Equipment leasing revenue rose 7% while equipment trading revenue fell 29%. Pre-tax income excluding one-time items declined 20% in Q1.

“Trade volumes remain at very low levels, with customers reporting container volumes down 15% compared to last year,” according to management. Container drop-offs are increasing while pick-ups are down, causing utilization to decline.

Top five customers accounted for 48% of leasing revenues in 2008. APL-NOL and CMA CGM accounted for 15% and 12% of leasing revenue.

Customer credit risk related to equipment leases. The top five customers accounted for 53% of leasing revenue (44-45% of total revenue) in Q1.

Controlled by The Jordan Company, a private equity firm that owns 40% of TAL. Jordan’s Resolute Fund sponsored an MBO in 2004.


MV

($mn) EV

($mn) EV / Rev.

P / T. Book

This FY P/E

Next FY P/E

GMT 1,170 3,900 2.8x 1.2x 13x 12x

AYR 500 2,840 4.9x .4x 5x 5x

TGH 490 1,080 4.1x 1.2x 6x 7x

CAP 90 290 3.5x .8x 7x 6x

TAL 320 1,600 3.8x 1.1x 7x 7x

MAJOR HOLDERS CEO Sondey 2% │ Other insiders 1% │Resolute 40% │ Fairholme 8%* │ Abrams Capital 7% │ North Run 6% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year? * Bruce Berkowitz resigned from the board on February 24, 2009.

THE BOTTOM LINE TAL is the third-largest independent container leasing firm, with 11% market share. Since going public in 2005, TAL has achieved 14% annualized growth in assets and 29% growth in income. Pre-tax ROE was 28% in 2008. The operating environment turned negative in 2009, but management expects TAL to remain profitable absent any major customer defaults. The company has more than $1 billion of net debt. At 8x 2009E EPS, we do not feel compelled to buy the stock.


…additional insight into TAL: SLIDES FROM COMPANY PRESENTATION, MARCH 2009


USG Corporation (USG) – Owned By Buffett, Watsa, Weitz Chicago, IL, 312-436-4000

Capital Goods: Construction - Raw Materials http://www.usg.com




Market value: $1.2 billion This quarter -$0.38 -$0.56 11 P/E FYE 12/31/10 n/m



Ownership Data FYE 12/31/10 -1.10 -1.26 10 EV / LTM EBITDA -5.3x








per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 3,468 3,666 4,509 5,139 5,810 5,202 4,608 4,307 1,165 864

Gross profit 584 545 837 1,102 1,384 599 192 194 46 48

EBIT 258 210 508 (2,354) 999 165 (512) (494) (60) (42)

Net income 43 121 312 (1,436) 297 76 (463) (544) (41) (42)

Diluted EPS 3.21 3.18 5.61 (25.29) 4.46 0.78 (4.67) (4.68) (0.41) (0.42)

Cash from ops 442 237 428 506 (3,703) 1,307 (165) (148) (47) (30)

Capex 100 111 138 198 393 460 238 149 105 16

Free cash flow 342 126 290 308 (4,096) 847 (403) (297) (152) (46)

Cash & investments 699 764 894 1,170 565 297 471 223 190 223



Total assets 3,636 3,799 4,278 6,142 5,365 4,654 4,719 4,446 4,712 4,446

Short-term debt 0 1 1 0 1,065 0 194 4 45 4

Total current liabilities 438 414 570 600 1,764 567 756 522 658 522

Long-term debt 2 1 0 0 1,439 1,238 1,642 1,641 1,238 1,641



Common equity 535 689 1,024 (302) 1,534 2,226 1,550 1,491 2,184 1,491

EBIT/capital employed 13% 10% 24% -104% 33% 5% -17% -16% n/m n/m


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BUSINESS OVERVIEW USG provides building materials for residential, new nonresidential, and repair and remodel construction. USG products are also used in industrial processes. The company operates in three segments: North American Gypsum, Building Products Distribution and Worldwide Ceilings. Sales are highest from spring through the middle of fall.

USG emerged from a five-year Chapter 11 process in 2Q06. The company raised $1.7 billion in a rights offering in 3Q06. Berkshire backstopped the offering, buying seven million shares at $40 per share. In March 2007, USG completed an offering of nine million shares at $48.60 per share. INVESTMENT HIGHLIGHTS

U.S Gypsum is #1 producer of gypsum wallboard in U.S., accounting for 30% of gypsum wallboard sales in 2007. CGC is the largest manufacturer of gypsum wallboard in eastern Canada. USG Mexico is the top maker of gypsum wallboard in Mexico.

L&W Supply (Building Products Distribution segment) is the leading specialty building products distribution business in the U.S., accounting for 13% of all gypsum wallboard distribution in 2007.

Worldwide Ceilings is leader in interior ceiling products used in commercial applications.

Berkshire and Fairfax bought $400 million of 10% converts in late 2008 ($11.40 conversion).

Asbestos liabilities transferred to outside trust, accompanied by $4 billion payment in 2006. Future claims must be brought against the trust.

Making “progress toward profitability despite challenging market conditions,” according to CEO Foote. “The significant cost-reduction initiatives we implemented last year helped to mitigate the impact of an exceptionally weak housing market [in Q1], a decline in commercial construction and contractions in most international markets. Our liquidity position remains solid…”

Trades at .9x tangible value and .6x LTM revenue. INVESTMENT RISKS & CONCERNS

Cyclical business, particularly sensitive to North American housing and construction markets. Prices are impacted by excess wallboard capacity.

Vulnerable to raw materials price increases. USG uses gypsum, wastepaper, mineral fiber, steel, perlite, starch, and high pressure laminates.

$1.4 billion of net debt and $792 million of long-term liabilities, incl. asset retirement obligations.

SELECTED OPERATING DATA FYE December 31 2005 2006 2007 2008 % of revenue by segment: North American Gypsum 63% 62% 55% 51% Building Products Distribution 40% 43% 44% 43% Worldwide Ceilings 14% 13% 16% 18% Eliminations -16% -18% -14% -13% Revenue growth by segment: North American Gypsum 17% 12% -22% -17% Building Products Distribution 18% 21% -8% -13% Worldwide Ceilings 3% 7% 8% 4% Total revenue growth 14% 13% -10% -11% EBIT margin by segment: North American Gypsum -77% 23% 3% -10% Building Products Distribution 7% 8% 5% -2% Worldwide Ceilings 9% 10% 9% 9% Corporate and other 12% 13% 14% 16% Total EBIT margin -46% 17% 3% -6% DD&A as % of revenue1 2% 2% 3% 4%1 Capex as % of revenue1 4% 7% 9% 6%1 % of revenue by geography: U.S. 90% 90% 88% 86% Canada 8% 8% 8% 9% Other foreign 6% 7% 9% 10% Geographic transfers -5% -4% -5% -5% Selected U.S. Gypsum metrics:1 Revenue ($mn) 2,881 3,215 2,417 1,5181 Rev. as % of N.A. Gypsum 89% 89% 85% 82%1 Sheetrock ASP ($/'000 sq.ft) 144 181 135 1101 Sheetrock ASP n/a 25% -25% -22%1 manufacturing costs n/a "up" 9% 11%1 Utilization 96% 92% 78% n/a1 Shipments (bn sq. ft) 11 11 9 61 shipments n/a -4% -17% -17%1 gypsum industry shipments n/a -3% -15% -17%1 Building Products Distribution metrics: L&W Supply locations 192 220 247 198 L&W Supply locations n/a 15% 12% -10% Tangible equity to assets n/a 26% 45% 32% Home Depot as % of revenue 11% 11% 11% n/a

1 2008 data represents data for the nine months ended September 30, 2008, as full-year data was not available as of the publication date.

MAJOR HOLDERS* CEO <1% │ Other insiders 1% │ Berkshire Hathaway 17% │ Gebr. Knauf 15% │ Fairfax 7%│ T Rowe 5% * Not adjusted for potential conversion of $400 million of notes issued to Berkshire Hathaway and Fairfax Financial in November 2008.


THE BOTTOM LINE USG holds market-leading positions in gypsum wallboard across North America, putting the company in a position to benefit from an eventual rebound in the housing and construction markets. In the near term, however, USG remains vulnerable to continued weakness in the company’s key end markets. Should housing market conditions deteriorate further, USG may be unable to satisfy its financial obligations, potentially leading to permanent capital loss for equity holders. While the shares trade at a large discount to tangible book value, we believe the potential reward of owning the equity may not justify the risks. Investors may consider evaluating the company’s debt securities for investment, as Berkshire and Fairfax have done.


USG / NORTH AMERICAN GYPSUM SEGMENT / U.S. GYPSUM – SELECTED METRICS

Source: Company data.


Yahoo! (YHOO) – Owned By Icahn, Ashton, Miller Sunnyvale, CA, 408-349-3300

Services: Business Services, Member of S&P 500 http://www.yahoo.com












# of institutional owners: 1204 4/21/09 $0.08 $0.08 LTM pre-tax ROC -1%



per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 3/31/08 3/31/09

Revenue 953 1,625 3,575 5,258 6,426 6,969 7,209 6,971 1,818 1,580

Gross profit 790 1,255 2,232 3,162 3,750 4,131 4,185 4,002 1,063 879

EBIT 88 296 689 1,108 941 695 13 (7) 121 101

Net income 43 238 840 1,896 751 660 424 (0) 536 117

Diluted EPS 0.09 0.18 0.58 1.28 0.52 0.47 0.29 0.00 0.37 0.08

Cash from ops 302 428 1,090 1,711 1,372 1,919 1,880 1,356 786 262

Capex 52 117 246 409 689 713 746 673 149 76

Free cash flow 251 311 844 1,303 683 1,206 1,134 683 638 187

Cash & investments 774 1,310 3,512 2,561 2,601 2,001 3,452 3,446 2,608 3,446

Total current assets 970 1,722 4,091 3,450 3,750 3,238 4,746 4,595 3,839 4,595

Intangible assets 512 2,251 3,032 3,430 3,374 4,614 3,927 3,842 4,808 3,842

Total assets 2,790 5,932 9,178 10,832 11,514 12,230 13,690 13,736 13,426 13,736

Short-term debt 0 0 0 0 0 750 0 0 0 0

Total current liabilities 412 708 1,181 1,204 1,474 2,300 1,705 1,480 1,683 1,480

Long-term debt 0 750 750 750 750 0 0 0 583 0

Total liabilities 528 1,568 2,077 2,265 2,353 2,697 2,439 2,164 2,926 2,164


Common equity 2,262 4,364 7,101 8,566 9,161 9,533 11,251 11,572 10,500 11,572

EBIT/capital employed 57% >100% >100% >100% >100% 91% 1% -1% n/m n/m


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BUSINESS OVERVIEW Yahoo! is a leading global Internet brand and one of the most trafficked Internet destinations. The company serves users, advertisers, publishers, and developers.

Yahoo! was founded by David Filo and Jerry Yang while they were graduate students at Stanford University in 1994. SELECTED OPERATING DATA

FYE December 31 2006 2007 2008 1Q09 Revenue growth 22% 8% 3% -13% Selected items as % of revenue: Gross profit 58% 59% 58% 56% R&D 13% 16% 17% 19% EBIT 15% 10% 0% 6% D&A 8% 9% 11% 11% Capex 11% 10% 10% 4% % of revenue by geography: U.S. 68% 68% 72% 75% International 32% 32% 28% 25% EBIT margin by geography: U.S. 33% 30% 4% 2% International 22% 22% -9% 20% Corporate -15% -18% 0% 0% Total EBIT margin 15% 10% 0% 6% Return on tangible equity 14% 12% 7% 2% Tangible equity to assets (avg) 70% 68% 70% 77% diluted shares out (avg) -2% -4% 0% 1%


Most visited website globally, ahead of Google, YouTube, Live.com, and MSN.com, according to Alexa (as of February 16).

Second-most visited website in U.S., behind Google and ahead of YouTube, MySpace, and Facebook, according to Alexa (as of February 16).

Advertising revenue-driven model. Publisher affiliates, such as eBay, WebMD, Cars.com, and Forbes, attract users by providing relevant content, presented on web pages that have space for ads.

Fee revenue complements ad revenue. Although many of Yahoo!’s user services are free, the company charges for a range of premium services.

Strategic objectives: become Internet starting point for users; establish Yahoo! as “must buy” for advertisers; deliver platforms that attract developers.

Carol Bartz became CEO in January 2009, replacing co-founder Jerry Yang, who resigned under shareholder pressure following weak operating performance and botched M&A negotiations with Microsoft. Bartz was previously CEO of Autodesk, where she had spent 14 years.

$3.4 billion book value of long-term equity stakes includes investments in Alibaba.com (Hong Kong: 1688), the largest online B2B marketplace, and Yahoo Japan (Tokyo: 46890). These investments are accounted for under the equity method.

Rock-solid balance sheet, with cash of $2.3 billion, short-term investments of $1.1 billion, long-term equity investments of $3.4 billion, and no debt.

Shares trade at 3% trailing FCF yield and 36x next year’s consensus earnings estimate.


Unclear whether value will be maximized. Carl Icahn disclosed a 5.5% stake in late 2008 and has put pressure on management. However, Yahoo! has not yet taken any material new steps to maximize the value of the company’s stakes in Alibaba or Yahoo Japan. The company spent only $79 million buying back stock in 2008 vs. $1.6 billion in 2007.

Reported operating profit of $101 million in Q1, down 17% from the year-earlier quarter, on a 13% decline in revenue. Operating cash flow declined 6% to $409 million.

Guiding for 2Q09 revenue of $1.425-$1.625 billion and non-GAAP operating cash flow of $375-425 million, compared to 2Q08 revenue of $1.798 billion and operating cash flow of $427 million.

Ad serving technology inferior to that of Google. While Yahoo! serves targeted search ads and integrates its ad offerings into affiliate websites, the company trails Google on most ad-related metrics.

Former CEO Yang was forced out in November, following his failure to agree on a sale of Yahoo! to Microsoft. The latter had made an unsolicited offer of $31 per share for Yahoo! in February 2008.


MV

($mn) EV

($mn) EV / Rev.

P / Tang. Book

This FY P/E

Next FY P/E

MSFT 175,770 152,430 2.5x 7.8x 12x 11x

GOOG 124,320 106,540 4.8x 5.2x 19x 16x

YHOO 20,910 17,460 2.5x 2.7x 42x 36x

MAJOR HOLDERS Former CEO Jerry Yang 4% │ Other insiders 6% │ Capital Re 11% │ Capital World 10% │ Carl Icahn 4% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE Yahoo! is the most highly trafficked website globally. The company has a large net cash position and owns equity stakes in publicly held companies Alibaba.com and Yahoo Japan. While shares are quite cheap on a going-concern basis, the risk-reward is enhanced by the potential for strategic transactions, including a sale of the company, divestitures and buybacks.


Reduced or Eliminated Superinvestor Holdings


AmerisourceBergen (ABC) – Owned By Pzena, Robbins

Ark Restaurants (ARKR) – Owned By Richardson, Greenblatt

Dell (DELL) – Owned By Hawkins, Greenberg, Watsa

URS Corporation (URS) – Owned By Einhorn


AmerisourceBergen (ABC) – Owned By Pzena, Robbins Chesterbrook, PA, 610-727-7000

Health Care: Biotechnology & Drugs, Member of S&P 500 http://www.amerisourcebergen.com









Insider buys (last six months): 0 LT EPS growth 11.8% 12.2% 6 P / tangible book n/m






per share data) 9/30/02 9/30/03 9/30/04 9/30/05 9/30/06 9/30/07 9/30/08 3/31/09 3/31/08 3/31/09

Revenue 45,235 49,584 53,121 54,577 60,812 65,672 70,190 69,805 17,756 17,312

Gross profit 2,025 2,226 2,166 1,980 2,122 2,219 2,047 2,068 537 553

EBIT 718 882 877 525 693 789 828 846 235 248

Net income 345 441 468 265 468 469 251 261 134 143

Diluted EPS 1.58 1.95 2.06 1.37 2.09 2.53 2.89 3.09 0.81 0.95

Cash from ops 536 355 825 1,527 807 1,208 737 677 193 337

Capex 64 91 189 203 112 111 137 152 28 26

Free cash flow 472 264 636 1,323 695 1,097 600 526 165 311

Cash & investments 663 800 871 1,316 1,329 1,108 878 655 591 655



Total assets 11,213 12,040 11,654 11,381 12,784 12,310 12,218 12,550 12,573 12,550

Short-term debt 61 61 281 1 2 1 2 1 2 1


Long-term debt 1,757 1,723 1,157 952 1,094 1,227 1,187 1,159 1,224 1,159



Common equity 3,316 4,005 4,339 4,280 4,141 3,100 2,710 2,759 2,948 2,759

EBIT/capital employed 37% 43% 41% 33% 67% >100% >100% >100% n/m n/m


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BUSINESS OVERVIEW AmerisourceBergen is a large drug wholesaler. Services range from pharmacy automation and pharmaceutical packaging to reimbursement and pharmaceutical consulting.

All continuing operations are reported in the Pharmaceutical Distribution segment, which includes AmerisourceBergen Drug Corporation (ABDC), AmerisourceBergen Specialty Group (ABSG) and the AmerisourceBergen Packaging Group (ABPG). The company spun off the PharMerica Long-Term Care business in July 2007, combining it with Kindred HealthCare’s institutional pharmacy to create PharMerica Corp. (NYSE: PMC). AmerisourceBergen’s top ten customers account for one-third of operating revenue. SELECTED OPERATING DATA

FYE September 30 2006 2007 2008 Pharmaceutical distribution data:1 Revenue growth 13% 17% 7% EBIT growth 21% 13% 15% EBIT margin 1.15% 1.12% 1.19%

1 Pharmaceutical distribution accounts for 99% of revenue.


Industry expected to grow in mid single digits in the U.S. in coming years, despite likely slower growth in FY09. Growth drivers include an aging population, new drugs, increased use of generics, and increased use of drug therapies.

Achieved respectable performance in FY08, due to slight share gains, “excellent contribution” from the PRxO Generics program, a diverse mix, and cost control. The company reported growth in operating revenue of 7% and growth in diluted EPS from continuing operations of 14% in FY08. EBIT margin expanded by 7 bps. FCF was $600 million, while share repurchases amounted to $680 million.

Sold underperforming workers’ comp business. The company sold PMSI in the June quarter, recording a $222 million non-cash charge.

Guiding for revenue growth of 1-3% and EPS growth of 7-12% in FY09 against a backdrop of low single digit market growth. Management will focus on expense management, EBIT margin expansion, and FCF generation ($460-535 million).

Authorized $500 million buyback in November; to spend $350 million in next twelve months.

Stock price implies 10% trailing FCF yield, 11x current FY P/E and 10x next FY P/E.

INVESTMENT RISKS & CONCERNS Low-margin business. The company achieves

pharmaceutical distribution operating margins of less than 1.5%, leaving it with little maneuvering room should the cost of doing business rise quickly. Gross margin has eroded due to competitive pressure, from 5.42% in FY01 to 3.38% in FY08.

Integration of acquisitions. AmerisourceBergen has spent close to $700 million on the purchase of several businesses in the past three years, including Trent, Asenda, Rep-Pharm, Health Advocates, Bellco Health, NMCR, IgG America, AMD, Xcenda, and Brecon. While these purchases have improved AmerisourceBergen’s market position, they also raise execution and integration risks.

Goal of 15% long-term EPS growth aggressive. AmerisourceBergen targets revenue growth at market rates while aiming for faster EPS growth, driven by margin expansion and share repurchases (30%+ of FCF to be returned to shareholders). Few companies achieve 15% EPS growth over the long term, and we are skeptical that AmerisourceBergen can deliver on this goal. However, the company does not need to grow EPS anywhere close to its goal in order to justify the current valuation.


MV

($mn) EV

($mn) EV / Rev.

P / T. Book

This FY P/E

Next FY P/E

CAH 12,340 14,650 .2x 5.4x 10x 9x

MCK 11,100 11,500 .1x 6.2x 10x 9x

OMI 1,380 1,580 .2x 3.3x 13x 11x

PSSI 930 1,120 .6x 4.4x 14x 12x

ABC 5,520 6,020 .1x n/m 11x 10x

MAJOR HOLDERS CEO Yost 1% │ Other insiders 1% │ Vanguard 5% │ Barclays 5% │ State Street 4% │ Pzena 3% │ Glenview 3% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE AmerisourceBergen is not cheap enough to warrant serious consideration. The company operates in a steady-as-you-go business that is neither likely to deliver impressive rewards nor result in permanent loss of capital. The question becomes whether the opportunity cost of capital is too great to tie it up in shares of the company. We believe the answer is yes.


Ark Restaurants (ARKR) – Owned By Richardson, Greenblatt New York, NY, 212-206-8800

Services: Restaurants http://www.arkrestaurants.com





Enterprise value: $37 million Next quarter 0.49 0.51 1 P/E FYE 9/30/11 n/a


Ownership Data FYE 9/30/10 1.49 n/a 1 EV / LTM EBITDA 3.7x

Insider ownership: 40% FYE 9/30/11 n/a n/a n/a EV / LTM EBIT 5.6x




# of institutional owners: 35 5/11/09 -$0.11 $0.03 LTM pre-tax ROC 28%



per share data) 9/28/02 9/27/03 10/2/04 10/1/05 9/30/06 9/29/07 9/27/08 3/28/09 3/29/08 3/28/09

Revenue 102 103 112 107 111 118 125 121 24 24

Gross profit 18 16 19 19 18 22 22 74 15 14

EBIT 6 6 10 9 8 11 10 7 0 (1)

Net income 4 3 6 7 5 16 7 5 0 (1)

Diluted EPS 1.37 1.45 2.10 1.91 1.68 2.21 1.93 1.50 0.05 (0.20)

Cash from ops 9 10 10 10 11 12 11 8 1 (1)

Capex 1 2 2 4 5 4 8 6 2 0

Free cash flow 9 8 9 6 5 8 3 3 (1) (1)




Total assets 48 44 45 47 52 52 54 50 50 50

Short-term debt 6 0 0 0 0 0 0 0 0 0


Long-term debt 10 7 0 0 0 1 1 0 1 0



Common equity 21 25 34 37 40 38 38 36 37 36



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BUSINESS OVERVIEW Ark Restaurants operates 20 restaurants and 30 fast food concepts, catering operations and bakeries. The company operates seven restaurants in New York City, four in D.C., five in Las Vegas, two in Atlantic City, one at the Foxwoods Resort in Connecticut and one at Faneuil Hall in Boston.

Seasonality: The second fiscal quarter ending March 31 is generally weak, as it consists of the non-holiday portion of the cold weather season in New York and Washington. The third and fourth fiscal quarters are the seasonally strongest. SELECTED OPERATING DATA

FYE September 30 2005 2006 2007 2008 1H09 Revenue -6% 5% 7% 6% -8% Same store sales 2 -1% 0% 9% 1% -12% Headcount -2% 6% 2% -10% n/a Selected items as % of revenue: Gross profit 76% 75% 74% 74% 75% EBIT 9% 7% 9% 8% -2% Net income3 6% 5% 11% 6% 0% D&A 4% 3% 2% 2% 4% Capex1 4% 5% 3% 6% 2% Dividend per share ($) 1.35 1.37 4.46 1.75 0.44 Return on tang. equity 15% 13% 38% 22% 0% Equity to assets (avg) 100% 87% 72% 68% 68% shares out (avg) 3% 0% 2% 0% -3%

Source: Company filings, Manual of Ideas analysis. 1 Higher capex in 2008 due to construction costs associated with the opening of Yolos, a Mexican restaurant at the Planet Hollywood Resort and Casino. 2 Spike in same store sales growth in 2007 due to higher sales growth in Atlantic City, following the rebranding of restaurant concepts in 2006. 1H09 change in SSS is based on a 15% decline in Q1 and 10% decline in Q2. 3 Net income in 1H09 was impacted by non-recurring expenses, including $300,000 in legal expenses and a $220,000 real estate tax adjustment.


Has expanded beyond New York City; operates restaurants primarily in tourist destinations, including at Union Station in Washington, D.C.; South Street Seaport, Bryant Park and the World Financial Center in New York City; the Venetian, Planet Hollywood and New York-New York Hotel & Casino in Las Vegas; Faneuil Hall in Boston; and Foxwoods Casino Resort in Connecticut.

Revenue rose 6% to $125 million in 2008. Gross margin remained flat at 74% while operating margin declined from 9.1% in 2007 to 7.8% in 2008.

History of value creation. From 2005-08, the company paid out $32 million in dividends or ~$9 per share. Ark suspended dividends last December.

Experienced, incentivized management. CEO Michael Weinstein has been with the company since its founding in 1983 and owns 32% of the shares.

Net cash and short-term investments of $7 million at the end of the second quarter. Off balance sheet operating lease expenses over the next five years totaled $33 million at yearend 2008.

Authorized 500,000 share buyback in March 2008, amounting to 14% of shares outstanding. Ark repurchased 65,000 shares at $19 per share in 2008 and another 42,000 shares at $12 per share in 1Q09.

Shares trade at 1.4x tangible book value, 6% trailing FCF yield and 9x this FY earnings.


Same-store sales down 10% in 2Q09. Declines were most pronounced in Atlantic City and New York, where comparable sales fell 31% and 14%, respectively. Same-store sales in Washington D.C. and Las Vegas fared somewhat better, dropping 7% and 11%, respectively.

Geographic concentration, with high exposure to tourist destinations. The company owns and/or manages locations within casinos in Las Vegas and Atlantic City as well as restaurant(s) in New York City, all of which are dependent on tourist traffic.

Does not own any real estate, opting instead to lease all restaurant properties and corporate offices.

Large shareholder sold majority of stake in Q1. Prides Capital owned 10% of the company at yearend 2008 but only 2% as of March 31.


MV

($mn) EV

($mn) EV / Rev.

P / T. Book

This FY P/E

Next FY P/E

PFCB 670 820 .7x 2.3x 18x 16x

MSSR 100 120 .3x 1.0x 21x 17x

RUTH 90 250 .6x n/m 11x 10x

COSI 20 20 .2x 1.4x n/a n/a

CASA 10 20 .2x 1.1x n/a n/a

ARKR 40 30 .2x 1.3x 9x 8x

MAJOR HOLDERS CEO Weinstein 31% │ Other insiders 15% │ Fidelity 10% │ Prides 6% │ Royce 5% │ Babson 5% │ Gotham 1% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE Ark is a restaurant operator facing challenges related to the weak economy (same store sales dropped 10% in Q2). Ark’s operations are highly exposed to the gaming industry, as the company owns and operates restaurants and food courts in casinos in Las Vegas, Atlantic City and Connecticut. The company benefits from an experienced and properly incentivized management team that has created significant shareholder value and retuned value via dividends and share repurchases. Despite some positive aspects, the shares do not appear to be cheap enough to warrant serious attention.


Dell (DELL) – Owned By Hawkins, Greenberg, Watsa Round Rock, TX, 512-338-4400

Technology: Computer Hardware, Member of S&P 500 http://www.dell.com















per share data) 1/31/03 1/30/04 1/28/05 2/3/06 2/2/07 2/1/08 1/30/09 1/30/09 2/1/08 1/30/09

Revenue 35,404 41,444 49,121 55,788 57,420 61,133 61,101 61,101 15,989 13,428

Gross profit 6,349 7,552 9,018 9,891 9,516 11,671 10,957 10,957 2,994 2,312

EBIT 2,844 3,544 4,206 4,382 3,070 3,440 3,190 3,190 776 457

Net income 2,122 2,645 3,018 3,602 2,583 2,947 2,478 2,478 679 351

Diluted EPS 0.80 1.01 1.18 1.47 1.14 1.31 1.25 1.24 0.31 0.18

Cash from ops 3,538 3,670 5,821 4,751 3,969 3,949 1,894 1,894 1,197 729

Capex 305 965 515 747 896 831 440 440 195 39

Free cash flow 3,233 2,705 5,306 4,004 3,073 3,118 1,454 1,454 1,002 690



Intangible assets 0 0 0 0 155 2,428 2,461 2,461 2,428 2,461

Total assets 15,470 19,311 23,215 23,252 25,635 27,561 26,500 26,500 27,561 26,500

Short-term debt 0 0 0 65 188 225 113 113 225 113


Long-term debt 506 505 505 625 569 362 1,898 1,898 362 1,898



Common equity 4,873 6,280 6,485 4,047 4,439 3,829 4,271 4,271 3,829 4,271



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BUSINESS OVERVIEW Dell is the #1 supplier of PCs in the U.S. and the #2 supplier globally, behind HP. Product categories include desktop PCs, servers, networking, software, mobility, peripherals, and storage. The company was founded in 1984 by Michael Dell. SELECTED OPERATING DATA

FYE February 1 2006 2007 2008 2009 % of revenue by product group: Desktop PCs 39% 35% 32% 28% Mobility 26% 27% 29% 31% Software and peripherals 15% 16% 16% 17% Servers and networking 10% 10% 11% 10% Enhanced services 8% 9% 9% 9% Storage 3% 4% 4% 4% Revenue growth by product group: Desktop PCs 2% -8% -1% -12% Mobility 20% 8% 13% 7% Software and peripherals 26% 8% 10% 7% Servers and networking 12% 7% 12% -3% Enhanced services 35% 20% 5% 7% Storage 38% 21% 8% 8% Total revenue growth 14% 3% 6% 0% % of revenue by segment: Americas commercial n/a 49% 49% 47% EMEA commercial n/a 21% 22% 22% APJ commercial n/a 11% 12% 12% Global consumer n/a 19% 17% 19% EBIT margin by segment: Americas commercial n/a 8% 9% 9% EMEA commercial n/a 5% 7% 4% APJ commercial n/a 5% 6% 6% Global consumer n/a 1% 0% 1% Stock-based compensation n/a -1% -1% -1% Total EBIT margin 8% 5% 6% 5%


Continues to gain market share. Dell grew unit volumes in the high teens in 1H09, roughly 1.5x the industry growth rate. While growth slowed in 3Q09, management expects continued market share gains.

Turnaround progressing; more work remains. In Q3, the company attained its goal of reducing headcount by 8,900. COGS are still too high, with management focused on reducing product costs as more efficiently produced products come to market.

Pursuing five key growth initiatives: enterprise, notebook, consumer, SMB, and emerging countries. Dell’s growth is outpacing the industry in each area.

Focused on growing higher-margin services (~10% of revenue), both organically and through digestible acquisitions; a large combination, such as HP/EPS, appears unlikely. Dell uses the client business as an “anchor tenant,” allowing it to win incremental services business over time.

Maintains strong cash cycle dynamics (-29 days), though retail presence has increased inventory.

Michael Dell returned as CEO in January 2007. Strong balance sheet, with $7 billion of net cash. Bought $2.9 billion of stock in FY09. Michael Dell

has purchased ~$200 million in the past year. Shares trade at 0.2 EV to trailing revenue, 10x

FY10E EPS and 7% trailing FCF yield. INVESTMENT RISKS & CONCERNS

Consumer EBIT margin less than 1%, vs. 5-6% at HP (might include some printing). Dell believes it can achieve “reasonable” profitability. Retail is not yet profitable, with Dell present in 15,000 stores. The company likely needs more scale in retail.

Direct model evolving as Dell enters stores and notebooks gain share (consumers like to “touch” before buying). Warranty is a high-margin business in which Dell’s attach rate is below average.

European margins have not met expectations, but margins may bounce back in next two quarters.

EMC partnership may be impacted by Dell’s purchase of EqualLogic, though Dell management remains “committed” to both offerings.

CTO Kevin Kettler left in January after 13 years with Dell; a marketing VP left in November.


MV

($mn) EV

($mn) EV / Rev.

P / Tang. Book

This FY P/E

Next FY P/E

IBM 134,640 153,320 1.5x n/m 11x 10x

HPQ 81,820 87,580 .7x 190x 9x 8x

CAJ 41,410 35,560 .9x 1.6x 168x 42x

SNE 25,890 25,720 .3x 1.2x 198x 31x

DELL 21,170 14,090 .2x 11.7x 10x 9x

MAJOR HOLDERS CEO Michael Dell 11% │ Other insiders <1% │ Southeastern 9% │ Fairfax 1% │ Chieftain 1% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE Dell is a global technology products leader with capable, properly incentivized management. The company is addressing challenges in the consumer business amid slowing growth and greater competition. Some have questioned Dell’s direct model, and the company has felt a need to partner with retailers to expand distribution. Nonetheless, we like the company’s long-term focus (no quarterly guidance), strong FCF generation, share buybacks, insider buying, and cost leadership.


URS Corporation (URS) – Owned By Einhorn San Francisco, CA, 415-774-2700

Capital Goods: Construction Services, Member of S&P MidCap 400 http://www.urscorp.com















per share data) 10/31/03 10/31/04 12/31/04 12/30/05 12/29/06 12/28/07 1/2/09 4/3/09 3/28/08 4/3/09

Revenue 3,187 3,382 567 3,890 4,223 5,383 10,086 10,348 2,259 2,521

Gross profit 1,181 1,241 198 230 245 288 478 516 102 141

EBIT 97 162 9 174 219 263 505 436 116 163

Net income 57 62 1 83 113 132 220 246 49 76

Diluted EPS 1.79 1.53 0.03 1.72 2.19 2.35 2.66 2.98 0.60 0.92

Cash from ops 166 96 15 200 165 312 344 582 (17) 221

Capex 18 19 2 23 29 42 92 80 21 9

Free cash flow 148 77 13 177 136 270 252 502 (38) 212


Total current assets 960 1,059 1,100 1,273 1,374 2,588 2,641 2,775 2,545 2,775

Intangible assets 1,016 1,013 1,012 992 993 3,713 3,670 3,657 3,699 3,657

Total assets 2,188 2,269 2,308 2,469 2,581 6,930 7,001 7,121 6,908 7,121

Short-term debt 54 102 119 22 23 34 17 21 19 21

Total current liabilities 505 572 579 699 786 1,682 1,587 1,647 1,569 1,647

Long-term debt 789 502 509 298 150 1,289 1,092 1,090 1,289 1,090



Common equity 765 1,067 1,082 1,345 1,507 3,479 3,625 3,671 3,532 3,671



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BUSINESS OVERVIEW URS provides program management, planning, engineering, construction, operations, and decommissioning services.

The URS Division provides project-related services to governments and private clients.

The EG&G Division provides project-related services to U.S. government agencies, primarily the DOD and DHS.

The Washington Division, formed via the acquisition of Washington Group in November 2007, provides project-related services to governments and private clients. SELECTED OPERATING DATA

FYE December 31 2005 2006 2007 2008 % of revenue by division: URS 65% 62% 57% 33% EG&G 35% 33% 29% 24% Washington 1 0% 5% 14% 43% Revenue growth by division: URS 12% 5% 17% 9% EG&G 21% 4% 10% 55% Washington n/m n/m 268% 467% revenue 15% 9% 27% 87% book of business 14% 8% 132% 7% EBIT margin by division: URS 8% 7% 7% 7% EG&G 5% 5% 5% 5% Washington n/m n/m 4% 5% Corporate and other -2% -1% -1% -1% Total EBIT margin 4% 5% 5% 5% Capex as % of revenue 1% 1% 1% 1% D&A as % of revenue 1% 1% 1% 1% % of revenue by geography: U.S. 90% 91% 90% 91% International 10% 9% 10% 9% % of revenue from U.S. Army 20% 20% 18% 16%

1 Pre-acquisition revenue due to realignment of segments in early 2008, which included transfer of majority of URS Division’s stake in Advatech, which provides emissions control for coal-fired power plants, to Washington Division.


Top-tier engineering, construction and technical services firm with strong positions in power sector, military outsourcing, nuclear waste management, dynamic infrastructure, and oil and gas markets.

Federal sector (35% of revenue) to exhibit slow but steady growth. Scale and reach improve URS’s ability to win large, bundled DOD contracts.

Infrastructure business (18% of revenue) could benefit from need to update aging infrastructure.

Acquisitions have boosted growth, propelling URS from $100 million in revenue in 1990 to $9.8 billion in 2008E. Major acquisitions include Washington Group in 2007 (construction, DOE, power), EG&G in 2002 (federal O&M) and Dames & Moore in 1999 (PM/CM, transit, private sector).

Shares trade at 0.5x trailing revenue, 13% trailing FCF, 15x 2009E EPS and 14x 2010E EPS.

Revenue up 12% to $2.5 billion in Q1, with growth in each of four major market sectors (see chart below). URS “continued to win significant new contracts and grow our book of business.”

Revenue by Sector, 2008

Federal35%

Industrial and commercial

29%

Power19%

Infrastructure17%

Source: Company, The Manual of Ideas.


Realization of book of business may be delayed. The company accounts for all contract awards that may eventually be recognized as revenue as the “book of business,” which includes backlog, designations, option years and indefinite delivery contracts (IDCs). The backlog consists of signed contracts, including task orders issued under IDCs. As of March 31, the book of business was $32 billion, including backlog of $20 billion.

No tangible book, with $1.1 billion of debt, ~$400 million of cash, retirement obligations of ~$200 million, self-insurance reserves of ~$100 million.


MV

($mn) EV

($mn) EV / Rev.

P / T. Book

This FY P/E

Next FY P/E

ABB 36,550 31,730 .9x 4.5x 14x 13x

FLR 7,840 5,930 .3x 2.8x 11x 13x

ACM 3,190 3,240 .5x 6.3x 17x 14x

KBR 2,680 1,760 .1x 2.0x 10x 11x

URS 3,830 4,550 .4x 266x 15x 14x

MAJOR HOLDERS Insiders 2% │ Capital World 6% │ Greenlight 5% │ Lord Abbett 5% │ Barclays 4% │ FMR 3% │ Vanguard 3% RATINGS VALUE Intrinsic value materially higher than market value? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends? EXPLOSIVENESS 5%+ probability of 5x upside in one year?

THE BOTTOM LINE URS derives more than 60% of revenue from the government, providing some stability in the current difficult economic environment. Nonetheless, the shares are not cheap enough to warrant serious consideration.


Notes from Value Investing Congress, May 5-6 Manual of Ideas research analyst Zain Griffith attended the Value Investing Congress in Pasadena. Here are his notes.

Zeke Ashton, Centaur Capital Zeke Ashton’s presentation was entitled Surviving the Worst Case: Risk Management and Value Investing.

LONG Investment Idea: Alleghany (Y)

Holding company that operates primarily in the specialty and property & casualty insurance industry.

Long term track record of value creation by building, acquiring, and selling businesses—particular expertise in the insurance, investment management, and natural resource areas.

Investment results are in high teens. Alleghany uses a “total return” approach to investing its float and has a good investment track record. Over the past five years, the company has produced a 10.6% annualized return vs. a -2.2% annualized return for the S&P 500 Index.

The company has a $4.1 billion investment portfolio and has a portfolio of valuable assets.

Valuation: Sum of Parts: RSUI (insurance with 80% combined ratio in 2008) 1.5x book = $1.65 bil. Capitol Transamerica – 1.2x book = $360 mil. EDC .75x book = $125 mil. Cash and investments at parent = $800 mil.

LONG Investment Idea: Odyssey Re (ORH)

Globally diversified insurance and reinsurance company, one of the top 20 reinsurance companies in the world.

71% owned by FFH, investment portfolio managed by Prem Watsa.

Grown BV/share by more than 20% annually since going public in 2001.

Buying back stock below book; spent $351 million on share buybacks in 2008, ~13% of shares outstanding in 2008.

Bottom line: ORH is classified as a medium risk stock. Current book value is about $43.80/share (as of Mar. 31), thinks BV/share should increase to $47-$48. At 1.3x book, company would be worth upwards of $55+/share.

Risk Management & Value Investing

Many value manager downfalls may have been due to complacency. Asks the question: If the core principle of value investing is "margin of safety" then how did so many well-known value investors lose as much or more than the market average during the bear market that began in 2007? Did they do something wrong or are they unlucky? Why did their value investing principles, years of experience, and long track records of success fail to protect them? Did they become overconfident?

Value investors previously assessed risk at the individual position level. This was all the "risk management" that seemed required. A lesson he recently learned was that risk must be assessed from the portfolio level—looking at the portfolio from the "top down" can be a useful exercise. He believes managers should try to determine if a bubble is building and where the economy is at in the business cycle.

Centaur doesn’t want: 1) excessive concentration—never wants the outcome of any one or two ideas to determine their ability to survive or dominate results in a given period, 2) Excessive portfolio-wide exposure to any one specific factor or theme (i.e. inflation, interest rate/currency fluctuations), 3) Excessive leverage at the portfolio level or the individual idea level, 4) Political risk – does not want investments to be overly vulnerable to change in government regulations, laws, tax codes, etc, 5) Liquidity risk, 6) Shorting stocks—wants to avoid “blow-up” risk. Believes we will see some short funds blow up due to recent market rally.


Concept of risk limits: Limits prevent investors from taking unacceptable risks, which should be thought about in advance. Home run style investors will have a different risk management style than high probability investors.

Helpful limits: 1) position size, 2) total exposure (long and short), 3) leverage, 4) limits on illiquid stocks.

Example of Fairfax Financial Holdings (FFH): Many people were short FFH in prior years when it really should have been a long (due to their large CDS portfolio). –Not a typical insurance holding.

Centaur’s ideal position is about 5%, i.e. 20 stock portfolio. Believes that 20 names in a portfolio is better than 6 or 100, thinks 20 is the sweet spot. The ultra-concentrated model increases the odds of experiencing occasional periods of outstanding performance, but also increases odds of really terrible performance.

Diversifying by idea doesn’t necessarily help if there is excessive sector or single factor correlation. “If you owned a bunch of different stocks in different industries that all had leveraged balance sheets, you probably didn’t benefit much from diversification in a year like 2008.”

Two types of leverage: 1) Recourse (high-risk leverage) 2) Non-recourse (smart leverage). Best way to achieve non-recourse leverage is by using in-the-money LEAPs—which offer reasonable implied borrowing costs as well as an implied put below a certain price.

Two Schools of Value Investing

1. Home run (i.e. Eddie Lampert) – magnitude of winners is the success factor. If one idea triples, you can afford to have a few ideas that do not do well.

2. High-probability (i.e. Seth Klarman) – Less concentrated portfolio, but more concentrated relative to the rest of the world. Centaur has 15-30 positions—1-2 big winners will not drive portfolio performance. Zeke follows the high-probability approach.

Each style depends on the type of investor. Key is matching investment style to the type/characteristics of the capital base and manager philosophy.

It is important to match the attributes of the capital base to the investment style of the manager. The "home-run" style investor must have stable, long-term capital in order to compensate for higher volatility of fund performance. These types of investors are at the highest risk of business failure.

“High probability” investors can operate with a much more fluid capital base—business failure is driven more by showing favorably divergent returns over time.

Centaur risk limits: Position 7.5% --10% maximum size at market. Sector – no more than 20% in any one sector—25% at market.

Ingredients of a blow up: 1) excessively sized bets, 2) excessive leverage, 3) unexpected negative event, 4) inadequate liquidity to unwind the position without negatively affecting price.

Take away from Kelly Formula: 1) The better the idea, the bigger you can go. 2) The more undervalued the idea, the lower the risk, the bigger the position should be. Believes that investors who rely on the Kelly Formula as intellectual support to take excessively sized bets will accelerate gambler’s ruin, not avoid it.

About Zeke Ashton

Zeke Ashton is the founder and Managing Partner of Centaur Capital Partners, a Dallas-based value-oriented investment firm. He and co-portfolio manager Matthew Richey are the advisors to the Centaur family of private partnerships using a long / short equity strategy, and are the sub-advisors to the Tilson Dividend Fund, a mutual fund utilizing a unique, income-oriented value investing strategy.


John Burbank III, Passport Capital John Burbank’s presentation was entitled China and the U.S. Dollar: “Should We See Other People?”

Key Themes and Conclusions

Fiat money is questionable. Gold is on the rise.

Tailwinds for scarce natural resources and emerging market currencies are in place.

China’s growth should become increasingly independent (they have the cash and knowledge).

Investment Ideas

Holdings: fertilizers: Mosaic (MOS), Potash (POT); crude oil: Petrobank (PBG CN) and EFG Hermes (HRHO EY)

Burbank believes in being long financial services in the Middle East.

Gold (see below)

On China and the Big Picture

China is “the world’s marginal provider of liquidity.” (See recent Economist publication on China).

You cannot only take a bottom up approach; you must understand the top down (macro picture).

If you look at GPD to private debt, in China these two metrics have risen at about the same rate. In the US, total debt and private debt have risen much quicker than GDP. He believes this will serve China well in the future. The US is currently printing money ($2.2 trillion in new government debt from TARP and other spending). Asks the question: Which would you rather own?

China currently holds 24% of Treasuries, Japan about 21%, Eurozone 8%, Middle East 6%, Brazil/Russia/UK 4%.

China’s options for investment in the future: 1) Maintain status quo (consequences: continue purchasing treasury securities and have the US government be your primary capital allocator) 2) diversification, 3) invest in yourself, 4) invest in things you will need.

Things China will buy for itself: Education, Entertainment, Leisure, Financial Services. Passport only buys companies trading in Hong Kong, Singapore or the United States.

What China needs most: Iron ore, potash, crude oil, copper, soy beans. China is a net importer of these commodities and Burbank believes this should shape portfolio decisions with respect to commodities.

On Gold

Gold has gained 13.2% per year over the past decade. China will be a very large buyer of gold in the future. Burbank believes that, from a game theory perspective, there is no reason for China not to purchase gold in the future.

Lebanon has the highest gold/GDP percentage at 28.8%. U.S. and China gold/GDP are 1.7% and 0.8%, respectively.

How Passport owns gold: 1) Equities: challenging, as gold miners tend to make value-destroying acquisitions. Passport leverages team of analysts and geologists to identify earlier-stage assets. Detour Gold (DRGDF.PK) is a company they own. Passport also owns gold ETFs (proxy for physical gold) (GLD)

About John Burbank

Burbank is the founder and Chief Investment Officer of Passport Capital, a San Francisco global hedge fund. The firm manages over $2 billion. Passport employs macro-economic and sector analysis to identify opportunities from the long term expansion of leading emerging economies, select natural resource scarcity, and network business models common to the technology and service sectors. Investments primarily emphasize public equity securities. Passport also makes targeted investments in equity derivatives, select private companies, and swap contracts. Mr. Burbank has over a decade of experience investing in global equity markets. Prior to founding the firm in 2000, he was a consultant to JMG Triton Offshore and before that was the director of research at ValueVest Management. He earned a B.A. from Duke and an M.B.A. from Stanford.


J. Carlo Cannell, Cannell Capital Carlo Cannell’s presentation was entitled Hydrodamalis Gigas.

Extinction and Investing

Example #1: The Steller’s Sea Cow is known as Hydrodamalis Gigas (which is extinct) and is the title of the presentation. Before humans arrived, they ranged along the North Pacific coast. By the middle of the 18th century, they were restricted to the Bering Sea with a population of around 1,500. They were hunted for food, skins, and fat oil and went extinct in just 27 years after being discovered. How does this relate to investing? Sometimes new circumstances come into the equation or investment situation. Some species (companies) can have a more difficult time adapting to a changing environment. For example, a restaurant would have a more difficult time adapting to a slowdown in the economy than an oil/gas company.

Example #2: Irish Elk (Megaloceros Giganteus)—extinct. Became extinct due to maladaptive traits. How does this relate to investing? Some corporate creatures are struggling for survival. We cannot predict when the environment will change. Companies that have fallen victim to this form of extinction include: Orange 21 Inc, Bakers Footwear, Heelys, and Design Within Reach.

Example #3: The California Condor (Gymnogyps Californianus) – critically endangered. Carrion scavengers like the condor were taxonomically diverse in North America during the Pleistocene. The Pleistocene was a colder time with wide open grasslands, sustaining “megafauna” including mammoths, bison, and ground sloths. Condors feasted on the abundant carcasses. The combination of warmer climate and the arrival of humans drove the species to the verge of extinction. How does this relate to investing? Example American Automakers—akin to the condor?

Example 4: The Red Queen Effect: for an evolving system, continued development is needed in order to maintain viable fitness relative to a system it is co-evolving with. For example, faster cheetahs result in selection for faster antelopes, faster antelopes select for faster cheetahs. This relates to business through price wars. For example, Best Buy vs. Circuit City and how a reduction in prices can have a negative spiral effect. Relates this example of extinction to the semiconductor equipment industry as well.

Buffett avoids many of these risks by investing in companies that are more essential (i.e. razor blades). Carlo tries to observe the patterns which govern nature—and makes investments based on his conclusions. It’s easier to benefit from the laws of nature than to try and predict the next Coke.

Industries he finds attractive: agriculture –mentions irrigation companies (mentioned two based in Omaha), oil/gas (equipment service companies)—mentions sandridge-quicksilver-pioneer, some precious metals and the death care industry (cremation).

About Carlo Cannell

Cannell has 16 years of experience investing in small caps and over 19 years of experience in analysis of technology companies. A graduate of Princeton, he attended New College, Oxford, and studied business at Templeton College. Mr. Cannell, a third generation investment manager, is the Managing Member of Cannell Capital LLC in Jackson, Wyoming.


David Chu and Igor Lotsvin, Soma Asset Management David Chu and Igor Lotsvin’s presentation was entitled The U.S. Banking Sector: Chaos and Opportunity.

Economic Outlook

Foreclosures are beginning to pick up. We will see a massive wave of foreclosures over the next several months.

Next shoe to drop is commercial real estate (more alarming than subprime). Size of U.S. commercial market is $3.5 trillion vs. $1.5 trillion subprime. Banks have exposure to $700 billion in construction loans (the most combustible portion of the CMBS market). Total bank’s capital is about $1 trillion.

The worst of the banking crisis is ahead of us. Banks are not lending. There is a massive reduction in all lines of credit, which will suffocate growth. By 2011, cards capacity will be down by $2 trillion. SBA loans are down 60%. Deposit insurance fund will run out shortly.

Bottom Line: Banking crisis unlike anything seen before; there is deleveraging on a massive scale; disconnect between credit and equity markets; extreme correlation and volatility; banks are a proxy for credit markets; no recovery until banking function is restored. Remain concerned and very bearish.

Investment Idea: Sell Short Zions Bancorporation (ZION)

ZION focuses on the Southwest (bubble states). 22nd largest bank in the U.S. 7x tangible equity in RE loans and 2x tangible equity in commercial. Company’s credit is deteriorating, reserve coverage ratio is dropping (reserves taken so far are inadequate)—holds true for the entire industry. AZ and NV are responsible for about 50% of chargeoffs.

About Soma Asset Management

Investment philosophy (foundation of the firm): 1) Value Investing Bias (limited downside) 2) Investing (Looking) Across The Capital Structure, 3) Long Term Bias

2008 performance, net, was 26%. Returns driven by focus on credit markets. Saw structured products as a leading indicator (RMBS, CDOs, CLOs, etc). The collapse in ABX preceded fall in banks. Took very large short positions in LEH, BSC, FNM. Says the recovery rate for many loans issued by banks is 35 cents on the dollar—the carrying value on most bank balance sheets is above this level.

About the Principals

David Chu. Prior to co-founding Soma Asset Management LLC, Mr. Chu was most recently with Scion Capital, LLC, a fundamental analysis, deep-value hedge fund with over $500 million in assets under management (AUM). While at Scion, Mr. Chu launched that firm's Asia office and served as the company's Executive Director responsible for overseeing the day-to-day operations in Asia. Mr. Chu also worked extensively on Scion's large credit default swap portfolio. Mr. Chu began his career as an investment banker at Goldman Sachs & Co. in New York in the Leveraged Structured Finance Group, where he completed high yield securities offerings and project finance transactions across numerous sectors. Additionally, Mr. Chu was a private equity executive both domestically and internationally, specializing in bankruptcy and distressed opportunities, and worked in financial operations for a technology company. Mr. Chu graduated magna cum laude from Georgetown and earned an MBA from Harvard Business School.

Igor Lotsvin. Prior to co-founding Soma Asset Management LLC, Mr. Lotsvin was a portfolio manager with Symphony Asset Management, LLC, a multi-strategy hedge fund and an asset management firm with over $7 billion in AUM. While at Symphony, Mr. Lotsvin was part of the portfolio management team working on the firm's flagship long/short equity hedge funds (with over $1 billion in AUM) and was lead portfolio manager on several long-only strategies. Mr. Lotsvin was instrumental in building Symphony's long-only strategies, having helped develop this business from concept to over $1.2 billion in AUM. Prior to joining Symphony in 2003, Mr. Lotsvin was a High-Yield and Distressed securities analyst at Franklin Templeton, where he was responsible for coverage of multiple sectors including financials, media and real estate. Mr. Lotsvin represented Franklin in numerous high profile bankruptcies and restructurings and served on several creditors' committees. Mr. Lotsvin began his career in public accounting with Arthur Andersen, LLP. Mr. Lotsvin is a Certified Public Accountant, a Chartered Financial Analyst and earned an MBA degree from Harvard Business School.


Charles de Vaulx, International Value Advisers Charles de Vaulx’s presentation was entitled A Cautious and Opportunistic Approach to Global Investing: Where Are We Finding Value Opportunities in the World Today.

Investment Idea: LONG SECOM (JP: 9735) Japanese, steady, stable cash flows Has “diworsified” over the past few years so there has been some value destruction. Has a strong balance sheet, with net cash. At 7x EBIT, company is cheap.

Investment Idea: LONG Nestle (NSRGY.PK) If you strip out stake in L’Oreal and other stakes, you pay 9x EBIT for food business. Good balance sheet. Accused of overpaying for acquisitions. The company appears cheap and safe.

View of Markets and Economic Outlook Too many financial stocks do not offer “safety.” Charles uses gold as an insurance policy (gold bullion—insurance

against inflation/deflation—banks go bankrupt during deflation and bank “IOUs” become worthless). Cash is viewed as a residual. Would like to have twice as much capital employed in Japan but would like to see cash-rich companies be able to maintain dividends and buy back shares—needs more evidence of caring for shareholders before investing more. He is seeing many “net nets” in Japan—not as much in the US and Europe.

His idea of a good business is natural monopolies. Many companies in China are very capital intensive. Favorite way to play emerging markets is through commodities, either directly or through bonds.

Outlook: May remain bleak, yet some pockets of value have emerged.

Recent Lessons Learned Too many people focused on the upside, not enough focus on the downside. Monitoring credit cycles – following these cycles can be helpful and help determine when a bubble is forming (said

he reads Grant’s Interest Rate Observer, Shilling, Marc Faber)

About International Value Advisers IVA takes a cautious and opportunistic approach to global investing. It is owner operated (22-23 people)—not outside seed capital, they “eat their own cooking” ($30 mil+ of principals

own money in fund) and long only. Willing to make large negative bets/build portfolios that have nothing to do with a benchmark. Gold is an 8% position. Uses gold bullion, money shares, or other proxies to invest in gold. About 1% of funds are

in UltraShort 20+ Year Treasury ProShares (TBT). Japan is 12%. Main objective is not to lose money. Believes in some form of diversification. Uses calls and puts to create cheap entry prices (recently sold puts on GE,

3M and Comcast to create an entry price that makes sense to them). Since markets are higher, will most likely collect the premiums on those positions. $2.3 billion AUM.

International Investing Diversification argument [for international investing] is getting weaker—especially in a more global world, The real attraction is that foreign markets remain less efficient than US markets. At the margin, accounting is more reliable outside the U.S. (the real issue is poor disclosure). Corporate governance outside the US needs to improve—there have been some improvements in the field of

takeovers (French have improved quite a bit). Small foreign stocks are not as risky as they appear—many are family controlled businesses. Family controlled

businesses can be better run (less leverage) than non-family owned businesses. Another argument against international investing is exposure to currency fluctuations. IVA mitigates currency risk

via hedging; those some companies need not be hedged (e.g., Japanese exporter may earn foreign currency income). Currently has cash level of 23%, 7% US, 34% high yield bonds, 8% gold, Europe 12%, Asia 15%, >1% Energy. Believes on average that European stocks are 15% cheaper than U.S. stocks.


Brian Gaines, Springhouse Capital Brian Gaines’s presentation was entitled Low Risk Bets in a Risky World.

Investment Idea: LONG ModusLink Global Solutions (MLNK) – formerly known as CMGI Supply chain management provider; main products are consumer electronics (Sandisk, AMD, and HP are largest

customers). The company does not take ownership of customer inventory. Largest player in outsourced space. The industry still has a large number of players who want to outsource for either

strategic or legacy reasons. Several competitors are distressed, versus a strong balance sheet at MLNK. Largest risks here are management acquisition risk (company has a huge NOL), operational cash burn, and complete

unwind of global growth and consumer electronics business. Company has been good at managing costs, running positive EBITDA ($9+mil EBITDA last quarter). Valuation: Low = $4.00/share (downside protection: there’s $4.70/share of liquid net working capital), Base

$7.00/share, Homerun is $20/share. He only gives the NOL value in the “homerun” scenario.

Investment Idea: LONG Market Leader (LEDR) One of Brian’s favorite ideas. They have a site called justlisted.com. Stock price is $1.90, cash/share is $2.40, cash

burn = breakeven, views the business as a legacy in wind-down and small upcoming spend on option. Made $20 million in EBITDA when market was good; could do $5-7 million in EBITDA and be worth $5+/share.

Investment Idea: LONG zipRealty (ZIPR) Brokerage agency; operates mainly online. Gives you a 20% kickback if you buy through ZIPR. Cash/share is $2.32, losing $10-12 million ($0.50 cents per share). A high risk/high reward opportunity.

Investment Idea: LONG Tree.com (TREE) Spun off from IACI. Stock price is about $9.00, cash/share is $7.00, $8M EBITDA in last quarter, clear brand name

in LendingTree (medium risk/medium reward). Owns realestate.com; management owns a lot of shares. (Recent price increase makes the investment less attractive.)

Investment Idea: Sell Short Jack in the Box (JACK) He sees short opportunities in restaurant industry: Thesis is that multiples implying full recovery, cost cuts (which

have boosted earnings) will end. Discounting is pervasive from QSR up to high-end dining. Jack and Qdoba have higher than average company owned restaurants. Qdoba was a growth engine. Nearly one-third of operating income is refranchising. Weakness in operations will limit ability to refranchise going

forward. Starting six months ago the company began providing mezz financing for the franchisees. Discounting is running rampant across the industry. Brian estimates than franchise margin is 1.5% or $21,000 on average unit volume of $1.4mm. Valuation: Downside $26/share, Base $16/share, Homerun $10/share.

Investment Idea: Short-Sell Blackboard (BBBB) Education software provider that sets up portals to share stuff (60% higher Ed/40% K-12). Management says growth

will come from upgrades and not new licensees (believes BBBB has fully penetrated its market and customers). Brian is looking out a year on this investment. BBBB is not as mission-critical to the education system as the

company claims it is. Schools have been cutting costs—one school in Florida has cut purchases of toilet paper. Valuation: Downside $31.00/share, Base $20.00/share, Homerun $13.00/share.

About Springhouse Capital Springhouse was down 10% in 2008, up 24% YTD. What does Springhouse look for? Uses moderate leverage,

and looks for multiples on normal earnings. Longs: 20% maximum loss over time, 50% upside in a year (or some iteration of multi-years); looking for 5-10 great ideas at any time and to ideally be 70%-90% invested on the long side but willing to hold cash. Shorts: 10% loss, 30% upside, small positions of 1-3%, based purely on opportunities.

What are they finding? Longs: Few true good stress tested mid-cap/large cap ideas (35% invested on the long side). Seeing opportunities in small and micro-caps with strong balance sheets where you can look out 1-2 years. Also sees opportunity in mediocre but clearly real businesses, possibly great businesses but unproven and flexible operating models able to adjust to new levels of demand. Shorts: Many stocks priced for perfect execution and economic rebound, approximately 30-40% gross short.


Scott Klein, Beach Point Capital Management Klein’s presentation was entitled Opportunities in Stressed and Distressed Credit.

About Beach Point Capital

The firm has more than $3.7 billion in AUM.

Specializes in high yield bonds, corporate loans, distressed debt and other credit related strategies.

Investment team includes 15 people with offices in Los Angeles and New York.

The Opportunity in Distressed Investing

The distressed debt market currently presents an “opportunity of a generation.” The key in distressed debt is the ability to analyze legal documents and bond covenants.

The high yield market recently yielded 16%-18%. Distressed debt can offer investors better downside protection than many equities.

On the high yield side, Klein sees companies with mid teens yields that are attractive. Example: Dole Foods. The company missed a window of opportunity to refinance some of its debt. This particular example is yielding 16% and the downside is par (very safe, high yielding piece of paper).

The high-yield default rate is increasing (about 10%-12%)—default rates are a lagging indicator.

One of Klein’s largest distressed holdings is called Digital Globe. They are a content provider for Google Earth (satellite imagery). They filed for bankruptcy after a failed satellite launch. In this situation, Beach Point turned its private debt into equity and the company recently filed an S-1 and should go public soon.

About Scott Klein

Scott Klein is Managing Partner and Portfolio Manager for Beach Point Capital Management with $3 billion under management. He has over 17 years of experience in managing high yield bonds, bank loans and distressed debt portfolios and restructuring companies in financial distress. Before founding Beach Point, Mr. Klein was Senior Managing Director at Post Advisory Group, where he spent over 12 years helping grow the company from under $200 million in assets to over $10 billion. In the early 1990s, he spent four years as a bankruptcy attorney at the law firm of Murphy, Weir and Butler. Mr. Klein received a bachelor's from Wharton (magna cum laude) and a J.D. from UCLA.


David Nierenberg, D3 Family of Funds David Nierenberg’s presentation was entitled Not Dead Yet: Surviving Today to Triumph Tomorrow.

About Investment Risk

Risk is not associated with volatility; risk is a chance of permanent capital loss. Risk is not a quotational loss.

Permanent loss can be caused by: leverage (D3 does not use leverage to magnify returns), redemptions when illiquid, counterparty risk, custodial risk, legal and regulatory risk, execution: investments, portfolio, cash and fraud.

Investment Idea: Move, Inc. (MOVE)

Leading online network of websites for residential real estate search, with the most comprehensive and up to date database of existing homes for sale on the web. Largest shareholder of the company. Main asset is relator.com.

Serves three primary constituents: 1) Consumers, 8.1 million average users/month, 2) Real estate agents and brokers, 3) General advertisers. Online ad penetration has not penetrated the real estate brokerage industry compared to other industries. D3 believes that this trend is not likely to last. Dollar advertising by US real estate agents in newspapers is down 71% over the past few years. Believes this represents a great opportunity for web based advertising and will benefit MOVE. Revenues have remained stable from 2006-2009, the most visited website for real estate brokerage advertising.

Recent changes: Company has closed underperforming businesses, took $20 million out of annualized operating costs, New CEO Steve Berkowitz named CEO in JAN 2009, currently searching for a new CEO.

D3 has a “punch list” for MOVE. 1) Continue to improve product and grow site traffic. 2) Hire new CFO, 3) Continue expense reduction, 4) Monetize ARS, 5) Establish relationship with “The Street, “ 6) Eliminate 100 mil shares to drive EPS, EPS growth and ROE. D3 just filed a 13D yesterday.

Bottom line: MOVE basically has no leverage, ~$1.00/share in net cash. Believes that 2013 EPS could grow to $.58/share. Thinks it could appreciate 5x based on a 17.5x to 20x multiple.

About D3 Family of Funds

Long-term investors that invest in a concentrated portfolio of undervalued, domestic, micro-cap growth companies.

Average market capitalization: $300 million; tries to establish 15%+ positions in investee companies.

Believe in activism in some circumstances.

About David Nierenberg

David Nierenberg is the Founder of the D3 Family of Funds, which manages $350 million in four private investment partnerships. Mr. Nierenberg serves on the Washington State Investment Board, which manages $80 billion of public employee retirement funds. He is a graduate of Yale College and Yale Law School.


Jed Nussdorf, Soapstone Capital Jed Nussdorf’s presentation was entitled In Search of Pricing Power.

Area of Investment Opportunity: Reinsurance

Jed sees opportunity (pricing power) in certain lines of reinsurance.

Equity market participants have not recognized the pricing dynamic and reinsurance equities are trading at historical low valuations relative to earnings and book value, excluding distressed carriers.

Reinsurers that are most interesting include RenaissanceRe Holdings (RNR), Validus Holdings (VR) and Lancashire Holdings (LCSHF).

Economic Context and Investment Approach

Global recession has pressured demand for most goods and services, while supply/capacity for those goods has yet to respond, pressuring pricing across the economy.

Excess capacity exists in most areas of transportation, power and energy, real estate, and consumer services given declining demand for goods, electricity, space, and discretionary expenditures.

Jed looks for industries with more inelastic demand functions, preferably with static or decreasing supply, enabling pricing to hold, if not rise. He looks for evidence of pricing power, which is typically accompanied by accelerating revenue growth and operating margin expansion.

About Soapstone Capital

Backed by Joel Greenblatt (founded Soapstone Capital four years ago).

Soapstone he looks for companies with pricing power.

About Jed Nussdorf

Jed Nussdorf is the Managing Member of Soapstone Capital. Prior to founding Soapstone in 2005, Mr. Nussdorf was a managing director at Force Capital Management from 2003-2005. He earned an M.B.A. from Wharton.


David Rabinowitz, Kirkwood Capital David Rabinowitz’s presentation was entitled Stock-picking for the Scared and the Ignorant: Notes from an Expert.

Investment Approach

David focuses on the downside of an idea more than the upside.

He takes a very long time to understand an idea before taking a position.

He often holds large amounts of cash—often for extended periods of time. It takes him a long time to find ideas.

He believes in specializing in a few industries—he specializes in restaurants and retailers.

He conducts extensive research, including reading 10-Ks, industry publications, even bankruptcy filings of former companies—which he says can be more helpful in understanding an industry or the competitive landscape than reading current annual reports.

Understanding an industry very well will help an investor capitalize on an idea when it presents itself. It helps him act quickly when he sees opportunity.

View of Restaurant Industry

David does not own any restaurants or retailers right now.

From his experience at looking at retail over the past 10-15 years, he does not feel that individual opportunities are currently as exciting as they’ve been in prior years (i.e. 1994-1995).

Retail valuations are currently much higher than in the recession of 1994-1995.

Investment Idea: LONG Lancashire Holdings (LCSHF)

Four year old Bermuda based insurance company (specialty insurer) trading at book value.

Trades on the LSE under the ticker LRE. $1.27 bil market cap. Founded in late 2005.

Not like a normal insurer. Only 14% of book is reinsurance, 86% of current business is primary.

LRE is not “part hedge fund;” 85% of investment book is “risk-free.” LRE has a conservatively run portfolio.

CEO Richard Brindle has a successful track record. He cares more about underwriting, maintaining a strong balance sheet, managing capital through the cycle, and staying nimble. They’re not trying to rule the insurance world.

Investment portfolio returned 3.1% in 2008, duration consistently below 2.0, $300mil in corporate bonds (none below investment grade) in $2bil portfolio.

Management has stated that they’re willing to walk away from premiums.

Operating expense less than 10% of premiums and has about 91 employees.

Gross written premium down 16% in 2008, Q109 GWP down 20-25%. Returned about $397 million of capital in 2007 and 2008. CAGR of book value since inception has been ~18%.

Management ROE goal = 13% plus risk free rate.

Valuation: Believes it could trade at 1.5x-2x book value (profits made in the mean time are being returned to shareholders). Bases this multiple on: 1) reserve additions being highly unlikely, 2) investment book is not at risk, 3) Bermuda taxation, 4) Conservative management.

About David Rabinowitz

Dave Rabinowitz runs Kirkwood Capital, the Atlanta-based investment fund he founded with Gotham Capital in 2002. Prior to founding Kirkwood, he worked as an attorney with the Special Matters department of King & Spalding in Atlanta. Mr. Rabinowitz has also been an adjunct professor at Columbia Business School's Value Investing program. He is a graduate of Binghamton University and Emory Law School.


Guy Spier, Aquamarine Capital Guy Spier’s presentation was entitled Investing in Global Education - From China to Brazil.

Non-U.S. For-Profit Education

The world is becoming more developed (meat consumption, milk, etc. are increasing). Not so sure about the "trends" in iron/oil—may not want to bet on these since iron can be recycled and there are alternatives to oil. He believes that food is a better trend to bet on.

People will demand more education in the future. This bodes well for education companies such as Raffles Education, Corinthian Colleges (COCO), etc.

Bullish on Brazil: has $2 trillion GDP, 200 million population, largest iron ore mine in the world. Brazil does not have a system of community colleges. Gross enrollment rate in Brazil is 24% vs. 80%+ in USA.

Guy sees a lot of potential in non-US based education companies.

Investment Idea: Estacio de SA

Largest player in the private post-secondary education sector in Brazil.

GP Investments is involved with Estacio.

The founding family acquired many “mom and pop” education companies.

Trades at a single digit to EBITDA, has low EBITDA margins (room for improvement), management is intent on creating a lot of value.

Thesis relies on: Developing duopoly in Brazil for post secondary education, low penetration, no community colleges, undeveloped consumer finance sector, natural resource based economy. This is an investment that Guy plans on holding for the next 20 years.

Investment Idea: Raffles Education

Headquartered in Singapore.

They are different than other education companies in China in that they turn out English-speaking graduates.

The company is cheap and has a dividend yield of 5-6%. Company is trading at a single digit multiple to EBITDA.

Key Lessons Learned Last Year

Pay attention to concentrations of risk (credit, geography, customer, other)

Pay attention to hidden leverage

Tangible vs. intangible assets (likes intangible assets but will pay more attention to tangible assets going forward)

Position sizing

Always carry lots of cash at all levels

About Aquamarine Capital

Aquamarine was down 46.7% in 2008, up about 2.9% in 2009. He describes himself as a “focused investor.” Guy’s fund has recovered 26% from March 1 through April 24, 2009. He feels prepared to hold his key positions.

Uses checklists when investing, similar to Charlie Munger. A checklist he recently developed includes business-specific questions as well as psychological factors. Guy has used a checklist for many years, but since 2008, has had to rethink many of the factors he considers before taking a position. For investors, he stresses the importance of developing a checklist and continuing to add and improve the items one considers before investing in an idea.


Whitney Tilson and Glenn Tongue, T2 Partners Tilson and Tongue’s presentation was entitled An Update on the Mortgage Crisis and a Discussion of Wells Fargo.

Opportunities for Long Investing

Blue-chips: Coca-Cola (KO), McDonald’s (MCD), Wal-Mart (WMT), Altria (MO), ExxonMobil (XOM), Johnson and Johnson (JNJ), Microsoft (MSFT)

Out-of-favor blue-chips: Berkshire (BRK.A), Wells Fargo (WFC), American Express (AXP), Target (TGT)

Balance sheet plays: EchoStar (SATS), dELiA’s (DLIA)

Turnarounds: Wendy’s (WEN), Winn-Dixie (WINN), Huntsman (HUN), Crosstex (XTXI), Res. America (REXI)

Special situations: Contango Oil and Gas (MCF)

Mispriced “options”: General Growth Properties (GGWPQ.PK), TravelCenters of America (TA), Ambassadors International (AMIE), Borders Group (BGP) and PhotoChannel Networks (PNWIF.OB).

Investment Idea: Long Wells Fargo (WFC)

WFC net income spread was 4.8% and could be seen as a competitive “moat.” Believes the combined earnings power (normalized) of WFC/Wachovia is $3.55 to $4.26/share.

Bull case: $4.00/share in earnings power. Implies a $40-$50 stock price at 10-12x earnings. Enormous yield spreads. Wachovia portfolio already significantly marked down. Buffett recently touted the stock and said he would have been willing to put 100% of his net worth in WFC when it was trading at lower levels earlier in the year.

Potential risks: Wells Fargo has a minimal amount of tangible equity to absorb losses—Glenn and Whitney think they have no tangible equity (which makes them cautious). Expect losses to be between $47 billion and $120 billion in the future. They have provisions in the low $20 billion range right now.

Mortgage Market Analysis and Outlook

About two-thirds of homes have mortgages. Of those homes, 56% are owned or guaranteed by the two government sponsored enterprises (Fannie Mae, Freddie Mac). There was a surge of toxic mortgages over the past ten years. The wave of resets from subprime loans is mostly behind us.

What is ahead of us? Alt-A = $2.4 trillion category (much larger than subprime—known as “liars loans”). Alt-A mortgages and their resets are mostly ahead of us. Alt-A delinquencies by vintage show the collapse in lending standards in 2006-07. About $750 billion of Option ARMS were written in 2007 and three-fourths were written in the four housing bubble states. Option ARMs are beginning to soar. Delinquencies on jumbo prime mortgages are soaring. This is the next big wave to hit California. Delinquencies on prime mortgages are beginning to soar.

HELOCs and home equity loans were popular during bubble. This is a $1 trillion market. Only $200 billion was securitized—much is still on banks’ books. 30% of all cars purchased in CA in 2007 were purchased with HELOCs.

Housing outlook: Homes sales are falling and foreclosures are rising, leading to a surge in inventories. There is large “shadow inventory” on banks’ books. Recent supply numbers understate the severity of the housing crisis.

Foreclosures in March rose 48%, y-y and 17% sequentially. RealtyTrac estimates that more than 1.5 million bank-owned properties are on the market, representing one-third of all properties for sale in the U.S.

Home prices are in a freefall. Whitney uses the Case/Shiller national index to gauge home prices.

Home prices need to fall another 5-10% to approach the long term trend line. The real danger is not returning to trend, but overshooting the trend line. Home prices in California have already overshot the trend line.

Outlook for housing prices: Prices are already down about 30%; “trend” would be down about 40%. Prices could go down 45-50% in total, and it will take another year or so to get there.

Total estimated financial sector losses will be about $3.8 trillion. Institutions have been able to raise capital to mostly keep up with write downs, but this is not likely to continue.


William Waller and Jason Stock, M3 Funds William Waller and Jason Stock’s presentation was entitled Banks: Have We Seen the Worst of It?

M3 Funds: Investing in Under-followed Banks Long/short equity fund focused on the U.S. banking and thrift sector. There are 1,300 publicly traded banks,

5,500 private banks, 700 mutual banks and 7,900 credit unions. M3 focuses on publicly traded banks—93% of which have a market cap below $500 million. M3 has edge in investing in under-followed banks.

A bank is a leveraged play on the market in which it operates. M3 conducts research through travel, public records searches, private banks and credit unions, FDIC data, call reports, real estate agents and developers. Jason Stock says that call reports are the best way to analyze banks.

State of U.S. Banking Sector Banking sector is under-capitalized. This is the #1 problem. Credit quality has deteriorated and will continue to

deteriorate. The number of bank failures is accelerating. Tangible equity/asset ratios have “fallen off a cliff” in 2007-08 and are 4%-5% vs. historical levels of 6%-7%. These ratios are not sufficient to handle the losses that will come in the future. Total delinquencies: Construction 12%, 1-4 Family 8%, CRE 2.6%, C&I 2.8%, consumer 5%.

Where we are headed: Commercial real estate (CRE), consumer loans (auto, credit cards)—have yet to see much deterioration on many balance sheets. Auto loans have held up but M3 is starting to see deterioration in the category.

Significant number of bank failures ahead. There have been ~30 bank failures YTD – may rise to 150+ by yearend. Regulators are overwhelmed– could shut down 100+ banks right now if they had enough staff.

State of commercial real estate: Unemployment will continue to rise and commercial real estate is the next shoe to drop. 25% of all CRE is securitized, most of which was originated from 2002-07 and is beginning to come due. Vacancies are rising—commercial foreclosure process is just beginning, which will impact all commercial values and CAP rates. The primary problem areas include retail strip centers and office properties.

Investment Approach: Criteria for Long Positions Low price to tangible book value, excess capital Bearish management team Attractive markets (real estate and employment

trends—like state capitals and university towns as they provide stable job base)

Share repurchase plan Attractive deposit base Low loan to deposit ratio

Excess capital is the number one statistic M3 focuses on. A bank’s biggest asset is its liability base (deposits). A bank’s biggest liability can be its asset base (loans) — the deposit base is a hidden asset.

Long Investment Idea: First of Long Island (FLIC) $1.25 billion asset bank headquartered in Glen Head, NY. 140% of tangible book value and 11x LTM earnings. Hidden value in branch ownership would increase TBV by 15%. Excess capital: 8.5% common tangible equity/assets. 68.5% loan to deposit ratio—very disciplined underwriter. $1 billion of high quality deposits with a 1% cost. Pristine credit quality: very low non-performing assets at 3/31/09. Near term catalyst: Russell 2000 addition requires 400K+ shares.

Investment Approach: Criteria for Short Positions Negative credit trends, rising delinquencies, out of

market exposure, high severity loss markets Overstated or declining tangible book, thin capital Bullish management team

Aggressive underwriting High-cost deposit base and wholesale funding

Short Investment Idea: FNB Corporation (FNB) Don’t think it’s a zero, but trades too high given credit risk. Trades at over 2x tangible book and 20x LTM earnings. Thin capital structure: 4.5% common tangible equity/assets ($357 million). $294 million of loans in FL of which 50% are land loans. Credit quality is deteriorating: over 2% of assets are non-performing. High severity of loss on FL exposure—reserves are insufficient. Loan mix: 33% consumer, 30% CRE, 20% C&I. Should trade down to book; will need to raise capital.

Key Takeaways Banking sector remains under-capitalized. Commercial real estate and C&I loans pose a threat to the banking sector. Fed’s actions are creating long-term risks for the banking sector and the broader economy. Recommendations: Find a niche and become the expert. Utilize technology and creative strategies to gather

information. Timing the market is difficult; develop a thesis and be disciplined. Never concentrate portfolio in one investment. Always ask yourself if you have a competitive edge. Don’t just read it or hear it—go see it for yourself.


Essay: Want to Be The Next Warren Buffett? “Don’t just study him, copy him,” says Manual of Ideas contributor Nadav Manham, president of Elera Advisors, an investment advisory firm focused on value-oriented manager selection.

Another year, another Berkshire Hathaway Annual Meeting for the record books. Despite the poor performance of Berkshire stock in 2008, over 35,000 people made the Pilgrimage to Omaha this year. Though all kinds of people own Berkshire shares, the fastest-growing group of attendees seems to be the young professionals, hedge fund analysts and managers mostly from the east coast, easily identified by their blackberries, their dress, and their energetic networking. Like everyone else they come to Omaha to have fun, to meet old friends and make new ones, and to (don’t forget) attend the meeting itself. But they also come to Omaha to find answers to the question: How can I be more like Buffett?

To me the greatest lesson of Buffett’s life is that if you can figure out and then focus on exactly what you’re meant to do in life—even if it takes some time (before he founded his partnership he was a failed gas station owner, a mediocre stockbroker, and a stressed-out New York commuter), and even if what you’re meant to do is unique (No other public company CEO spends his day like Buffett), then you can reap great rewards. Many of Buffett’s professional admirers, for obvious reasons, have translated this lesson as “What I’m meant to do in life is… be Warren Buffett.”

The net result for a manager selector like me is thousands of Buffett-inspired money managers to evaluate. A surprisingly large number of them can successfully imitate their idol on paper or in person, or even with their short-term track records, but only a small minority will end up even earning their fees, let alone approaching Buffett’s long-term record (whether they themselves get rich in the process is a separate question).

What then separates a true superinvestor from the rest of the (very large) crowd?:

Focus on quality of track record. Overwhelmingly, professional investors are paid based on the simple quantitative measure of their performance. But the best ones also judge themselves by its quality, by how that record was achieved. The main questions to ask are how much risk was taken in order to achieve it (everyone defines risk differently, but for me it’s simply the probability and magnitude of permanent loss of capital), and whether the track record is repeatable or else inextricably intertwined with the particular time and place in which it was achieved. In the last several years we’ve had a hedge fund boom, fueled by credit and massive investor interest. In its essential characteristics it was no different than the housing boom, the tech boom, the oil boom, the railroad boom, etc., in that many people got rich during the boom who otherwise would not have, and you have to judge how well the person will do without the boom.

Focus on quality of investing vehicle. I’m consistently amazed at how many of the greatest superinvestors structure their vehicles in a way that guarantees they will make less money themselves, but do better by their investors. Had Buffett continued to charge an incentive fee in a limited partnership structure he would be many billions richer than he is today. Seth Klarman could easily be running a fund twice its current size if he were not so choosy about whom he allows to invest with him. I can only conclude from this that the quality of an investor’s investing vehicle—type of investors, permanence of capital, shared goals—matters tremendously to investment success.

Execution vs. strategy. This is the biggest differentiator between true superinvestors and the rest of us. Jack Welch of GE was once asked what was more important, strategy or execution. His answer was that both were equally important, but that strategy took twenty minutes to figure out, while execution consumed the rest of his life. Investing is similar: If you read The Intelligent Investor and the Berkshire letters, plus maybe Security Analysis and Margin of Safety, you know all you need to know about how to be a successful investor. A great many of Buffett’s admirers have read all of these and can recite them chapter and verse. What these books (or any other, or visiting Omaha) won’t help you with is executing that strategy. Execution in investing means studying businesses, one after the other, until you know how to predict the future cash flows that determine their values, or else know not to try. In his public appearances and writing, Buffett talks about strategy and execution more or less equally. But in private he’s all about execution—this was apparent to Adam Smith as early as 1972’s Supermoney, which introduced Buffett to the wider world: “After a while, around Warren, you begin to get a feel for business, as opposed to stocks moving.” The best investors copy what Buffett actually does rather than focus unduly on what he says.

Warren Buffett is one of a kind, and it’s unfair to accuse his acolytes of expecting to equal him. But many are determined to give it their best shot. To improve your chances, focus hard on the concrete things he and other superinvestors do, both strategically and on a day-to-day basis.


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