Eric Falkenstein discovers value investing

Eric Falkenstein, economist/hedgie who writes the excellent Falkenblog (and author of Finding Alpha: the Search for Alpha when Risk and Return Break Down) recently showed the returns associated with buying companies in December 2008 that were selling for less than the cash on their balance sheets. Some correctly point out that he ignored associated debt (net cash would have been appropriate for many of these companies that were having trouble servicing the debt), but it is an interesting write-up nonetheless and if you don’t already, you should subscribe to his RSS feed.

Here’s their subsequent return for 12/1/08 through 6/20/2011 (a couple were taken over):

TotalReturn 12/1/08-11/20/11
Company
401%
FORD MOTOR (F)
-100%
GENERAL MOTORS (GM)
25%
ICAHN ENTERPRISE (IEP)
79%
CONTINENTAL AI-B (CAL)
183%
GOODYEAR TIRE (GT)
119%
UAL CORP (UAUA)
48%
CENTEX CORP (CTX)
64%
US AIRWAYS (LCC)
151%
CIENA CORP (CIEN)
669%
ASHLAND INC (ASH)
201%
AMKOR TECH (AMKR)
445%
WELLCARE HEALTH (WCG)
1922%
TRW AUTOMOTIVE (TRW)
230%
SANMINA-SCI CORP (SANM)
363%
ATLAS AIR (AAWW)
107%
GLOBAL INDS (GLBL)
2410%
LIBERTY-CAP A (LCAPA)
403%
ARVINMERITOR INC (ARM)
204%
RTI INTL (RTI)
417%
Avg

The market’s up only 64% over that period. Quite the call.

Read the rest of the article over at Falkenblog.

Talk to Frank about this article