Summer 2009

General Electric was trading at $5.80, reflecting a market perception that it was going bankrupt. However, the investor believes that much of this pessimism has already been priced into the stock, suggesting it could be undervalued and poised for recovery.

Citigroup was also trading as if it was going bankrupt, but the investor sees potential for recovery as the market sentiment shifts and prices reflect a more balanced view of the company's prospects.

Fortress International is expected to perform well regardless of the overall economy, indicating a strong business model that can withstand economic fluctuations.

Apollo Group is priced to perfection while the outlook is far from perfect. The company must increase its enrollment by more than 70% to maintain its current valuation, which is unrealistic given increased regulatory scrutiny, competition, and rising student defaults. Additionally, the shift towards Associate degree students, who have lower graduation rates and higher default rates, poses a significant risk to the company's financial health.

The team argued that Apollo Group's growth in Associate degrees, which have lower tuition and higher default rates, poses a significant risk to its revenue, with 80% at risk due to Title IV eligibility review. They believe that both students and investors are 'paying more and getting less' with APOL, making it a poor investment.

The team recommended purchasing Clear Channel senior secured term loans, which were trading at forty cents on the dollar, implying an enterprise value of $6.7 billion. They calculated the firm's value at a minimum of $12 billion, suggesting a potential IRR of 30% per year over three to five years, indicating significant upside.

The team recommended Jack in the Box with a target price of $30 per share, citing strong core restaurant operations, significant asset value, and growth potential in its Qdoba chain. They believe refranchising company-owned locations will unlock additional value, making it a compelling investment.

Avantair is benefiting from a shift in consumer spending habits, as it offers fractional ownership of planes at half the cost of competitors like NetJets. This positions the company well to capture market share from higher-end services as consumers look for more cost-effective options without completely sacrificing quality.

Essex Crane has shown strong fundamentals and a great management team, with the stock price recovering from a low of $3 to a current bid of $5.40, indicating positive market sentiment and growth potential.

Fortress International operates in a huge growth industry with a solid management team. The stock is currently priced at $1 per share, with an enterprise value of about $6.3 million, while the business is projected to generate $80 to $100 million in sales, making it a compelling investment opportunity.

TNR Technical is trading at $8.50, but has $2.55 million in cash, making its enterprise value extremely low at just $47,000. The company has generated $700,000 in operating income over the last year with no debt, presenting a significant undervaluation opportunity.

AO Smith is acquiring Smith Investment Company for stock, which presents an arbitrage opportunity. The deal involves receiving shares of AO Smith for shares of Smith, and the underlying businesses of Smith Investment Company are also being liquidated, creating additional value.

Smith Investment Company is involved in a merger with AO Smith, where shareholders will receive shares of AO Smith, and the company also has other businesses being spun off into a liquidating LLC, which adds to its value.

PCP’s business is misunderstood due to its cyclical nature, but it will benefit from a secular shift to high performance materials like titanium, providing organic growth of 5-10% per annum. Additionally, a significant portion of its sales comes from maintenance and repair, ensuring steady revenue. With dominant market share and strong returns on invested capital, PCP is well-positioned for sustained growth despite cyclical downturns.

The current price of $60 per share implies expectations that are unreasonably low, assuming a downturn twice as severe as that of 2001-2003 and an anemic recovery. My fair value estimate of $90 suggests that PCP can achieve a CAGR of 4-5% over the next decade, supported by management's historical ability to control costs and trim capacity during downturns.

Dentsply is the leading provider of consumable and other products to dentists, benefiting from positive demographic trends that should fuel increased demand. Currently trading at $26, under 14x this year’s EPS, while our intrinsic value estimate is north of $40.

Grainger is a leading distributor of maintenance, repair, and operations supplies with significant market share growth potential, as it currently holds less than 5% of a $140 billion market. The company has a strong customer value proposition that generates repeat purchases.

XTO is involved in acquiring and exploiting proven resources with low finding and development costs, making it a solid investment despite the volatility of commodity prices.

Occidental focuses on proven resources rather than wildcat exploration, with low finding and development costs and a strong emphasis on return on invested capital, making it a compelling investment despite being in the commodity sector.

Pool Corporation has a strong management team and an enviable competitive position in the pool construction and maintenance supplies distribution business, making it an attractive investment opportunity.

The long-term outlook for the waste industry is strong, and Waste Management is a leader in this space, making it a favorable investment choice.

Republic Services has capable management and good assets, making it a solid alternative to Waste Management, which is currently in the portfolio.

Vulcan Materials is a strong business in the materials sector, and while there is a similar situation with Martin Marietta, Vulcan is currently owned in the portfolio.

Berkshire Hathaway is one of the insurance companies in the portfolio, reflecting a careful selection of firms with strong franchises and balance sheets.

Chubb is included in the portfolio as a property and casualty insurance company, chosen for its strong franchise and balance sheet.

Progressive is another property and casualty insurance company in the portfolio, selected for its strong fundamentals.

Aflac has a strong capital position and a conservative investment strategy, which should help it survive current market challenges despite facing balance sheet issues.

Coca-Cola's strong competitive position and ability to raise prices in an inflationary environment make it a solid investment choice.

The team recommended the purchase of Lender Processing Services, believing the stock is 'unloved, neglected, and misunderstood' by analysts due to its exposure to the mortgage industry. They see significant value in the company as it is the largest mortgage processor in the U.S., handling over one-third of all originations, processing, and default services.

The core title insurance operation is undervalued due to a decline in home sales, but earnings power is conservatively estimated at $155 million, suggesting significant upside. The market is valuing the Information Services segment too low, indicating a margin of safety of 20% to 70%.