Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (2518)	7/3/2000 7:39:12 AM
From: John Pitera	Respond to of 33421

I'm interested to see the Tankan report that's coming out tomorrow, and see how the market handles it. Here is a stock Y, that may once again be selling under it's asset value, from today's B's: Asset-management companies are commanding record prices these days, with BankAmerica last week paying $950 million, or a whopping 12% of assets, to acquire the half of Marsico Capital Management that it didn't already own. The high valuations of money-management firms could benefit Alleghany. The company is a low-profile New York conglomerate that owns Alleghany Asset Management, which manages $48 billion. Alleghany's thinly traded shares finished Friday at 168, down 8% this year. The company has 7.4 million shares outstanding, valuing it at $1.3 billion. "The way we look at it, you're effectively getting the asset manager inside Alleghany for nothing," says Peter Russ, analyst at Fairholme Capital, a Short Hills, New Jersey, money manager. Russ values Alleghany at around $245 a share. Alleghany, run by a 32-year company veteran, John Burns, has slimmed down considerably in the past two years, spinning off its title insurance operation, Chicago Title, to shareholders in June 1998 and selling its reinsurance operations to Swiss Re in April. The company's principal assets now consist of 18 million shares of Burlington Northern, the railroad operator, worth around $60 per Alleghany share, roughly $55 a share in cash and another $60 a share in other assets, including insurance and minerals operations and some real estate in California. Russ conservatively values the asset-management arm -- its principal division is Montag & Caldwell, a successful manager with strong equity performance in recent years-at around $500 million, or roughly 1% of assets. That's about $70 per Alleghany share. Alleghany Asset isn't worth as much as some money managers because its asset base is skewed toward lower-fee institutional accounts. But if Alleghany Asset were valued at five times revenues, the average price in recent transactions, it would be worth $840 million, or $115 per Alleghany share before taxes. Russ believes Alleghany may make a cash distribution and buy back a sizable amount of stock using the proceeds from the sale of the reinsurance business. There has been some speculation that Alleghany might liquidate itself because Burns is 68 and the company's chairman, F.M. Kirby, is 80. Various members of the Kirby family control 35% of Alleghany stock. But Burns, who has a small cult following on Wall Street, has indicated no interest in retiring. He told shareholders at the annual meeting that Alleghany "is once again in a position to redefine itself." What that means remains to be seen.