Leucadia National - Consistently Ahead of the Curve

Everyone has heard the theory that no investor can expect to consistently beat the market over the long term; the stock market today is simply too efficient. Of course, in most cases this sentiment is correct; it is exceedingly difficult to be on the right side of the market year after year. However, there are exceptions to every rule and one exception to this investment adage is Leucadia National Corp. (LUK). To be fair, LUK does not outpace the market every year, but over the long haul its performance is undeniable. From 1979 through the end of 2007, this diversified holding company has returned a gaudy 26.2% per year versus an annualized 9.8% return on the S&P 500. Yet, there is relatively little buzz about LUK and also fairly little information available about the company—but this is certainly a story that should be told.



The key to Leucadia’s success has to be the talented men that steer the strategic vision of the company: Ian Cumming and Joseph Steinberg. These two gentlemen have successfully navigated the ups and the downs over the last few decades always with a firm grip on macroeconomic trends. For example, as they describe in their annual letter to shareholders, after observing the simultaneous rise of population and standard of living in Asia (China and India in particular), Cumming and Steinberg sensed opportunity. Realizing that infrastructure expansion in these regions would surely be necessary to foster further growth, they invested in copper and steel mining operations. As they surmised, global demand for basic materials ramped up in a big way—with prices following suit—and now their investments are paying off. This is just one demonstration of the fundamentally sound and profitable vision of these two leaders. Their management style is to find and exploit under-appreciated value in the marketplace, and in my opinion it is an approach that is part science and part art.

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