The Third Pig

It’s a little amusing to me how much attention Jim Cramer’s comments about pulling your “5-Year-Money” out of the market and sitting it in a safe place like cash or bonds garnered over the past few days. I for one, having given similar advice, didn’t find it that controversial. An investor, especially an individual investor, should never put their near term money at risk in the stock market.

Some professionals, like Henry Blodget [video], have even gone as far to say Cramer’s call to action is at odds with what Warren Buffett is doing, which is buying up strong franchises like, Constellation Energy, GE and Goldman Sachs. I beg to differ. Underlying Cramer’s call was any money investors do not need for near term purposes, should absolutely be at work in the market. It’s time to buy.

There are deals in the stock market that can be had right now that will likely not be seen again for quite sometime. A few are:

• Berkshire Hathaway (BRK-A, BRK-B): If there was ever a time to invest in Buffett’s company it’s now. For years the firm held $50 billion in cash searching for investments to make. This year alone, Buffett has invested $40 billion. He received warrants on both the GE and Goldman Sachs deals and though both are currently out of the money, they stand to be highly profitable investments. Berkshire’s A shares are likely worth $150,000 to $160,000 before accounting for how the company’s new investments will impact the business. Shares ended the day at around $113,000 per share, representing a 25% to 30% discount.



• Perini (PCR): Perini, a construction and general contracting concern has been trading well below the value of their backlog of sales and orders waiting to be filled. The company also recently announced $248 million in new contracts in Florida and Virginia. The stock gained almost 20% today skyrocketing at the end of the day to $17.64, but still trades near cash on the balance sheet of $15.55 per share.



• Delia’s (DLIA): Recently Foot Locker (FL) offered to buy this clothing retailers direct marketing business CCS for $102 million. The enterprise value (market cap + debt – cash) for the entire firm is only $66 million. The market hasn’t responded yet as the stock continues to hover around $2 per share although it gained almost 10% today. The selling in the market is pervasive and there just aren’t any buyers right now. But there will be for this company which is likely trading at less than half it’s true worth.

Disclosure: I and the clients of Brick Financial Management, LLC owned share of Berkshire Hathaway, Perini and Delia’s at the time of this writing.