SEC investigating the CEO for securities fraud. Oddly, the company has 19 employees but a billion dollar market cap. No investor would buy this stock right?
Well…. If you had bought in June 2012 when the SEC announced the investigation you would be up over 80% today. The company is quite profitable and has a PE of 5! The company is Harbinger Group Inc (NYSE:HRG) and it was recommended by value investor, Chris Mittleman in Summer 2011. Since that time, HRG is up over 60% while the S&P 500 has returned approximately 20%. Want to hear more picks from Chris? Chris Mittleman will be speaking at the upcoming Value Investing Congress in Las Vegas. Readers of ValueWalk receive a large discount (details below).
Harbinger Group Inc (NYSE:HRG)
Michele Ragazzi's Giano Capital returned 1.9% for March, taking the fund's year-to-date performance to 1.7%. Since its inception, Ragazzi's flagship fund has produced a compound annual return of 7.8%. According to a copy of the €10 million fund's March update, a copy of which ValueWalk has been able to review, Giano's most significant investment at Read More
- Earlier this month, we highlighted Mittleman Brothers’ investment in Carmike Cinemas, Inc. (NASDAQ:CKEC), a rural-based cinema chain amid a major turnaround. Now we are shifting our focus to Mittleman’s growing position in HRG.
- Similar to LUK, HRG is a holding company that invests in a number of businesses. Billionaire investor Phillip Falcone runs the firm.
- Falcone first made headlines from his investments against the subprime space. In 2009, Falcone decided to transition away from the hedge fund model, and so he bought Zapata and turned it into a holding company focused on acquiring undervalued assets and maximizing cash flow. HRG subsequently acquired a majority stake in Spectrum Brands Holdings, Inc. (NYSE:SPB), which owns consumer brands such as Rayovac, Remington, George Foreman, Black & Decker, Farberware, etc.
- Yet, perhaps his biggest bet was in telecom provider LightSquared. It was a telecom carrier that was created to offer a satellite-based 4G network. This firm’s success, however, was contingent upon the use of satellite technology for terrestrial use. Ultimately, Falcone failed to sway lawmakers who ruled that LightSquared would interfere with GPS signals used by the military.
- Adding to his woes, the SEC charged Falcone and Harbinger Group Inc (NYSE:HRG) with securities fraud in June 2012. It was alleged that he was using funds to pay off his own personal taxes, among other charges. So there’s clearly some headline risk associated with the name, which may have unfairly added pressure to HRG. It’s important to distinguish, however, that HRG is not being charged.
- Aside from the LightSquared, HRG’s investments have performed well. The company has since recovered, in part thanks to its nearly 60% stake in SPB.
- will be presenting for the first time at this spring’s Value Investing Congress.
Readers can receiver a discount but only for a limited time so act fast.
Discount Code: S13VW7
Expiration: March 18th
UPDATE 10:36 AM EST: This article incorrectly stated that HRG owned Lightsquared. Lightsquared is owned by the hedge fund not HRG. The incorrect statement has been removed from the updated article.