In contradistinction to the typical company, many owner-operator companies-those whose manager is also the primary owner and for whom that capital represents a major or the greater portion of their wealth-have been investing aggressively during this period rather than accumulating cash. Historically, owner-operators have a statistical likelihood of producing a far more favorable result than the average company. And it's hypothesized, but could never be proven, that those favorable results are a function of the incentive of management having most of its wealth embedded in the company, so that the only pathway to increase that wealth is really the success of the enterprise. It is a little known fact, even within Horizon Kinetics, that Horizon Research once published something known as the Intangible Asset Report, which was a regular compendium of such individuals and their companies.
In recent weeks and months, some of the following owner-operator transactions have been observed; consider, in each case, how cyclical or financially risky these businesses appear to be:
- Wilbur Ross recently purchased in excess of 1.3 million shares of Assured Guaranty which, among other activities, provides mortgage guaranty insurance to institutional lenders. That represents a commitment of about $16 million. He already owned 16 million shares, or 8.7 percent of the company. This latest purchase was at approximately 52 percent of book value.
- In July 2011, Wilbur Ross and Fairfax Financial, the property-casualty insurer ably led by owner-operator V. Prem Watsa (13.2 percent book value/share growth since 2001), each agreed to invest 300 million in the Bank of Ireland. Each will own 9.9 percent.
- Google, under the leadership of Larry Page and Sergey Brin, recently agreed to buy Motorola Mobility for $12.5 billion, presumably for its patent portfolio. It also recently announced it is acquiring Zagat, the restaurant guide, for $125 million.
- Carl Icahn recently purchased another 3 percent of the auto parts maker Federal Mogul. He had already owned about 75 percent. He had made those purchases at, more or less, book value.
- Charlie Ergen's DISH Network, some months ago bought Blockbuster Video out of bankruptcy for $320 million. And some months prior to that, through his other company, known as EchoStar, he paid $2 billion for Hughes Communications, a satellite manufacturer, presumably because in two or three years the United States will exhaust its available cellular spectrum and have to rely upon the bandwidth granted to satellite providers. There are a handful of individuals - owner-operators, not agent-operators - that have been purchasing the available satellite spectrum over the last several years.
- BGC Partners, formerly known as Cantor Fitzgerald, the bond dealer, led by Howard Lutnick, recently bought Newmark Realty, a real estate broker, real estate being about as depressed as real estate has ever been.
- Joseph Steinberg and Ian Cumming of Leucadia National recently acquired nearly 27 percent of Mueller Industries. Mueller Industries makes pipes and fittings for the housing and large-scale construction markets, which are clearly depressed. As of the most recent 13D filing, Leucadia owned 26.7 percent of the company.
- In late September 2011, the board of Berkshire Hathaway, a company that for 40 years has not repurchased any shares, announced that it would repurchase potentially billions of dollars of shares at prices up to 1.1x book value. The shares are the same price they were five years ago, although book value is about 45 percent higher.