I’ve said it before, and I’ll say it again: Phil Falcone, I believe in you. I think Harbinger is the thing finance stories are made of. And you know what’s great?I’m now not the only one who thinks so….no longer the lone voice in Wall Street’s wilderness.
As the NYTimes reports, Christopher Mittleman of Mittleman Brothers Investment Management has joined my chorus of singing Falcone’s praises.
As laid out in “The Case for Harbinger Group as the Next Berkshire,” Mittleman argues that the embattled hedge fund manager’s (turned LightSquared investor) fund and performance evolution mirrors that of Carl Icahn’s primary investment vehicle.
“When we were investing… back in 1996, one of the reasons it was available so cheaply was because Icahn’s reputation was at a low point, with his investment in airline company TWA wiped out after its second bankruptcy…But with the margin of safety provided by a discount to NAV in excess of 50%, and operating under the simple assumption that decades of outstanding investment returns are not undone by one or two bad bets, we correctly decided that Icahn had not suddenly become an inept investor in the mid-1990s, and so by the time he was considered an investing genius again about a decade later, the discount to NAV that had plagued those shares for so many years very suddenly became a substantial premium.”
So what, precisely, does this have to do with Falcone and his LightSquared play?
Mittleman postulates that “when exceptional investors and/or business operators take control of otherwise unremarkable public corporations, it’s often a prelude to a lucrative transformation of which outside investors can also take advantage, if they happen to notice what’s going on before Wall Street wakes up to metamorphosis in progress.” In short, Falcone knows what he’s doing, and just because it’s not obvious to the rest of Wall Street (which can be about as obtuse of group as any) what he’s up to, that doesn’t mean Falcone’s a guaranteed failure.
Obviously, I very openly agree with Mittleman, not just with the specifics but the general arc of his argument. Finance represents, broadly speaking (a glossy literary trick, I know), a lazy intellectual group – more in love with worshipping results while simultaneously ignoring details and processes. Once upon a time, Carl Icahn was a lone, depressed former-success kicking around Texas, a laughing stock example of “what happens when you take too much risk.” Correspondingly, Warren Buffet – Omaha’s favourite (and only?) billionaire – was once a regimented investment “weirdo” swilling cherry cokes and eschewing sushi in Nebraska.
And now…now I have faith that Phil Falcone will soon be joining the ranks of the Icahns and Buffets as one of our generation’s “often-worshipped-rarely-understood” success stories.
And I, for one, look forward to reading the footnotes.
Margaret Bogenrief is a Partner with ACM Partners, a boutique crisis management and distressed investing firm serving companies and municipalities in financial distress. She can be reached at [email protected]