Value Investment opportunity

1

• Welcome!
• Value Investment opportunity
• 
  
  
  
• 
  
  

2
Highest Return Scenario
Temporary bargain price Fixable Error
Solid Fundamental value Able
Management Highest return
www.gjfunds.com
3
High Return Opportunities AMEX GEICO

• 1960 American Express Salad Oil crises, AMEX
  shares dropped 65/share to 35/share.
• Warren Buffett partnership invested 13
  Million (40 of his partnership fund). In 2
  years,
• Price tripled and partnership earned 20
  Million profit.
• GEICO (1976) Stock dropped from 61/share to
  2/share.
• Over next 5 years until 198, Berkshire
  invested 45.7 Million.
• 1996 Berkshire owned 51 of the company
  and agreed to pay 2.3 Billion for 49 of the
• company, paid close to 70/share
• Compound Annual return for 20 years 19.45
  for 20 years.

www.gjfunds.com
4
Recent High Return Opportunities GS,BAC and CITI
Citigroup (08 to 09) - 30 to 0.97/share,
March 09 touched 0.97/share, bounced
back to 5.23 on August 09.. 530
return in 5 months

• Goldman Sachs(Jan08-09)- From 195/share to
  59/share
• in Nov 08. Then Bounced back to 165/share
  in Dec 09. 270 return in
• one year
• Bank of America (Jan 08-09) From 40/share to
  2.53(Mar 09),
• Bounced back to 15.28(Dec 09). That is 600
  return in 9 months

www.gjfunds.com
5
Warren Buffett - Pessimism

• The most common cause of low prices is
  pessimism - some times pervasive,
• some times specific to a company or
  industry. We want to do business in such an
• environment, not because we like pessimism
  but because we like the prices
• it produces. It's optimism that is the
  enemy of the rational buyer
• 
  
  -Warren Buffett
• The future is never clear, and you pay a very
  high price in the stock market
• for a cheery consensus. Uncertainty is the
  friend of the buyer of long-term values
• - Warren Buffett
• Price is what you pay. Value is what you get
• 
  
  - Warren Buffett

www.gjfunds.com
6
TEREX Corporation Present opportunity

www.gjfunds.com
7
Temporary Bargain Price -Terex Corporation(2007-20
09)

• TEX trading around 74/share in October 2007,
  
• 2007 yearly revenue 9.1 Billion, Net income
  613 Million
• 2007 Diluted shares 104.9 million shares
• Market cap in October 2007 7.76 Billion.
• 2007 EPS 5.85/share
• 2007- P/E trading ranges 9 and 17, stock
  trading 56 to 65/share
• Recession started in 2008, revenue started
  coming down, financial crisis happened,
• Price came down, lowest point reached February
  2009 8.92/share
• Kendall Law Group filed lawsuit for possible
  securities violations related to public
• statements made Dec 31 st, 2009 price
  19.81/share

www.gjfunds.com
8
Fixable Error

• Terex lower revenue because of Industry down
  turn started in 2008 and
• continue in 2009.
• Terex started managing the business for cash
  conversion in 2009
• 2009 Long term Debt 1.9 Billion
• Over 1.5 Billion Liquidity and no near term
  debt maturities until 2012
• Improved prospects for 2010
• Networking capital reduction 199 Million
• Cash from inventory reduction 497 Million YTD
• Current administration infrastructure spent and
  Emerging market demand

www.gjfunds.com
9
Solid Fundamental Value

• 2009 last 3 Quarters revenue 3.82 Billion
  compared to 7.7 Billion in 2008
• 2004 to 2008 EPS growth 16.5
• Retained earnings are great. Each dollar
  retained created 2.48/share from
• 2004 to 2008
• 2004 to 2008, Average ROE 22.58
• Owner income increased 12.41 from 2004 to
  2007

www.gjfunds.com
10
Solid Fundamental value- Intrinsic value

• Owner income increased 12.41 from 2004 to
  2007.
• Company in the cost conservation strategy to
  survive the recession,
• After the recession, probably next year
  revenue will start grow.
• Calculating conservative owner income
  increases, 5 for next two
• years and 4 for another three years.
• Discount rate 20
• Calculated intrinsic value 45/share
• 12/24/09 trading price 21.24/share
• Which is 52.8 discount to intrinsic value.

www.gjfunds.com
11
Able Management - Divestiture of Mining Business

• Divestiture of mining business to Bucyrus
  international for 1.3 Billion cash.
• Through 2004-2008, mining has accounted for 12
  and 14 of consolidated net sales
• and operating profit respectively.
• 2008 Net sales with Mining 9.9 Billion
• 2008 Net sales without mining 8.4 Billion
• Company planning to concentrate on machinery
• and industrial production.
  
• 
  
  Ron DeFeo, Chairman and CEO
• Company projecting to earn EPS 8.5/share
  in 2013 that is double the business in 2013
• Use of proceeds to pay down debt.
• 14 of the profit 1.3 B cash offer
• 100 of the company should be valued at 9.2
  Billion.
• 12/24/09 market cap 2.3 B, which is 75
  discount to intrinsic value.

www.gjfunds.com
12
Terex return projection Owner earnings

• 2013 projected Cash flow 694 Million as per the
  owner earnings projection, that is around
  6/share.
• This stock historically traded between 9 and 17
  ratio. Dec 31 st,2009 TEX price 19.81
• Lowest P/E calculation - 54/share,
• Compound annual return 28.4
• High P/E Calculation 102/share
• Compound annual return 50.63

www.gjfunds.com
13
Long term Approach Southwestern Energy

• Invest in Business and behave like Private
  Business owner. Long term holdings will yield
  great results over time.
• As per the new Wall street jargon, Buy and hold
  strategy is dead. Present portfolio managers,
  turn their portfolios 200 to 300 normally.
• Last Decade example South western Energy
  company(2000 to 2010)
• Dec 31 st, 1999 - 0.80/share, Dec 31
  st,2009- 48.20/share
• Total return 6025, Compound Return
  50.65

www.gjfunds.com
14
Long term Approach Amazon, Priceline

• Amazon
• May 1997- 1.50/share, Dec 31 st,2009-
  134.52/share
• Total return 8968, Compound Return
  45.25
• Priceline
• Dec 29, 2000- 7.88/share, Dec 31
  st,2009- 218.41/share
• Total return 2771, Compound Return
  44.64
• Above stocks are purchased, when temporary
  bargain price and kept long term. These stocks
  are not present day recommendations. Do your own
  research.

www.gjfunds.com
15
Investment Framework

• Invest in Business, Behave like owners.
• Invest in circle of competence business, needs to
  know analyze the business as business owner.
• Invest in simple and high return on Equity type
  business.
• Look for temporary down turn, depressed prices in
  great business.
• Invest in Moat based business.
• Invest in great management team
• Look for low debt business.
• Never use leverage
• Invest for long term
• Entry price should have minimum 25 discount to
  intrinsic value(Margin of safety)
• Maintain concentrated portfolio, not more than 20
  to 25 names

www.gjfunds.com
16
Thank You
Jeeva RamaswamyGJ Investment Funds I LP, 4
Walter E Foran Blvd, Suite 206 Flemington,
NJ-08822 Email jeeva_at_gjfunds.com Ph
908-782-0009 Ext 225 Mobile [phone] Fax
908-782-2765 www.gjfunds.com We have experienced
loss in the past. Do your own research
www.gjfunds.com