MF Global Ltd. (MF)

Commodity brokers to the world. Commodity markets are going to be heating up.

A series of fortunate events over the last year or so has provided patient, opportunistic investors looking beyond the next twelve months with an opportunity to purchase an unimpaired franchise at a gigantic discount to intrinsic value. These events include...

A 150m loss by a "rogue" trader trading wheat futures, fears concerning the refinancing of a 1.4B bridge loan, an interest rate squeeze that ended up costing MF roughly $18M pre tax, and last but not least the markets shoot first, ask questions later attitude regarding all things financial. Taken together, the events listed above culminated in MF's common equity being driven down to a fraction of its tangible book value.

Now that these concerns have abated and it has become clear that MF's normalized earnings power remains intact, investor's have an opportunity to earn a few hundred percent as the smoke clears and MF returns to a more appropriate valuation. With a TBV of $8, and earnings power over the next few years of at least $1...an $8 to $12 price target represents what I believe to be conservative multiples to those values and hence a decent estimate of intrinsic value.