218 The Business of Value Investingrate has been astonishing, and in 2008, it replaced more than 200
percent of its production. At the height of the oil boom, shares
overshot to $ 50 a share. In March 2009, they severely undershot to
$ 3 a share for a company that earned $ 13.17 a share in cash fl ow in- With 36 million shares outstanding, each share of company
stock represented about 3.5 barrels of proven oil reserves with the
price of oil around $ 50 per barrel. Factor in probable reserves, and
each share represents just under 6 barrels of oil.
Horsehead Holding Company ( ZINC )
Horsehead is a producer of zinc and zinc - based products. Zinc is a
valuable but often misunderstood commodity. It ’ s used as a protec-
tive coating for pipes and towers. Zinc oxide is an integral part of
tire and rubber products, plastics, and pharmaceuticals. Plus, the
company is the largest recycler of electric arc furnace (EAF) dust in
the United States. EAF dust is an extremely hazardous waste mate-
rial produced by steel mini - mill operators such as Nucor.
Horsehead was being valued by the market at $ 140 million with
zero debt and about $ 60 million in cash, equivalent to about $ 2 per
share. The price was $ 4 a share with $ 2 a share net cash in the bank
and 2008 EPS of $ 1.43. Profi ts are likely to be lower in 2009. Still,
Horsehead ’ s manufacturing and recycling plants are worth $ 1 bil-
lion. Insiders own 16 percent of the stock.AgFeed Industries ( FEED )
Jumping over to the other side of the pond, AgFeed is the leading
seller and producer of animal feed in China. AgFeed also raises,
breeds, and sells hogs for use in China ’ s pork production markets.
Very few people seem to realize how important pork is to the
Chinese. China actually has a strategic pork reserve very similar to
the Strategic Oil Reserve here in the U.S. The Chinese consume six
times the amount of pork that the U.S. consumes.CH010.indd 218CH010.indd 218 9/2/09 11:50:57 AM9/2/09 11:50:57 AM