OSS Capital, aka Oscar Schafer, today announced that they would be closing their fund at that a new fund would be opening run by two of Oscar's co-portfolio managers. OSS states that since opening they have beaten the S&P 500 by 600bps which would put their IRR at around somewhere around 5% - 7% since their fund launched in 2001 and over this time the S&P has gone down about 5% or -0.48% per annum. I have a feeling I may be off on this since I assumed they launched at the begining of the year when in all likelihood they launched at some point during making their actual performance likely in the 7% - 10% range.
Oscar has been a staple of the Barron's Investing Round Table for ever. His ideas are normally well thought out and very interesting. He was recently at the Barron's conference in NYC discussing how Hertz Global and Xerox.
His Hertz investment centers around five key points:
No. 1, the industry is consolidating. There are now four big players. There might be three if Dollar Thrifty Automotive [DTG] gets absorbed by Hertz. No. 2, historically this business was characterized by lots of excess fleet, driven by the automobile manufacturers' persistent overproduction and need to dump these cars into the car-rental channel. Following bankruptcy and management changes, the Big Three have stopped dumping cars into the rental channels, leading to improved profitability for the car-rental companies.
No. 3, strength in the used-car market has been driven by a dearth of leasing during the recession that has significantly lowered car-rental depreciation costs.
No. 4, Hertz owns a good equipment-rental company.
No. 5, it is going in a new area.
He thinks the Company has a big opportunity to gain share in teh off-ariport/insurance-replacement market. He thinks the stock could be worth mid-to high teens.
On Xerox, he thinks they can rebound to $12 to $15 a share (upfrom around $7) as operating income rises to the high single digits this year, and the company is repurchases 20% of its shares. He thinks the copier business will continue to decline but the outsourced goverment services can do well going forward (although they are cyclical).
Here is his letters to investors announcing the closing of the fund and spin-off of the new fund:
OSS Capital Management