here is an interesting article
http://www.lloyds.com/News_Centre/Features_from_Lloyds/Societe_Generale_rogue_trading_and_a_little_solution_called_insurance_29012008.htm
Tuesday, January 29, 2008
Sunday, January 27, 2008
Whitney Tilson likes Fairfax Financial and Berkshire Hathaway
here's the link
http://www.youtube.com/watch?v=1p0hZgCd5MI
Interestingly Whitney Tilson says he believes the stockmarket represents the best value he has seen since late 2002 and early 2003.
http://www.youtube.com/watch?v=1p0hZgCd5MI
Interestingly Whitney Tilson says he believes the stockmarket represents the best value he has seen since late 2002 and early 2003.
Wednesday, January 23, 2008
First Marmon acquisition, then municipal bonds now a deal with Swiss re. Berkshire Hathaway turns credit crisis into a financial windfall.
Here's the link to the Swiss re deal
http://www.independent.co.uk/news/business/news/buffett-snaps-up-3-per-cent-stake-in-struggling-reinsurance-firm-swiss-re-773171.html
http://www.independent.co.uk/news/business/news/buffett-snaps-up-3-per-cent-stake-in-struggling-reinsurance-firm-swiss-re-773171.html
Monday, January 21, 2008
What a legendary investor did during a stockmarket crash
With European markets falling over 6% during Monday’s trade(marking a 20%+ drop since last June) and Wall Street set to fall sharply on Tuesday, its easy to feel a sense of panic right now. Are we in for 1987 all over again?
Let me tell you what Shelby Cullom Davis did on that infamous day “Black Monday” in 1987. Davis , one of the greatest investors of all time, achieved 20% plus compounded share returns over multiple decades and put himself on the Forbes rich list.
On Black Monday, Shelby Davis picked up the phone & placed millions in buy orders to his broker’s trading desk. His office manager thought he had gone mad and tried to hang up Davis’s phone. But Davis grabbed the receiver back and kept on dialing(The Davis Dynasty – Rothchild)*
After the market had closed, Davis had lost $125 million* on paper. But as far as Davis was concerned, he hadn’t lost anything. He had bought many stocks at big discounts to what he knew was their real value. Why did other investors sell to Davis? Because they panicked. Over time Davis was proven right as Wall Street rallied following its Black Monday correction.
There’s a well known saying that when panics occur in the stockmarket, wealth flows from weak hands to strong hands.
So whatever happens on Tuesday or beyond, remember what Shelby Cullom Davis did. The worst thing you can do during a panic is to sell. And if you have the nerve and conviction, its probably smarter to buy stocks on discount.
*(The Davis Dynasty by John Rothchild is an excellent book I highly recommend).
Disclaimer: The above comments represent the authors own opinions and are not intended as investment advice and should not be relied upon as investment advice.
Let me tell you what Shelby Cullom Davis did on that infamous day “Black Monday” in 1987. Davis , one of the greatest investors of all time, achieved 20% plus compounded share returns over multiple decades and put himself on the Forbes rich list.
On Black Monday, Shelby Davis picked up the phone & placed millions in buy orders to his broker’s trading desk. His office manager thought he had gone mad and tried to hang up Davis’s phone. But Davis grabbed the receiver back and kept on dialing(The Davis Dynasty – Rothchild)*
After the market had closed, Davis had lost $125 million* on paper. But as far as Davis was concerned, he hadn’t lost anything. He had bought many stocks at big discounts to what he knew was their real value. Why did other investors sell to Davis? Because they panicked. Over time Davis was proven right as Wall Street rallied following its Black Monday correction.
There’s a well known saying that when panics occur in the stockmarket, wealth flows from weak hands to strong hands.
So whatever happens on Tuesday or beyond, remember what Shelby Cullom Davis did. The worst thing you can do during a panic is to sell. And if you have the nerve and conviction, its probably smarter to buy stocks on discount.
*(The Davis Dynasty by John Rothchild is an excellent book I highly recommend).
Disclaimer: The above comments represent the authors own opinions and are not intended as investment advice and should not be relied upon as investment advice.
Saturday, January 19, 2008
Title insurers could be on the menu
"[Stock market investing] is the one sphere of life and activity where victory, security and success is always to the minority and never to the majority. When you find anyone agreeing with you, change your mind. When I can persuade the Board of my Insurance Company (National Mutual) to buy a share, that, I am learning from experience,is the right moment for selling it."
John Maynard Keynes quote (Sep 1937) p154 The Keynes Mutiny Justin Walsh
With the depressed housing market, housing related stocks are very unpopular at the moment. The housing industry in the US will remain in recession for at least 2008 and probably 2009 and the general economic outlook is negative. Unsurprisingly, housing related stocks such as homebuilders, mortgage insurers, banks etc have been on Wall Street's sell lists. Title insurers have also been swept up in the large wave of selling of housing related stocks.
When will these stocks bottom? Who knows. But the storm will eventually pass , it always has in the past. Nevertheless, it will claim its victims, companies with weak balance sheets or banks and lenders who have written poor loans will suffer the consequences.
Title insurance is a very old business and is indispensible in all real estate transactions. When you buy a property you want protection from anyone else laying claim the property, you want a clean title. Title insurance provides this protection. In fact it is required by law.
Title insurance is a very profitable business because defects or problems with title are generally very low. Its required every time a property is sold or refinanced, residential or commercial.
Over the foreseeable future, title insurers will face headwinds from lower transaction volume and value, as vendors become reluctant sellers, but this is normal in the title insurance business during a down period.
I recently read an excellent presentation from the value investing conference by Zeke Ashton of Centaur Capital on two title insurers, Fidelity National Financial(FNF) and LandAmerica Financial(LFG). The stock prices of both these companies are currently trading close to 52 week lows. What is interesting also is that insurer Markel Corporation(MKL), know for its value investing prowess, recently disclosed a new position in LandAmerica and is seeking permission to push its ownership to over 10%. Markel also owns stock in Fidelity National Financial.
So could title insurers now be on the menu for patient long term investors?
Here is the presentation link (remember also that reading intelligent analysis is no substitute for your own research. A good place to start but not to end)
http://blog.valueinvestingcongress.com/2007/11/06/digging-for-value-in-the-real-estate-rubble-by-zeke-ashton/
Disclaimer: The above opinions represent the authors own views and are not intended as investment advice and should not be relied upon as investment advice.
Disclosure: I own shares in Markel Corporation(MKL) but no other securities discussed.
John Maynard Keynes quote (Sep 1937) p154 The Keynes Mutiny Justin Walsh
With the depressed housing market, housing related stocks are very unpopular at the moment. The housing industry in the US will remain in recession for at least 2008 and probably 2009 and the general economic outlook is negative. Unsurprisingly, housing related stocks such as homebuilders, mortgage insurers, banks etc have been on Wall Street's sell lists. Title insurers have also been swept up in the large wave of selling of housing related stocks.
When will these stocks bottom? Who knows. But the storm will eventually pass , it always has in the past. Nevertheless, it will claim its victims, companies with weak balance sheets or banks and lenders who have written poor loans will suffer the consequences.
Title insurance is a very old business and is indispensible in all real estate transactions. When you buy a property you want protection from anyone else laying claim the property, you want a clean title. Title insurance provides this protection. In fact it is required by law.
Title insurance is a very profitable business because defects or problems with title are generally very low. Its required every time a property is sold or refinanced, residential or commercial.
Over the foreseeable future, title insurers will face headwinds from lower transaction volume and value, as vendors become reluctant sellers, but this is normal in the title insurance business during a down period.
I recently read an excellent presentation from the value investing conference by Zeke Ashton of Centaur Capital on two title insurers, Fidelity National Financial(FNF) and LandAmerica Financial(LFG). The stock prices of both these companies are currently trading close to 52 week lows. What is interesting also is that insurer Markel Corporation(MKL), know for its value investing prowess, recently disclosed a new position in LandAmerica and is seeking permission to push its ownership to over 10%. Markel also owns stock in Fidelity National Financial.
So could title insurers now be on the menu for patient long term investors?
Here is the presentation link (remember also that reading intelligent analysis is no substitute for your own research. A good place to start but not to end)
http://blog.valueinvestingcongress.com/2007/11/06/digging-for-value-in-the-real-estate-rubble-by-zeke-ashton/
Disclaimer: The above opinions represent the authors own views and are not intended as investment advice and should not be relied upon as investment advice.
Disclosure: I own shares in Markel Corporation(MKL) but no other securities discussed.
Tuesday, January 15, 2008
Post-Christmas sales
Everyone loves a post-christmas discount sale, investors should feel no different about the recent correction in equity markets. The fact is, its better to buy companies when they are cheap & negativity abounds than when everthing is positive.
Buy at the sound of canons, sell at the sound of trumpets. So goes the saying.
Now is a great time to start making a list of stocks with your preferred buy target price that you have always liked but may have been too expensive to consider in recent years. My only suggestion is to stick with companies with strong balance sheets & great managers that can weather tough credit and consumer conditions.
If you own mutual funds , now may be a good time to consider making contributions. Its always smarter to average down than try & pick a stockmarket bottom so consider staggering those contributions over each month.
Hopefully I will have a few interesting stock ideas to post in the next few weeks so stay tuned.
Disclosure: The above comments represent the opinions of the author and are not intended as investment advice and should not be relied upon as investment advice.
Buy at the sound of canons, sell at the sound of trumpets. So goes the saying.
Now is a great time to start making a list of stocks with your preferred buy target price that you have always liked but may have been too expensive to consider in recent years. My only suggestion is to stick with companies with strong balance sheets & great managers that can weather tough credit and consumer conditions.
If you own mutual funds , now may be a good time to consider making contributions. Its always smarter to average down than try & pick a stockmarket bottom so consider staggering those contributions over each month.
Hopefully I will have a few interesting stock ideas to post in the next few weeks so stay tuned.
Disclosure: The above comments represent the opinions of the author and are not intended as investment advice and should not be relied upon as investment advice.
Friday, January 11, 2008
Why Fairfax Financial(FFH)remains one of my largest positions
Property and casualty insurers will face tough headwinds over the course of 2008. On the underwriting side, over-capacity is driving rates down and lowering premiums and we are likely to see worsening combined ratios. On the investing side, some insurers face losses on CDOs and riskier corporate bonds while insurers with large equities positions will see lower returns from capital gains as economic growth slows.
It all sounds a bit grim. There are opportunities out there for investors in insurance stocks, but now is the time to be extremely selective.
Canadian based insurer Fairfax Financial is one company I own and remains one of my top holdings. Here are my reasons
Fairfax will benefit from a large housing downturn and I think we still have ways to go. Fairfax owns a large credit default swap position ( with a notional value of over$18 billion at 30th September 2007) on 30 names exposed to a collapse in the housing market such as mortgage insurers, financial guarantors and mortgage lenders. Fairfax has enjoyed substantial unrealized gains on this CDS portfolio to date, in excess of $1 billion as of the 3Q 2007 conference call, and this CDS portfolio will likely have continued to appreciate in recent months.
Substantially all of Fairfax’s fixed income portfolio is in government bonds, they have no CDOs or other toxic securities . As treasury yields(and interest rates) fall, Fairfax will enjoy unrealized gains on the bonds they own, a 1% fall in interest rates will lead to a 10% increase in the value of their bond portfolio(2006 Annual report). This will boost shareholder equity and book value per share.
Fairfax has hedged 80% of its equity portfolio against a decline in the S&P. This is insurance for Fairfax, protecting its capital position against any unforeseen shock we might see to equities as the economic fundamentals and business conditions deteriorate.
Fairfax’s Asian operations will continue to grow rapidly with the economic expansion throughout the Far East. US is facing a recession but the prospects in Asia continue to look favourable. Fairfax’s net premiums written on its Asian subsidiaries are up 20% year over year.
Fairfax’s investment portfolio is worth more than its carrying cost. Their 26% interest in ICICI Lombard, India’s largest general insurer, is carried on the books at $60 million well below its fair value estimated at $147 million in Fairfax’s balance sheet disclosures. Commentators such as Whitney Tilson have placed even high fair value estimates. Also Fairfax owns private equity investment in Chou Associates Fund that would be in the books at cost.
Softer insurance pricing for reinsurance and general insurance will affect Fairfax’s US and Canadian operations. However, even as the top line shrinks, Fairfax enjoys an improved reserving position from that which existed a few years ago which means Fairfax can continue to improve its bottom line through a stronger combined ratio. In the first nine months to 30th September 2007, even though net premiums were down slightly, Fairfax’s had a big improvement in underwriting profit of $198million versus $62 million for the year earlier.
Prem Watsa, Fairfax's Chairman and CEO, is a fantastic value investor with a great track record. Investors in Fairfax should rejoice over declining equity values, as Prem Watsa will have the opportunity, the smarts and financial wherewithal to take full advantage.
Finally, with an estimated book value of around $220 as at December 2007. At around $280 per share Fairfax trades for a reasonable 1.3x book value. That’s cheap considering Fairfax has compounded book value at a 24%+ clip over 20 years . Looked at another way, Fairfax has around $1000 per share in cash and invested assets, if they can do conservative 5% after tax return that’s $50 a share on a $280 share price.
In part due to poor equity market conditions, Fairfax’s shares are also likely discounted as a result of Fairfax’s troubles over the last few years. However, on the latter point, I remain confident, based on their improving reported financials, that Fairfax have now put these reserving issues behind them.
Disclosure: I own Fairfax Financial (FFH) shares
Disclaimer: The opinions expressed in this article represent those of the author and are not intended as investment advice and should not be relied upon as investment advice.
It all sounds a bit grim. There are opportunities out there for investors in insurance stocks, but now is the time to be extremely selective.
Canadian based insurer Fairfax Financial is one company I own and remains one of my top holdings. Here are my reasons
Fairfax will benefit from a large housing downturn and I think we still have ways to go. Fairfax owns a large credit default swap position ( with a notional value of over$18 billion at 30th September 2007) on 30 names exposed to a collapse in the housing market such as mortgage insurers, financial guarantors and mortgage lenders. Fairfax has enjoyed substantial unrealized gains on this CDS portfolio to date, in excess of $1 billion as of the 3Q 2007 conference call, and this CDS portfolio will likely have continued to appreciate in recent months.
Substantially all of Fairfax’s fixed income portfolio is in government bonds, they have no CDOs or other toxic securities . As treasury yields(and interest rates) fall, Fairfax will enjoy unrealized gains on the bonds they own, a 1% fall in interest rates will lead to a 10% increase in the value of their bond portfolio(2006 Annual report). This will boost shareholder equity and book value per share.
Fairfax has hedged 80% of its equity portfolio against a decline in the S&P. This is insurance for Fairfax, protecting its capital position against any unforeseen shock we might see to equities as the economic fundamentals and business conditions deteriorate.
Fairfax’s Asian operations will continue to grow rapidly with the economic expansion throughout the Far East. US is facing a recession but the prospects in Asia continue to look favourable. Fairfax’s net premiums written on its Asian subsidiaries are up 20% year over year.
Fairfax’s investment portfolio is worth more than its carrying cost. Their 26% interest in ICICI Lombard, India’s largest general insurer, is carried on the books at $60 million well below its fair value estimated at $147 million in Fairfax’s balance sheet disclosures. Commentators such as Whitney Tilson have placed even high fair value estimates. Also Fairfax owns private equity investment in Chou Associates Fund that would be in the books at cost.
Softer insurance pricing for reinsurance and general insurance will affect Fairfax’s US and Canadian operations. However, even as the top line shrinks, Fairfax enjoys an improved reserving position from that which existed a few years ago which means Fairfax can continue to improve its bottom line through a stronger combined ratio. In the first nine months to 30th September 2007, even though net premiums were down slightly, Fairfax’s had a big improvement in underwriting profit of $198million versus $62 million for the year earlier.
Prem Watsa, Fairfax's Chairman and CEO, is a fantastic value investor with a great track record. Investors in Fairfax should rejoice over declining equity values, as Prem Watsa will have the opportunity, the smarts and financial wherewithal to take full advantage.
Finally, with an estimated book value of around $220 as at December 2007. At around $280 per share Fairfax trades for a reasonable 1.3x book value. That’s cheap considering Fairfax has compounded book value at a 24%+ clip over 20 years . Looked at another way, Fairfax has around $1000 per share in cash and invested assets, if they can do conservative 5% after tax return that’s $50 a share on a $280 share price.
In part due to poor equity market conditions, Fairfax’s shares are also likely discounted as a result of Fairfax’s troubles over the last few years. However, on the latter point, I remain confident, based on their improving reported financials, that Fairfax have now put these reserving issues behind them.
Disclosure: I own Fairfax Financial (FFH) shares
Disclaimer: The opinions expressed in this article represent those of the author and are not intended as investment advice and should not be relied upon as investment advice.
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