Catching up on some favorites and a couple add-on personal buys for the Friday File

Updates on Markel, Greenlight Re, Ligand Pharmaceuticals and a few others

By Travis Johnson, Stock Gumshoe, August 2, 2013

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We brought you Myron Martin’s latest column for the Irregulars this morning, which included some new ideas in the junior resource stock space — that’s not where I prefer to invest most of the time, but I know a lot of you like those kinds of stocks so hopefully you find his musings to be helpful and interesting. Since you’ve got that to work through for some new ideas as well, I’m going to keep it a little bit brief on this first August Friday and just share some updates and opinions on a few of the stocks in our Gumshoe Universe … and let you know what small additions I’ve made to my portfolio.

Markel (MKL) remains one of my strongest conviction stocks as a long-term holding, but I am hoping for a dip when they report their next quarter on Monday — the next quarter will be the first one that includes Alterra, and therefore a dramatically larger and more bond-heavy portfolio for Tom Gayner to invest (and adjust, gradually), but we also saw interest rates spike in June at the end of that quarter, so the book value of the bonds in their portfolio would very likely have fallen. I’m hoping that investors overreact if that’s the case.

The book value of the combined company would have been roughly $464 at the end of the first quarter of 2013 according to the latest filings they’ve made with the SEC upon the closing of the acquisition, which if you use my guesstimate of a “safe” level to buy at 1.1X book means you’d be happy buying at about $510 (Markel has historically almost never traded below 1.2X book, at least not for very long, but Alterra is their largest acquisition by far and Alterra, like many other reinsurance-heavy insurance companies, has often traded at a discount to book value). I’ve still been tempted to buy more in recent months as the shares have occasionally drifted down to near that price, and even got down to about $505 very briefly at one point, but I’m holding out and waiting to see if there’s another chance to buy MKL cheap. It’s possible that won’t happen, since their underwriting could have been very good this quarter or their equity portfolio may have overshadowed the challenges of the bond portfolio, but I think there’s a good chance that we’ll see ...

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