by Travis Johnson, Stock Gumshoe | November 19, 2012 7:34 pm
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I have been watching GLRE following your article about the “Golden Cross” (or whatever the pitchman called it). And I am interested but haven’t bought. My main concern (other than the fact that insurance – particularly reinsuance – frightens me) is that GLRE seems like a side project, and not a focus, for Einhorn. It looks like Einhorn & family beneficially own 17% of the fully diluted shares of GLRE or $146 million based on a $850 million market cap. And Greenlight Capital earns a management fee from investing anywhere from $5-20 million. For a guy purportedly worth well in excess of a billion dollars, how much attention will he pay to GLRE? Is the stake large enough to keep his attention? If he is looking for capital to invest, given his track record, I can’t imagine he would have any problems finding the money so why bother with all the SEC/admin/compliance headache/reinsurance risk that comes with GLRE? I guess I just don’t understand why he bothered in the first place and I can’t imagine he hangs up his hedge fund business to focus on this. But, hey, what do I know, I am not the guy with the $1 billion plus net worth. I will continue to watch and consider purchasing. Travis, nice analysis as always.
Mostly what Einhorn is doing is using the float from GLRE, I expect his is involved in other ways as well but Greenlight Capital’s primary role with GLRE is to invest its money. And they invest it exactly the same way they do all the other money invested in their fund, this isn’t a different strategy for him. So he gets ownership, a public vehicle to raise funds, and, most importantly, a decent-sized pile of capital that won’t cash out or call and yell at him if there’s a bad year or some rich guy has his Greenwich mansion repossessed or all the Firemen in Podunk, NY take early retirement and their pension fund needs money. I don’t know if it will be at the top of Einhorn’s mind but it’s not a bad deal for him or for his management firm.
And now Buffett has announced one buyback, and raised the threshold from 1.1X book for future buyouts to 1.2X book … right about where the stock is now. Tough to argue against buying Berkshire here, and I continue to have a buy order in if it happens to dip a bit, this is one of my top holdings and I’d like to have a bit more.