by Travis Johnson, Stock Gumshoe | October 1, 2014 4:32 pm
This is premium content. To view this article (and to have full access to the rest of our articles), sign up. Already a member? Log in.
Source URL: https://www.stockgumshoe.com/2014/10/incremental-share-purchase/
Copyright ©2024 Stock Gumshoe unless otherwise noted.
I think Tekmiro was much weaker after Dr. Kss’s commentary ! While i do not entirely disagree
with his views it will be painful today for those who shorted the stock as it is up over $ 4.00 !
Hi Travis,
I am a recent “irregular” . Congratulations !!! Good service at right price :))) I`ve been following TPRE but don’t pull the trigger just yet. I consider Leukadia (Luk), the mini BRK.b. The price to book is 0,83. What y think about this stock?
Thanks
Antonio
I generally like Leucadia, but it’s baffling and very time consuming to analyze. Looks like their “rescue” of Jefferies is probably going to work out pretty well, but there’s so much crazy stuff on the other half of their balance sheet that I haven’t put in any time to analyze, including timber and energy and their proposed Oregon LNG export project among lots and lots of other stuff. The builders of the company, Cumming and Steinberg, still own major amounts of stock but put Jefferies CEO Richard Handler in as CEO after the merger a couple years ago, so it’s really hard to know what the company will be like in a few years under his leadership — will it continue to swing more to investment banking and finance, or will they do more esoteric investments like the old Leucadia in commodities, wine, telecom and everything else?
All else being equal, I’d prefer to have an insurance company as the heart of my conglomerate rather than an investment bank — but Leucadia has been really interesting over the years. They don’t talk much to investors outside of their filings with the SEC, but they did have a presentation last month at their investor day that newcomers to the stock might find interesting. Charles Mizrahi has been pitching Leucadia as the “next Berkshire” off and on over the last few years, I wrote about it most recently here.
Thanks :)))) And about L (Loews Corp)? P/B= 0,79 I follow Tisch story and like very much their style of investment. Do y have any research about L ?
Loews I’ve liked and owned at times in the past — they’re taking a beating this year because of their ownership of Diamond Offshore and Boardwalk Pipeline, for the most part. This is a fairly easy company to analyze based on a “Sum of the parts” analysis — their biggest subsidiaries are publicly traded.
90% of CNA Financial = ~$9.1 billion
50% of Diamond Offshore = ~$2.3 billion
54% of Boardwalk Pipeline = ~$2.3 billion
So that would get you $13.7 billion, ignoring the debt or cash at those companies (they’re fairly low-debt relative to their industries, in my opinion). The parent also carries some debt.
The other assets are Highmount Exploration, a gas and oil company that is losing money but should have reserves that are worth something, and the Loews hotel chain. Loews agreed earlier this year to sell Highmount, reportedly for $800 million, though I don’t think they’ve confirmed that. So that would get Loews minus the hotel chain to be worth $14.5 billion. The current market cap is about $15.75 billion. So that means the hotel and any other corporate cash or investments at the holding company level have to be worth at least $1.25 billion — you can make your guess from there. I don’t remember whether or not they own their hotel real estate, but they do have 24 very nice hotels in desirable places.
So Loews has often traded at very near the value of their combined CNA, BWP and DO holdings, or even at a small discount to those holdings, but it trades at a substantial premium to the publicly traded value of those three subsidiaries now largely because BWP and DO have been hammered this year and L has been much more resilient. BWP and DO are each down about 40-50% this year — those were the darling assets of Loews a few years ago, when CNA financial was a lousy insurance company that couldn’t make a profit. Now, with CNA firmly up into the “mediocre” and arguably turning around camp, it’s CNA that is floating the company simply because their value hasn’t been collapsing (it’s now roughly flat on the year).
So … Loews isn’t an obvious bargain on “sum of the parts” — but neither is it particularly expensive. Do keep in mind that it usually trades at a discount to its real value, which is typical of a holding company (after all, if they went to sell all their DO shares tomorrow they wouldn’t get full market price for them). If you see DO and BWP recovering, then Loews would be a nice bet on that outcome. CNA is likely to be fairly slow in recovery if it recovers at all, given the generally competitive p&c insurance market (they’ve been right near breakeven lately on an underwriting basis), so I wouldn’t bet on them driving L much higher soon — the “optionality” in Loews shares is if the Highmount deal is better than reported, or if they were to monetize the hotels in some dramatic fashion or improve operations and valuations at DO and BWP. It’s not cheap enough that I’d be excited about that, but it certainly might work out.
ok, fair enough :)))
Hi Travis,
Have you done any research about PGLC (Pershing Gold)? I have curiosity because a Diretor (Honig Barry C) keep pulling lots of money on it…..
Thanks,
Antonio
Nope, have never heard of it. That is indeed a lot of insider buying.
Just to finish the thought: the Highmount sale did go through, announced last week, and it was for $805 million. Doesn’t make a big difference, still a good long-term management, still a stock that’s really been driven down by DO and BWP and not helped at all by CNA also being near 52-week lows.
Hi Travis,
I`me thinking buying Lancashire. It´s better to buy in LSE (LRE) or the ADR ?
Regards,
Always better to buy where the listing and volume is if you can, I’d prefer to buy it in London.
I’m submitting my perception of the “property & casualty insurance” industry as a whole from my investor pov: This is not about a particular stock.
Some of the companies are seemingly avoiding Florida a la devastating Hurricane Andrew. The State apparently has a last resort a citizens insurance program or something for those who can’t get coverage. This is a blunt/stark prediction:
If there really is “climate change,” then the p & c industry is seemingly inoperable eventually.
There certainly is climate change, though predicting exactly what the next 50 years will be like is next to impossible. Insurance companies are, we can be sure, studying this much more closely than anyone else — they are the ones on the hook for many of the anticipated effects, including increased storm severity (though so far, severity of hurricane losses has a lot more to do with where people are building, and the value of what they’re building, than long-term changes to the climate). Our insurance in Florida is still relatively cheap, even though it did have to go through some government-connected pool, though flood insurance is getting a lot more expensive on the coasts because the Feds are effectively cutting the subsidy. )rising sea level is what really worries Florida,
(http://www.epa.gov/climatechange/science/indicators/oceans/sea-level.html)
I agree with your basic point — insurance should be screwed if there’s substantial near-term impact from climate change… but insurance is not something you “set and forget” for 20 years, the rates change each year based on risks and actuaries and insurance risk analysts have gotten incredibly good at understanding and modeling average risks. I expect that people will continue to need to insure against unforeseen outcomes, and that insurers will continue to add all new data to their models to predict the likelihood of those unforeseen outcomes. Florida may be in trouble in 50 years if the current temperature change pace continues, but it won’t happen in one year — and your insurance contract renews every year at a new rate. At least, that’s my thinking on the situation now — we’ll see, I may change my mind at some point.
As I was posting another query for Travis, could not help but comment on the issue of climate change. I believe real science has shown that the climate change that is currently occurring is cyclical in nature and what we are observing today is more to do with natural phenomenon, rather than a man made one. If that is the case, I would not be too worried about insurance as mother nature has supreme ways of correcting these sporadic anomalies and any supposed trajectory of global temperature rise!
“mother nature has supreme ways of correcting these sporadic anomalies and any supposed trajectory of global temperature rise!” She sure did in the past, it was called the ice age!
Travis Absolutely there is climate change,,,,,,always has been and always will be as that is its nature and is governed by many things the primary one being the amount of radiation we get from the sun. It is a variable star which means its output changes. Does man cause climate change ,,YES,,,when you build cities and roads,cut down or plant trees or food crops,,,in fact every time you put up a wall the micro climate on the north/south sides of the wall will change. Those changes can occur more rapidly than solar changes but have far less impact. Current evidence is that global temperature rise has stabilized and not risen for the last 18 years…we could in fact be facing a period of global cooling,,,non of the computer models of the last 30 years has been accurate. In any case
the rise in ocean levels world wide is just about as fast as the continents are drifting,,,
about as fast as your fingernails grow. I am sure insurance companies know this and can
adequately adjust their rates accordingly, Remember weather is what happens each day,,climate is what you expect for extended periods,,,rain forest,desert,,humid dry,,,
warm cool etc.
Travis, was curious about another security that I hold along with you (as indicated in your portfolio) – AOIFF. There has been a huge carnage in that stock of late, do you have any opinions? Fundamentally, all the catalysts are still in place except that the Kenyan government tax policies on CGT will definitely affect future investments and continued hydro carbon exploration in Kenya. Have you had a chance to review this mutual holding of ours? Thanks…..
I’ve taken enough profits off the table to not worry too much about the ups and downs of this one — taxes do have everyone worried at this point, but if they’re too onerous for the economics of the projects (which are still up in the air anyway) there could well be some give and take, sounds like no one is really clear on the implications yet. I think assuming it will be like Mongolia all over again (with their expropriation of more of Oyu Tolgoi from Rio Tinto) is probably premature, Africa Oil over the longer run is likely to be more impacted by exploration success or failure and by reserve growth and oil prices than by the tax regime. Sure doesn’t help that oil prices are in freefall at the moment, but I haven’t done a deep dive into AOIFF lately — perhaps I should.
That would be great…..
Travis – With the $US likely to continue to rise in the foreseeable future, US-centric companies are going to find increasing favor in the stock market whereas companies whose earnings come from overseas may not do as well. Do you agree? Of your Gumshoe ‘Core’ and “Speculative’ stocks, which are the most US-centric?
All the REITs (COR, ROIC, MPW) are almost US-only, Berkshire is mostly US through it’s subsidiaries, Xerox is mostly US but is pretty richly valued now.
Oct 9th 2014.
TPRE looks to be getting close to ‘buy’ territory.
Is it going down because its Book Value is going down as stocks it owns are going down ?
If so, then really it is about timing the market as the market dips/drops/slides.
That’s certainly part of it, they report their investment gains/losses on the portfolio once a month so we can’t know for sure how Loeb’s portfolio is doing during violent gyrations like now… but one of the key skills of these hedge funds is hedging, the expectation is that they underperform the market during good times because they’re hedging against downturns with short positions. Loeb is activist and event-driven, too, so doesn’t necessarily track the broad market, but the book value is likely to go down most of the time in months when the market is down sharply. I like the potential of a fantastic investor compounding a large portfolio, particularly if they can get the reinsurance to break-even and thus get their portfolio leverage for free, but I like it long-term and plan to nibble more along the way as the valuation gets compelling. I consider it cheap right now, pretty much at book value, even though book value is likely to drop a bit in the next quarter, hoping it drops a bit more. Reinsurance companies can and do trade at substantial discounts to book value sometimes, so it’s an important valuation tool for me but it’s not a rock-bottom level.