Alleghany: Small-Scale Berkshire - Barron's

Jun.17.07 | About: Alleghany Corporation (Y)

Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

Meet the (Not-So-) Poor Man's Warren Buffett by Andrew Bary

Summary: Barron's says $3 billion Alleghany Corp. (NYSE:Y) is "the closest thing to a small-scale Berkshire in the public market." The similarities: Great books and excess capital, conservative CEOs that measure success "the old way," and 15% returns since 1967 (vs. Berkshire's incredible 21%). At 1.3x book value, it's cheaper than Berkshire's 1.5, and its diminutive $3B market cap (vs. Berkshire's $168B) means CEO Weston Hicks can make a difference with investments as small as $100M. Alleghany currently carries $1B in cash: "The company is stocked with cash, and you have a smart guy at the helm," says Reed Conner & Birdwell's Jeffrey Bronchick (he owns a 3% stake). Alleghany got into Burlington Northern Santa Fe Corp. (BNI) ten years before Berkshire's Buffett, and the railroad now accounts for half of its $1B equity portfolio. It also owns stakes in Chevron Corp. (NYSE:CVX) and ConocoPhillips (NYSE:COP). Its insurance units made $28/share in 2006, accounting for the bulk of its $30 EPS. Bronchick says it doesn't get full credit for its insurance portfolio. The company carries its real-estate and 55% stake in Darwin Professional Underwriters Inc. (DR) at below-market-value, meaning its true book value is probably $300 and not $271/share. Barron's says shares could jump 50% by 2010 -- "not bad for a low-risk investment."

Related Links: Unusually High Institutional Ownership StocksA Trio of Bargain Stocks [Morningstar] • Alleghany website

Alleghany 17 06 2007