Primus Guaranty Ltd (PRS)

All Comments on PRS

  • commenter
    James Cullen
    Mar 12 12:51 PM
    My Website
    What Tuesday's Wild Trading Says About Housing, Financials [view article]
    Tony,
    I think a buyout is a possibility, but not enough that you should be buying the stock only looking for a quick pop on such news.

    My figures are similar enough to Morningstar's that I'll say I agree with them - my last estimate for fair value is about 10% above theirs, and I think USG is a good stock to buy now for long-term investors.     Reply
  • commenter
    Tony Soprano
    Mar 12 09:18 AM
    What Tuesday's Wild Trading Says About Housing, Financials [view article]
    Do you think USG will be taken over and at what price? There are two big boys a German and an American that have very big positions in this company.

    Morningstar has a Fair Value @ $50.00 with five stars and a buy recommendation under $37.50. What say you?     Reply
  • commenter
    dhatkoff
    Mar 07 04:01 PM
    TheStreet.com on Primus Guaranty: Wacky and Uninformed [view article]
    Tom, thanks for the great discussion of Primus' merits. One point in your post that I think needs a bit of clarification though. Yes, spreads have widened significantly, and no, I don't think most people believe that that is because fundamental credit risk has increased in proportion. But that disconnect could exist for one of two reasons: 1) As you explained, we're in fear mode so spreads are unduly wide, or 2) A tremendously benign credit environment allowed spreads in the recent past to tighten to record levels, suggesting perhaps risk was underpriced in the past.

    Reality is probably a mix of the two, but with a $29Bn book of business I think the clear downside risk is that that book is slightly mispriced, given how levered the business model is.

    Assuming their in-force book of business performs ok, you're right, they're in an amazing position to take advantage of significantly more profitable business. As a major investor in the company, how did you get comfort in the quality of their portfolio?     Reply
  • commenter
    Erich
    Riesenberg
    Mar 03 10:16 AM
    2 Noteworthy Points From Warren Buffett's Annual Shareholder Letter [view article]
    Comparing BRK to PRS is a mistake. BRK has minimal credit default exposure, less than $2 billion in current value and $5 billion in notional value. It is a fraction of BRK's equity. I conclude the opposite, if Buffett saw credit default premiums as a great investment in the second half of 2007, he would have sold more.

    And of course, PRS is making unhedged investments, it is impossible to know precisely why BRK is selling credit default protection.     Reply
  • commenter
    texalope
    Mar 02 09:40 AM
    2 Noteworthy Points From Warren Buffett's Annual Shareholder Letter [view article]
    Primus is a good bet and here's my thinking.
    You have to think like an owner of a privately held business with no daily quote.
    They have a solid book. Spreads are going up so the income stream is rising. My company is getting paid quite well for the risk we're assuming (much like the Property and casualty business after hurricanes Katrina and Wilma).
    My accountant comes in quarterly and tells me we're losing tons of money because he marks our holdings to market. My bank account is growing larger and larger and my prospects for continuation of this stream of money are very good in this cycle. I have no intention or need to sell my assets into this weak market, I'll hold them to term(about 5 years) until my insurance guarantee expires. My accountants' proclamations do not hold much value for me. My bank account does.
    If a competitor came to me and offered half of book value for my good business with a growing stream of cash flows, I'd be a fool to sell it to him. Frankly, I'd buy his business under the same arrangement. So, these factors tell me Primus is a good buy here at 50% of economic book value.
    The risk- a black swan event occurs with a huge bankruptcy that I couldn't predict. An outlier type event that can happen with any investment at any time.

    I don't think that's enough to dissuade me from a bet that will double my money at the least($9 assigns no value to ongoing business) so this company is worth more. But,that amount is subject to debate.     Reply
  • commenter
    Erich
    Riesenberg
    Feb 21 12:33 PM
    TheStreet.com on Primus Guaranty: Wacky and Uninformed [view article]
    I am curious about the comparison between PRS and BRK. A minor (5% in notional terms) of BRK's derivative contracts are credit default, most are equity, interest, foreign exchange. Those could be hedges or outright investments of the type BRK has always made. Also, BRK could pay off all its derivatives liabilities without much of a dent.

    With Buffett offering to reinsure so many municipals the concept of credit default coverage seems reasonable, but it doesn't appear to have been done in bulk at least through Dec of 2006.

    Also, a typo, I hope no one is paying $91,000 a year to insure $1 million in BRK default.     Reply
  • commenter
    fxtrader07
    Feb 21 11:24 AM
    TheStreet.com on Primus Guaranty: Wacky and Uninformed [view article]
    another great article, Tom

    @reclined: good points though i doubt that the company will disclose what exact amount of dry powder it still has.
    apart from that, i simply don't see anyone willing right now to start a company like PRS. the banks are trying to get out of a business they in most cases were running with too little regard for risk. hedge funds are in many cases reeling for cash as well. most important though: it seems you cannot easily replicate a mgmt team like the one running PRS. talk about a moat. others are blowing up left and right - these guys are expanding business! maybe their higher cost structures are due to more resources deployed for really careful analysis. I mean, genius and talent apart, there is very much hard work involved in running a cds business in a superior way- so employing a few very bright and high-paid analysts may be costlier - but pay off ultimately. but i guess, tom could explain what i am just guessing
    Reply
  • commenter
    valueinvesto
    r123
    Feb 21 10:47 AM
    TheStreet.com on Primus Guaranty: Wacky and Uninformed [view article]
    I have talked with Tom Jasper several times in the last year and found him to be very insightful about the credit markets and when I have looked at Primus, I have always come away with the feeling that they are doing the best they can in these tough times. I also agreed with their decision to shut down the hedge fund product they had launched. However, because PRS in this current environment will continue to get lumped in with similar companies there are better places to put your money than PRS right now. Reply
  • commenter
    Reclined
    Feb 21 08:03 AM
    TheStreet.com on Primus Guaranty: Wacky and Uninformed [view article]
    Wow, someone's certainly furious here ...

    I like Tom and his ideas but would love for him to more directly address the central concern. While the TheStreet.com article appears somewhat unstructured it is not entirely oblivious of most of the points Tom is making in his article (no serious risk of BK or losing the AAA rating, currently only m2m losses etc).

    Key sentence in the TheStreet.com article is "Given Primus' high cost structure and its book of credit protection that could be easily replicated today at much better prices, the stock will remain in trouble."

    TheStreet implies that Primus has most of its available capital employed and might not have a lot of dry powder left to take advantage of the current spreads. Recapitalisation probably is difficult/too dilutive with the stock price so low. Therefore competitors who are starting in the current environment might have a much better priced portfolio in a short time. Tom's data shows that Primus is currently writing more business than it has done before which is a good thing. The remaining question then is how much dry powder there is left in case the current "mispricing" will stay with us for say the remainder of 2008.

    And, of course the argument with a cost structure, that according to TheStreet is 60-100% higher than industry average, also needs to be addressed (though this might be more open to management's intervention).

    I would love to hear Tom's view on these two points specifically.     Reply
  • commenter
    Ryan Freund
    Dec 26 03:17 PM
    My Website
    15 Stocks With the Lowest PEG Ratios [view article]
    Hi,

    I agree that this, in itself, does not tell us a whole lot of information. However, when used as an initial screener, it can be very valuable for finding companies that could be undervalued at current levels.

    As I said in the article, "As important as the PEG ratio is, it cannot be completely relied upon for investment selections. Rather, it should be used as one portion of the overall picture."

    This provides a great place to find companies that could be undervalued. Is there more legwork involved in determining which are truly undervalued? Of course.

    Thanks for your input!

    Ryan     Reply
  • commenter
    Pj568
    Dec 26 05:44 AM
    15 Stocks With the Lowest PEG Ratios [view article]
    Put me in the little useful information camp. It may have some revelance when comparing companies within the same sector but not across the board against sectors that maintain different PE ratios. How much reliance can be placed on a 5 year future estimate when the current year can't be accurately estimated? Reply

Trading Center


Loading...
Symbols:
Authors:
Quick Links: