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  • Haynes International: High-Performance Alloy Maker Positioned For Growth [View article]
    Thanks for the article Tom. Will have to do some more research, but seems like a conservative way to play a potential rebound in metal prices without taking on the high risk of a miner. It seems, that at some point, even if nickel were to continue down significantly, the industrial part of their business will provide a floor.
    Apr 20, 2015. 02:23 AM | Likes Like |Link to Comment
  • Assured Guaranty - Aggressive Stock Buyback Will Reward Long-Term Investors [View article]
    Well, we really can't bet on that or I wouldn't collect for 25 years.

    But here's the thing. The problems with pension funding is well-documented and known, so for AGO to say it expects 12 payouts in a SEC filing, it means they have looked into their insured risks and the pension plan underfunding, etc. information and can justify saying 12 claims. If we were talking about 20% or almost 2,000 of their obligors requiring support, someone at AGO would be getting sued or going to jail.

    You can argue that they don't understand the scope of the problem, but I would argue the other side, that they do understand it very well as judged by their navigation through the financial crisis. You also have the ratings agencies, who obviously made mistakes in the past, but are not repeating them now, saying things are fine. And, the municipalities know this problem and most municipalities will figure out a way to fix things without resorting to not paying bond-holders. The pension problem is an issue, but but it is being addressed, even in areas like Chicago, which is one of the worst.

    So, for you to be correct, you have to believe that there is something unexpected coming down the road. And that's fair, it is possible. But I really don't see it being the pension and benefit obligations of municipalities which are well known.
    Mar 28, 2015. 08:12 PM | Likes Like |Link to Comment
  • Assured Guaranty - Aggressive Stock Buyback Will Reward Long-Term Investors [View article]
    According to their latest company presentation,

    "Out of approximately 9,500 direct U.S. public finance obligors, we expect future losses to be paid, net of recoveries, on less than a dozen. In 4Q-14, we made payments on only three"
    Mar 27, 2015. 02:14 PM | Likes Like |Link to Comment
  • Assured Guaranty - Aggressive Stock Buyback Will Reward Long-Term Investors [View article]
    Management at AGO is smart and see the same things you are describing. They also know they are overcapitalized and have been doing buybacks and dividends with this, but if it looks like the business truly is dead long term, they will either go into run-off mode or, more likely, get involved in more M&A to grow the business.
    Mar 27, 2015. 09:17 AM | Likes Like |Link to Comment
  • Assured Guaranty - Aggressive Stock Buyback Will Reward Long-Term Investors [View article]
    Since WTM came public, they have doubled the return of the S&P 500, so they are a well run company.

    Berkshire got into municipal bond insurance back in 2007, pretty much the worst possible time, so it was good they got out. They did not have the seasoned, well-underwritten book of business AGO had. They have done a bit of underwriting of bond insurance since, so they do not appear against insuring this market, just not doing it at the price/risk level of the 2007 - 2009 period.

    As far as why others have not entered the market, the market is currently not large enough to attack a lot of other companies. AGO is well-positioned and WTM is trying to get in early while returns are high and risks much lower than before. It is a smart business strategy to get into a market before it starts growing. Should the market for this type of insurance get larger, it will attract other companies to underwrite business in it. In the meantime, companies like AGO, can write very profitable business having just one competitor. It is great to invest in monopolies or 2 company oligarchies as they tend to price for maximum profits.
    Mar 17, 2015. 07:43 AM | Likes Like |Link to Comment
  • Assured Guaranty - Aggressive Stock Buyback Will Reward Long-Term Investors [View article]
    It seems pretty likely that there shouldn't be a lot of muni-defaults going forward, based on the rationale that, except for specific unique problems, the broad pressure on municipalities has eased. So owning AGO, even if it is pretty much is in run-off, should still be a good business.

    The second thing I would think about is why would a smart insurance company like White Mountain be moving into the muni-market through their Build America investment if this was a permanently impaired industry. While of course they could be wrong, I think this shows there is a good chance this type of insurance revives as rates rise and White Mountain sees it as lucrative, which it would also be for AGO.
    Mar 15, 2015. 05:37 PM | 1 Like Like |Link to Comment
  • Assured Guaranty - Significant Intrinsic Value Per Share Growth Continues [View article]
    I think the selloff in October was mainly just market related. If you compare the charts of AGO with the general market, you'll see the trends are quite similar there, with AGO being a bit more volatile.

    I agree with your comment that AGO is pretty much a "no-brainer" at this time. If you look at their record over the last 10 years, you'll see they've consistently increased book value per share (which is how this stock is generally valued) and only had 1 year of losses.

    They survived the financial crisis and dealt with all of their major issues (Alabama, Stockton, Detroit, Harrisburg) easily and with minor hits to earnings. The one major outstanding one is Puerto Rico, but like Tim says, it is very manageable.

    Because the crisis is over, it should be quite rare to see future major issues in the state/municipal market (even Illinois is trying to do some things to fix it!), and the book value (GAAP and Operating Shareholder Equity) should approach the $53.66 Adjusted Book Value over time. Any new business which is being written is certainly going to be underwritten conservatively as well and add to book value.

    The biggest risk with AGO that I see is the time cost to get to the adjusted book value. They've been growing their Operating Shareholder Book Value by about 10% a year, so we should see the stock increase by 10% a year plus the discount to book should decrease over time, so a 20% average annual return is probably realistic with a 3 to 5 year time horizon.

    This does not count the upside if the municipal market should come back, IF that does, there are only 2 players in the market, AGO and BuildAmerica, which was funded by White Mountain Insurance, which is another successful insurance company which obviously thinks municipal insurance should do well in the future. With only 2 players and AGO being the better established, larger player, they should be able to win significant market share and grow the new business.
    Mar 3, 2015. 09:06 PM | Likes Like |Link to Comment
  • Report: Airbnb raising ~$1B at $20B valuation [View news story]
    AWAY has a $3 billion market cap and is profitable and has many more listings in every city I've looked at vacationing in. Seems like people are willing to pay any price to get into these things and will end up losing a lot in the end.
    Feb 28, 2015. 07:37 PM | 1 Like Like |Link to Comment
  • Why P&C Insurance Companies Have Outperformed The S&P 500 [View article]
    The other thing I'm sure Tom is aware of, but others may not be is insurance companies are required to do the standard SEC filings, but also a set of Insurance Statutory Filings. These often provide more detail than the SEC filings and are worth reading if you want more details on a company.

    For example, TRV's are here:

    Some companies provide even more detail like life insurer, NWLI, lists every bond that they own:
    Feb 13, 2015. 03:54 PM | 1 Like Like |Link to Comment
  • Holloway Lodging Update: Oil Pains [View article]
    Thanks for the article. I've been doing some similar analysis to try and figure out where they stand and basically gave up and am waiting for the Q4 results to try again when we have more details and hopefully some guidance.
    Jan 28, 2015. 09:33 AM | Likes Like |Link to Comment
  • Why P&C Insurance Companies Have Outperformed The S&P 500 [View article]
    It is surprising some of the large cap lifeco's in particular haven't done better.

    It could be a buying opp as people are afraid to step while they still don't know what they SIFI designation will mean. Kandarian talking in the press about how being a SIFI may help build their court case, but it may scare investors away. But it's hard to see why companies like PRU and MET are at such low valuation metrics.

    Or it could just be they are being lumped in with the big banks, which also have low valuations, even though they don't have near the risk profile of a bank.

    I would think we'd see a pretty good bump in MET if they do win.

    It would be interesting to compare them to the big Canadian lifeco's value-wise as they are pretty comparable in market cap, MFC in particular, as even though they report in IFRS, MFC also provides GAAP earnings and book value in their financial statements.

    When people talk about the markets being expensive, I sure don't see it in most of the insurers.
    Jan 22, 2015. 09:03 PM | Likes Like |Link to Comment
  • Why P&C Insurance Companies Have Outperformed The S&P 500 [View article]
    P&C insurance does seem to be becoming less cyclical up here in Canada too. It could be better analytics or perhaps industry consolidation. I think we need to wait a few years to find out for sure. I do think with lower investment returns, the push to chase "float" has been reduced and companies are focused more on underwriting profit. It will be interesting to see what happens when bond rates do finally rise.

    I think the reason for P&C outperformance is due to the lack of attention. It's amazing how many investors you talk to who think financials mean banks. Better hunting ground for us and, with some of the unique accounting factors like AOCI, provides for good opportunities. I've got 30% of my portfolio in insurance companies now - NWLI, ORI, AGO and AEG. I could easily make the case for others, but I'm happy with these. They are all cheap and pretty diverse from each other.
    Jan 22, 2015. 06:12 PM | 1 Like Like |Link to Comment
  • Why P&C Insurance Companies Have Outperformed The S&P 500 [View article]
    Re Buffet, I think it is still the case but haven't looked in a while, but Berkshire and White Mountain (another top notch insurer) both have a pretty good sized ownership in Symetra Life (SYA).

    I owned it, but sold it a couple of years ago as their price to book value ex-AOCI, was getting high and others were cheaper, but having those 2 companies behind them is a good endorsement.
    Jan 22, 2015. 11:17 AM | 1 Like Like |Link to Comment
  • Why P&C Insurance Companies Have Outperformed The S&P 500 [View article]

    I think ORI is worth a look at current prices. It's a bit complex, because they own 2 mortgage insurers, one separately incorporated (RFIG runoff) and one part of the general division (CCI). CCI has been taking some hits the last few quarters and hurting earnings as they've settled some big claims, but also have a pretty big lawsuit in progress with BAC which should be a big win. RFIG runoff has become profitable the last year or so as the housing market has improved.

    I have quite a large position in it based on:

    1. Good dividend with 25+ year record of increasing
    2. Balance sheet looks good and no concerns
    3. Cheap relative to other insurers that it usually trades in line with on a p/b basis, dividend yield basis like CINF, so this discount should go away as mortgage insurance overhang is cleaned up

    It's complex, which I think is part of the reason it is cheap, but they do a good job of laying things out for you if you look at their financial reports and the supplement on their web site.
    Jan 22, 2015. 11:08 AM | 2 Likes Like |Link to Comment
  • Assured Guaranty - Aggressive Stock Buyback Will Reward Long-Term Investors [View article]
    I have a lot more faith in the management of AGO than MBIA as they avoided the traps that MBIA and the others fell into and avoided most of the major losses from the financial crisis.

    Perhaps MBIA is good now, with a tailwind at the industry's back, but with insurance, you want conservative management, and AGO seems better. And if it is a similar valuation as Tim says (I haven't looked), I think you just want to just stick with AGO.
    Nov 23, 2014. 03:34 PM | 1 Like Like |Link to Comment