Larry Pitkowsky & Keith Turner on “Back to the Future"VW Staff
“Back to the Future”
Prior experience at Bruce Berkowitz’s Fairholme fund (MUTF:FAIRX)
Above average returns
Batting average crown – not the home run derby
Consistent behavior irrespective of short term performance
Expect the Unexpected –they tend to keep cash around 20% or so
Need to have the liquidity to take advantage of distressed situations
Learn to love dead money—nobody wants to touch a stock
Seek a level playing field –mainly with management. Look for significant ownership by management.
Avoid losses! Avoid permanent loss of capital
Concentrated- don’t believe in diversification
Diversification is an excuse for ignorance, bc you don’t understand what you own well enough.
PRICE MATTERS!! Price is what you pay, value is what you get.
What interests us
Mispriced lottery tickets
Movies we’ve seen before
Try not to be overly concerned with Macro concerns. Don’t try to predict, react
Past leads to present
Buying insurance companies- just like they did in 1999
Markel is very much like Berkshire Hathawaway. Keep an eye on them. Tom Gayner and Steve Markel are great guys
Insurance is a necessary expense, not going away.
Get money up front, float.
It’s a commodity business- capital allocation and underwriting skills are critical.
Some insurers will benefit when interest rates rise
Tough past few years for insurance companies
Poor insurance pricing
Ultra low IR’s
Financial crisis/volatile markets
Stock picks: White Mountains Insurance Group, Ltd. (NYSE:WTM) and Alleghany Corporation(NYSE:Y)
Y bought transatlantic
Recent huge buybacks at WTM- 40% reductions in shares outstanding over past 5 years
ROE of 10-15% on a normalized basis
WTM: Underwriting comes first, maintain a disciplined balance sheet, ….. Sold Esuranc. Buying back stock and reduced shares by 37% over 5 years. 2.4 year bond duration. 76% FI, 10% ST, 9% Equities, 2% Converts. Normalized EPS power between $65 – $85 and growing. Price increases seem to be taking root. Markel Corporation (NYSE:MKL) indicated increasing confidence in higher prices.
Y- Weston Hicks, CEO — well thought of
stock has lagged both investment and book value growth
Transatlantic acquisition should be very accretive for Y
Opportunity to reposition the $13B investment portfolio of transatlantic
Y’s book value per share $350.34. Profitable underwriter for many years. Consistent redundancies over the last number of years. Book value up 7% over 5 years but the stock is up only 4%. Transatlantic portfolio 91% fixed income, cash at 3%, 4% in equities. Normalized EPS is $35 – $60 per share.
Bought a private industrial company on Friday.
Risks: transatlantic reserves inadequate
Further issues at capitol or pacific
Rapid inflation leads to large casualty losses
Poor investment choices
Rapid rise in IR’s before re-positioning
IR’s are too low,
Horrible if you bet wrong
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