giofranchi

"Why Europe Is Still Broken" by Charles Gave giofranchi Daily+9.12.13.pdf

As of 2012 year-end he held 858,022 common shares. I another post of this same thread I remember twacowfca explained that, though Mr. Brindle owns a small percentage of LRE’s shares outstanding, the great majority of his personal wealth is invested in LRE, which, of course, is what we want to see. :) giofranchi

Hi klmaranite - I don't think you're starting with the right formula. Here's my alternative suggestion: Add up the following three things: 1) Underwriting profits (premiums times combined ratio) 2) Investment income (total investments times expected rate of return) 3) Pre-tax profits Markel Ventures (you're probably need to estimate this, I don't Markel shares many details) To that sum, apply a reasonable tax rate. That will leave you with comprehensive income. Divide comprehensive income by market cap. That will give you the return you can expect to achieve by owning Markel stock. I have model that does this automatically and updates with CapIQ data. The answer for Markel is 7%. If you're happy earning 7% annually, then the stock is perfectly priced. If you're greedy and want to earn 14% every year, then the stock is 2x too expensive. If like to set your sights low, say 3.5% per year, then you're in luck -- the stock is at a 50% discount to its fair value. So that's it... oh, except I forgot the first step. Before doing your valuation, you should decide if you want to buy the stock. That way, if you don't like the answer that you're getting, you know which way to change the estimates to achieve the proper result. Otherwise, how else would you know what to do? And where do you put growth? The problem with not taking into consideration growth is that in investing you don’t want to be either an optimist nor a pessimist: instead, you just want to be right. And, if you don’t consider growth in valuing MKL, you will most probably be wrong. MKL has an history of increasing BVPS at a CAGR of 17%. I just cannot see why it should fail to go on increasing BVPS at around 15% annual. Now it is selling for 519 / 451 = 1.15 x BVPS. If it compounds BVPS at 15% annual and in 10 years it is still trading at 1.15 x BVPS, the CAGR of your capital invested today in MKL will be 15%. So, if you don’t consider growth, you get to a 7% annual: you probably won’t invest. Instead, if you consider growth, you get to a 15% annual: you probably will invest. One of the two must be right, and the other wrong. It is up to each of us to decide. :) giofranchi

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Is Tibco Dan Loeb's Next Pet Project? http://seekingalpha.com/article/1684032-is-tibco-dan-loebs-next-pet-project?source=feed giofranchi

Hi Ron! Funny!! ;D ;D No, unfortunately LRE almost got to my new target price for adding more shares (700 GBp), but never quite got there… And, as I have said in another post, I won’t add on the way up… To have great conviction in a business and its management gives you a great advantage: we all now that to average down, and to refrain from buying when share price is increasing, is the way to go… yet, at least for me, it is much easier said than done with a business you have no conviction about, instead it just comes natural with a business you have great conviction about. Imo, whatever helps you behave more rationally and do the right thing is a huge advantage! Cheers! giofranchi

"Advantage America" by Gary Shilling giofranchi Advantage_America.pdf

Talk about market timing… since I wrote that, LRE is up almost 10%... It seems I enjoy this particular gift: whenever I foresee something in the short term, the exact opposite invariably comes to pass!! ;D ;D Btw, twacowfca, a dumb question: why the run up in share price? Maybe someone big is buying? ;) giofranchi

2013 Interim Results giofranchi Interim_Results_2013.pdf

Find the presentation in attachment. :) giofranchi Howard_Marks_Barclays_Global_Financial_Services_Conference1.pdf

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http://www.endo.com/news-events/press-releases giofranchi

Also their portfolio of investments is interesting: as you can see on page 35 of the presentation, 83% of investments have short to medium duration, in between 1 month and 5 years. Instead, “Alternative Investments”, which could provide higher risk-adjusted returns, are only 16.8% of total invested assets. Yet, they amount to 67% of equity, and might therefore have a significant impact on BVPS growth. giofranchi

What I also like is their acquisition history on page 9 of the presentation. In 2008, when everybody got scared and paralyzed, they bought more assets than during their whole existence until that year! Afterwards, they kept on buying, yet always less (on a yearly basis) than what they did in 2008. Talk about opportunistic behavior! :) giofranchi

Thank you, Mikenhe! Your insights are always precious and very welcomed! :) twacowfca, do you also know the company? Anything to add? giofranchi

I would also add that by now they have built a good track-record: 57 businesses bought and successfully integrated (results until now are pretty good and consistent) are no small feat… and should give some assurance they know what they are doing. They also seem to be very focused on their “circle of competence”, and never blunder into something they don’t know as well. giofranchi

Well, I guess an increase in BVPS is a good proxy for growth in intrinsic value. I first got interested because also FFH runs a portfolio of insurance businesses in run-off, and has been very active in recent years purchasing those businesses. Evidently, they see good opportunities in that area. Of course, risks tied to insurance contracts cannot be evaluated by outsiders, that’s why management in insurance is almost all that counts and the presence of Mr. Chuck Akre on the Investment Committee is important (of course, he is also a large investor in ESGR). His involvement in the business should give some assurance about the quality and trustworthiness of management: I simply don’t see him partnering with crooks or idiots… giofranchi

Enstar Group (ESGR) is a company that deserves to be closely watched (see presentation in attachment). It is still run by its founders and is managed to achieve an healthy growth in book value per share. BVPS has grown at a CAGR of 19.6% since 2006. Its strategy is straightforward: to increase net book value per share over time by growth in net earnings and re-investing in acquisitions. It specializes in running insurance businesses in run-off and has successfully acquired approximately 60 companies to date. Mr. Chuck Akre, who needs no introduction, is on its Investment Committee. Finally, it is based in the Bermudas, which might entail some tax advantages. Maybe 1.43 x BVPS is not such an attractive entry point… But, if the price declines to the 1.1 – 1.2 x BVPS range, I would gladly invest in Enstar. I would appreciate very much any comments from board members who know and have followed Enstar! :) giofranchi EGL_-_July_10_2013_Investor_Presentation_final.pdf

I agree 100%! Thank you WhoIsWarren & racemize! Great job! :) giofranchi

Result of SGM --Richard Brindle giofranchi Result-of-SGM-5September2013.pdf

Hi original mungerville, My idea is very simple: you have to trust some people in business (as in life). You might certainly devote your whole daytime to run a portfolio of 100+ securities, like Kraven is so capable of doing, and therefore trust might not be a fundamental part of your business… But, if you are not able to do that (and I know I am not), imo there is no way to get around trust. In any other business endeavour that I can think of trust is paramount. So, if you are not able to manage a portfolio of 100+ securities, at least you should become very good at judging people… of course, it is a continuous work in progress, and I hope to get better and better at it, but I already have a clear enough idea of who I think might turn out to be a good and reliable business partner in the long-run. And today Mr. Prem Watsa and Mr. Richard Brindle are at the top of my list. Btw, if you know someone better deserving of trust than those two, please let me know! I am all ears! :) For that reason FFH and LRE would be a large part of my firm’s portfolio in any situation. This is further accentuated today by the fact we are still in the midst of a global deleveraging process, and stock market prices are historically high. Those two facts won’t stop me from doing business, but make me gravitate even more towards FFH and LRE (basically decreasing positions which have handsomely appreciated in the last months, and redeploying those funds in LRE, which instead has trended down). My primary sources of information about Mr. Brindle and LRE are this thread and LRE’s website. I think this thread is “blessed” by the presence of someone like twacowfca, who not only has been following LRE since its very beginnings, but also, if I remember well, has still something like 50% of his portfolio in LRE: I really think he is constantly watching LRE like an hawk, and will be among the very first to realize and warn, if a change for the worst should unfortunately come to pass. On the other hand, I think LRE’s website is full of useful information, including periodic interviews with Mr. Brindle that I find insightful and revealing about his thoughts and modus operandi. giofranchi

Quiet Period Ends On Monday For Third Point Reinsurance http://seekingalpha.com/article/1674702-quiet-period-ends-on-monday-for-third-point-reinsurance?source=email_rt_article_readmore giofranchi

Very good question, WhoIsWarren! And, of course, I ignore the answer…! :) Might it have something to do with original mungerville’s reticence to invest at today’s price? When you know something very well, maybe you are also able to “play” the ups and downs of its stock price effectively. For instance, a lot of people on the board say they make much more money trading in and out FFH, than staying invested in it. Might it be that Och-Ziff is doing something similar with Lancashire? Just my two cents… And twacowfca might surely be able to answer your question with much deeper insight! ;) giofranchi

Hi original mungerville, Don’t know if you care about it, but I will tell you how I see this anyhow! :) First of all, let’s admit that I am a “man on a mission”… And my mission is to build a company with $1 billion in equity. How to achieve that? Easy enough: all I have to do is to grow the equity of my firm at a compound rate of 15% for the next 45 years…!! Ok, now this must surely sound like a joke to you, but, believe me, it is not… Instead, it is the goal I have in mind every morning as soon as I wake up. Every single year first of all the BV of my firm must grow by 15%, then I try to live as comfortably as I can with any “surplus” that remains at my disposal. If, for instance, in a difficult year I would be forced to cut even drastically my own salary, in order to achieve that 15% growth, I will do so without hesitation. So, when I invest my firm’s capital, I basically ask myself two questions: 1) Is it a business that I really want to possess for a very long time? 2) Is it possible to achieve a 15% compound annual return for a very long time? It might seem naïve to you, but 1) and 2) are really all that matters to me: if I have great conviction about both 1) and 2), I invest. Now, with the only possible exception of FFH, Lancashire is the business that better satisfies 1) among all the businesses that I know. So the question is: does it satisfy 2)? With an 11% present earnings yield, Lancashire should grow BV at 4%-5% annual for many years into the future. Unfortunately, growth is always uncertain, right? In 1) I had already come to the conclusion that someone like Mr. Brindle won’t grow just for the sake of growing… Instead, he will seize any opportunity for growth, only if he expects the expanded business to post ROEs in line with Lancashire historical results. And this decreases much future opportunities for growth, right? But this is exactly why I think the market is wrong and why, instead, I look at the acquisition of Cathedral enthusiastically: because it clearly shows that Mr. Brindle thinks and cares about growth, and knows how to achieve it. I think it shows that for Mr. Brindle it clearly is not enough to carry on with business as usual and keep paying big dividends to his shareholders. It provides an answer to the biggest question mark regarding Lancashire: will it grow sufficiently? The market looks at the acquisition of Cathedral and sees more uncertainty, I, instead, look at that acquisition and see much less uncertainty, because it answer the most important question I was not able to answer by myself. Now, will the share price keep trending down? My best guess is yes… at least until Lancashire declares its next special dividend. It might not be in Q3 2013, but who knows what might happen in Q4 2013? So, my best guess is Lancashire’s share price might keep decreasing until the beginning of next year (maybe longer, if also Q4 2013 Results are announced without declaring a special dividend). Of course, I don’t invest based on such “guesses”. Instead, if the share price keeps trending down, what I intend to do follows: - at 700 GBp I will invest in LRE another 1.5% of my firm’s capital, - at 665 GBp another 1.5%, - at 630 GBp another 1.5%, - at 595 GBp another 1.5%, - at 560 GBp another 1.5%, - at 525 GBp another 1.5%, - at 490 GBp a final 1.5%. If this happens, I will have invested circa 30% of my firm’s capital in Lancashire at more or less 1.4 BVPS, or little more than a 13% present earnings yield. A company that I now think will be able to grow (opportunistically, always opportunistically!), and that I might keep for the next 20 years. giofranchi

Agreed! Highly recommended! Actually, I have used Professor Penman's formula for calculating the PV of equity and posted the results both on the LRE's thread and on a thread about FFH. Professor Francesco Reggiani of the Bocconi University, who has written many papers together with Professor Penman and got cited in the book, is a dear friend of mine. :) giofranchi