Patmo

I guess I'll get the discussion going, my view is still the same as before, the life segment is not a 0 as everybody assumes a priori but proof is about 4 years away still, and despite a trend of premium increases that spans almost a decade now, the remaining requirement's too long of a timeframe for skeptics to change their excel input for (and also skepticism over whether that would be enough in the first place). In a couple years from now, the value guys will start warming up to this thesis, and eventually the suits will start following into the ticker. But that's just my outlook on the life insurance division and I'm naturally alone on this. Even considering life a 0, the shares are still discounted. Mark USMI at ~5b in line with comps (about to IPO so we'll get a confirmation on market valuation - big catalyst & resolves any and all upcoming obligations), capitalize corporate at ~-1b and runoff at ~.5b, for a valuation just shy of $9ps. If life doesn't pan out as I claim with my crystal ball, it's still 50 cents on the dollar anyway...

With Q1 out, curious what are people on here still following GNW's thoughts.

Gotta give it to them, that was very good timing on shorting the world.

The best advice is most difficult to implement. Well said! Amazon had almost a 95% drawdown from its high in 2000 and there was a high chance they would have gone out of business if not for Fed intervention. Sure, it's easy to look back now but very (very) few people could outlast a 90%+ drawdown. The person who won't outlive a 90% drawdown will also not outlive a 3 bagger, they wouldn't have seen the investment through to 2020 if they bought at $6 in 2001 either. They forgot the part where they had toforget about it for 30 years Easier said than done. When an investment becomes a huge, huge part of your net worth, it's very hard to just "forget" about it for 30 years. It's much more common to say "wow, this is crazy, I should sell it" or "a great depression is coming and I don't want to lose" or "I should sell this thing and take a tax right off since I'm down 90%". I mean, Prime didn't even start until 2005. So how could you forecast what it would have been in 2000? What if 2008 never happened and interest rates were at 7%? What if the Fed didn't drop interest rates down after the dot com bust? What if something happened to Bezos? All of these, I would imagine, dramatically reduced the outcome. Since it's intuitive, care to share with the rest of us the next 12,000% returner over 20/30 years? Not sure why so defensive but I guess I'll play along. In the meanwhile I'd be curious if you could substantiate in what ways you think your alternative is better because all you've been saying is how what I'm proposing is bad, and your arguments so far leave me wanting. For now, here is a response to some of your arguments: Everything in investing is easier said than done. Long term future earnings forecasts as accurate as the weather forecast. You just know the broad direction it'll go in. You, I, nobody can know it's going to be a 12000% returner in 20 years. Not for any business, not with any process. Would you have been dissatisfied with "just" 600%? I shall let you know when (or I guess, if) the next yuge thing hits me in the face. I can tell you if I was forced to back the truck up and forget for 30 years today, I'd put every penny I have on Google, no hesitation. Like I said above, I don't know what kind of returns I'd get, but I know the business and investment both'll be leaps ahead of today. You know that too, even if you maybe wouldn't admit it right now. No need to forecast what this and that subsidiary is going to spring out of their bums in Q3 2026. It's just going to turn out that way. Feel free to call me up in 30 years and let me know by how much your book beat it. Have you ever bought into a company without any what-ifs? Literally waking up in the morning is a what-if. What if a drunk driver rammed his truck into your bedroom? What if your wife poisoned your coffee? What if you got margin called? What if? What if? This argument makes no sense in and of itself, speculative trading around the news is only valuable in so far as to convince yourself you're in more control of the outcome than you are. The entire senior mgt team could die tomorrow, bombs dropped on silicon valley, it wouldn't change a thing in my assessment above, I'd still buy Google. Hell, why not throw in a little Amazon for good measure? Look, let's forget the trees and look at the forest. You don't have to buy into one company all in and suffer its variance in entirety. You don't have to buy into it at the height of a mania. You don't have to buy any business running at net loss at the time of investment. You don't have to buy stocks right now at all. You certainly don't have to buy amazon specifically. Forget getting 12000% returns in 20 years. None of these things are required to succeed in what I propose. You do however need that kind of time horizon if you want to enjoy the end results of a growing high quality business. It's plainly a required feature of disciplined growth investing, including the "spawning" strategy outlined in the OP. Or, are you telling me you're going to buy these "spawners" and exit in 18 months when one of the "spawnees"' first 6 months of existence doesn't live up to your model? WHAT IF it subsequently crushes your model? My entire point is, why force the issue by trying to uncover random obscure businesses when bets with much better odds will sooner or later fall right into your lap? I guess you have no choice if you're running OPM and have various incentives against practicing patience and forcing you to document support for every little decision, but at that point you wouldn't waste your afternoon getting defensive over some random guy of questionable reputation arguing against your currently favored investing practices on the internet, would you? Sorry to all for derailing the thread a little, I was just opining randomly.

The best advice is most difficult to implement. Well said! Amazon had almost a 95% drawdown from its high in 2000 and there was a high chance they would have gone out of business if not for Fed intervention. Sure, it's easy to look back now but very (very) few people could outlast a 90%+ drawdown. The person who won't outlive a 90% drawdown will also not outlive a 3 bagger, they wouldn't have seen the investment through to 2020 if they bought at $6 in 2001 either. They forgot the part where they had toforget about it for 30 years

Those rate increases do not compound unless the same policies are in both rate actions. The 2018 set of policies acted upon may be mostly disjoint from the 2020 set which impacted about 38% of their in-force premiums. Indeed, thanks for the clarification.

Finding companies to invest in for growth is more of a "it comes to you" kind of thing in my experience, because of its more abstract qualitative requirements. Setting out to find new, more obscure companies is tough business. If you had asked me around the year 2000 what company I'd invest in, it'd be Amazon. In fact I tried to learn how to invest so I could do just that. I was but a toddler and I knew the answer intuitively. That's the kind of growth you pay up for, the kind that is so self evident that you don't need to find it, categorize it or value it. It jumps at you in your everyday life. Wait for it to come to you, back the truck up when it happens and forget about it for 30 years.

From the MD&A and judging from current position, it appears that they could pay off 1 or the other, but likely not both. They could always try refinancing but I presume the debt markets would not be hot on it. They don't seem keen on the idea themselves, strategically speaking deleveraging has been a cornerstone of their plan. In that sense, the IPO is a risk as flopping would be bad news and alternatives are not fleshed out currently. On the flip side, MD&A commentary suggests there is more than sufficient appetite for it - after all, it would be the piece that investors would want the most out of GNW right now. Like you, I have concerns as to USMI's true long term value, but not everybody sees eye to eye.

Maybe. Did you notice the sudden increase to $22B from $16B in the NPV of necessary premium increases, and that the rate at which regulators are approving these has been decreasing over the past 3 years? Rates increased 34% over prior year, still very large even compared to the 45% 2018 average which was anomalous. The 2020 increase was nevertheless higher than historical average. On an absolute basis, they also increased more than the 45% back then (eg. $1.45 x 34% =$.49) - correct me if I am wrong. I'm not sure what to make of the sudden increase in NPV necessary, in fact I missed it. I could provide some speculation as to why, but that would just be that, speculation. The fact remains that rate increases have been approved for a number of years now, and the program will be tilted back into balance within a couple years if it hasn't already.

Another thought that sprung to mind as I wrote my last post, is that the market naturally valued GNW at $5.20ish standalone, including GLIC at 0. You don't even have to decide how much GNW is worth under that scenario, the market already said what it thinks. So in a vacuum, your only risk here would be opportunity cost from other investments compared to the annualized yield you expect from further delays/merger overhang, as you make 60% profit whether the (or a) deal finally closes or GNW continues as a going concern. Waiting another, say, 5 years for a 60% gain would suck, but on an absolute basis, it wouldn't make sense not to take the bet.

" I might be wrong, but I opine the deal is dead in the water and all parties are posturing a little right now to save face. GNW knows the business is not where it was years ago, and even then the deal wasn't a cracker according to the market, it was barely above trading price on the day of announcement and shares had been trending upwards significantly at the time. On the other side, COW doesn't have the funding to close it in the first place so it's a nonstarter. I agree the length of time it took for this deal to close only to be surprised at the last minute by the buyer turning out too broke is quite ridiculous. But that's rear view mirror stuff and right now shares are trading on the low end of average since merger arbs took over the stock. Just a return to the market's natural valuation pre-merger is still a 60% gain from here and you get the last 4-5 years for free (aka PAIN free).

If COW returns with financing it won't be a quick payoff, but still not a 5+ year grind. Call it 2 years, annualized it's a good return from here. Definitely not the ideal scenario nevertheless. They're discussing moving towards a JV into China instead. I'm not sure how I feel about this. GLIC assumption of a zero is overly conservative nowadays, rate increases continue to be approved and the life insurance unit is recovering materially. There is no point operating on that basis a priori.

I'm curious if anybody is still interested in this stock. The deal is finally falling apart and the stock could re-rate to a going concern valuation instead of a merger arbitrage discount, once it is finally definitively terminated. And if COW comes back with financing, the waiting time to close will then be significantly shortened as most of the legwork is already done, so a solid annualized gain from here. As a going concern, valuation is completely out of whack. Qualitatively, the company's main thorn is being dissipated - the LTC unit continues to recover at a nice pace. The US mortgage insurance business continues to deliver, though I'd expect it could hit a wall soon with the COVID stuff. Corporate overhead cuts were made to the tune of about $50mil annually mostly at the holdco level. I expect these cuts to be "trim the fat" cuts rather than "chew through the bone" given the circumstances. They're going to IPO 20% of USMI to maintain a reasonable liquidity buffer while they satisfy near term obligations - there seems to be a strong appetite for it in the markets, they already received an offer for a 100% private takeout. Quantitatively is where the valuation makes no sense, at $3.2ps price is at ~10% of book value - all the assets are marked to market, and the liabs include quite conservative provisions. It's going to earn over $1ps next year, so about 3x earnings. Worse performing comps are trading at 3x the valuation. Essentially the price has been super depressed artificially to enact a spread for merger arbs and there is still overhang since the transaction is not definitively terminated. It's been a painful few years as I originally viewed it as a "heads I win, tails I win a little less" stock, and the worst case scenario that I envisioned has happened: deal just refused to either close or terminate. It looks like it might start to pay off, at a slightly more attractive price than originally to boot.

I hate that I was right on this one and didn't take my own goddamn advice. YOLO is up ~50% since this post. WSB might just be getting started I want in on the rockets, what's your next call?

On trimming winners. I’ve struggled with it. I’ve left a lot of money selling early. I’m going to try letting winners ride this year Well if it makes you feel any better, I've lost a lot of money holding on too long lol... a 7 bagger to 0, and a 5 bagger to a 70% loss in the past couple years. I'd rather regret squeezing another 20% of juice out of these investments if I had the choice. Yeah, FELP, lots of discussions on it here. To be fair I should have never put money in it in the first place, but that's a different topic altogether. The other one is KRN, a cash box with a construction ready potash mining project that had its financing announced but the deal fell through quickly. Tons of boardroom drama in that one. The founder got in bed with the wrong people and got thrown out the window a couple times.