Liberty

Looks like your timing was pretty good, Gio!

AT&T names 100 cities where it could offer gigabit fiber http://arstechnica.com/business/2014/04/att-copies-google-names-100-cities-where-it-could-offer-gigabit-fiber/ (none in Alaska)

This company has been discussed elsewhere (the Colfax thread, among other places), but it think it deserves its own thread so discussions aren't scattered all over and lost in the archive. Today's bit of news is about their CEO transition next year:

You're probably right, I was probably thinking of the things I read online.

http://www.teslamotors.com/blog/fair-price

Update: here's the original story that I previously referenced (might as well go to the source): http://www.ft.com/cms/s/0/0b3f0ef0-c719-11e3-929f-00144feabdc0.html#axzz2zY5YbrGu

He mentioned in an interview that there were some errors that would be fixed in the next edition, but that they didn't detract from the overall point. He said that it's impossible to publish 100,000 words and not have people find some errors. It's just funny that some people on the financial news media attacked him with the good old subtext of: "Ha! See! There's an error here, hence the whole book is null and void."

Do you also have personal theories about epidemiology and quantum physics? I'd love to hear those.

the behavior of equity prices is influenced by human psychology, the impact of co2 on the mean temperature of the planet, like most phenomena investigated by scientists, is not. Don't waste your time, it appears we have an armchair climatologist here.

http://oraclefromomaha.wordpress.com/2014/04/20/whats-alibaba-really-worth-2/ Good read. I'm not even looking into the company as I don't know enough about China, but I thought it was very instructive to look at these other similar business and see how even if you discount back to the IPO, you could have paid very high multiples and still have done well. Reminds me of a recent post by @Jesse_Livermore where he did a similar thing with Wal-Mart and other companies: http://philosophicaleconomics.wordpress.com/2014/03/22/wmt/

Good post by Glenn: http://glennchan.wordpress.com/2014/04/20/how-the-sec-should-reform-market-structure/

I missed it when I first looked, but there's also a second writeup on the VIC that recommends shorting JAH: http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/64598 Here's another negative piece on JAH: http://seekingalpha.com/article/703071-this-companys-management-and-accounting-practises-obscure-business-evaluation Gio and others, had you seen this? What do you think?

Most insurers would probably blow up if they tried to invest in equities in any significant way. It takes a good investor at the helm, so few insurers even try. A few rare specialty insurance businesses can make decent returns from underwriting profits. Check out RLI for example. The problem is that these usually can't grow too much because the niches that they find usually aren't very big, so they tend to return a lot of capital to shareholders (dividends, special dividends, buybacks). That's the LRE model afaik. RLI could be so much better if someone like Buffett or Gaynor invested the float... I wish Markel would buy them if they ever become cheap (which they pretty much never are)...

How are you thinking about it?

Interesting: http://9to5mac.com/2014/04/18/fuelband-and-other-hardware-discontinued-development-team-fired-as-nike-seeks-to-exit-wearable-tech-market/

I'd need to look again to confirm and I don't have my notes here, but I think that Markel has inherited a lot of longer-duration bonds from Alterra. It is likely not their preference to have that much of those and they are probably in the process of adjusting the portfolio, which can take some time. Unless there's a big interest spike soon, I think they should have time to further optimize things. But this is from memory, I could be wrong about this.

Remove whatever characters are after .pdf in the URL bar of your browser after you click on the link and it sould work. Alternatively, you can cut & paste the link from the board and that should work too. Not sure why just clicking on it doesn't work, but I had the same problem.

Agreed. And I think Markel is doing a good job of that. They shortened their durations a lot, have lots of cash, have a lot of equity in solid companies, and cash coming in from ventures. But maybe you disagree and think they should have done something else?

Perhaps. But right now, Markel is way more levered to the investment portfolio than the insurance premiums written. Premiums written ~ 0.6xBook, and investments ~ 2.6xBook. But wouldn't premiums written go up significantly (and very profitably) in a hard market?

I'm not sure if I would agree it's "a lot". According to Yahoo finance, insiders own 2.02 million shares, and in the past 6 months they've sold 1,051 shares (they also purchased 1,455, but these were not in the public market, though a bunch of directors purchased shares for $583.30 last month). As they say, there's a thousand reasons to sell some stock, but there's only one for buying, so of course I'd rather see insiders buy in the public market. But small sales don't need to be a negative sign; maybe someone has a basement to renovate or something.

I wonder if a rapid increase in interest rates could help create a hard market by removing capital from the insurance industry and forcing higher rates. Does anyone know if this has happened in the past?

Thank you, I got both and look forward to reading them.

Given my most recent track record… just don’t ask me!! ;D What I believe is JAH is still small enough, and Mr. Franklin is still young enough, to go on growing for the next two decades. If, on the other hand, entrepreneurs who have built something extraordinary during the last 10 years, all of a sudden lose interest and start dumping it... well, then I really don’t know what to think nor say. ::) Gio Don't feel too bad, Gio. One way to look at the situation is that the only reason why you are so shocked by Mr. Brindle's voluntary departure is because that kind of thing is so rare. If it was frequent, it wouldn't stand out and be surprising. But then, now that I've said that, we'll probably learn that Brian Dalton is retiring to a coconut plantation in the Bahamas or something like that :D

Thanks fareastwarriors, Gio, and colinwalt! I've started looking a bit deeper last night. I was already a bit familiar with it as it was on my list and always liked what I saw, but I haven't yet been able to determine if what made it successful in the past decade is still intact and if Mr. Franklin is now focusing more on PAH (these 20% preferreds are probably a good incentive...) or if JAH is still a primary vehicle for him. He does own about 5 million shares of JAH out of 133m...

What are your thoughts on the size of bond holdings on Markel balance sheet? At the end of 2013, the balance sheet shows bonds of $10.14B, which come to 150% of book value of $6.7B. It seems that their portfolio & book value will be quite sensitive to interest rates. Others have given good replies, but I'll add that I indeed think being a kind of leveraged bond fund is definitely a headwind, but it is one for the whole industry, and I think Markel is higher quality than the vast majority of the industry and has more levers to pull to compensate (a conservative value approach that keeps them out of trouble, a bigger but high-quality equity portfolio, better at bond investing than average, a history of underwriting profit, Markel Ventures starting to really take off). Management has been asked about this (I don't remember where I saw this, maybe in notes from a recent AGM?), and they didn't seem to be too worried. They've been positioning themselves for this for a while, so it shouldn't catch them flat-footed. So I wouldn't pay 2x book with interest rates this low, but I think that between 1.1-1.2 is pretty reasonable for a business of this quality that should keep compounding nicely between 10-15% for years. I don't think it's priced and positioned to give the 20%+ returns that many are looking for, but I also see it as one of the safest companies I own, and that's worth something. There's also always the possibility of a good hard market to rev up the machine, but who knows when that would happen...