fishwithwings Posted August 20, 2018 Share Posted August 20, 2018 Has anyone looked at this stock as a long-term investment ? Link to comment Share on other sites More sharing options...
EricSchleien Posted August 20, 2018 Share Posted August 20, 2018 I have but I just took a pass. Long-term capital allocation isn't super stellar. Just not my thing. Let's say it never trades at book value over the next 10 years. That's a pretty crap investment. I'd honestly rather buy a basket of unprofitable net-nets and bet a few reverse to the mean or pay a fairly cheap price for an asset that's growing quite nicely. I'd rather pay 1.5x book for Markel or Berkshire and hold for 15 years. I haven't looked at it in a few months but paying even 60-70 cents on the dollar of book value for a company that tends to do ROE of basically 1-5% a year just isn't so interesting to me honestly. I don't think you'll lose much money but I certainly wouldn't hold this long-term. ANAT is kind of the same deal. There was a guy I used to follow in high school named Irwin Michael who was into this kind of stuff. To me, buying this overly conservative insurance company at a discount to book just seem kind of fairly priced. Why would this EVER be worth book value is the question I would ask. Capital allocation at a lot of these companies just kind of suck. Just my thoughts and feel free to tell me if you think I'm totally wrong or missing something. Just really don't spend much time on these things. Has anyone looked at this stock as a long-term investment ? Link to comment Share on other sites More sharing options...
Hielko Posted August 20, 2018 Share Posted August 20, 2018 Let's say I put a $100 dollar bill in a box, how much would you pay for it? You trust me I put in there, but you can't see it, and perhaps the key of the box is gone. So I guess it deserves a discount. At the same time, if you throw the box on the ground it might break and you get a $100 bill. KCLI is like that. It's a box with money. You trust it's there. But you can't just pick it up and break it. But it's not an unbreakable box. Someone could break it and realize full value. Either liquidating the company, or just selling it to a strategic acquirer (probably way better). So in that sense it's perhaps not that much different than the money losing net-nets. Some of these boxes will stay locked, and you will never make a lot of money. Some of these boxes will be opened, and you could make a great return. Link to comment Share on other sites More sharing options...
EricSchleien Posted August 20, 2018 Share Posted August 20, 2018 The family has been running it for 4 generations. The current CEO has been there since 1985. I just hate situations like these. Let's say I put a $100 dollar bill in a box, how much would you pay for it? You trust me I put in there, but you can't see it, and perhaps the key of the box is gone. So I guess it deserves a discount. At the same time, if you throw the box on the ground it might break and you get a $100 bill. KCLI is like that. It's a box with money. You trust it's there. But you can't just pick it up and break it. But it's not an unbreakable box. Someone could break it and realize full value. Either liquidating the company, or just selling it to a strategic acquirer (probably way better). So in that sense it's perhaps not that much different than the money losing net-nets. Some of these boxes will stay locked, and you will never make a lot of money. Some of these boxes will be opened, and you could make a great return. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted August 20, 2018 Share Posted August 20, 2018 The family has been running it for 4 generations. The current CEO has been there since 1985. I just hate situations like these. Let's say I put a $100 dollar bill in a box, how much would you pay for it? You trust me I put in there, but you can't see it, and perhaps the key of the box is gone. So I guess it deserves a discount. At the same time, if you throw the box on the ground it might break and you get a $100 bill. KCLI is like that. It's a box with money. You trust it's there. But you can't just pick it up and break it. But it's not an unbreakable box. Someone could break it and realize full value. Either liquidating the company, or just selling it to a strategic acquirer (probably way better). So in that sense it's perhaps not that much different than the money losing net-nets. Some of these boxes will stay locked, and you will never make a lot of money. Some of these boxes will be opened, and you could make a great return. I was just about to post this, but you beat me to it. Bixby family has effectively controlled the company for many decades. They own something like 70% of the total shares and the top two execs are both Bixbys. By no means is family control necessarily a bad thing, but their move to de-register with the SEC several years ago was a pretty clear signal about the intent to maintain the status quo here. Nearly anything is a buy at the right price, but something like this would have to be cheap indeed before I would pull the trigger. Link to comment Share on other sites More sharing options...
Spekulatius Posted August 21, 2018 Share Posted August 21, 2018 The money in a box analogy is pretty good in this case. What would you pay for Per $ for money in a bank account controlled by someone else (for decades) yielding let say 3%? Certainly not a 100c on the $. 50c maybe? Even 70c on the $ would be too high. Link to comment Share on other sites More sharing options...
bskptkl Posted August 21, 2018 Share Posted August 21, 2018 I compare KCLI with NWLI and ELF.TO. KCLI was trading more like 50% of TBV while those other 2 trade closer to 70% of TBV so I have been picking away at KCLI this year after selling NWLI last year. Still slightly below water at $42 though. Should have kept NWLI. C'est la vie. Big losses in their securities portfolio though. Don't know why it popped up about 10% recently. A 2Q that wasn't as bad as 1Q maybe? Maybe one day family takes it completely private. They did pay $52.50 not too long ago so someone thought that was a fair price. Link to comment Share on other sites More sharing options...
Spekulatius Posted August 21, 2018 Share Posted August 21, 2018 I compare KCLI with NWLI and ELF.TO. KCLI was trading more like 50% of TBV while those other 2 trade closer to 70% of TBV so I have been picking away at KCLI this year after selling NWLI last year. Still slightly below water at $42 though. Should have kept NWLI. C'est la vie. Big losses in their securities portfolio though. Don't know why it popped up about 10% recently. A 2Q that wasn't as bad as 1Q maybe? Maybe one day family takes it completely private. They did pay $52.50 not too long ago so someone thought that was a fair price. I think NWLI is a better company than KCLI and it deserves a higher multiple. I owned NWLI st around 35% of book and sold for a little more than 50% book - too early obviously. Link to comment Share on other sites More sharing options...
Philbert77 Posted October 21, 2018 Share Posted October 21, 2018 I think NWLI is a better company than KCLI and it deserves a higher multiple. I owned NWLI st around 35% of book and sold for a little more than 50% book - too early obviously. When did you own NWLI at 35% of book? I sold them this summer at $319 a share. I notice that they have drifted down towards $280 recently and on a book value of $507 that looks pretty good to me. Just wish the family would actually do something to close the discount. I held the stock for 6 years, it was good to me but man closing that discount somehow would be nice... Link to comment Share on other sites More sharing options...
Spekulatius Posted October 21, 2018 Share Posted October 21, 2018 I think NWLI is a better company than KCLI and it deserves a higher multiple. I owned NWLI st around 35% of book and sold for a little more than 50% book - too early obviously. When did you own NWLI at 35% of book? I sold them this summer at $319 a share. I notice that they have drifted down towards $280 recently and on a book value of $507 that looks pretty good to me. Just wish the family would actually do something to close the discount. I held the stock for 6 years, it was good to me but man closing that discount somehow would be nice... I believe it was in the 2011/2012 timeframe. At that point, NWLI was trading quite a bit below 50% of book. I bought in the $130-135 range. Link to comment Share on other sites More sharing options...
bskptkl Posted April 12, 2019 Share Posted April 12, 2019 I visited KCLI this week. What an impressive headquarters, built around 100 years ago for 1 mm in construction costs. It looks like the federal reserve building. My impression is that KCLI is conservatively managed company that's been around forever and plans to be around forever. They're comfortable in their niche market, not trying to hit home runs, knocking out singles. The low interest environment hurts of course, but they feel we are late in the cycle and it's not time to take more risk. They point to their real estate portfolio (most certainly understated on the balance sheet) and commercial lending arm as areas of expertise (been doing it forever) and how they take risk in a smart way, as opposed to reaching for yield in their bond portfolio. They were very aggressive lenders in 2008, contrary to everyone else. They want to be just as opportunistic when the market eventually corrects. But they are not looking to aggressively buyback stock and hopes of the Bixby family taking it private seem misplaced to me. I get the impression we could wallow at these prices for a while until earnings get better. Personally, I will continue to buy dips and maybe trade around my current position just to amuse myself, but it will remain a large holding of mine - even though I am underwater. Link to comment Share on other sites More sharing options...
Spekulatius Posted April 12, 2019 Share Posted April 12, 2019 Yes, KCLI is cheap based on price/ book. I do find it strange that they buy up another insurer ( Grange) for multiples of their book value, while their own stock trades at 1/2 book ( roughly). Also, the CEO ( Buxby) is paid very well - ~$3.6M in 2014. After they went semi private, we don‘t know, but I suspect hiding the extremely generous salary is one reason why they went down that route. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted September 10, 2019 Share Posted September 10, 2019 Looks like these jokers have a corporate jet: https://seekingalpha.com/instablog/957061-chris-demuth-jr/5350087-fly-corporate-jet Link to comment Share on other sites More sharing options...
Jurgis Posted September 10, 2019 Share Posted September 10, 2019 Looks like these jokers have a corporate jet: https://seekingalpha.com/instablog/957061-chris-demuth-jr/5350087-fly-corporate-jet It's good to be the king. Link to comment Share on other sites More sharing options...
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