mpauls Posted October 21, 2010 Share Posted October 21, 2010 I'm finding too many wonderful companies to buy right now and can't justify buying this one, but it is quite nice and many of you will take a liking to it. Hallmark Financial Services, Inc. (HALL) (Pay me later) Link to comment Share on other sites More sharing options...
Guest Bronco Posted October 21, 2010 Share Posted October 21, 2010 Why not post your better ideas? What makes this stock a better value than Harry Long's RLI? Link to comment Share on other sites More sharing options...
ragnarisapirate Posted October 21, 2010 Share Posted October 21, 2010 What makes this stock a better value than Harry Long's RLI? While I have no opinion on which is better, this is a super interesting company to follow. The CEO of HALL is kind of a less public version of Sardar Biglari... You should do some research on Mark Schwartz. Given your new found interest in Biglari, I think you would like to read up on him. The story behind Pizza Inn alone, is fascinating. :) As a strange corollary, the former CEO of Pizza Inn (Tim Taft) was probably in the running for the top slot at SNS, just after Sardar took over. Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted October 21, 2010 Share Posted October 21, 2010 Rising combined ratio (104.5% for latest quarter) and reserving deficiencies indicate problems. For the same price as HALL, you could but SUR, a much better insurer. Link to comment Share on other sites More sharing options...
Guest Bronco Posted October 21, 2010 Share Posted October 21, 2010 Ragnar - thanks for the heads up - I will research this. I guess my question still outstanding for Mpauls is why he/her isn't sharing his better ideas? For the record, I share what I own. If you are scared to list stocks you are invested in because you are a fiduciary, use an alias! Link to comment Share on other sites More sharing options...
benhacker Posted October 21, 2010 Share Posted October 21, 2010 I guess my question still outstanding for Mpauls is why he/her isn't sharing his better ideas? Because some of us make a living by doing this, so some sharing is not appropriate. Let it drop. Matt has shared plenty of valuable ideas. Ben Link to comment Share on other sites More sharing options...
Guest Bronco Posted October 21, 2010 Share Posted October 21, 2010 Sounds like a friend that says "I can set you up with this girl, she's really nice". "I wouldn't date her, but she's got a great personality". I don't want this person as my matchmaker. Link to comment Share on other sites More sharing options...
omagh Posted October 21, 2010 Share Posted October 21, 2010 Agreed...for those of us who play in small caps, the internet is a big place and it will just suck up the margin of safety. -O I guess my question still outstanding for Mpauls is why he/her isn't sharing his better ideas? Because some of us make a living by doing this, so some sharing is not appropriate. Let it drop. Matt has shared plenty of valuable ideas. Ben Link to comment Share on other sites More sharing options...
Guest Bronco Posted October 21, 2010 Share Posted October 21, 2010 Omagh - I get it. But I hope my point is well taken as well, with a little humor thrown in. Link to comment Share on other sites More sharing options...
omagh Posted October 21, 2010 Share Posted October 21, 2010 Bronco ;) it's all good. -O Omagh - I get it. But I hope my point is well taken as well, with a little humor thrown in. Link to comment Share on other sites More sharing options...
schin Posted October 22, 2010 Share Posted October 22, 2010 Hey guys.. Here's my 36th best idea.... ;D Bronco, I get it.. heheeh... It's is all in good humor. Link to comment Share on other sites More sharing options...
mpauls Posted October 22, 2010 Author Share Posted October 22, 2010 (I saw that you like Nicholas, not a bad one either.) Link to comment Share on other sites More sharing options...
Parsad Posted November 2, 2010 Share Posted November 2, 2010 Sounds like a friend that says "I can set you up with this girl, she's really nice". "I wouldn't date her, but she's got a great personality". I don't want this person as my matchmaker. That's pretty damn funny! Although, I think Mpauls is at least paying for the dinner. Cheers! Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted November 3, 2010 Share Posted November 3, 2010 Rising combined ratio (104.5% for latest quarter) and reserving deficiencies indicate problems. For the same price as HALL, you could but SUR, a much better insurer. ;D HALL isn't even in the top 10 of insurers, let alone the top 10 of all investment ideas. Link to comment Share on other sites More sharing options...
Myth465 Posted November 3, 2010 Share Posted November 3, 2010 HALL was nice at 70% of book. I wouldnt buy it over book, regardless of the investing prowess. Link to comment Share on other sites More sharing options...
Myth465 Posted November 11, 2010 Share Posted November 11, 2010 HALL is getting cheaper. Its now at 75% of book off of crappy combined ratios. Interesting times. Auctually it may not be that cheap if you take out the goodwill. http://www.hallmarkgrp.com/docs/IDEASConfNov102010.pdf Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted May 13, 2011 Share Posted May 13, 2011 HALL has taken a pasting in the last two days after posting ugly results. Link to comment Share on other sites More sharing options...
gfp Posted May 13, 2011 Share Posted May 13, 2011 I have noticed little bits of insider buying at Pizza Inn and occasionally at HALL. Never held this one but used to follow the drama. Link to comment Share on other sites More sharing options...
ragnarisapirate Posted May 13, 2011 Share Posted May 13, 2011 HALL has taken a pasting in the last two days after posting ugly results. The adverse prior year development and the losses from the winter storms contributed 25.8% to the 121.6% consolidated combined ratio for the quarter. Wow. They are now selling for (basically) .95 of tangible book... By comparison, it doesn't seem like the cheapest thing out there; if there wasn't a well known value guy at the helm, I wonder how much lower it would be? Oddly, it still has a pretty high short ratio (though, that may change with the next reporting in light of the drop? Link to comment Share on other sites More sharing options...
onyx1 Posted May 13, 2011 Share Posted May 13, 2011 They made an unforced error by trying to repeat the success they have long had in non-standard auto in TX. Begining in 2008 they expanded into FLA and it has been a disaster because of rampant fraud. Personal injury claims in FLA (a no-fault state) are completely out of control as claims and payouts have doubled in the last three years. The trial lawyers have successfully stopped the most recent attempt to bring the system back into control. It looks like HALL is doing a 180 and getting out of FLA. The experience has been so bad, though that it wouldn't surprise me to see a management change. Anyone who underprices policies by 100%-200% has no underwriting credibility, despite what historically has been a pretty good record for the firm overall. What may be an upside catalyst is that two funds (associated with the controling shareholder) that own 16% of outstanding shares are set to mature sometime this year and have filed to sell their HALL shares. Management has indicated that there is nothing to keep them from repurchasing all 16%. With shares currently at 65% of BV, I see about a 6.5% accretion to BV if they buy them all. Link to comment Share on other sites More sharing options...
ragnarisapirate Posted May 13, 2011 Share Posted May 13, 2011 What may be an upside catalyst is that two funds (associated with the controling shareholder) that own 16% of outstanding shares are set to mature sometime this year and have filed to sell their HALL shares. Management has indicated that there is nothing to keep them from repurchasing all 16%. With shares currently at 65% of BV, I see about a 6.5% accretion to BV if they buy them all. care to give some more info on this? Link to comment Share on other sites More sharing options...
onyx1 Posted May 13, 2011 Share Posted May 13, 2011 care to give some more info on this? Mark Schwarz, Chairman and CEO, controls a number of funds under the Newcastle name, which together own 34% of outstanding shares. Two of these funds, Newcastle Special Opportunities Fund I, and Newcastle Special Opportunities Fund II were originally set with a hard maturity date sometime in 2011. Each of these funds own 8% of outstanding shares of HALL. Schwarz is deemed the beneficial owner and therfore a SEC S-3 filing is required and was made in Jan 2011. I listened to Schwarz at a recent insurance conference and he made it clear that the shares would not be liquidated in the public market, but rather through an orderly sale at a privately negotiated price. This sale can be made to a third party or to Hallmark itself as a share repurchase, or a combination of both. I don't have any information on the exact timing. I confirmed with management at the conference that they have no restriction to making a repurchase, but as you would expect, no other indication was given as to whether they will be the buyer or not. We will find out when the transaction is complete with a supplemental prospectus sometime in the future. Schwarz used the word 'cheap' in a public setting to describe the shares when they were at 73% of BV in February ($8.5 vs BV of $11.70). Today they closed at 64% of BV ($7.05 vs. BV of $11.10). Given that HALL management has enough cash to make the $23mm purchase and that they hold all the cards with respect to the current state of reserves, they are in the best position to buy. I have no idea what will happen but their degree of participation in the purchase will speak volumes about their confidence in the business going forward. Here is the S-3 filing: http://www.sec.gov/Archives/edgar/data/819913/000114420411002118/v208011_s3.htm Thats all I can add at the moment, if something else comes to mind I'll post it. Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted May 14, 2011 Share Posted May 14, 2011 Schwarz used the word 'cheap' in a public setting to describe the shares when they were at 73% of BV in February ($8.5 vs BV of $11.70). Today they closed at 64% of BV ($7.05 vs. BV of $11.10). Given that HALL management has enough cash to make the $23mm purchase and that they hold all the cards with respect to the current state of reserves, they are in the best position to buy. I have no idea what will happen but their degree of participation in the purchase will speak volumes about their confidence in the business going forward. Like Ragnar said, tangible book value is 0.95, as opposed to the 0.64 figure that you're quoting. Like I said when this thread was created, underwriting performance is awful, reserving is as bad (still is). Why should anyone pay close to book value for a turd, when only a few months ago they could have bought a gem (SUR) for even less? Honestly, this looks like a stock to avoid until they actually decide to run this company as an insurance operation, as opposed to a hedge fund. Link to comment Share on other sites More sharing options...
Rabbitisrich Posted May 14, 2011 Share Posted May 14, 2011 Schwarz used the word 'cheap' in a public setting to describe the shares when they were at 73% of BV in February ($8.5 vs BV of $11.70). Today they closed at 64% of BV ($7.05 vs. BV of $11.10). Given that HALL management has enough cash to make the $23mm purchase and that they hold all the cards with respect to the current state of reserves, they are in the best position to buy. I have no idea what will happen but their degree of participation in the purchase will speak volumes about their confidence in the business going forward. Like Ragnar said, tangible book value is 0.95, as opposed to the 0.64 figure that you're quoting. Like I said when this thread was created, underwriting performance is awful, reserving is as bad (still is). Why should anyone pay close to book value for a turd, when only a few months ago they could have bought a gem (SUR) for even less? Honestly, this looks like a stock to avoid until they actually decide to run this company as an insurance operation, as opposed to a hedge fund. SUR and HALL are in different businesses with different loss expectations but also different growth expectations. That's a general statement rather than specific to this particular company. It's interesting that the NPW in personal lines increased despite the statement that unprofitable agent relationships were discontinued. Instead smaller premiums written, the expense ratio rose, apparently due to more claims staff. I wonder about the details behind "complexity related to Florida personal injury protection claims." Link to comment Share on other sites More sharing options...
onyx1 Posted May 14, 2011 Share Posted May 14, 2011 Like Ragnar said, tangible book value is 0.95, as opposed to the 0.64 figure that you're quoting. I wasn't quoting to TBV, I was quoting to the BV number expressed in the earnings release. Either way, the point I was making was that if the CEO liked it in February, he should like it even more today. Link to comment Share on other sites More sharing options...
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