fareastwarriors Posted April 1, 2014 Share Posted April 1, 2014 Westhouse Securities - Changing spots somewhatWesthouseSecuritiesLimited_LancashireHoldingsNeutral-Changingspotssomewhat_Feb_28_2014.pdf Link to comment Share on other sites More sharing options...
giofranchi Posted April 2, 2014 Share Posted April 2, 2014 Richard Brindle explains the power of three. http://www.lancashiregroup.com/investor-relations/lancashire-holdings-annual-results-2013.aspx Gio Link to comment Share on other sites More sharing options...
thefatbaboon Posted April 2, 2014 Share Posted April 2, 2014 I see someone bought a 200k block at 6.67 - pretty much exactly on the nose of 1.5x my estimate of bv. Link to comment Share on other sites More sharing options...
giofranchi Posted April 2, 2014 Share Posted April 2, 2014 I see someone bought a 200k block at 6.67 - pretty much exactly on the nose of 1.5x my estimate of bv. I have bought more at 6.65... but not that much!! ;D ;D ;D And I will keep buying. ;) Gio Link to comment Share on other sites More sharing options...
thefatbaboon Posted April 2, 2014 Share Posted April 2, 2014 Where do you keep finding all this money! Link to comment Share on other sites More sharing options...
nwoodman Posted April 2, 2014 Author Share Posted April 2, 2014 Book Value at the moment is around 4.50. Could our dreams come true? I understand people buying small chunks at these prices but I am sure they would give their hind teeth to be able to buy sizable positions in this at around book. At least there is finally something of interest to watch again Cheers nwoodman Link to comment Share on other sites More sharing options...
giofranchi Posted April 2, 2014 Share Posted April 2, 2014 Where do you keep finding all this money! ;D ;D ;D Cheers! Gio Link to comment Share on other sites More sharing options...
giofranchi Posted April 2, 2014 Share Posted April 2, 2014 Book Value at the moment is around 4.50. Could our dreams come true? I understand people buying small chunks at these prices but I am sure they would give their hind teeth to be able to buy sizable positions in this at around book. At least there is finally something of interest to watch again Cheers nwoodman I will have reached a full position in LRE well before price gets to 1xBV. If and when price truly gets there, I won’t be buying no more, because Mr. Brindle will be buying in my stead like crazy! ;) Gio Link to comment Share on other sites More sharing options...
thefatbaboon Posted April 2, 2014 Share Posted April 2, 2014 Where do you keep finding all this money! ;D ;D ;D Cheers! Gio Now that you are going to be getting many LRE dividends - you might go down to G.Lorenzi and buy me a nice present! Link to comment Share on other sites More sharing options...
giofranchi Posted April 2, 2014 Share Posted April 2, 2014 Where do you keep finding all this money! ;D ;D ;D Cheers! Gio Now that you are going to be getting many LRE dividends - you might go down to G.Lorenzi and buy me a nice present! Well, the answer to where do I keep finding all this money is I am a damn cheapskate! Sorry! ;D ;D ;D Gio Link to comment Share on other sites More sharing options...
thefatbaboon Posted April 2, 2014 Share Posted April 2, 2014 Where do you keep finding all this money! ;D ;D ;D Cheers! Gio Now that you are going to be getting many LRE dividends - you might go down to G.Lorenzi and buy me a nice present! Well, the answer to where do I keep finding all this money is I am a damn cheapskate! Sorry! ;D ;D ;D Gio :'( Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 2, 2014 Share Posted April 2, 2014 Gio, The more I look into Richard Brindle and the management team the more I like them. Dazel. Link to comment Share on other sites More sharing options...
giofranchi Posted April 2, 2014 Share Posted April 2, 2014 Gio, The more I look into Richard Brindle and the management team the more I like them. Dazel. And if the stock downtrend keeps going on a bit longer, you might get a wonderful price too! :) Gio Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 2, 2014 Share Posted April 2, 2014 Gio, As you know when it is an industry driven (soft market) decline and is not company specific it is our greatest opportunity for a management or company to separate themselves from the pack. I like what these guys are saying....but importantly what they are doing...building a franchise. I will be buying at these prices. Dazel. Link to comment Share on other sites More sharing options...
nwoodman Posted April 2, 2014 Author Share Posted April 2, 2014 Book Value at the moment is around 4.50. Could our dreams come true? I understand people buying small chunks at these prices but I am sure they would give their hind teeth to be able to buy sizable positions in this at around book. At least there is finally something of interest to watch again Cheers nwoodman I will have reached a full position in LRE well before price gets to 1xBV. If and when price truly gets there, I won’t be buying no more, because Mr. Brindle will be buying in my stead like crazy! ;) Gio Gio, only wishful thinking on my part as I think everyone understands them a little better these days. But you never know history may repeat, it was book value and them buying back shares that gave me the margin of safety with very little knowledge about the company to open a position originally. Just be a little careful, even the best laid plans of the best can sometimes go awry for re-insurers (but you know that anyway) Cheers nwoodman Link to comment Share on other sites More sharing options...
giofranchi Posted April 2, 2014 Share Posted April 2, 2014 Just be a little careful, even the best laid plans of the best can sometimes go awry for re-insurers (but you know that anyway) Cheers nwoodman Yes I know. I wish I could find more public companies with the same characteristics of LRE, to diversify a little bit, but unfortunately I cannot… I plan to get an investment in LRE as large as the one I already have in FFH. That will be a full position for me, and I will stop there. Gio Link to comment Share on other sites More sharing options...
giofranchi Posted April 2, 2014 Share Posted April 2, 2014 Richard Brindle explains the power of three. http://www.lancashiregroup.com/investor-relations/lancashire-holdings-annual-results-2013.aspx We have low expenses, I don't have an office. --Mr. Brindle I'll keep buying. :) Gio Link to comment Share on other sites More sharing options...
CorpRaider Posted April 2, 2014 Share Posted April 2, 2014 What do you think about the Lancashire foundation? I sort of prefer WEB's philosophy of not donating other people's money. Link to comment Share on other sites More sharing options...
giofranchi Posted April 2, 2014 Share Posted April 2, 2014 What do you think about the Lancashire foundation? I sort of prefer WEB's philosophy of not donating other people's money. Yeah! Sure! If you are Mr. Buffett, Mr. Gates, Mr. Ellison, and very few others, certainly that might be the best policy… But how exactly it could be followed by anyone else, and still donate meaningful sum of money, I don’t understand… Anyway, I have never thought much about philanthropy, therefore I am most probably wrong. ;) Gio Link to comment Share on other sites More sharing options...
hillfronter83 Posted April 2, 2014 Share Posted April 2, 2014 Thanks to many on this thread, I, too, finally became a Lancashire shareholder. LRE seems to be a classic stock that could be valued using dividend discount model. Price = Dividend / (R-g) = E * ROE * payout / [R - ROE * (1-payout) ] where R is required rate of return. So the P/B ratio is about ROE * payout / [R - ROE * (1-payout) ], plug in numbers from Bloomberg and here is what I got: Base Bull Bear ROE 20% 25% 15% Req Ret 15% 15% 15% Payout 81% 75% 90% P/B ratio 1.45 2.14 1.00 Base Bull Bear ROE 20% 25% 15% Req Ret 10% 10% 10% Payout 81% 75% 90% P/B ratio 2.61 5.00 1.59 I’m comfortable using 15% as my required rate of return, especially in this rate environment. So I think I at least got a fair price for this great company at 1.4 P/B. As you can see, if I drop my required rate of return to 10%, even in bear case, this company deserves 1.6 P/B. To echo many on this thread, I just can't find any other public trade company like LRE. Link to comment Share on other sites More sharing options...
fareastwarriors Posted April 2, 2014 Share Posted April 2, 2014 I'm ready to add more as the price drips lower. ;) Link to comment Share on other sites More sharing options...
thefatbaboon Posted April 2, 2014 Share Posted April 2, 2014 hmmm….I find your base calculations quite bullish! Last years ROE was 12.5%, the year before 15.3%, the year before 15.8%. You also assume in your bull case that they can use a retention/reinvestment ratio of 25% and get a 25% return on it, i.e. g of 6.25%. Whereas they haven't been able to retain earnings and grow their tbv at all over the last 5 years. I think you need to get rid of that bull case, make your base the new bull case, the bear the new base, and estimate a new bear case that assumes a soft market that continues for a while. Link to comment Share on other sites More sharing options...
link01 Posted April 2, 2014 Share Posted April 2, 2014 this might partially explain LRE's steady price declines. what it doesn't explain is why so many other reinsurers are still trading much closer to their highs "Reinsurance renewal prices fall by as much as 20% across sector:" http://www.artemis.bm/blog/2014/04/01/reinsurance-renewal-prices-fall-by-as-much-as-20-across-sector/ Link to comment Share on other sites More sharing options...
fareastwarriors Posted April 2, 2014 Share Posted April 2, 2014 Leading brokers said insurers had obtained reductions in reinsurance premiums of between 15 and 20 per cent on average in talks over annual policy renewals, which took effect at midnight. For months, capital markets investors have been ploughing capital into reinsurance in the face of weak returns from other fixed income instruments. They now supply enough funds to meet an estimated $50bn worth of claims. Until now they have committed funds mostly to areas of reinsurance in which the risks of losses are easier to model, notably natural catastrophes including hurricanes. ... Investors that want to commit funding to hard-to-model areas invest in vehicles such as “sidecars” – set up in conjunction with reinsurers, which involve traditional underwriting – rather than buying insurance-linked securities. More than $2.5bn of reinsurance premiums have just been renegotiated in the spring reinsurance renewal season, which is dominated by Asian markets including Japan and Korea. In a report released on Tuesday, Willis Re said reinsurance prices had fallen “across nearly all classes and geographies”. The broker added that the new sources of funding had brought “additional capacity and adds a new competitive dynamic to non-catastrophe markets”. Reinsurance capital wave grows http://www.ft.com/intl/cms/s/0/eceecca0-b8d2-11e3-835e-00144feabdc0.html?siteedition=intl#axzz2xfqwU7IL Link to comment Share on other sites More sharing options...
giofranchi Posted April 3, 2014 Share Posted April 3, 2014 hmmm….I find your base calculations quite bullish! Last years ROE was 12.5%, the year before 15.3%, the year before 15.8%. You also assume in your bull case that they can use a retention/reinvestment ratio of 25% and get a 25% return on it, i.e. g of 6.25%. Whereas they haven't been able to retain earnings and grow their tbv at all over the last 5 years. I think you need to get rid of that bull case, make your base the new bull case, the bear the new base, and estimate a new bear case that assumes a soft market that continues for a while. I continue to believe it is dangerous to value an asset with a duration of 50 years or more on the basis of last 3 years results. Think of it this way: Mr. Brindle is among the best in the world in what he does, Mr. Klarman is among the best in the world in what he does. Mr. Brindle looks for the best bargains in global insurance and reinsurance markets, Mr. Klarman looks for the best bargains in global equity and distressed debt markets. Just because Mr. Klarman suffers 2 or 3 years of subpar performance, would you then infer that he is destined from now on to underperform? Or would you think more likely that his average performance in time will be more or less like the one he has experienced during the last 20 years? Or, put differently, why disregard the possibility that 3 years of underperformance might be followed by 3 years of outperformance? Mr. Brindle long-term performance has been ROEs around 19%-20%, and it has been very lumpy. I assume his future long-term performance will stay around 19%-20% and will keep on being lumpy. Gio Link to comment Share on other sites More sharing options...
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