It was not a great week for my portfolio, but I still like my stocks. Is global growth slackening? I don’t think so. Are the financials that I own under threat? With the possible exception of Deerfield [DFR], no, not at all. Four quality US insurers, three quality European banks, and DFR. Hey, Deutsche Bank actually profited from the crisis. And Safety Insurance, unlike Commerce Group which missed estimates, beat estimates by a dime after the close. Bright management team there, and it trades at 97% of book, 5.7x 2007 earnings, and 6.8x 2008 earnings. (Did I mention that the reserves look conservative?)
Today’s action makes me think that there is some mindless “sell financials” program out there, and not caring about what is inside the financials. I will be adding to my names that were the worst hit recently, and perhaps, giving a higher weight to some of the insurers that I recently purchased. Assurant at 8.7x 2008 earnings, and Lincoln National at 9.2x 2008 earnings? It doesn’t make sense; these are two high quality companies with excellent growth prospects.
I am a value investor. Scanning my portfolio, I see a median 2008 P/E between 9-10x, and a median P/B in the 1.1x area. My portfolio will find support, even if the market falls further.
Full disclosure: long DFR DB AIZ LNC SAFT
Hi David, I’m wondering why insurance stocks seem to be taking a hit similar in magnitude to lenders. (SAFT & RAMR for example) How much risk do insurance companies take in their investment bond portfolios?
How firm are their book values?
Good Morning David
What a crazy week and yes it was not a great week for my portfolio as well. This week though has made me realized how little I know and that it is time to settle down to a style that is comfortable, that I understand, that is profitable and that I can implement without so much time being consumed. I am a wife and mother first and at times my children have laughing said they have lost their mom to the Stock Market.
I have been reading all your blog updates and out of curiosity this week I took your stock choices and evaluated them using different groups analysts opinions that I use to evaluate my own choices. They were: Merrill Lynch (my husbands 401K is with them), Morning Star, various others that Merrill Lynch provides, S & P stock reports, Reuters (Scottrade). What I found interesting was that Merrill Lynch had the majority of the stocks that you list as either hold or sell (19), GPI, LR, COP and DB being the only buys and the others either not being covered, Rst or urvw. Where you differed with Merrill Lynch you were mostly in agreement with Morning Star. As a new investor, I have found it very interesting and at times very confusing the differences in how a company is viewed. The data for evaluation is the same… but so different conclusions made (wondering if time frame is the quintessential difference?). So, I have copied most of the articles that you have listed and plan on reading them so that I understand how a value investor like yourself thinks. Looking at my stock choices so far, I have tended to favor value over growth. The great conversations on growth verses value at RM this week have been very interesting and informative.
Again, I thank you for all your hard work and willingness to share your knowledge. I pray that Lord bless you as you start down this new path in a business you know quite well…. encouraging you with that fact that the Lord makes no mistakes and He does all things Well!!
Theresa
Hi David,
I enjoy reading your blog. Thank you for all the information.
Regarding the assurants in your porfolio, aren’t they exposed to the current subprime and bond mess as they might invest premium proceeds in them?
The apprentice.
Hi David, I read SAFT quarterly press release and thought it looked good. I’m wondering why the SAFT share price has declined so much.
EIG and RAMR shares have also slid. I think that RAMR is trading below Book Value. I don’t have a BV for EIG. Are there fundamental reasons why these companies’ market values declined?