Since the last time I wrote about my portfolio, things have been volatile. Here are my actions since then:
New Buys
- National Western Life Insurance
- Canadian National Railway
New Sells — Hartford Financial
Rebalancing Buys:
- Assurant (brnging it up to a double-weight)
- Dorel Industries
Rebalancing Sells:
- Allstate (2)
- Assurant
- Companhia De Saneamento Basico
- General Dynamics Crp
- Genuine Parts
- Hartford Finl Svcs Group Inc (3)
- Industrias Bachoco SA (2)
- Ishares Inc MSCI Brazil Index Fund
- Noble Corporation
- Safety Ins Group Inc
- Shoe Carnival Inc
- Vishay Intertech Inc (3)
Comments
After the plunge, and the run, I scaled out of Hartford three times, and then sold because of the high odds that they will take the TARP money. Taking TARP money has led to underperformance in the past, and though it looks like cheap capital, it can be a very expensive set of handcuffs to cut off.
If Allstate takes the TARP money, I will sell them as well, and buy a certain P&C reinsurer. I suspect that they won’t take it — only the desperate take TARP money.
I replaced Hartford with National Western Life. Little company, and illiquid. If you follow me here, limit orders only. It is a basic life an annuity company. No debt. Trades for half of book value. Currently profitable, but future profits are uncertain. One controlling investor, R. L. Moody, and the rest of the shareholder’s list reads like a “Who’s Who” of small cap value investing. I have not reviewed the accounting in detail, but when I reviewed it in detail six years ago, I thought the accounting was more conservative than most insurance companies.
With all of the cash building up from rebalancing sales, I needed to add another name with a strong balance sheet. I chose Canadian National. Unlike US railroads, they go coast-to-coast — less need for loading and unloading. Second, the valuation is not much higher than peers. Third, the balance sheet is stronger than all peers. Not that I think that any of the major North American railroads is at risk of failure, but it is unlikely that Canadian National will come under significant stress.
That’s all for now. So far, it’s been a good year for me. I’m running with cash at my upper 20% limit, so I am looking for safe and cheap ideas that would not get hit that badly in another pullback.
Full disclosure: long NWLI CNI DIIB.PK AIZ ALL SBS GD GPC IBA EWZ NE SAFT SCVL VSH
David, any details on why Assurant is getting double weight? They just missed earnings, are seeing some mark-to-market losses in their portfolio (but not nearly as much as at other firms), their growth engine (Specialty Property) will slow when housing bottoms, and their other units (Emp Benefits, Solutions/Extended Warranties) are suffering due to rising unemployment and the bankruptcies of major customers like Circuit City and the consumer’s major spending retrenchment. Meanwhile, the SEC investigation into reinsurance side agreements has never (as far as I know) been resolved, and they’ve been advised by legal counsel not to buy back stock while the SEC mulls the case. I think the reinsurance side agreement, a tiny $7 mm from years ago, is minor, but the SEC has enough on its plate (Madoff, defending its competence and existence) that they could leave the inquiry open for years.
Meanwhile, AIZ has lagged most other insurance stocks in the rally. (Maybe that’s why you like it.)
ANAT is the sister company of NWLI. Take a look at that one.