2014 comes to an end! Happy Christmas and a Happy New Year 2015!

December 22nd, 2014 Comments off

2014 comes to an end in a rather turbulent manner.

Shares are beaten down after the rapid slide of the oil price. Even shares of companies which profit from cheaper oil are beaten down highlighting how hysteria and speculation are influencing markets in these days.

Let’s keep calm! The most important is not to sell on panic but to stay in for the long term.

One of our long term holdings Colfax Corp. (NYSE: CFX) held its investor day on dec. 16th

The company issued guidance for 2015 below expectations seeing EPS of $2.20-$2.40 vs. $2.58 analyst consensus estimate and revenues of $4.525B-$4.675B vs. $4.8B consensus.

Colfax as an industrial company certainly is not immune against headwinds of the world economy but the company will continue to grow by acquisitions and growth investments.

I wouldn’t be surprised to hear them announcing an acquisition pretty soon.

Hopefully this will be in a sector which is not heavy industry and more independent of the economic cycles than there existing activities.

Stay tuned for more to come. CFX certainly is a buy at this price!

We wish a Happy and Peaceful Christmas and a very successful New Year 2015 to all our readers!

Only 3 weeks left and 2014 is over!

December 9th, 2014 Comments off

This blog follows the stock of 2 companies:

Colfax Corporation (NYSE: CFX), the industrial manufacturing and fluid handling company and

Markel Corporation (NYSE: MKL), the speciality and niche insurer.

So how did they perform year to date?

Let’s start with the worst: Colfax performance is a whopping -24% ytd    … ouch …

Now the better one: Markel’s performance is +20% ytd beating the S&P 500 which performed 13.6% ytd.

Does this change our long term view of these 2 companies:    …    NO!

The investment thesis of Colfax is still intact: It grows by successful acquisitions and integration of the acquired activities getting them up to their efficiency levels.

On the conference call Q3 2014 CEO Steve Simms hinted at a full acquisition pipeline, so expect more. Insiders do the same and are buying shares!

Markel on the contrary got finally the performance it deserves I would say.

This reflects the successful integration of Alterra and slightly improving general conditions of the insurance market.

Both shares are a buy at these prices. Don’t forget, we are in for the long term!

Wird die Restrukturierung von Staatsschulden in Europa bald ein Thema?

November 27th, 2014 Comments off

Alle erwarten, dass die EZB demnächst ihr Kaufprogramm für Staatsanleihen ausweiten wird. Quantitative Lockerung also in immer stärkerem Ausmass im schwächelnden Europa.

In ganz Europa erreichen deshalb die Anleiherenditen neue Tiefstände. Die Rendite spanischer Anleihen mit zehn Jahren Laufzeit fiel erstmals unter die Marke von 2%. Italienische und portugiesische Anleihen mit derselben Laufzeit sanken in gleichem Ausmass.

Aber lässt sich allein mit monetären Massnahmen bei gleichzeitigem Ausbleiben von politischen und rechtlichen Strukturreformen Wirtschaftswachstum erzeugen, das die Staatsverschuldung wieder auf ein erträgliches Niveau sinken lässt?

Die historische Erfahrung spricht dagegen!

Die Staatsschulden haben wohl auch bereits ein solches Ausmass erreicht, das sie selbst bei stärkerem Wirtschaftswachstum nicht mehr innerhalb eines vernünftigen Zeitraumes zurückzuführen wären.

Deshalb überrascht es nicht, dass das Thema Beendigung der Schuldenkrise durch Restrukturierung und Erlass von Schulden zunehmend diskutiert wird, wie u.a. Jim Reid von der Deutschen Bank besorgt feststellt (siehe Valuewalk.com über seine Studie vom September 2014). Dies würde bedeuten, dass die ultimative Finanzblase unserer Jahre wohl die Staatschulden am Bondmarkt wären.

Und nochmals ein Blick in die Geschichte:

Als während der Lateinamerika-Krise der 1980er Jahre die Banken wieder ausreichend rekapitalisiert waren, wurde erkannt, dass die Staatsschulden der Region restrukturiert werden müssen. Den Anfang machte Mexiko, das den Schuldendienst im August 1982 einstellte.

Die vergleichbare Ausgangslage wäre in Europa jetzt gegeben: Nach Abschluss des Stresstests der EZB ist sichergestellt, dass das Bankensystem wieder ausreichend kapitalisiert ist!

Markel just released its 13F Holding Report

November 12th, 2014 Comments off

Markel Corp. (NYSE: MKL) just released its 13F Holding Report which they filed with the SEC.

As always this is a very interesting filing!

It reveals in which shares of public companies CIO Thomas Gayner is invested in in order to achieve his above average investment results!

Of course this does not include “Markel Ventures” which invests exclusively in privately held companies.

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Markel needs to improve Markel Ventures!

November 8th, 2014 Comments off

Markel Corp. (NYSE: MKL) released its Q3 2014 results and the 10Q.
As usual the transcript of the conference call has been published by Seeking Alpha.

So what’s the picture?
Book value per share, perhaps the single most important metric in the insurance business is up 8% year to date at $514.06

All three insurance segments — U.S., international, and reinsurance — made an underwriting profit with an overall combined ratio of 97% and they continued to align the legacy Alterra reserves with the Markel’s reserving philosophies.

Equity investments returned 7.3% and fixed income 4.5%, for an average return of 5.2% over the 9 months period which is pretty good.
During the quarter, Markel added $300 million to its equity portfolio, which now stands at 52% of shareholder equity, up from 48% at the end of 2013.
Markel will gradually increase the equity percentage of their holdings over the next months which means better investment returns over the long term but at the same time also more volatility.

But what a contrast to the results of Markel Ventures:
This non-insurance division had revenues of $595 million in the nine month period, up from $486 million in the corresponding period last year but net earnings were a meager 2.7%
Management emphasizes that the more important metrix to watch is EBITDA but as we all know this backs out depreciation which is a real cost!

Markel Ventures purchased Cottrell Industries, the leading manufacturer of car holding trailers and equipment during the quarter.

As CIO Thomas Gayner pointed out we’ll see more from Cottrell as well as the rest of the Markel Ventures companies in the fourth quarter.

We certainly have to watch closely within three months!

Markel Ventures is designed after Berkshire Hathaway but in order to match this success story or even get up to the profitability of the investments within the Markel insurance divisions they need to improve dramatically!

At book value/share of $514.06 and at yesterday’s closing price of $701.89 Markel is valued at a price/book ratio of 1.4
As a price/book of 1.5 times is surely justified for this high quality company, the share price will eventually rise to $771 over the next months.

Although not a discount at today’s price Markel certainly remains a buy as a long term investment!

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Markel released its Q3 2014 Earnings!

November 6th, 2014 Comments off

Markel Corp. (NYSE: MKL) released its Q3 2014 earnings.

Book value/common share came in at $514.06 up 8% from $477.16 at December 31, 2013

Have a look!

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Colfax marches on!

October 24th, 2014 Comments off

Q3 2014 was a disappointing quarter for this successful company.

Colfax (NYSE: CFX) is working in a still difficult macroeconomic environment.

The earnings release you can find here and the Conference call transcript as always was published by Seekingalpha.

Results were short of expectation. Demand remained soft in both segments, the gas and fluid handling and in the fabrication segment, and margins were below expectations in fabrication technology as CEO Steve Simms pointed our on the conference call.

Total net sales came in at $1.160 billion, an increase of 15% over the same period last year. This consists of 20% growth from acquisitions and negative 1% impact from foreign exchange, resulting in an organic decline of 4%.

As a consequence Colfax is lowering their guidance range for 2014:
They now expect full year revenue to be between $4.675 billion and $4.725 billion and adjusted EPS to fall in the range from $2.11 to $2.18.

But the general outlook given by Steve Simms was rather upbeat:
The new fluid handling management team has executed a restructuring program and the order rate at their high-margin services business has continued to strengthen.

Each of their businesses will be reducing 2015 costs in response to the current demand environment.

And arguably the most important hint came at last:
„We continue to aggressively pursue strategic acquisition. Our M&A pipeline is extremely robust with numerous active projects as well as many strong prospects for 2015.“

Don’t forget that part of Colfax business model is the successful acquisition and integration of new businesses into the existing organisation.
So stay tuned for more on this front!

Colfax stock yesterday closed at $ 54.03 . This translates into a p/e ratio FY 2014 of 26 with respect to the lower end of guidance.

Colfax is only temporarely slowed down by the macroeconomic environment.

The stock remains a buy on weak days like these!

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Colfax released its Q3 2014 results

October 23rd, 2014 Comments off

Colfax Corp. (NYSE: CFX) just released its Q3 2014 results which missed earnings and revenue expectations.

Have a look!

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Is Colfax a buying opportunity?

September 18th, 2014 Comments off

Investors in Colfax Corp. (NYSE: CFX) learned something new in the past months: weakness of the stock price!

After the company missed expectations in their Q2 2014 results due to weakness in some of their markets the stock price receded from an all time high of $75.37 down to less than $62 in these days.
Is it a buying opportunity? Insiders think so and bought on several occasions within the last months.
Colfax stock certainly is not cheap but it never was all the way up to ten-bagger status for readers of this blog! Today it is trading at a p/e FY 2015 of 20.

The fluid handling market will recover and Colfax business model of permanent improvement of their operations together with the successful integration of acquired businesses is working better than ever.
Expect above average growth potential which justifies an above average price of Colfax stock!

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Markel – steady as it goes

August 11th, 2014 Comments off

Markel Corporation (NYSE: MKL) released its Q2 2014 results.

The conference call transcript as always is made available by Seeking Alpha.

The insurance group reported book value per common share outstanding of $511.28 at June 30, 2014, up 7% from $477.16 at December 31, 2013.

The combined ratio was 101% for the second quarter of 2014 compared to 103% for the second quarter of 2013. The combined ratio was 98% for both the six months ended June 30, 2014 and 2013.

Markel made very good progress integrating the Alterra and the Hagerty Insurance acquisitions which explains that total operating revenues grew 35% to $2.5 billion in 2014 compared to $1.9 billion in the first half of 2013 and earned premiums increased 42% to $1.9 billion.

Excellent news came from their investment activity:

During the first half of 2014, the total return from the portfolio was 4.6% with equities up 8.6% and fixed income up 3.5% Recasting of the investment portfolio they picked up in the Alterra acquisition is largely complete. They have reset the fixed income portfolio, largely eliminated the high cost alternative investment activities and continued the process of building up the equity investments. Equities now represent 51% of shareholders’ equity up from 48% at year end and this percentage will continue to climb over the next years.

Perhaps the most interesting comments were made on „Markel Ventures“:

The contribution from this segment is still rather poor.

During the first six months of 2014, revenues from Markel Ventures were $355 million compared to $314 million a year ago. Net income to shareholders from Markel Ventures was just over $5 million in 2014 compared to $10.5 million for the same period in 2013.

As chief investment officer Thomas Gayner explains the manufacturing operations within the Ventures Group are lumpy businesses where big orders come irregularly and make a big difference on the bottom-line

Therefore they set high hopes into the Cottrell acquistion, the leading manufacturer of car hauling in the US.

The initial consideration for Cottrell is $130 million and this is the largest transaction yet for Markel Ventures.

With this addition, revenues of the Markel Ventures companies will now round to $1 billion, about 20% of Markels total revenues and they expect double-digit EBITDA profitability.

The market reacted negatively to these results and the stock fell to $ 632. But we are convinced that patient investors will be rewarded over the long term.

Fortunately Markel does not only depend of their insurance results. The investment portfolio especially the equity part is very promising and key to further development will be „Markel Ventures“ ability to acquire companies like Cottrell! Markel’s stock trades at a price/book ratio of only 1.2 ! That’s not expensive at all – Markel remains a buy!

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