Markel is off to a strong start in 2016!

May 6th, 2016 Comments off

Markel Corp. (NYSE: MKL) released its Q1 2016 earnings and is “off to a strong start” as pointed out Executive Chairman Alan I. Kirshner.

Book value per common share outstanding came in at $589.86 at March 31, 2016, up 5% from $561.23 at December 31, 2015.

Comprehensive income to shareholders was $397.0 million for the first quarter of 2016 up 41% compared to $281.8 million for the first quarter of 2015.

The combined ratio was 88% for the first quarter of 2016 slightly up compared to 83% for the first quarter of 2015, due to a 5 points less favorable development in the prior accident year loss ratio in 2016 compared to 2015.

The transcript of the conference call has been published by Thompson Reuters.

“Our first quarter results were very strong and are in many ways a continuation of the trend that we saw in 2015 with our investing, underwriting, and Markel Ventures operations all contributing to our success” pointed out CFO Anne Waleski on the call.

Total operating revenues grew 6% to just under $1.4 billion in 2016 from $1.3 billion in 2015. The increase is driven by a roughly 18% increase in revenue from Markel Ventures.

“On the investment side, Markel earned 3.6% on the equity investments and 2.4% on the fixed income holdings with a total return from the portfolio of 3.1%”, explained CIO Tom Gayner.

Equities represented 52% of shareholders’ equity at the end of the first quarter.

No wonder that investors liked what they saw and Markel’s stock briefly jumped up to $950.

At yesterday’s close of $937 Markel’s stock is valued at a book value/share of 1.6 which can be considered as fairly valued.

But Markel’s stock is a buy at any weakness considering their strong ability to create shareholder value powered by “three engines”, the insurance operations, the investment activities, and Markel Ventures!

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Colfax still faces headwinds from their end markets

May 6th, 2016 Comments off

Colfax Corp. (NYSE: CFX) released Q1 2016 earnings.
The conference call transcript has been released by Thompson Reuters!

Colfax’s adjusted net income dropped to $36.9 million, or $0.30 per share, compared to last year’s first-quarter mark of $44.5 million.
Revenue dropped 3.8% to $876.8 million during the first quarter.
Despite topping estimates the stock declined 20% over the last 5 days. The financial market is clearly spooked by bad conditions of Colfax’ end markets.

As Colfax new CEO Matt Trerotola pointed out in the conference call:
“We continue to make good progress on our cost reduction efforts, but our progress on growth initiatives has been offset by the end market environment, which remains choppy with a mix of positives and negative indicators and no clear sign of recovery in the near-term.”

With continued weakness in the oil and gas industry Colfax is focused on cost reduction and share buy backs.
Already they are monitoring market conditions and order activity to get an early picture of 2017.

Despite those excellent internal efforts Colfax’ stock will continue to suffer until market conditions improve.

When will that happen? Unfortunately no one knows.

Shares of Colfax remain a buy at these depressed prices for the long term investor who has the patience to wait until the markets turn! And one day they will turn, that’s for sure!

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Colfax reports Q1 2016 results!

May 3rd, 2016 Comments off

Colfax Corp. (NYSE: CFX) reported Q1 2016 results today Have a look!

They beat earnings per share by $ 0.03 and also revenue came in higher than expected!

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Auch die Kids auf dem Weg zur Elektromobilität!

February 18th, 2016 Comments off

Im Mai 2016 erscheint das ultimative Spielzeug für Autofans, die ihre Kinder auf die Elektromobiliät vorbereiten wollen, wie die Firma Tesla Motors gerade getwittert hat:

tesla.radioflyer.com

image

Es kann jetzt schon vorbestellt werden!

Den Grossen bleibt es natürlich unbenommen, gleich auch für sich selbst das “Erwachsenenmodell” S zu bestellen. Oder auf das Model 3 zu warten, das Ende März zum ersten Mal vorgestellt wird!

Und wer dann noch etwas Geld übrig hat, sollte sich mit einem Langfristhorizont die Tesla-Aktie (Nasdaq: TSLA) anschauen. Ist im Zuge der augenblicklichen Börsenkorrektur stark zurückgekommen!

 

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Markel’s FY 2015 – Excellent underwriting results!

February 13th, 2016 Comments off

Markel Corp. (NYSE: MKL) the speciality insurer this blog follows for years now released excellent FY 2015 underwriting results!

“Unfortunately the favorable impact from underwriting was muted by investing results which were adversely affected by volatility in the equity markets”, as pointed out CFO Anne Waleski on the conference call.

Gross written premiums were $4.6 billion for 2015 compared to $4.8 billion in 2014, a decrease of 4%, driven by a decline within the reinsurance segment.

Market conditions continued to be very competitive but Markel’s consolidated combined ratio for 2015 was an outstanding 89%, compared to 95% a year ago.
“The decrease in the consolidated combined ratio was driven by more favorable development on prior year loss reserves in each of our underwriting segments in 2015 compared to 2014 as well as a lower current accident year loss ratio in 2015 compared to 2014.“

Book value/share the all important ratio of an insurance company was $561.23 at the end of 2015, up 3% from $543.96 at the end of 2014.
Over the five-year period ended December 31, 2015, compound annual growth in book value per common share outstanding was 11%.

And what happened on the investment side?

“In 2015 we emphasized defense in the investment operations“ declared CIO Tom Gayner. “We maintained our high credit quality profile in our fixed income operations and we kept our equity exposure at the low end of our range for equity investments over the last 25 years.”

Markel reported an overall return in local currency of .5%. In the equity portfolio they were down 2.9%, and in the fixed income portfolio they were up 1.6%. After a 1.2% drag from the foreign currency effects, the net return is a negative .7%.

The results of Markel Ventures were ok but not sensational:
2015 revenues were $1 billion compared to $838 million in 2014. Net income to shareholders from Markel Ventures for 2015 was $11 million, compared to just under $10 million in 2014. EBITDA was $91 million in 2015 compared to $81 million in 2014.

For sure the investment results could not match the quality of the underwriting results in 2015. The slowing signs of the overall stock market were already visible.
But this does not change the big picture of Markel as an outstanding longterm compounding machine of shareholder value!

Markel shares closed Friday at $ 841.22 which translates into a price /book ratio per share of 1.5
Not cheap but not too expensive either.
If you want to add to your position this is certainly not a bad moment, but your time horizon with this type of company should be „longterm“ (at least 5 years from now) in order to reap the benefits of your investment!

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Markel released Q4 and FY 2015 results

February 11th, 2016 Comments off

Markel Corporation (NYSE: MKL) released Q4 and FY 2015 results:

They reported book value per common share outstanding of $561.23 at December 31, 2015, up 3% from $543.96 at December 31, 2014.

 

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Colfax stock jumped 15% after releasing FY 2015 results!

February 8th, 2016 Comments off

Colfax Corp. (NYSE: CFX) released FY and Q4 2015 results last week and the stock price immediately jumped 15%.
Is everything fine again in this commodity related business? Not exactly!

Net sales were $1.061 billion in the fourth quarter, a decrease of 12.0% from the prior year.
Adjusted net income was $63.0 million, or $0.51 per share, compared to $89.7 million for the fourth quarter of 2014, or $0.72 per share.
But this was much better than analysts expected!

Even if the downturn in the industry is and remains brutal Colfax is a very well managed company!

On the Conference Call the new CEO Matthew L. Trerotola hinted at already announced additional cost reduction efforts to eliminate $100 million from the 2014 cost base by the end of 2016.
And he continued to announce good progress on these actions through the quarter, which will allow to recognize $50 million of incremental cost savings this year.
These measures together with other cost reductions and „Colfax Business System“ tools will allow Colfax to increase the operating margin in 2016!

Impressive as they continue to expect market headwinds!

CFO C. Scott Brannan explained the historically strong cash flow generation in the fourth quarter: „We generated $152 million in operating cash flow in the 2015 fourth quarter of which $109 million is from a reduction in working capital and this was a major contributor to the strong free cash flow for the quarter and for 2015 in total. We finished 2015 with $100 million less debt than we started the year despite the use of $200 million for acquisitions and $27 million for share repurchases.“

Colfax will continue to „advance our acquisition cultivation efforts“ as Trerotola put it. „But with current market conditions, we’re also deploying capital to attractive stock repurchases.“

A change in the commodity cycle does not seem to be in sight but Colfax is well prepared to take advantage when their industry market will change.

Colfax stock is for long term investors who believe that commodity prices will not remain that low forever!

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Colfax releases FY and Q4 2015 results

February 4th, 2016 Comments off

Colfax Corp. (NYSE: CFX) today released the FY and Q4 2015 results.

They beat (already low) analyst expectations.

Have a look!

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2015 ends within 10 days!

December 21st, 2015 Comments off

Time to review our performance. How did we fare until today?

Our blog follows 2 stocks which in 2015 went exactly in opposite directions.

Markel Corp. (NYSE: MKL) our insurance and investment champion presented good results and performed 27% over the year until today, by far outperforming the S&P 500.

Colfax (NYSE: CFX) unfortunately did the exact opposite: Colfax lost 57% until today…. ouch!
And this performance followed an already negative performance of – 19% last year … two times ouch!

It is difficult to blame management. Colfax operates in the heavy industry sector and has a strong relation to the oil sector which itself sails through a cyclical downturn of enormous proportions.

Colfax thinks the downturn of the industry will continue until 2017.
Management reacts by restructuring, lowering costs, improving performance and in addition the board has approved a share repurchase program of $ 100M.

Colfax stock trades at a p/e of 15 which means that the market values Colfax as a general industry stock with only modest growth perspectives. But if Colfax can reassume once again its superior growth path by acquisitions and by strictly applying the CBS-tools this valuation could prove too conservative and the stock will go up again.

Patient investors could bet on this and slowly start a position going into 2016!

To all our readers a Merry Christmas and a happy and prosperous 2016!

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Very good Q3 2015 for Markel

November 7th, 2015 Comments off

Markel Corp. (NYSE: MKL) released very good Q3 2015 earnings although the all important book value/share number suggests otherwise!

Underwriting results were outstanding, contributing just under $300 million to pretax profits for the first 9 months of 2015 as pointed out Anne Waleski, Markel’s CFO on the conference call.

The consolidated combined ratio declined to 89% down from 97% one year ago! All insurance segments contributed to this success. This is a remarkable succes given the still very competitive insurance market conditions!

But book value / share stood at $551.63 up only 1% compared to $543.96 at December 31, 2014.

“While underwriting results have made a significant contribution to shareholder value, the favorable impact from underwriting was muted by our investment results for the first nine months, which were adversely affected by volatility in the equity markets,” explained Anne Waleski.

“Net unrealized investment gains decreased $397 million for the first nine months of 2015, compared to an increase of $499 million for the same period last year which was attributable to decreases in the fair value of our equity and fixed maturity portfolios compared to prior yearend.”

Equities were down 5.3%, and fixed income earned a positive return at 1.3%.

But this is a temporary effect caused by volatility in the markets. Markel’s high investment standards remain unchanged and will lead to even higher gains in the future.

Interesting to note is that on the equity side, the allocation as a percentage of Markel’s total shareholders’ equity, equity securities stand at 54% on September 30th, compared to 55% at yearend 2014.
Historically, this number has ranged between roughly 50% and 80% over the last 25 years as underlined CIO Thomas Gayner.

That means Markel has large sums ready for investment when opportunities present themselves.

Markel Ventures the private equity arm of Markel caused “other revenues” to rise 30% to $817 million from $630 million last year, primarily due to the acquisition of Cottrell in 2014.

Only net earnings contribution of Markel Ventures was depressed because of a higher earnout payment as Cottrell is performing better than originally thought at the time of acquisition.

At a share price of $876.56 Markel trades at a book value/share of 1.6 which should be considered a fair price for this high quality speciality insurer.

The combined ratio will not remain a low as this quarter forever but given the forseeable upside in investment gains over the long term Markel remains a buy at this price !

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