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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Markel reports Q3 2015 results!

November 5th, 2015 Comments off

Markel Corp. (NYSE: MKL) reported Q3 2015 results!

Book value per share, the all important ratio of the insurance industry came in at $ 551.63 up 1% from $543.96 at December 31, 2014!

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Shares of Colfax fell 14% after releasing Q3 2015 results!

October 17th, 2015 Comments off

Shares of Colfax Corp. (NYSE: CFX) the global manufacturer of gas- and fluid-handling and fabrication technology products and services, fell more than 14% after announcing Q3 2015 results:

Ouch, what happened?

Net sales were $969.1 million in the third quarter, a decrease of 16.8% from the prior year. Net sales decreased 6.5% organically compared to the third quarter of 2014.
Net income was $18.4 million, or $0.15 per dilutive share. Adjusted net income was $29.5 million, or $0.24 per share, compared to $71.3 million for the third quarter of 2014, or $0.57 per share.

Third quarter gas- and fluid-handling orders decreased by 17.6% to $444.2 million compared to orders of $539.4 million for the third quarter of 2014, an organic order decrease of 12.5%.
Gas- and fluid-handling finished the period with backlog of $1,313.8 million.

The company has been hit by the severe downturn in the oil and gas market we all witnessed but their marine market showed continued weaknesses, too.

The new CEO Matthew Trerotola explained how they intend to react in this difficult situation:

“We are aggressively accelerating cost reduction programs in response to this cyclical downturn. By the end of 2016, we now expect to eliminate in excess of $100 million from our cost structure and reduce the workforce by approximately 1,500 compared to where we started 2015. In addition, the Board authorized a stock repurchase of up to $100 million.“

On the conference call he added that “through the strategic planning process, we believe that these downturns are cyclical, not structural, but the timing of the recovery in these markets is uncertain and may not be seen before 2017.”

So it’s no surprise that they lowered earnings expectations for 2015 to a range of $1.52 to $1.56.

But this does not stop the company to pursue their M&A goals. The CEO indicated that they have several active deals in the pipeline.

So what should shareholders do now:

Perhaps the best is …. nothing ….!
Hold your shares and wait!

No one really knows when oil and gas prices will go up again but for sure one day they will recover!
Colfax continues to be the very well run and value oriented business with a strong balance sheet we all know for years.
The shares trade at a p/e ratio of 18 (FY 2015). Not extremely cheap, the market still sees the quality of this company. Insiders also bought shares in September.
Outside investors could consider to join them going into 2016 in order to slowly anticipate an overall market turn!

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Colfax released Q3 2015 results and missed estimates

October 14th, 2015 Comments off

Colfax Corp. (NYSE: CFX) today released Q3 2015 results!

They missed estimates on earnings and on revenues reflecting the brutal downturn of their industry.

The board authorized a stock repurchase program of up to $100 mln.



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Insider buying at Colfax!

September 23rd, 2015 Comments off

In these days we are watching share prices going lower and lower. Especially industrial activities take a hit by fears about a slowdown of the Chinese economy followed by a slowdown of the whole global economy.

No wonder that the share price of Colfax Corp. (NYSE: CFX) behaves in synchronicity reaching lows not seen since August 2012!

But wait! Someone sees the decline as a buying opportunity:

Mitchell P. Rales, one of the founders of Colfax in August bought 261’600 shares of Colfax for $10 mil for his family.

As a general rule investors shouldn’t rely to much on insider activities but sometimes they are a helpful hint especially after a change of the CEO as happened at Colfax this summer.

Colfax shares are priced at a p/e of 17 (Dec. 2015) and a p/e of 15 for Dec. 2016 respectively. Not expensive at all. Investors should consider this for adding to their position!



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Markel’s Q2 2015 results came in solid!

August 8th, 2015 Comments off

2015 Q2 results from Markel Corp. (NYSE: MKL) the diversified insurance holding company came in solid!

“While our underwriting results were positive, our investing results and our growth in book value were impacted by an increase in interest rates during 2015” CFO Anne Waleski pointed out on the conference call.

Book Value/Share the most important metric in the insurance business was $554.97 up 2% from $543.96 at Decmber31, 2014.
Total operating revenues grew 4% to $2.6 billion in 2015 from $2.5 billion in 2014. Other revenues, which include Markel Ventures, were up 34% to $510 million from $380 million last year, primarily due to the acquisition of Cottrell in July 2014.

The combined ratio improved to 96% for the second quarter of 2015 compared to 101% for the second quarter of 2014 mostly driven by more favorable development on prior accident year’s loss reserves in 2015 compared to 2014 and even as insurance market conditions continue to be very competitive.

On the investment side Markel made a modest return of 1.5% in the equity portfolio for the first six months and was flat on the fixed income portfolio, as a slight rise in interest rates offset the modest coupon income from the portfolio.
During the first six months of the year, the equity holdings as a percentage of the shareholders’ equity rose from 54% to 56% as volatility in the markets offers some good prices.
The Markel long term approach is clearly at work and will reward shareholders in the future.

Markel Ventures the private equity arm, finally enjoyed better times!
For the first six months Markel Ventures reported EBITDA of $46.8 million compared to $35.1 million a year ago. “This is a 33% increase and not bad. The EBITDA this year of $46.8 million, though, comes after a charge of $17.6 million, stemming from a recent acquisition that is actually doing better than what we expected when we purchased it” as explained CIO Thomas Gayner.

So what can shareholders make out of this quarter?

It was certainly a solid quarter by all meanings, all insurance divisions produced positive results, Markel Ventures improved and the equity portfolio promises above average results for the future.
The share price closed Friday at $ 868.63 which translates into a price/book ratio of 1.6
This is above Markel’s average of the last years but not unreasonable even after the 27% runup of the share price this year.

The shares of this high quality company are a buy for the long term especially if the share price declines further within the next days or weeks!

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Markel reports strong second quarter 2015 results

August 6th, 2015 Comments off

Markel Corp. (NYSE: MKL) reported strong Q2 2015 results:

The most important metric in the insurance business, book value/share rose to $ 554.97, up 2% from December 31, 2014!



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Colfax names new CEO when headwinds are strong!

July 26th, 2015 Comments off

Colfax (NYSE: CFX) released its Q2 2015 earnings and at the same time announced a new CEO!
The edited transcript of the conference call was published by Thomson Reuters.

The second quarter of 2015 was a difficult one for Colfax!

Adjusted EPS was $0.50 per share, a 4% increase compared to last year.
The increase was driven by continued margin improvement in the gas and fluid handling segment, non-repeating one-time expenses experienced in the prior year and lower interest expense, which were largely offset by continued volume weakness in the markets.

Net sales were $1.025 billion for the second quarter, a decrease of 15% over the same period last year. This consists of 5% organic volume decline and a negative 12% impact from foreign exchange, partially offset by 2% growth from acquisitions, as explained the outgoing CEO Steve Simms.
Especially weak has been the fabrication technology business, which saw an 8% organic drop in sales. But fluid handling too was hit by a sharp fall off in commercial ship building activity.

As the company sees a continued weak market environment they lowered guidance for the rest of the year: they now expect revenue between $4.035 billion and $4.11 billion, and adjusted operating profit between $405 million and $423 million. Adjusted earnings per share should come in per between $1.83 and $1.93.

Given this situation Colfax is aggressively cutting costs, reducing capacity and implements other measures like p.e. increasing the aftermarket share.

As Steve Simms put it: „While we’ve not changed our perspective on the long-term growth of our serve markets, we expect the weakness we are seeing to continue for the near-term.“
And with regard to acquisitions he added:
„In line with our ongoing plan to strengthen each of our platforms, we’re deeply committed to our strategy of bolt-on acquisitions and remain confident in the strength of our M&A pipeline, especially in the gas and fluid handling space….We’re working on attractive deals that align with our financial discipline, match our organizational capacity to execute and could be announced later this year.“

The new CEO is Matt Trerotola. He spent most of his career at DuPont, Danaher and McKinsey.
Since 2007 he knows well the „Danaher Business System“ after which is modeled the „CBS – Colfax Business System“.

What does this all mean for shareholders?

After this earnings release and the lowered guidance Colfax stock hit a low of $39.50 not seen since the end of 2012!
Colfax works in industries like p.e. gas ond oil or equipment for commercial vessels which have other cycles than the economy in general. So shareholders clearly need a long term view here.

Colfax is still a high quality company with outstanding personnel but the new CEO has to demonstrate that he is able to really grow the company by excellent acquisitions which were already announced for a year or so but never materialized (except the small Roots Blowers & Compressors).

Colfax stock now trades at a p/e ratio of 21. The stock is a Hold until a significant acquisition will be announced.

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Colfax Q2 2015 Earnings are out

July 24th, 2015 Comments off

Colfax Corp. (NYSE: CFX) released its Q 2 2015 earnings:

Revenue came in at $ 1.03B and EPS at $ 0.50.

Both numbers surprised by beating estimates. Have a look!

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US Jobs market report and Greek crisis

June 30th, 2015 Comments off

Everyone in these days is talking and discussing about the Greek crisis.

But another danger is already looming on the horizon: At the end of this week the US jobs report June 2015 will be released. If it comes out strong (which can be expected) this could mean that the Federal Reserve can no longer withhold rising interest rates!

This would mean that finally after years the change of the interest environment has arrived and interest rates at least in the US $ would start to rise again. Some days ago the yield of the 10 y – US treasury bond has already been near 2.5%.

So if rising interest rates would spread to the Euro what would be the effect on highly indebted European countries beyond Greece?

Which interest rate will investors ask for in order to be compensated for the risk to finance p.e. Portugal or Italy  in an environment of rising interest rates backed by a strong US economy?

This crisis story seems to have more chapters than only the Greek one!