Asmus Puhl Finance Blog

Markel Corporation (NYSE: MKL) in FY 2021 fired on all three engines as Co-CEO Tom Gaynor put it:

In the underwriting operations segment, gross written premiums were $8.5 billion for the year, compared to $7.2 billion in 2020, an increase of 19%.

And earned premiums increased 16% to $6.5 billion in 2021. The increased premium volume reflects both strong growth in new business, as well as ongoing favorable pricing trends across most of the product lines.

The consolidated combined ratio for 2021 was an excellent 90, which included $195 million or three points of losses on natural catastrophes.

With regards to net investment income, Markel reported $375 million for 2021, compared to $372 million last year.

Investment income continues to be impacted by the low interest rate environment we currently face.

Revenues from Markel Ventures increased 30% to $3.6 billion for 2021, compared to $2.8 billion last year. The increase reflects a more significant contribution of revenues from Lansing Building Products, which was acquired in April 2020, and the contribution of revenues from Buckner Heavylift Cranes, which was acquired in August 2021.

Book value per common share outstanding came in at $ 1034,56 up 16,8% from $ 885,72 at dec 31st 2020.

Markel’s stock trades at a price/book value ratio of 1.2 referring to the last share price of $ 1’260,61 This is not expensive!

If one believes that the ultra low interest environment is coming to an end Markel could be an interesting investment as finally insurance companies will be enabled to earn more interest on their bond portfolio!

Sometimes continued success can be a little boring…

Markel Corp.(NYSE:MKL) reported excellent Q3 2021 results:

“Our third quarter and year-to-date results reflect the strength and balance of our three-engine operating model of insurance, investments and Markel Ventures,” said Thomas S. Gayner and Richard R. Whitt, Co-Chief Executive Officers.

Earned premiums grew 17% for the 3rd quarter, reflecting continued growth in gross premium volume from new business and more favorable rates.

The combined ratio for the 3rd quarter 2021 included $114.4 million, or seven points of net losses and loss adjustment expenses attributed to natural catastrophes.
The ratio improved to 93% from 97% quarter over quarter.

Looking at the “second engine“, net investment gains for the nine months ended September 30, 2021 reflected a substantial increase in the fair market value of our equity portfolio driven by favorable market value movements during 2021.

And the Markel Ventures businesses continue to grow and add value. They added Buckner HeavyLift Cranes to the group in the third quarter.

The all important metric of the insurance industry book value per common share outstanding came in at $ 988.99 up from $ 885.72 in the 3rd quarter 2020.

Markel remains a stable long term investment. A significant upturn of this company eventually will be seen when interest rates continue to rise which will improve the results of the fixed income segment of their investment portfolio.

Markel is valued at 1.3 price / book value which is not too expensive.
Markel is a buy for longterm investors!

Investors liked Shopify’s (NYSE, TSX:SHOP) Q3 2021 results!

More and more merchants are using the platform even now as the economic environment starts to normalize.

Total revenue in the third quarter was $1,123.7 million, up 46% year over year.
GMV (Gross merchandise volume or all merchandises sold via the platform) for the third quarter was $41.8 billion, an increase of $10.8 billion or 35% over the third quarter of 2020.

Shopify’s cash position grew year over year to $7.52 billion up from $6.39 billion at December 31, 2020.

Shopify is heavily investing in its growth initiatives:

The company launched Shopify Markets, a product that makes cross-border commerce easier for entrepreneurs. Shopify began rolling out Shopify Balance, a money management product for merchants in the United States, introduced TikTok Shopping to merchants and continued the buildout of its fufillment network.

Therefore Shopify’s adjusted earnings per share fell 28% to $0.81.

Shopify’s share trades at a price/sales ratio of 47 and a price/earnings ratio of 76. Certainly a steep price!

But if you believe that the future of e-commerce will not only be in the hands of a few very big players like Amazon but in the hands of many smaller more specialized merchants than Shopify is a clear „Buy“.

Shopify is the „enabler“ of those merchants and still has enormous growth potential.

Markel Corp. (NYSE:MKL) today released Q2 and HY1 results „that reflect outstanding performance across all the three engines“ as Thomas S. Gayner and Richard R. Whitt, Co-Chief Executive Officers put it.

So how was the performance of those „three engines“?

Markel continued to achieve double-digit premium growth in their underwriting operations through both organic growth in new business and more favorable rates, and they delivered an 87% combined ratio for the quarter.

Markel Ventures revenues surpassed $1 billion for the quarter,
This private equity arm of Markel is steadily growing.

Within the investment portfolio, significant gains did result from the equity portfolio.

Book value per common share outstanding grew 10% from $885,72 to $974,45, very solid indeed!

Markel’s stock at today’s price of $1’220 means that it trades at a price/book ratio of 1.3
That’s not very expensive but it reflects its limited earnings power in this low interest environment.
Markel is a long term buy and will become more interesting when interest rates will finally rise again.

Shopify Inc. (NYSE: SHOP) released once again record Q2 2021 results!

Shopify believes that last year the formerly distinct industries of retail and online commerce industry have become one only commerce industry!

„Shopify is building the essential infrastructure for this increasingly digital world to allow as many people as possible to participate,” said Tobi Lütke, Shopify’s CEO

Total revenue in the second quarter 2021 reached $1,119.4 million, up 57% year over year and for the first time quarterly revenue exceeded $ 1 billion.

Adjusted net income for the second quarter of 2021 was $284.6 million, or $2.24 per diluted share, compared with adjusted net income of $129.4 million, or $1.05 per diluted share, for the second quarter of 2020.
At the end of Q2 Shopify had $7.76 billion in cash, cash equivalents and marketable securities, compared with $6.39 billion at December 31, 2020.

On their partnership conference “Shopify Unite 2021” the company announced new initiatives and improvements of the platform:

• More flexible and customizable storefronts by the platform upgrade Online Store 2.0
  An improved Shopify Checkout including a new Shopify Payments Platform.
• Continued investments in the Shopify Fulfillment Network.
• The payment system Shop Pay will become available to all merchants selling in the U.S. on Facebook and Google, even if they don’t use Shopify’s online store.

Shopify’ stock today stands at $ 1’550. That means the stock trades at an expensive price/sales ratio of 56.

But management puts the company’s total addressable market at $153 billion. That’s about 45 times Shopify’s $3.4 billion in sales over the last 12 months.

There is a lot of room to grow for this company!

Shopify’ stock is a „buy“!

Shopify Inc. (NYSE: SHOP) released its Q1 2021 earnings and once again blew away expectations!

Quarterly revenue jumped 110% year over year to $988.6 million.

Subscription revenue came in at $320.7 million with growth accelarating to 71%

Merchant solutions revenue was $668 million with growth of 137%

The gross merchandise volume (GMV) which is the amount of all sales of their merchants over the platform increased an awe inspiring 114%, to $37.3 billion.

Operating income for Q1 2021 was $118.9 million, or 12% of revenue,

Net income for Q1 2021 improved substantially to $1,258.4 million, or $9.94 per diluted share, compared with a net loss of $31.4 million, or $0.27 per diluted share, for the first quarter of 2020.

The balance sheet is rock solid with $ 7.87 billion in cash, cash equivalents and marketable securities.

These numbers show that Shopify’s growth was once again fueled by digital commerce tailwinds caused by the pandemic.

Therefore Shopify keeps the outlook for 2021 cautious as this pandemic will not continue forever.

But rest assured Shopify still has a lot of growth lying ahead.

International expansion outside Canada and the US is just starting and they invest heavily to expand their logistics network, payment solutions and other technological improvements which will help their merchants.

So even after the incredible runup of Shopify’s stock over the last couple of years, Shopify still remains a “Buy”!

Earned premiums grew 13% to $1.5 bil coming from new business and more favorable rates.
The combined ratio for the first quarter was 94% which is very good as it still includes 5% from losses and loss adjustments from a winterstorm and from Covid19.

Net investment gains were driven by strong equity market conditions.

“Our first quarter results reflected strong, profitable growth across our underwriting operations globally, as we executed on our strategic plans to drive market leadership in key insurance product lines, while maintaining our focus on increasing operational efficiencies” said Thomas S. Gayner and Richard R. Whitt, Co-Chief Executive Officers.

Markel’s stock closed yesterday at $1’174 which translates into a price/book ratio of 1.3
In today’s environment it should be considered a fair price.

We should not forget that for insurance companies it is nearly impossible to earn good interest amounts and for Markel Ventures it is difficult to find good companies to acquire at acceptable prices. Therefore we cannot expect a higher share price!

Only a few people expected less:

Shopify Inc. (NYSE:SHOP) released FY and Q4 2020 results that beat expections!

Reported revenue in Q4 jumped to $978 million, up 94% year over year.

Adjusted net income came in at $199 million which translates into adjusted earnings per share that soared 198% to $1.58.

Primarely those results were driven by “merchant solutions” revenue that jumped 117% to $698 million year over year in Q4 but also “subscription solutions” revenue grew an impressive 53% to $279 million.

Operating margin in FY 2020 for the first time swung to 3% from a loss and the sales / free cash flow margin came in at 13%.

And all this happened while Shopify continous to investing heavily in its future!

Shopify continued to build out its “Shopify Fulfillment Network”. 52% of eligible merchants in the United States and Canada already utilized Shopify Shipping in the fourth quarter of 2020.

They launched the all-new Shopify POS, a faster, more intuitive, and more scalable POS software designed to meet the needs of the more complex Brick-and-Mortar retailers and expanded Shopify Payments and the accelerated checkout Shop Pay.

Shopify’s stock was down after releasing these results, because Shopify tried to dampen highflying expectations for FY 2021:

“… the ongoing shift to ecommerce, which accelerated in 2020, will likely resume a more normalized pace of growth.”

But don’t forget that Shopify the past years has always been prudent with its outlook.

Shopify certainly has a bright future given the rapid change of commerce which will continue and the shift to ecommerce accelerated in an unprecedented way by the pandemia which will go on in a more normelized way.

But Shopify’s stock valuation reflects all these optimistic assumptions.

The stock trades at a price/sales ratio of about 56 and a mind blowing price/free cash flow ratio of more than 400!

But Shopify remains the top dog in an at least $78 billion small- to medium-sized business market and we all know how profitable dominant software provider can become over time!

Shopify remains a “buy” whenever there is a pullback in the market!

Markel released FY 2020 results!

At speciality insurer Markel Corp. (NYSE:MKL) earned premiums rose 11% from $ 5’049’793 in FY 2019 to 5’612’205 $ at the end of FY 2020

Book value per common share outstanding rose 10% from $ 802,59 to $ 885,13 at the end of FY 2020.

The combined ratio in FY 2020 was 98% after 94% in 2019 but in the fourth quarter 2020 Markel reported an improved combined ratio of only 89%, which even included four points of pandemic and catastrophe-related losses.

Markel’s insurance operations improved in a significant way:

“Our insurance operations delivered an underwriting profit for 2020 in the face of significant losses attributable to the global pandemic and the unusually high number of natural catastrophes as we benefited from capturing meaningful rate increases and new business in targeted growth areas globally, while exercising strong expense discipline,” commented Thomas S. Gayner and Richard R. Whitt, Co-Chief Executive Officers.

The investment return of Markel decreased 18% primarily driven by the impact of lower short-term interest rates on short-term investment income.

Net investment gains of $ 617,979 in 2020 were primarily attributable to an increase in the fair value of equity securities.

Looking at the private equity segment “Markel Ventures” operating revenue rose 36% to $ 2,794,959 thanks to 2 acquisitions in 2020 and operating income rose 51% to $ 254,078

Investors were pleased with these results. Markel’s share price rose 11% since the 2^nd of February when results were released.

The all important book value / share price ratio stands at 1.2 ,rather cheap for Markel which is normally valued at 1.5!

This low ratio reflects 2 problems Markel has in the current environment:

1. Today to find great businesses as acquisiton targets at acceptable prices for Markel Ventures is very hard!

2. Regulatory control of the way Markel holds and invests capital!

Therefore investors should not expect market beating results in the near future but over a time horizon of 5 to 10 years the picture could change materially.

Markel today is a „Hold“!

Shopify’s (NYSE:SHOP) share price yesterday fell more than 13% together with other online retail and digital payment stocks after Pfizer and BioNTech released coronavirus vaccine news.

It is understandable that investors want to lock in gains they made year to date. Even after this correction shares of Shopify surged 127% this year!

But should they ignore long term trends? The coronavirus pandemic only accelerated economic and technological trends that existed before and will continue after the pandemic.

So perhaps this is a good moment to look at Shopify’s Q3 2020 financial results:

Shopify grew revenue 96% and gross volume merchandise (GMV) which is all what is sold by merchants on Shopify’s platform, grew 109% year over year!

These are incredible numbers: “The accelerated shift to digital commerce triggered by COVID-19 is continuing“, said Shopify’s president Harley Finckelstein.

And don’t forget that this year we most probably look ahead to the biggest online shopping holiday season ever!

The company also signed up a record number of merchants to its premium-level plan for high volume merchants called Shopify Plus like p.e. luxury brand Dior.

Q3 2020 was Shopify’s second profitable quarter: Net income for Q3 2020 was $191.1 million, or $1.54 per diluted share, compared with a net loss of $72.8 million, or $0.64 per basic and diluted share, for Q3 2019.

Shopify also fortified its balance sheet this quarter: at September 30, 2020, Shopify had $6.12 billion in cash, cash equivalents and marketable securities, compared with $2.46 billion on December 31, 2019.

To fund its growth and new initiatives the company raised additional cash with a stock offering of 1.265 million shares, bringing in $1.12 billion, and a convertible note equivalent to $920 million.

It is almost certain that Shopify’s long term growth trend will continue. After yesterday’s pullback the stock is still valued at a price/sales ratio of more than 50.

That is not cheap but considering the growth potential Shopify today is a buy!