Asmus Puhl Finance Blog

Markel Corp. (NYSE: MKL) announced today that it acquires Alterra Capital Holdings Limited (Nasdaq: ALTE) for $31 per share in stock and cash.

Alterra is a speciality and reinsurance company based in Hamilton Bermuda.

Markel is able to acquire this company which they consider highly complementary to Markel only at a very slight premium to its book value!

This certainly means a big step forward for Markel: with its market cap of $4.68 bil it is able to aquire a rival company with a market cap  of $2.22 bil!

They will held a Conference Call later in the day!

How performed the 2 stocks this blog follows regularly this year?

Colfax Corp. stock (NYSE:CFX) is up 37% as we are less than 2 weeks away from year end and is by far outperforming the 15% gain of the S&P 500 Index as of this writing.

Markel Corp. stock (NYSE:MKL) is up 17% year-to-date and is slightly outperforming the S&P 500 index, too.

In the case of Colfax it’s particularly impressive how patient buy and hold investing can be rewarding over the years:

This blog follows Colfax since May 2009 when the stock stood at $7.27.

This translates into a performance of 436% until now! Not bad for 3 1/2 years isn’t it? Capitalism at work!

To all our readers a Merry Christmas and a happy new year 2013! Stay the course!

The transcript of the Colfax Corp. (NYSE: CFX) annual analyst meeting reveils some interesting insights how this conglomerate works and thinks and therefore it’s a must read for every shareholder!

Once a year management takes a lot of time to explain how every sector of the group works and operates within its specific market, how they will improve overall efficiency applying their „CBS – Colfax Business System” and how they will grow over the long term.

As CEO Steven E. Simms puts it: „We believe we can become a premier global industrial enterprise. To us, that means outperforming GDP growth by 1 or 2 points. It means delivering operating income margins that are in the mid-teens, and certainly delivering free cash flow that is in excess of net income.”

And he adds: „We’ve got an outstanding portfolio where we’re the #1 manufacturer in most of the markets that we compete in. We’ve got a great geographic mix where nearly over 50% of our sales are driven by those markets, which are growing in terms of GDP in the mid to high single digits.”

Simms also confirmed that the Charter Acquisition was a tremendous opportunity for Colfax and that they will aggressively go after another strategic platform to add to the 2 that they have today.

Colfax share price is up 36% year to date clearly outperforming the S&P 500 which is up 12%.

So if everything goes as planned we are only at the beginning of a long term growth story!

Cheers!

Some days ago Colfax Corp. (NYSE: CFX) hosted their annual analyst meeting on which management provided a detailed analysis and discussion about every section of the company.

Have a look at the transcript which you can find on “Seeking Alpha”!

Shares of Markel Corp. (NYSE: MKL) now reaching $500 gained 20.6% year to date.

This more than doubles the 9.3% the S&P 500 gained so far this year!

As the market seems to appreciate financial stocks once again this high quality company surges all the long with much riskier stocks of the financial sector.

Markel Corporation (NYSE: MKL) reported its Q3 2012 results.

Net income per share came in at $5.32 slightly lower than the $5.48 a year ago.

The combined ratio was 101% due to the loss development on their asbestos and environmental reserves. One additional point is due to an accounting standard change.

The important insurance metric book value/share was $395.48, up 12% from $352.10 at December 31, 2011.

A transcript of their conference call you’ll find on Seeking Alpha.

So what happened at Markel lastly?

Operating revenue rose 13% to $2.2 bil in the first 9 months. The increase was due to an 8% increase in revenue from their insurance operations and an astonishing  51% increase in revenue from their non-insurance operations under the name of Markel Ventures.

If you already didn’t know it, the importance and earnings power of Markel Ventures is rising rapidly!

But there are other good news:

• The combined ratio for the 9 months came down to 95% from 105% in 2011.
• Throughout North America and in the entire company, they continue to work aggressively to reduce cost.
• Within the investment portfolio equities enjoyed a return of 15.5% and now represent roughly 52% of total shareholder equity. Fixed income produced a positive overall return of 4.5%.

Markel Ventures continued on its acquisition path and it seems that the market finally realizes the value creation which happens here: the share price yesterday rose above $500, a share price not seen for about 5 years!

This translates into a price/book value of 1.3, not too expensive for this great insurance company.

As their former secret weapon “Markel Ventures” slowly becomes a much more known weapon and the market reacts accordingly – are you prepared?

Colfax (NYSE: CFX) released its Q3 2012 results last week. It missed on revenues but beat EPS expectations.

Even if this is a minor detail for real long term investors it shows the difficult economic environment Colfax operates in.

In a quarter to quarter comparison margins shrank significantly:

Gross margin came down to 30.2% from 35.6%

Operating margin went from 5.4% to 3.2% and net margin was 1% on a GAAP basis.

But don’t forget: Those numbers were realized on a much bigger revenue basis after the Charter International acquisition!

So the important question here is: Did they continue to integrate and restructure the acquired businesses according to their plan?

Management gave a few indications on their conference call (the transcript you can find here on Seeking Alpha)

Related to ESAB CEO Steven Simms pointed out that „despite the lower-than-expected sales, adjusted operating margins improved by 70 basis points during the third quarter in comparison to the second. Despite the softness in top line sales, this margin rate was higher than expected as costs were tightly controlled and price increases largely held.”

And further on „…the ESAB cost and restructuring program remains on track, and we are — we continue to be confident with our plan to deliver margins in the low teens within 3 years of acquisition.”

Management adjusted their guidance for FY 2012 slightly:

Revenue is expected to be $ 3.9 – 3.95 bil and EPS should come in between $ 1.29 – 1.33

This values Colfax share at a p/e 2012 of 26 (… it’s only 2 months left!) and 2013 of about 16.

Interestingly the price/sales ratio 2012 is only 0.8 and even lower for 2013 which could mean that a successfull and profitable integration of the acquired businesses is not yet factored into the share price.

For investors who are convinced that management is capable to further execute the „Colfax Business System” the share remains a Buy!

Colfax Corporation (NYSE: CFX), one of the companies this blog follows on a regular basis released its Q3 2012 Earnings !

Have a look!

Markel Corp. (NYSE: MKL) continues to acquire smaller but certainly very profitable speciality insurers:

http://phx.corporate-ir.net/phoenix.zhtml?c=104364&p=irol-newsArticle&ID=1746468&highlight=

Have a look!

Markel will release its Q3 2012 numbers the 8th of November, so stay tuned!

Markel Corporation (NYSE: MKL) released its Q2 2012 earnings and the most important news is certainly the improved combined ratio:

It’s down to a remarkable 87% instead of 103% in the same period last year!

Ok, this year’s quarter was „disaster-free” but nevertheless it seems that the US insurance market is improving.

60% of Markel’s stockholder’s equity is now invested in stocks. So Markel would profit directly from the next stock market upturn.

For more details and all the numbers have a look at the earnings call transcript at Seeking Alpha.

Book value/share, the most important metric to value an insurance company, improved also 7.9 % from $ 352.10 to $ 379.88 this year.

So Markel’s stock sells for 1.1 book value at yesterday’s price of $ 432.25.

Rather cheap isn’t it? A “buy rating” seems more than justified!