Asmus Puhl Finance Blog

Colfax Corp. (NYSE: CFX) released Q3 2016 results!

Not as bad as some had expected. The stock jumped 9% yesterday!

Once again specialty insurer and financial holding company Markel Corp. (NYSE: MKL) released very solid results in Q2 2016!
The transcript of the conference call has been published by SeekingAlpha.

Diluted net income per share was down to $5.41 for the quarter compared to $6.72 for the second quarter of 2015 but the all important ratio in the insurance industry, book value/common share outstanding increased to $603.13 in Q2, up 7% from $561.23 atDecember 31, 2015.

Even better the combined ratio improved to 93% compared to 96% for the second quarter of 2015.
But be aware: Markel actually profits from the absence of large loss events. This will not always be the case in the future. So as a general rule investors should expect a combined ratio below 100%

Co CEO Thomas Gayner was proud to report that this quarter all 3 segments insurance, investments and Markel Ventures contributed to the good results:

“On the investment side of house we earned 5.3% on our equity investments and 4.7% on our fixed income holdings with the total return from the portfolio of 4.9%.
At June 30 equities represented 52% of our shareholders equity compared to 51% at year end.”

At Markel Ventures revenues increased 21% to $584 million compared to $485 million a year ago, primarily due to the acquisition of CapTech in the fourth quarter 2015 and higher sales volume in the manufacturing operations. EBITDA increased 92%, $102 million compared to $53 million.

After the earnings release Markel’s stock went down to $ 921.70 but don’t forget that the stock for some months now is trading at or above 1.5 times book value/share. This is a historically rather expensive stock price for MKL.

But this certainly doesn’t change our long term view!
Markel Corp. remains one of the best long term wealth creators in the stock market today!

Colfax Corp. (NYSE: CFX) reported Q2 2016 results yesterday and proved that the economic sectors they are working in are still in very difficult conditions.

Even as they managed to beat analyst expectations they reported lower net sales and lower net earnings than one year ago:
Net sales were $957.2 million, a decrease of 6.7% from the prior year.
Net income was $39.8 million, or $0.32 per dilutive share, compared to $53.1 million, or $0.42 per share, for the second quarter of 2015.

Even more worrisome is that second quarter gas- and fluid-handling orders decreased by 11.3% to $445.7 million compared to orders of $502.3 million for the second quarter of 2015, an organic order decline of 15.5%.

So what did Colfax do in order to address these market problems?

“In response, we have initiated additional, structural cost reduction actions to improve profitability even if the market does not return to growth in near term,” CEO Matthew Trerotola pointed out in the press release.

Shareholders can learn 2 things from this comment:
– Colfax visibility when market conditions will improve is very low.
– Colfax does what it already does for a couple of quarters: lowering costs and restructuring. This will indeed be a   very lean company when finally market conditions will improve.

But until this happens probably a lot more patience is needed.

Colfax stock trades at a p/e ratio of around 19, this is not exactly cheap as the market continues to have faith in this high quality company.

Perhaps news from the acquisition front could brighten the picture but until now nothing has been announced.

Colfax share is a buy for longterm oriented shareholders who can hold out at least until 2017!

Colfax Corp. (NYSE: CFX) the gas and fluid handling company today released Q2 2016 results:

EPS adjusted for restructuring costs came in at $0.41, revenues for the quarter were $957.2 million.

Both numbers exceeded analysts expectations!

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!

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!

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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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!

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.