Oh Come On!
Investor, Venture Capital Background
RLI is a rare once-in-a-decade opportunity, though its buyback has started slowly. It has crushed indexes over the long term on dividends alone, launched a very rare large buyback and has a CEO buying shares, yet the stock is not at all-time highs. So far it has used just $12 million of its $250 million authorization. x.comÂ
Markel looks attractive at this price, with 15-20% yearly EPS growth possible. That needs a better insurance combined ratio, a return to premium growth, a cyclical recovery in ventures and a mid-single-digit yearly fall in share count; delivering it would expand the multiple. Repeating the last five years still gives a 10-12% downside case. In a breakup, moving equities into fixed income after taxes could free about $8B of excess capital to pay out, plus ventures and the remaining insurer. x.com … Show more
Berkshire Hathaway is worth accumulating because its insurance float and $324.9B Treasury bill pile pay it to wait for an opportunity, so higher rates bring income and leverage over whoever runs out of cash first. It passes the Second Paycheck Test at unmatched scale, with $177.5B of float. Rate gains alone are small, about $642M after tax per quarter point, and GEICO's underwriting profit fell 45%. Management bought about $4.5B of stock near 1.4x book; at 1.48x, accumulate, don't chase. x.com … Show more
Berkshire Hathaway is an attractive hedge against speculative holdings because its fortress balance sheet gives it optionality either way. If markets do well, it cruises with existing assets and collects yield on its cash. If markets drop, it can buy the dip like no other. x.com x.com x.com x.comÂ
Property and casualty insurers such as W.R. Berkley should benefit as rates stay higher for longer, because their short-duration insurance float reprices higher, as in the 2022 hiking cycle. The Fed just hiked for the first time in over three years, while drone strikes shut Saudi Arabia's Petroline, which moved about 4 million barrels a day, sending Brent up 8.7% to $104.61 and the 10-year yield to 4.97%. That is a structural repricing of energy risk, and rate-cut bets will get run over. x.comÂ
Slide Insurance looks too cheap at 4.4 times trailing earnings for a company growing 48% a year with 35% net margins and virtually no debt. Strong cash flow funds heavy buybacks, over 10% of shares in the past year, plus a new first dividend. Even if net income stays flat, buybacks at about 4 times earnings would sharply reduce the float and support the price. x.com x.comÂ
Long-dated Treasuries are a good long because they lock in returns above 5% for 20 years, attractive versus other government yields. Yields should fall either way on AI, since an AI boom is deflationary and an AI bust means recession. x.com x.comÂ