Finally, I get to post some research. The following piece is an updated and expanded version of the research that I have been pitching to anyone and everyone who will listen. The last time I liked a P&C insurance company this much the company was IPC Holdings and Buffett/Berkshire made a bid for it before it got taken out by another company. Very simply, this microcap stock is under-followed and unloved and the market has yet to fully notice that the company has removed the overhang that has clouded the stock since about 2005.
I know this stock is not for everyone, but I think the valuation is compelling and the risk-reward is very attractive at the current price. As usual, I have kept the document in Scribd format in order to preserve the formatting of the charts. If anyone would like a PDF of the research, please feel free to email me. Also, I welcome any comments or questions.
PMA Capital Corporation (PMACA) Research
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“Warren Buffett once wrote that value investing is like an inoculation--it either takes or it doesn’t--and when you explain to somebody what it is and how it works and why it works and show them the returns, either they get it or they don’t.” -Seth Klarman of the Baupost Group
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5 Best Value Investing Quotes
- Seth Klarman: “It turns out that value investing is something that is in your blood. There are people who just don’t have the patience and discipline to do it, and there are people who do. So it leads me to think it’s genetic.”
- Seth Klarman: “It sounds kind of crazy, but in times of turmoil in the market, I’ve felt a sort of serenity in knowing that I’ve checked and re-checked my work, one plus one still equals two regardless of where a stock trades right after I buy it.”
- Howard Marks (Oaktree Capital): “For forty years I’ve seen the manic-depressive cycle of investor psychology swing crazily: between fear and greed – we all know the refrain – but also between optimism and pessimism, and between credulity and skepticism. In general, following the beliefs of the herd – and swinging with the pendulum – will give you average performance in the long run and can get you killed at the extremes.”
- Bruce Greenwald (First Eagle Funds): "There are no bad days in the market. When the market is down, you’ve got bargains, and it’s lovely to think of what you are buying at low prices. When the market is up, the bargains have gone, but you’re rich.”
- Mohnish Pabrai (Pabrai Funds): “Warren Buffett has said many times that people either get value investing in five minutes or they won’t get it in five years. So, there is something in the human brain, that for some of us, makes all the difference in the world right away and the patience it requires is part of the wiring process.”