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Introducing Myself


Liberty
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Hi everybody,

 

This is my first post on this forum and I'd like to introduce myself. I've been a lurker for a few months and would estimate that I've read about 75% of the archives (a goldmine of insights! Thanks to all the posters who have contributed to making this forum so excellent).

 

A little about myself:

 

Small investor, not too much experience but trying to make up for it by learning from other people's mistakes and successes.

 

I would say that I mostly align my investing philosophy with the usual suspects: Buffett, Munger, Graham, Fischer, Klarman, etc.

 

I try to stay acutely aware of my limitations as an investors, so my current plan is mostly to find excellent businesses that can compound my money better than I could do it myself by just buying & holding them for many years (which is why I'm attracted to Berkshire and Fairfax). I also have a very concentrated portfolio (very few stocks), but some of those businesses have varied portfolios of stocks and bonds, so I feel like I get some exposure to a broad variety of businesses that way.

 

I'd be quite happy with 10%/year average over the next decade or two, and I'd be ecstatic with 15%/year average, so I don't aim quite as high as the more aggressive investors on this forum.

 

My criteria are pretty much:

 

1. Integrity of management

2. Good track record (not too short)

3. Good 'defense' (solid business that can withstand a lot and not lose capital)

4. Pro-shareholder policies (in compensation schemes, share buybacks at low prices, etc)

5. Quality at a fair price (I'm ready to pay up a bit for quality that I can hold forever. I'm not a deep value guy so far, I prefer buy & hold to trading Graham-style)

 

I tend to prefer holding companies that allocate capital using Buffett-style methods, and my circle of competence is mostly in insurance (though I'm no expert), so I try to find holdings companies that allocate really well, as well as some specialty insurers that fit my criteria and that - while they might not invest as well as FFH - can generate good returns over the long-term because of superb underwriting.

 

Some companies that I own that fit my criteria:

 

BRK

FFH

RLI

WRB

MKL

 

Others that I've been looking at but haven't yet bought (yet?) for a variety of reasons:

 

HCC

NATL

AHL

AWH

ENH

L

 

Any feedback on any businesses mentioned here is welcome. I'm particularly curious to have more info about the HCC options scandal (?) from a few years ago. I have very little info about it (need to dig more), but ever since I saw it mentioned it has made me not trust them until I know more.

 

Anyway, I think that's long enough for a first post  ;D

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Welcome abroad sounds like you have a nice little portfolio. Those names are some of the most discussed and I own 4 of them. My only question is why the concentration in insurance?

 

Thanks. I'll try to answer your question as best as I can:

 

The biggest reason why I concentrate in insurance is probably because it's where I feel like I know the most how to evaluate a business. I know it's dangerous because this industry is inherently more complex than, say, manufacturing or retail, but for some reason I feel more comfortable there.

 

Berkshire is a significant part of my portfolio, so I feel like it provides me with some non-insurance diversification, and the insurance that they do have is extremely high-quality and backed up by a very solid balance sheet, so it makes me feel less nervous than if I had only insurance companies with less solid foundations.

 

Another reason why I've been concentrating on insurance is that, because of float, it gives me some leverage (more than 1 dollar working for every dollar I put in) without me having to do it myself (I don't feel qualified to do so).

 

I also like insurance right now because many excellent companies seem to be trading fairly cheaply historically. Not as cheaply as in 2008, but still pretty decent prices, good enough for me. I have a long time horizon, so I don't mind holding a bunch of insurance for a while even if it takes a few years for a hard market to come. I'd love to be well positioned when that happens, though.

 

"Invert, always invert."

 

So why shouldn't I concentrate on insurance? Hmm.

 

Maybe all the non-insurance stocks that BRK, FFH and MKL have in their portfolios don't give me as much market diversification as I think somehow. I'm not seeing it, but maybe that's something I'm missing.

 

It leaves me vulnerable to big cat events. But because of my long time horizon, if that happened it probably would just be a buying opportunity, as long as it doesn't cause so much damage that one of my firms goes bankrupt. Or am I too optimistic here?

 

I know I have to question my choice of concentration, but I do still feel more comfortable with insurance even knowing all this. I figure if it's good enough for Buffett, it should do fine for me, as long as I stay with high-quality corps.

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