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ORH or FFH


alertmeipp
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I got more ORH than FFH.

They are pretty much the same company with the same investment philosophy.

 

ORH appears to be cheaper now based on book.

 

But I figure FFH may move faster because Prem is getting his well-deserved attention these days...

 

Thoughts?

 

 

 

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Smazz, yes we seem to keep coming back to this topic... but I can't help myself!

 

Regarding ORH, now that FFH ownership has grown from 60% to 70% it would appear to make a takeout more likely (30% is much easier to come up with than 40%). Let's apply the same takeout valuation for NB = 1.2xBV = 1.2x$45.37x18 million shares = US$980 million. ORH has $540 million that could (?) be passed up as a dividend (if they were wholly owned). Looks possible but my guess is this sort of thing would compromise FFH financial position too much which would not be great in the current environment. Perhaps what we will see over the next 12 months is for FFH to have a solid year and continue to re-build their cash holdings back up to $1.5 billion (based on 2008 year end earnings they should be able to get solid dividend payments from Crum, NB and runoff should also be paying a special dividend again this year).

 

One concern I have with ORH is that their small float will stop large investors from buying and that this will hold back the share price.

 

On the more positive side, ORH has the ability to purchase another 10 million shares. If shares trade much lower and earnings come in decent this year they will be able to buy at .8 x BV which should put a nice floor price under the shares.

 

Regarding which is cheaper (ORH or FFH), ORH is cheaper when simply looking a share price to book value. However, they are quite different animals when it comes to insurance and I am not sure how one would value runoff at FFH.

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I posted a poll on this a few months back where the options were ORH, ORH.A and FFH and ORH was the clear loser. Of course, ORH was about 25% higher priced at that point and ORH.A was priced about 5% less that it is currently selling for. Obviously, the voting then was less about the virtues of the respective firms/issues and more about the price vs. value considerations.

 

Right now, I have to say that they are pretty even with a slight tendency to go with FFH if for no other reason that there is a higher upside. Time will ultimately tell, but the various smaller acquisitions of Polish Re and others past and future suggest to me at least that FFH a little more attractive at current prices.

 

It is not unlike going into a restaurant and pondering whether to go with the Porterhouse or the Filet.

 

I have opted for the Porterhouse.

 

-Crip

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It is not unlike going into a restaurant and pondering whether to go with the Porterhouse or the Filet.

 

I have opted for the Porterhouse.

 

Hey, why settle for one when you can have the buffett - I'm having the Porterhouse, the Filet MIgnon and the lobster! ;)

 

Crip, just out of curiousity, were the poll results right - in terms of relative performance from then till now?

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Good question. The last post was 12 February so I used that date:

 

                Votes          Performance 12-Feb - 30 Apr

ORH            1                          -27.64%

ORH.A          4                          +4.83% (Which I do not  believe includes dividends)

FFH            18                          -22.03

 

 

 

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oec2000 says: "Hey, why settle for one when you can have the buffett..."

 

There are plenty of pretenders around who write "Buffet" when they mean "Buffett". You must be a true Buffett cult member to do the opposite: write "buffett" when you meant "buffet"!

 

No offense meant, I just found this funny.

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I took the opportunity of the rally to bail out of my ORH shares and replaced them with an equal amount of ORH.A and ORH.B.  I think the summer will not be kind to stocks, especially those that are vulnerable to hurricanes.  I am happy with the 10%+ yield for my parked money and I think that I also get some sort of protection against treasury fluctuations.

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