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Strategies & Market Trends : Value Investing
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To: Esvida who wrote (2506)11/17/1997 11:29:00 PM
From: Paul Senior  Read Replies (2) of 78645
 
AlLe: Value 'em same way you approach a porcupine. Very carefully.
I like to look for substantial co's when the pc cycle (that's property casualty -g- different from IBM PC) is against them. Long-lived companies -geographically dispersed and with lots of employees.
Problem with midsize or small co's is that they either don't know their business well enough to price their policies or else they get greedy or something and purposely price low to bring in business. This eventually bites them and their stockholders. Big co's usually don't get this carried away (but they can invest their surplus in things they're not expert in -- like real estate). Try to hold for a long time - they grow slow but they can be profitable, although there is a strong opinion that competition is so severe, it's made profits non existent. I've not found any big insurance co's that I like at today's prices. For small and medium size co's, try to buy at book or maybe 1.5X. Combined Ratio staying under 100% is a good sign too. Also...sigh... you should diversify among several. (Aside to thread: Please. No more about diworseifcation--I just bot even more stocks and another insurance co. today!) I own a few co's spread out in pc, life, and auto. Also, you probably should not take my advice: One of the insurance stocks I purchased recently seems like it was or is bankrupt only I wasn't smart enough to know it when I bot it at a price that was 3x higher than today's price. Paul Senior
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