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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Robert T. Quasius who wrote (10304)	4/8/2000 6:08:00 AM
From: Madharry	Read Replies (2) \| Respond to of 78577

Presumably there are people who understand insurance far better than I but have not been serious questions raised about their account even prior to the greentree acquisition? Could you share with us what you know?

To: Robert T. Quasius who wrote (10304)	4/9/2000 1:44:00 AM
From: James Clarke	Read Replies (1) \| Respond to of 78577

Financials are well outside my circle of competence, though that is the industry I've worked in since 1991, but we'll see how I do. I prefer analyzing a widget maker any day. If you can back up, concisely with facts, your assertion that Conseco is financially stable I would be interested in hearing more. I have had this stock pitched to me at every "bottom" for the last three years, mainly by people who couldn't explain in a sentence what the company does. The Forbes article in November cited a few posts ago convinced me to stay away one more time. So far I have not been wrong. What convinces you you have a margin of safety here, or are you playing odds (1 in 3 it goes bankrupt, 2 in 3 its a triple - that can be a great investing strategy, but if thats what you're talking about tell us)? Until I get really convinced to look hard at a Conseco, I'll just keep playing my game with plain vanilla insurance and very selective financial stocks that I understand (kind-of - financials are not my strength, but when they all go down you've got to buy some). Mine are ABK, BRK and HMN. My favorite CMH is half financial, too. The first two I was buying near the lows, HMN I don't know how I missed it below 13 since I was a buyer at 20 and hadn't sold. I just got so frustrated I forgot about it I guess. As for banks, I was having a hard time finding one that didn't have exposure to something I didn't want to have exposure to. MTB was probably the cleanest I found (I am very worried about any bank that has done major acquisitions in the last five years - it makes their financial statements unintelligible to me. I also worry about residential real estate exposure in any West Coast market, Texas, DC/Virginia, New York and Boston - that rules out a lot of banks - common denominator is homes bought with stock options as collateral, and even if the bank was lending responsibly, the home's price was set by some other buyer buying with a loan guaranteed by stock option collateral. I liked First Virginia FVB until I remembered where AOL is headquartered.) I get concerned about the big money centers when I hear that one of the biggest of all, Chase, has most of its book value in venture capital equity (and presumably loans to these same companies). If you want to own Chase long-term, just put in a good-til-canceled order at 40 and wait patiently for it to hit. Believe me, when it does, you won't want it to. Why MTB? How much trouble can you get into in upstate New York and Northern Pennsylvania. And Buffett has owned a big chunk of the company for a while. I almost pulled the trigger at 410 when my boss sold all the bank stocks in his personal account and put them into MTB. This is my firm's bank analyst. Then I almost pulled the trigger again at 363 and bought Berkshire instead (something like 1450 on that trade - so I got the same 20% or so off the bottom there). So I own no MTB and it is now back up to 446. Still worth a long look though I have a hard time buying something I passed on 20% lower. There are many cheaper bank stocks out there in terms of P/E and P/B ratios, but look at MTB's financials for a while - go back ten years mindful that they haven't done the kind of acquisitions that make most large banks' financials almost meaningless in my view- and think about the risk level of their loans and I think you'll see what I saw. My other pick in the financial sector would be United Asset Management (UAM). Look at the cash flow statement. Look at the market cap. And recognize that their revenues are a percentage of assets under management, which go up and down arithmetically with the stock market - there's the risk. The company is buying back 10% of its stock annually. There is always something to worry about with banks and insurance companies. What insurance worriers were worried about seems to have played out, and I think the stocks have bottomed. What bank worriers were and still are worried about has not happened yet. The stocks are down, but the negative catalyst is still out there and nobody knows precisely what it is going to be. But it is always something. Maybe my "recommendation" on MTB above, given that I do not own it and am not planning to buy it, is more of an "if you must own a bank..."