idea #15 hallmark financial

This was an excellent VIC writeup about an insurance company in Dallas/Ft.Worth area that was, until recently, 70% held by a Texas hedge fund, NewCastle.  The hedge fund faced redemptions during the financial crisis.  It distributed the shares to their partners.  The writer assumes the stock is weak because the partners in the hedge fund sold their shares as they received them.  That is a good explanation for a stock being weak for non-fundamental reasons.

HALL's 7 year average p/book ratio is 1.25x, now it's .8x.  The writer makes the case that their assets are really safe, no mortgage debts, etc.  It compares them to 30 or so other insurance agencies, and by all accounts it is cheaper.

I read more about the CEO's style.  He was trying to build the insurance business for the same reason Buffett did so, to have access to more capital to invest.   He is a value oriented manager.  He doesn't mind owning small, thinly traded stocks... which was one of the reasons his fund suffered.  He is a low profile fund manager.  He has a long term track record in the high teens. 

Looking at a financial history of HALL, He has doubled the book value per share over the last 7 years.

I'm seeing a lot of cheap insurance companies.  The general bear argument against owning insurance is that the low cost of capital has made insurers less risk averse and their pricing power, which used to come in cycles, is not coming back as strong, for as long of periods.

What I like most about this idea is that there is a fund manager who runs the company and eats his own cooking.  Yes, he's said he's trying to grow it but for a "value" oriented manager to destroy capital for the sake of growth would be sacrilegious.