When my wife and I were in New York City last week I met a man who gave me a bit of advice that rings true. He said that I should always buy companies that I hated in my daily life. Not hated because of incompetence or shoddy products but hated because I had to pay those companies exorbitant fees/prices and didn't really have much of an alternative.
Companies that I love to hate include:
- insurance companies
- asset management companies
- banks (particularly the big banks)
- Telecoms (particularly here in Canada where the competition is either nonexistent or nearly so)
- Oil/gas companies
- Stock Exchanges
- no inventory nightmares
- no risk of obsolescence
- large cash float to invest (wisely I hope)
- brand name power
- flexibility to decrease underwriting in risky times and when the margins aren't favourable (the "umbrella" effect where the umbrella gets taken away by the insurer when it actually rains, lol)
AIG-- because it's current woes attributed to the failed Credit swap business and dilution of shareholder's stake through an undervalued equity secondary offering has knocked the stock down to a price that ignores it's excellent brand, dominance in emerging markets and long term track record. Morningstar calls the fair market value (FMV) at $76 and it's trading at $39. I own some in my RRSP and have a bid for more in at $38. I have no doubt it will drop more.
Y Alleghany Corp-- a full analysis is coming but this co has high insider ownership, conservative management with a superb track record (shareholders have made 26x their original investment in the last 25 years) and a great deep value investment philosophy (the discarded cigar butt approach... more on this later). It's also trading well below FMV $344/share v.s. $475/share.
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