Guru Real Time Activity: August 19-23
According to GuruFocus Real Time Picks the Canadian guru Prem Watsa made a notable increase in his position in American Safety Insurance (ASI) this past week as a result of his intent to acquire the company.
Watsa increased his position in American Safety by 54.77%. On Aug. 19, Watsa purchased a total of 548,390 shares of ASI at an average price of $31.06 per share. Since his buy, the price per share has dropped -3%. The guru currently holds on to 1,549,691 shares of American Safety Insurance representing approximately 15% of the company’s shares outstanding.
American Safety Insurance is a specialty insurance company that provides customized insurance products and solutions to small- and medium-sized businesses in industries which they consider to be underserved by the standard insurance market.
American Safety is considered the specialty insurance and reinsurance underwriter. The company's operating segments come from three main insurance divisions: excess and surplus, alternative risk transfer and assumed reinsurance.
American Safety’s historical revenue and net income:
The Peter Lynch Chart shows that American Safety is currently undervalued:
On Aug. 7, Watsa’s Fairfax Financial increased their offer to buy American Safety Insurance Holdings to $30.25 per share. This is up from their previous offer of $29.25 per share. The board of directors has approved an amendment to the Merger Agreement among American Safety, Fairfax and Fairfax Holdings Bermuda reflecting the revised price and an increase in termination fee to $13.4 million from $9.1 million.
On Aug. 18 representatives of Fairfax and Catalina informed American Safety that Catalina was withdrawing its revised proposal to acquire American Safety at a price of $30.75 per share and that Fairfax and Catalina had reached an agreement whereby Fairfax would sell American Safety’s reinsurance business to Catalina promptly after the closing of Fairfax’s pending acquisition of American Safety.
American Safety Insurance has a market cap of $290.4 million. Its shares are currently trading at around $30.12 with a P/E ratio of 6.60, a P/S ratio of 0.90 and a P/B ratio of 0.90. The company had an annual average earnings growth of 21.8% over the past five years.
Michael Dell made an initial purchase into Wesco Aircraft Holdings (WAIR) as reported on Aug. 19.The guru bought a total of 5,418,897 shares representing 5.82% of the company’s shares outstanding. Dell purchased these shares at an average price of $19.10 per share. Since his buy, the price per share has dropped approximately 3%. His buy into Wesco represents an 18.45% impact to his portfolio.
Wesco Aircraft is one of the world’s largest distributors and providers of comprehensive supply chain management services to the global aerospace industry, offering the world’s broadest inventory of aerospace parts, comprised of approximately 500,000 different stock keeping units, including hardware, bearings, tools, electronic components and machined parts.
Wesco Aircraft’s historical revenue and net income:
Prior to Dell’s purchase, Wesco held a public offering of 6 million shares at $18.87 per share. The public offering closed its offering on Aug. 13.
The company’s second quarter financials reported:
· Record revenue for the quarter of $230.2 million, up 21.6% from last year.
· Net income of $27 million, or fully diluted EPS of $0.28
· North American external sales increased 20.1%.
· “Rest of the World” sales increased 27.3%.
The Peter Lynch Chart suggests that the company is currently overvalued:
Wesco Aircraft has a market cap of $1.74 billion. Its shares are currently trading at around $18.45 with a P/E ratio of 17.40, a P/S ratio of 2.10 and a P/B ratio of 2.20.
Mario Gabelli bought into Volterra Semiconductor (VLTR) over the past week. The guru held on to the company previously but sold out in 2010Q1.
On Aug. 15 Gabelli bought back into the company, purchasing a total of 846,500 shares, giving him control of 3.36% of the company’s shares outstanding. The guru purchased these shares at an average price of $22.91 per share, and the price is trading slightly down at $22.85 today.
Mario Gabelli’s previous holding history of Volterra:
The company designs, develops, and markets proprietary, high-performance analog and mixed-signal power management semiconductors for the computing, storage, networking, and consumer markets.
Volterra’s historical revenue and net income:
Also on Aug. 15, Volterra announced that they would be acquired by Maxim Integrated (MXIM). Some of the transaction highlights include:
· Maxim to acquire Volterra at $23 per share.
· Transaction valued at $605 million equity value; $450 million enterprise value.
· Transaction will be immediately accretive to Maxim’s GAAP EPS.
The Peter Lynch Chart suggests that Volterra is currently overvalued:
Voltera has a market cap of $573.6 million. Its shares are currently trading at around $22.85 with a P/E ratio of 41.10, a P/S ratio of 3.80 and a P/B ratio of 3.00. The company had an annual average earnings growth of 14.9% over the past five years.
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