(GuruFocus, September 11, 2009) In the previous article, we reviewed the top holdings of Investment Guru David Einhorn. We stated that Einhorn turned bearish towards the end of the quarter; he did not think the stock rally was sustainable on economic concerns. Yet, he bought some stocks during the second quarter.
His top purchases during the second quarter or 2009 are:
1. Everest Re Group Ltd. (RE)
2. Pfizer Inc (PFE)
3. Wyeth (WYE)
4. Cardinal Health Inc. (CAH)
5. Aspen Insurance Holdings Ltd. (AHL)
We briefly reviewed Pfizer, Wyeth, and Cardinal Health Inc. in the top holding article. That leaves just these two stocks that need to go a bit further:
No.1: Everest Re Group Ltd. (RE)
Everest Re Group Ltd. is a world leader in property and casualty reinsurance and insurance offering innovative products responsive service and unsurpassed financial strength. Everest Re Group Ltd. has a market cap of $5.13 billion; its shares were traded at around $84.3 with a P/E ratio of 9.3 and P/S ratio of 1.4. The dividend yield of Everest Re Group Ltd. stocks is 2.3%.
Einhorn entered a very small position (90,173 shares) in 1Q09 and increased to 629K shares during 2Q09. As we can see in the case for the next stock, Einhorn likes insurance company for the time.
No. 5 Aspen Insurance Holdings Ltd. (AHL)
Aspen Insurance Holdings is a Bermudian holding company that provides property and casualty reinsurance in the global market property and liability insurance principally in the United Kingdom and surplus lines insurance in the United States. Aspen's operations are conducted through its wholly-owned subsidiaries located in London Bermuda and the United States: Aspen Insurance UK Limited Aspen Insurance Limited and Aspen Specialty Insurance Company. Aspen Insurance Holdings Ltd. has a market cap of $2.2 billion; its shares were traded at around $26.55 with a P/E ratio of 18 and P/S ratio of 1.2. The dividend yield of Aspen Insurance Holdings Ltd. stocks is 2.3%.
Einhorn entered a small position of 917,119 shares during 4Q08 and increased shares during the past two quarters. As of June 30, 2009, he held 4.1 million shares.
Einhorn highlighted AHL in his 2Q09 letter to partners:
Our new investment activity on the long side was sparse during the quarter. We purchased a number of reinsurance stocks, mostly notably Aspen Insurance Holdings (AHL). The reinsurance industry suffered a double whammy last year due to storm damage and investment losses. This appears to be leading to an improved competitive environment and higher returns on capital. Even after the capital market recovery, many of the stocks trade at sizable discounts to book value that already reflect investment losses that may prove to be temporary. For example, the partnerships established their AHL investment at an average price of $20.86 per share or 72% of AHL’s March 31, 2009 reported book value. With low public equity values and dislocations in the capital markets, there are no new entrants and the industry is becoming increasingly disciplined in risking capital, as it understands that replacing additional losses with fresh equity may be much more dilutive at this point. The combination should generate vastly improved risk-adjusted returns (higher returns and lower risk). AHL is capable of earming $4.00 per share if ground doesn’t shake too much and the wind doesn’t blow too hard. AHL shares ended the quarter at $22.34 each.
David Einhorn is a trader, so do not expect much of long term holding in his portfolio. For the second quarter of 2009, he seems to think drug companies and drug distributors, and re-insurance company interesting.
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