logo
  Join        Login             Stock Quote

Buffett's Newest 'Purchase'

 October 06, 2009 02:31 PM


In this article, we're digging into a new section of Morningstar Opportunistic Investor's repertoire: initial public offerings (IPOs). While investors often get overly excited about these things, IPOs can sometimes be a fertile hunting ground because of the limited operational data available, minimal analyst coverage, and perceived exogenous risks. A legendary example in this vein was MasterCard (MA), which went public at $40 a share because investors didn't understand the company and were afraid of potential anti-trust lawsuits. We don't claim to have found another MasterCard, but this upcoming offering is definitely intriguing.

Let's get started. On Oct. 6, insurance data provider Verisk Analytics is expected to come to market in one of the largest IPOs of the year, and there are some interesting technical aspects of the deal that have us excited. Verisk is primarily owned by property and casualty (P&C) insurance firms such as AIG (AIG), Berkshire Hathaway (BRK.B), Hartford Financial (HIG), Swiss Re, and so on. These firms were hit hard by the financial crisis as their investment portfolios took a beating. Also, underwriting losses were large in 2008 due to the damage caused by hurricanes Ike and Gustav.

Verisk will not be raising any "new" capital in its IPO. Rather, a 30-plus lot of its insurance-company owners and some employees will be cashing out. In some respects, these insurers are "forced sellers"--the IPO proceeds will help repair their balance sheets. If these sellers are willing to take a lower price to get some much-needed capital, we are happy to accommodate them. Interestingly enough, Berkshire is the only stakeholder not selling shares. By not selling, Berkshire is increasing its ownership stake from 5% to nearly 11%. While Buffett's lack of action is not the same as if he were participating in the IPO, we're still intrigued because it represents a vote of confidence for the business.


Next Page >>123
iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageInitial Jobless Claims Rose Unexpectedly

Claims unexpectedly rose in the latest report through last weekend to breach 300,000 for the first time read on...

article imageAll Quiet on the Record High Front

What can we glean from the media’s lack of attention to the market’s recent record read on...

article imageThe Chip Maker Short Sellers Should Be Watching

Investing in semiconductor stocks is always tricky. Industry cycles can lead to bumps in the road for the read on...

article imageChicago Fed: US Economic Growth Slowed In October

The pace of US growth slowed more than expected in October, according to this morning’s update of the read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center

Related Articles:

Recent Articles by Morningstar
More Articles on: Finance



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.