I really appreciate your work here. I put a meaningful chunk of our portfolio in HHH after the Vantage deal closed and the future path to compounding became obvious. You and Alexander have both independently led credence to how I was seeing it unfold.
That’s an aggressive valuation for Vantage IMHO. I can buy FFH.TO at 1.2x book with a demonstrable insurance track record. I think an assumption they will compound book at 15% pa over 4 years is also aggressive - as you say in a softer market. I’m also reminded that gun fund managers experiences with their own insurers are pretty…………dreadful (Einhorn, Loeb)
You can indeed buy FFH at 1.2x and it’s my biggest position for that reason - it ought to trade higher. Don’t miss the fact that I value Vantage at 1x *today*.
15% might be aggressive - but look at where the equity is invested. I would not be at all surprised to see those companies compound at that rate, with insurance profits on top. Guaranteed? No. But unreasonable? I don’t think so.
Absolutely agree about prior fund managers and insurance - with a few notable exceptions like Warren Buffett and Prem Watsa. I think Ackman has studied what went right with those examples quite closely and copied the structure. That’s why Grandisson is happy to be on board. For example, Ackman doesn't earn a fee on the Vantage capital he manages; he earns a fee on the HHH share price. That's a very different incentive.
That said, all your comments are fair. That’s why I said this isn’t a conservative valuation. But it allows for a 26% cagr. I can accept that trade-off.
I really appreciate your work here. I put a meaningful chunk of our portfolio in HHH after the Vantage deal closed and the future path to compounding became obvious. You and Alexander have both independently led credence to how I was seeing it unfold.
Let’s hope we are all correct!
That’s an aggressive valuation for Vantage IMHO. I can buy FFH.TO at 1.2x book with a demonstrable insurance track record. I think an assumption they will compound book at 15% pa over 4 years is also aggressive - as you say in a softer market. I’m also reminded that gun fund managers experiences with their own insurers are pretty…………dreadful (Einhorn, Loeb)
You can indeed buy FFH at 1.2x and it’s my biggest position for that reason - it ought to trade higher. Don’t miss the fact that I value Vantage at 1x *today*.
15% might be aggressive - but look at where the equity is invested. I would not be at all surprised to see those companies compound at that rate, with insurance profits on top. Guaranteed? No. But unreasonable? I don’t think so.
Absolutely agree about prior fund managers and insurance - with a few notable exceptions like Warren Buffett and Prem Watsa. I think Ackman has studied what went right with those examples quite closely and copied the structure. That’s why Grandisson is happy to be on board. For example, Ackman doesn't earn a fee on the Vantage capital he manages; he earns a fee on the HHH share price. That's a very different incentive.
That said, all your comments are fair. That’s why I said this isn’t a conservative valuation. But it allows for a 26% cagr. I can accept that trade-off.
Thanks for commenting!