I’m always inspired by the story of legendary investor Shelby Cullom Davis who borrowed some money from his father-in-law to buy deeply, deeply undervalued stocks of insurance companies, eventually growing his fortune to $800 million. His thesis was that the market was unwittingly discounting the stocks by completely disregarding the huge piles of cash the companies were sitting on (which all insurance companies have…mainly by mandate). Warren Buffett did the same thing with a little insurance company called GEICO. I’ve always liked to poke around stocks of life insurance companies. There are two reasons. First, they typically have and grow… Read More
I’m always inspired by the story of legendary investor Shelby Cullom Davis who borrowed some money from his father-in-law to buy deeply, deeply undervalued stocks of insurance companies, eventually growing his fortune to $800 million. His thesis was that the market was unwittingly discounting the stocks by completely disregarding the huge piles of cash the companies were sitting on (which all insurance companies have…mainly by mandate). Warren Buffett did the same thing with a little insurance company called GEICO. I’ve always liked to poke around stocks of life insurance companies. There are two reasons. First, they typically have and grow huge piles of money. Second, betting on the insurance company is the equivalent to betting on the house at a casino. It’s hard to beat the actuarial tables. Like John Maynard Keynes said: “In the end, we’re all dead.” #-ad_banner-#But lately, I’m rethinking that for two reasons. One, lower risk interest rates are horribly low, so the huge piles of cash the life insurers are sitting on aren’t earning very much. Two, there is a ticking demographic time bomb called “Baby Boomers” looming in the near future. I selected three large life insurers whose stocks seem to be trading and… Read More