Buy W.R. Berkley (WRB)
I’m buying these common shares of insurer W.R. Berkley (WRB) as a replacement for the preferred shares that I sold out of Jubak’s Picks on October 6. I think they offer almost twice the upside with just slightly more risk.
I’m a big fan of the very conservative ship run by CEO William Berkley. No financial company has escaped all damage from the recent (and in my mind on-going) financial crisis, but W.R. Berkley has dodged most of the big bullets. The $108 million write-down that WR Berkley took in the fourth quarter, for example, was on invested assets of $12.5 billion.
Sell W.R. Berkley Capital 6.75% Preferred (WRB-PA)
I’m going to sell these preferred shares out of Jubak’s Picks as of October 7. They’ve given me what I wanted—a good return and safety– while the market and economy were at their shakiest. But the reward for staying on board going forward is limited to the yield, about 7.2% at the moment—and I think I can do better while taking on only slightly more risk by moving from these preferred shares to the common stock of insurer W.R. Berkley. I’ll be buying those shares today; see my post below.
And now for some good news on banks–well, sort of.
During the financial panic stage of the global financial crisis, banks wrote down some $1 trillion in securities. Much of this came as banks took losses on thin to trade or never traded securities. What President George W. Bush’s Treasury branded “toxic” assets.
Now it looks like banks will have a chance to write back up some of those securities when they report results for the third quarter, which ends for the majority of companies on September 30. The Market ABX index, which tracks the price of such assets as mortgage-backed securities based on a portfolio of subprime mortgages, is up 30% in the last three months.
So some banks will be able to report big gains on their portfolios of damaged assets when the release third quarter earnings. And that has the potential to get investors really excited about the recovery in the financial sector. A rally in financials, one of the sectors that have led the stock market higher since the March 9 low, would put new momentum behind a rally that has started to look shaky recently.
The question for banks is how much of this 30% gain should they book now. And the question for investors is how excited they should get over what is essentially an accounting gain.
Behind the bad news in housing sales is there even worse news?
Bad numbers on existing home sales this morning. But is the reason behind the numbers even scarier than the numbers themselves?
The numbers, mind you, were bad enough. Existing home sales fell 2.7% in August. The drop comes after four consecutive months of increasing sales. And after a jump in sales of 7.2% in July economists had expected August numbers to continue the upward trend.
Want banks? Have you looked north, lately?
Looking for another way to invest the Canadian Loonie, which I called the world’s greatest currency, in my August 6 post? (See “The world’s greatest currency? The Canadian Loonie gets my vote. And soon some of my money” http://jubakpicks.com/2009/08/06/the-worlds-greatest-currency-canadas-loonie-gets-my-vote-and-soon-some-of-my-money/ )
It’s time to take a serious look at Canada’s banks. Their balance sheets are stronger; the Canadian housing market is closer to a turn-around than that in the United States; and with Canadian regulations keeping non-Canadian competition in the country’s banking sector to a minimum, they’ve free to use their home profits to expand into the much bigger U.S. market.
My favorite among the Canadian banks is Toronto Dominion (TD) because it’s furthest along in its penetration of the U.S. market. That meant it took more of a beating when the U.S. banking market fell into near collapse but it also means the stock has, in my opinion, the most upside.
But you can make a case for most of the big Canadian banks after they announced quarterly earnings on August 27.
