Worried about future inflation? Then this is your preferred stock. Because W.R. Berkley (WRB) CEO William Berkley is too. The insurance exec is building up reserves based on his forecast of 6% inflation not too far down the road.
In the meantime, it doesn’t hurt that this is one of the most conservatively managed insurance companies around as the company’s July 27 earnings report demonstrated. (Of that these preferred shares pay around 7.5%) Those results were good enough that I’m going to edge up my target price on this Jubak’s Picks holding.
For the June quarter, W.R. Berkley reported earnings of 60 cents a share, a penny ahead of Wall Street projections. Net earned premium declined by 8% as insurance prices continued their decline. But, said CEO Berkley, the rate of decline slowed and the insurance market looks set for an upturn beginning in the fourth quarter of 2009 or the first quarter of 2010.
Berkley’s minimal exposure to the market for catastrophic insurance has stood it in good stead during the financial crisis. Because the company doesn’t face big payouts for natural disasters, it’s been able to avoid liquidating riskier parts of its investment portfolio at a loss just to raise funds for a payout.
As of July 31, I’m raising my target price for W.R. Berkley Capital 6.75% preferred to $25 by March 2010. (Full disclosure: I own shares of W.R. Berkley Capital 6.75% in my personal portfolio.)
Are there performance reports on the new site yet?
Glad to have you back, Jim.
Just a quick question: Are there any plans to add the two Income/Dividend portfolios from MSN to this site?
viwi, no I don’t think your math is strange at all. The stimulus hasn’t all gone into the economy yet so we aren’t seeing the fulol effect of $785 billion, of course, but the question of whether it was big enough to get the economy growing on its own once the stimulus is withdrawn in 2011 is still very much open.
Hi Jim,
Just wanted to say great to have you back and best of luck with your new site – I am sure it will soon become very popular!
It is unbelievable to me that you were the last full-time staff member and that the rest were all freelancers, as you say in your About section here on this new site. Scary times indeed.
It was obvious something was up given how abruptly you left MSN Money — the little note by the managing editor there about how you’d suddenly gone on hiatus left more questions than answers, and it was simply put, all a little weird. Heck, they still have that note up there.
But all the best and good luck in your new venture — I enjoy reading your analysis and it helps me to think about how the global economy works. I look forward to reading your column again — this time in the format of daily posts!
Jay
Jim,
I have a simple math question. GDP is about $14 trillion, stimulus package is about $0.7 trillion, which is about 5%. It would be natural to expect that such stimulus package results in immediate 5% (or more) growth of GDP. However, we see 1% drop … It corresponds to 6% drop, i.e. even worse than one in the previous quarter (before stimulus).
Am I wrong in my math?
In my opinion, similar math is applied to China as well. What we see now is the effect of their stimulus, which is much higher, if compared to GDP. However, if I am wrong, I should be really jumping up and down.