Greenhaven Road Capital, an investment management company, released its second quarter 2023 investor letter. A copy of the same can be downloaded here. In the second quarter, the Fund returned 8% net, bringing YTD net returns to over 25%. The firm believes its portfolio is a little stronger with each passing day despite the challenges. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Greenhaven Road Capital highlighted stocks like Hagerty, Inc. (NYSE:HGTY) in the second quarter 2023 investor letter. Headquartered in Traverse City, Michigan, Hagerty, Inc. (NYSE:HGTY) offers insurance agency services. On August 11, 2023, Hagerty, Inc. (NYSE:HGTY) stock closed at $9.17 per share. One-month return of Hagerty, Inc. (NYSE:HGTY) was -0.54%, and its shares lost 27.85% of their value over the last 52 weeks. Hagerty, Inc. (NYSE:HGTY) has a market capitalization of $5.378 billion.
Greenhaven Road Capital made the following comment about Hagerty, Inc. (NYSE:HGTY) in its second quarter 2023 investor letter:
“Let’s start with an example of a company we own that’s pursuing several initiatives that will very likely yield a stronger business with the passage of time. As we have detailed in past letters, Hagerty, Inc. (NYSE:HGTY) focuses on the classic car industry. Their primary source of revenue (and profits) today is related to insurance. Classic cars represent an attractive niche in the insurance industry. People take care of their toys, and because an accident can impact resale values, they often do not claim damages to their insurance companies. The net result is that for every dollar taken in as revenue, Hagerty pays out only 42 cents to cover damages, compared to an industry average greater than 70.
The largest auto insurer in the U.S. is State Farm. They invested $500M into Hagerty at the IPO (technically de-SPAC transaction) and another $75M this past quarter. State Farm sits behind the Hagerty family and global specialty insurance provider Markel as the largest shareholders of Hagerty. This year, the Hagerty and State Farm IT systems will be sufficiently integrated and tested such that Hagerty should start onboarding 480,000+ State Farm policies. The onboarding is contractual and in both parties’ best interest. Every day is one day closer to transitioning the State Farm relationship from a cost center (setting up the systems) to a source of growth and profits. The State Farm partnership coming online is not a question of if; it is a question of when. The partnership will be profitable… the question is, how profitable?
Reinsurance is another of Hagerty’s paths to improved earnings that will just take time. The reinsurance business is very profitable, and their subsidiary HagertyRe has the option to buy out their partner Markel’s remaining 20% stake. Right now, HagertyRe benefits from Markel’s credit rating. As it establishes its own investment grade rating, HagertyRe can exercise its option on Markel’s remaining interest for $23M, and that one-time capital outlay should generate an incremental $16M+ per year in profits. Hagerty should make that investment all day long when the time comes…” (Click here to read the full text)
Hagerty, Inc. (NYSE:HGTY) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 9 hedge fund portfolios held Hagerty, Inc. (NYSE:HGTY) at the end of first quarter which was 12 in the previous quarter.
We discussed Hagerty, Inc. (NYSE:HGTY) in another article and shared Greenhaven Road Capital’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q2 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
