Third Avenue Management recently released its Q1 2020 Investor Letter, a copy of which you can download here. The Third Avenue Value Fund posted a return of -42.08% for the quarter, underperforming its benchmark, the MSCI World Index which returned -20.95% in the same quarter. You should check out Third Avenue Management’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.
In the said letter, Third Avenue Management highlighted a few stocks and Old Republic International Corp (NYSE:ORI) is one of them. Old Republic International is an insurance company. Year-to-date, Old Republic International Corp (NYSE:ORI) stock lost 27.2% and on June 12th it had a closing price of $16.43. Here is what Third Avenue Management said:
“During the quarter the Fund initiated a position in Old Republic, which operates in several lines of insurance. Old Republic’s largest exposures are in specialty property and casualty segments including trucking insurance, workers’ comp and variety of others. The company has generally been a decent underwriter, historically speaking, in spite of the fact that trucking insurance has been a particularly challenging business due to a trend of rising claims and surprisingly large claim awards. That trend has caused a number of insurers to cease writing trucking insurance and the remaining players to substantially re-price those risks. We would expect Old Republic’s underwriting results to improve going forward. Old Republic is also one of the largest players in the oligopolistic title insurance market. The first function of title insurance is the mitigation and near-elimination of title risk in residential and commercial real estate transactions. The second function is to insure against any residual risk. For this reason, title claims tend to be rare, required regulatory capital in the business tends to be small, and returns on that capital tend to be quite high. Pure players in the title insurance industry, who are Old Republic’s direct competitors, are typically highly profitable and trade at substantial premiums to book value. Finally, Old Republic’s consolidated results and returns on equity have been dragged down for years by a book of business that is in runoff. While the existence of the runoff portfolio tends to drag on consolidated returns, as it liquidates it will continue to free up equity, which the company will likely continue distributing to shareholders in the form of special dividends. Taking all of these things together, it appears likely that Old Republic’s operating performance can improve meaningfully over time and that, in any event, the consolidated valuation, at or below tangible book value, even after making adjustments for recent capital market turmoil, materially understates the sum of its parts. More qualitatively, the company has historically had a reputation for being less than eager to engage the investment community, but we believe there has been a reconsideration of this posture coinciding with a recent management succession and new hires. To the extent that Old Republic is more proactive in explaining each of these drivers of improving operating performance and the degree to which the company is substantially undervalued, we would expect the result to be a positive impact on the share price.”
In Q1 2020, the number of bullish hedge fund positions on Old Republic International Corp (NYSE:ORI) stock increased by about 35% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with ORI’s growth potential. Our calculations showed that Old Republic International Corp (NYSE:ORI) isn’t ranked among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
Video: Top 5 Stocks Among Hedge Funds
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:
Disclosure: None. This article is originally published at Insider Monkey.
