Kinsale Capital Producing Great Growth From A Great Model

A pure-play excess & surplus underwriter with a strong management team, excellent technology, and a large addressable market opportunity, Kinsale Capital (KNSL) has posted some very strong premium growth in 2017 and 2018 along with good underwriting ratios. While Kinsale may well find that it needs to raise some capital to maintain its growth, I believe this company could be looking at a five to 10-year run of well above-average growth.

The “but”, as is often the case with quality growth, is valuation. Kinsale still has some upside from here if it can, in fact, deliver high teens adjusted earnings growth, but that’s a demanding bar and the shares are certainly not cheap by more conventional metrics.

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Kinsale Capital Producing Great Growth From A Great Model

State National May Be Unusual And Almost Unknown, But It's A Business Worth Following

I like insurance companies and I especially like companies like Arch Capital (NASDAQ:ACGL), Argo (NASDAQ:AGII), and W.R. Berkley (NYSE:WRB) that do things a little differently than the typical insurance company. Well, State National (NASDAQ:SNC) may take the cake in that respect, as this is a pretty unusual insurance company compared to most publicly traded "P&C" insurance companies. While I do expect competition will limit returns to some extent, I think State National can maintain mid-teens ROE and generate enough adjusted cash earnings growth to support a fair value close to $16 today.

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State National May Be Unusual And Almost Unknown, But It's A Business Worth Following

Investopedia: Arch Coal - Some Risks, But More Value

The only way to consistently make money in commodities is to swim against the current. When times are flush and everyone is talking about how the world has changed, look to sell. When times are awful and commentary suggests that the world is changing (against the commodity in question), think of buying. Although, Arch Coal (NYSE: ACI) has some legitimate operating challenges and the Environmental Protection Agency (EPA) issues could lead to a stagnant domestic market, this looks like the right time to think about buying good coal producers. (For additional reading, check out: How To Invest In Commodities. )

A Tough Third Quarter
If there was anything good about Arch Coal's third quarter, it was that management had told the Street not to expect much. So, it was a tough quarter, but not all that surprising.


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http://stocks.investopedia.com/stock-analysis/2011/Arch-Coal---Some-Risks-But-More-Value-ACI-BTU-JRCC-PVR-CNX-CLD-UNP1101.aspx

Investopedia: What's Ailing Coal Stocks?

Coal has gotten very cold very quickly. One of the hottest commodities only a year ago, it feels as though the bottom has fallen out of many of these stocks. If coal follows the common commodity pattern, the overshoot at the top of the market will be coupled by a dive and investors will have the opportunity to pick up some real bargains. Investors thinking that today is the day to buy, should remember that another global recession presents a major downside, even from today's prices, but there are many stocks approaching interesting price levels.


What's Gone Wrong?   
A lot of the melt-up in coal was fueled by the economic recovery, as better business conditions promised better demand, both for thermal coal, used to produce electricity, and metallurgical, or met coal, used to produce steel. Since the spring of this year, though, investors have begun to not only accept the end of the recovery, but fear a potential slip back into recession. That has led to a great deal more caution at steel companies and lower orders at utilities. (For related reading, see Industries That Thrive On Recession.)


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http://stocks.investopedia.com/stock-analysis/2011/Whats-Ailing-Coal-Stocks-ANR-WLT-ACI-BTU-PVR-KOL-JRCC1011.aspx

Alpha Looks To Be The Big Dog In U.S. Met Coal

This weekend's announcement from Alpha Natural Resources (NYSE:ANR) that it reached an agreement to acquire Massey Energy (NYSE:MEE) not only ends months of speculation about Massey's future, but it also represents yet another tremor through the metallurgical coal world. With steel prices already on the rise, met coal trading at about twice the price of steam coal and relatively modest near-term supply coming online, it seems a safe bet that met coal pricing is going to be a popular topic this year.

Alpha's Deal
Alpha agreed to pay over $7 billion in cash and stock to acquire Massey. The deal is being structured as a mix of equity and cash, with Massey shareholders getting 1.025 shares of Alpha (and thereby owning about 46% of the combined company) and $10 in cash. That is not only a 21% premium to where Massey closed on Friday (and the stock has been strong since the summer of 2010), but a rather high multiple relative to normal historical coal stock metrics. (For more, see Coal Burns Bright Despite Pressures.)

Alpha may have felt that it needed to make an impressive bid for Massey in order to fend off potential rivals. Though unattributed rumors are hardly proof, it does not seem unreasonable that companies like Arch Coal (NYSE:ACI) or ArcelorMittal (NYSE:MT) may have been interested in Massey as well.

What Alpha Will Be
With this deal, Alpha acquires 2.9 billion tons in coal reserves, with 1.3 billion of those being the more valuable metallurgical coal. All told, the combined company will have more than 5 billion tons in coal reserves and will become a real player in the global met coal market. Though BHP Billiton (NYSE:BHP), Mitsubishi and Teck Resources (NYSE:TCK) will still have roughly 40% of the world met coal market, the new Alpha will crack into the double-digits in terms of share of the global seabourne market.


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http://stocks.investopedia.com/stock-analysis/2011/Alpha-Looks-To-Be-The-Big-Dog-In-U.S.-Met-Coal-ANR-MEE-ACI-MT-JRCC-PCX-TCK0201.aspx