Author Topic: ELF.TO - E-L Financial Corp. Ltd.  (Read 27757 times)

no_free_lunch

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Re: ELF.TO - E-L Financial Corp. Ltd.
« Reply #70 on: November 25, 2017, 12:15:19 PM »
Thanks for the feedback all.

I am definitely not suggesting it will trade up to book any time soon.  Just pointing out that there is large margin of safety combined with excellent management track record.  These two in conjunction are hard to find these days.  I do think it will trade to book if interest rates ever move up but won't hold my breath on that.

Historically it has traded roughly 55% book to 110-120% (back in 06).  So based on this simple metric it is well on the lower bound but I suppose could always go lower.  Limited downside, substantial upside and in the meanwhile should earn you high single digits to low double digits if prior record is meaningful.
« Last Edit: November 25, 2017, 12:17:28 PM by no_free_lunch »


ourkid8

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Re: ELF.TO - E-L Financial Corp. Ltd.
« Reply #71 on: November 25, 2017, 12:32:56 PM »
Is there a share repurchase plan in place?

Thanks for the feedback all.

I am definitely not suggesting it will trade up to book any time soon.  Just pointing out that there is large margin of safety combined with excellent management track record.  These two in conjunction are hard to find these days.  I do think it will trade to book if interest rates ever move up but won't hold my breath on that.

Historically it has traded roughly 55% book to 110-120% (back in 06).  So based on this simple metric it is well on the lower bound but I suppose could always go lower.  Limited downside, substantial upside and in the meanwhile should earn you high single digits to low double digits if prior record is meaningful.

oddballstocks

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Re: ELF.TO - E-L Financial Corp. Ltd.
« Reply #72 on: November 25, 2017, 01:39:51 PM »
I think this is an excellent opportunity.  I find the "It's always traded cheap" arguments flimsy.  A counter argument is if this is cheap then why aren't all other similar companies cheap as well?

I think there are a few dynamics at play:

1) The company doesn't have a website, they are 'hidden'
2) There are large insider holders
3) There is a bit of a convoluted structure with their ownership in subsidiaries and subsidiaries owning them

As to buybacks.  The parent owns funds that continually purchase shares of the parent.  This isn't the same as a buyback, but it's similar.  Along the same lines other subsidiaries have purchased shares in the parent as well.

A collection of assets that aren't impaired, and are at least run average (which ELF is) should at least trade at book.  The market is saying they are in the process of destroying shareholder value.  Yet results say otherwise.

This is the type of name I like to buy and shove in the corner of my portfolio.  Right now it seems cheap, it might in a year or four, then suddenly it'll be time to sell.
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SafetyinNumbers

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Re: ELF.TO - E-L Financial Corp. Ltd.
« Reply #73 on: November 26, 2017, 09:13:01 AM »
I think this is an excellent opportunity.  I find the "It's always traded cheap" arguments flimsy.  A counter argument is if this is cheap then why aren't all other similar companies cheap as well?

I think there are a few dynamics at play:

1) The company doesn't have a website, they are 'hidden'
2) There are large insider holders
3) There is a bit of a convoluted structure with their ownership in subsidiaries and subsidiaries owning them

As to buybacks.  The parent owns funds that continually purchase shares of the parent.  This isn't the same as a buyback, but it's similar.  Along the same lines other subsidiaries have purchased shares in the parent as well.

A collection of assets that aren't impaired, and are at least run average (which ELF is) should at least trade at book.  The market is saying they are in the process of destroying shareholder value.  Yet results say otherwise.

This is the type of name I like to buy and shove in the corner of my portfolio.  Right now it seems cheap, it might in a year or four, then suddenly it'll be time to sell.

I couldnít agree with Nate more.

I have asked Duncan about a buyback or stock split and I wouldnít expect either to happen (at the last few AGMs). I think they like the discount as it lets the family acquire shares more cheaply. I know stock splits donít effect value but if the stock was liquid enough after a split, it would allow market participants with liquidity constraints like Indices/ETFs to include ELF in their screens.

I also suggested they consider doing a tender offer below NAV for EVT as a way of effectively buying back stock. As an aside, EVT is a publicly traded closed end fund that is controlled by ELF that has a large position in ELF.

Itís nice to see a discussion on ELF.

ELF IAM GCM.DB.U/DB.V/DB.X PIF C.N

no_free_lunch

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Re: ELF.TO - E-L Financial Corp. Ltd.
« Reply #74 on: November 26, 2017, 09:32:52 AM »
I guess the one con I can see is that the founder has handed control over to his son, Duncan.  Not sure what his track record is.  Not a show stopper for me but something I will have to keep an eye on.

Appreciate the heads up on Economic.  Hadn't read their report in detail to notice the loop.  For those interested their stake is:

Quote
At December 31, 2016, the Companyís carrying
value of its direct and indirect investment in E-L Financial of $337,414,000 (2015 - $323,007,000)
represents 41.0% (2015 Ė 41.2%) of Economicís total equity investment

So they own about 10% of ELF and ELF owns 24% of them.  This should cancel out 2 or 3 percent of ELF public equity.

Do any of the other subs own ELF?
« Last Edit: November 26, 2017, 09:37:44 AM by no_free_lunch »

no_free_lunch

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Re: ELF.TO - E-L Financial Corp. Ltd.
« Reply #75 on: November 26, 2017, 09:47:47 AM »
Another change I have seen is that their investment portfolio is substantially larger relative to their equity than in the past.  Maybe this is the result of selling Dominion?  At any rate, it looks like in 2007 equity investments were only 35-40% of NAV, they are now in the vicinity of 100%.  These are invested mostly in equities and quite diversified from what I can tell.  Not an issue but just something to be aware of, perhaps their results will be more volatile go forward as a result.
« Last Edit: November 26, 2017, 09:49:57 AM by no_free_lunch »

Cardboard

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Re: ELF.TO - E-L Financial Corp. Ltd.
« Reply #76 on: November 27, 2017, 01:11:21 PM »
"A counter argument is if this is cheap then why aren't all other similar companies cheap as well?"

While Great West trades at a premium, have a look at the discount to NAV constantly experienced by PWF and POW who own most of it. ELF is somewhat similar to PWF and POW and does suffer from a holding discount.

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SafetyinNumbers

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Re: ELF.TO - E-L Financial Corp. Ltd.
« Reply #77 on: November 27, 2017, 02:46:22 PM »
"A counter argument is if this is cheap then why aren't all other similar companies cheap as well?"

While Great West trades at a premium, have a look at the discount to NAV constantly experienced by PWF and POW who own most of it. ELF is somewhat similar to PWF and POW and does suffer from a holding discount.

Cardboard

While it's true that the NAV discount on PWF and POW, have averaged about 12.1% and 17.5%, respectively over the past 10 years, they also calculate that based on the premium P/B that GWO, which is the biggest component, trades at. For example, right now GWO trades at ~1.75x book value. If you adjust that to 1x, then PWF is trading at a decent premium to NAV. I'm not saying that's the right way to look at it but it makes it more comparable.

Because Empire Life is a smaller component of ELF than GWO is of PWF, perhaps the right thing to do is put a 1.75x multiple on Empire Life. This doesn't seem unreasonable as the Empire would likely sell for a premium to that if it were to be sold. This would take the ELF NAV to over $1500 and increase the NAV discount to 47%. That still seems more attractive than the PWF discount currently at about 15%. One could argue the POW discount is bigger than the ~19% discount it trades at now because it's a double discount as PWF is the biggest component but still materially smaller than the ELF discount.
ELF IAM GCM.DB.U/DB.V/DB.X PIF C.N

bbarberayr

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Re: ELF.TO - E-L Financial Corp. Ltd.
« Reply #78 on: November 27, 2017, 04:22:02 PM »
A more appropriate compare for ELF might be Texas insures National Western Life, a small cap US insurer that is majority family owned.  The other reason I pick this is because it is easier to get long term valuation information on US stocks.

If you take a look at" https://www.gurufocus.com/chart/NWLI#&serie=,,id:pb,s:NAS:NWLI

You'll see NWLI has traded up near book value for only 3 small periods over the last 20 years - 1992/1993, 1998 and 2007, which is the same time that ELF traded above book value (and don't forget, ELF was half P&C in 2007 and P&C companies generally get higher p/b valuations than life insurers).

It seems now a lot of investors are concerned about life insurers because of low interest rates and what happened to the Japanese Life Insurers when they moved to a low interest rate environment in Japan and many of them became technically insolvent.


bbarberayr

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Re: ELF.TO - E-L Financial Corp. Ltd.
« Reply #79 on: November 27, 2017, 04:26:21 PM »
Regarding the Jackman family ownership, the son, Duncan, who has now taken over, is more amenable to dividends and has changed the policy of the main family holding company, Economic Value Trust (EVT-T), to now pay out all investment earnings as dividends through an additional special dividend once a year.  My opinion is he wants the cash flow more than his father did, but we will have to see what other changes he makes.  But so far, they are not indicating anything else.

The following is from the EVT Annual Report - seem fine with the discount in the market:

The Company has been a closed-end investment corporation since 1927 and has never bought back its Common Shares. The Common Shares have traded at a discount to their net asset value, ranging from a 40% discount to a 15% discount over the past 10 years. Management believes that shareholders who have invested in the Common Shares of the Company recognize that the Common Shares of the Company usually trade at a discount to their net asset value.
Closed-end investment corporations have the following benefits: they often allow investors the opportunity to purchase assets at a discounted price; they have management expense ratios which are generally much lower than those for actively-managed, open-ended funds; and the management of a closed-end investment corporationís portfolio is not impacted by shareholder subscription or redemption activities.
Economic has no plans to become an open-ended investment fund.