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Old Republic International Corporation Message Board

  • 12134 12134 May 14, 2006 1:34 PM Flag


    I have just started following this stock and wanted to hear some opinions on why this stock is so cheap. Specifically, how come it has a negative enterprise value and why is it selling for Price/free cash flow (P/FCF) of under 10?

    Thanks in advance for your responses. BTW, I am a holder of Berkshire Hathaway and came across this stock when I was looking for potential acquisitions for Mr. Buffett. It certainly meets all his criteria...

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    • I think I am just used to reading the financial statements of Berkshire in which the reserves against future claims (or float) is seperate from the investments. For BRK the investments are unencumbered but I guess that is not the case with ORI. Thanks for the input InvestIt.

    • fcf is a little different with insurance companies. 880M is the operating cash flow and not Free cash flow

      a large portion of the invesments used from operating cash flow are used as reserves for future claims and not funds that could be paid out to shareholders.

      the K should give you an idea as to how much. I don't have the numbers currently at my fingertips.

      This is also the reason for the EV as negative as others suggested.

    • I asked a similar question once and someone told me to be quiet and not let the cat out of the bag.

      Maybe it's one of these: (1) It's an unsexy industry. (2) It's a get-rich-slow proposition and everyone is in a hurry. (3) There is some concern (blah blah blah) over the real estate exposure.

      Cash doesn't lie. They keep increasing the dividend year-after-year, and have paid a special cash dividend 2 out of the past 3 years.

      Here's my answer: markets are inefficient. I don't know. All I can say is I own a big chunk of it.

      • 1 Reply to ou71764
      • Thanks for the reply. I do have an MBA so I am aware of inefficient markets but what I don't understand is if someone can buy this company with the cash on hand (and still have about $1.5+ left over) why it hasn't been done already (at the very least, management can do a LBO and take the company private if the public markets are this inefficient). Am I missing something here - is there some risk or liabilities that I am overlooking?

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