Monday, August 14, 2006

Notablecalls - Paperstand

The WSJ's "Heard on the Street" column out saying that reinsurers may prove a good bet. Worries about the shares of reinsurance firms this hurricane season might just be a tempest in a teapot. Of the roughly $83bn in insured losses from natural disasters world-wide last year some $40bn was paid out by reinsurers, according to reinsurance broker Guy Carpenter & Co., a unit of Marsh & McLennan (MMC) "The reinsurance industry took it on the chin," says Joshua Shanker, of Citigroup. But bold investors might be smart to bet that fears of another record storm season are exaggerated. The stocks of many reinsurers are trading at skimpy multiples of their projected profits. Some Wall St. bargain hunters sniff an opportunity because the stocks are priced as if last year's record storm season is the new norm. Federal forecasters warned last week that despite a relatively quiet start to this year's storm season, they still expect above-avg hurricane activity. Shares of reinsurers are down more than 4% on avg this year. "There's a fear of record hurricanes again this year that's easy to understand but also probably irrational," said Richard Pzena, of Pzena Investment Mgmt and manager of the $5.7bn John Hancock Classic Value Fund. He began investing in reinsurers like RenaissanceRe (RNR) and IPC Holdings (IPCR) last year. "It's one of these very big upside areas with potentially very little downside."

Barron's Online reports that Copper River Mgmt, a famed short-selling hedge fund, is taking a long-term position in Sealy (ZZ). Marc Cohodes, the portfolio manager of Copper River, disclosed that the fund has accumulated a 5.1% stake in Sealy.

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