It might appear that I am raising cash by selling Universal Insurance Holdings (UVE) because I believe that the market is frothy. There might be something to that, but in reality the investment process I follow makes me buy when the stocks are low and sell when they are high. Disciplined investing with the right strategy automatically makes you cash heavy at market highs and fully invested at the bottoms. By focusing on individual businesses and their valuations, I generally do not have to worry about the overall market or the economy.
I have had great success in investing in the Florida home insurance companies. UVE is the stock I bought (and recommended) just after I took profits on Homeowners Choice Inc. (HCI). It is a way of getting exposed to multiple catalysts:
- Rising home values and ownership in Florida
- State approved double digit growth in insurance premiums
- Many of these companies have suffered quite a bit during the downturn
In addition, UVE has been diversifying into states outside Florida to mitigate hurricane risk.
Here are the details:
Here is the original investment thesis
Subsequently, the sell targets were revised upwards, as the company entered into an agreement to repurchase shares from its ex-CEO at below market prices.
After this sale, my cash position is now around 28% and I am looking to put it to work.
Thanks once again for UVE.
This is getting better and better. Buffett may have to take a back seat if things carry on like this.