All About Interest

One man's journey to financial independence.

Purchased 50 TWGP

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I decided to purchase 50 shares of Tower Group, Inc. (TWGP) today.  I’ve been looking for a P&C Insurance company ever since I sold Harleysville Group (HGIC) due to the buyout last year.  They are only a 900 Mil Market Cap company.  P&C businesses didn’t do well in 2011, with many losses occuring from natural disasters.    I believe the company has a lot of room for growth as does the dividend.

TWGP has increased it’s yearly dividend from .1500 in 2007 to .6875 in 2011.  It has a Price/Book of .85 and payout ratio < 50%.  It has a low beta of 0.6 and its current yield is 3.3%.

Overview:

Headquarted in New York, NY, Tower Group, Inc. (Tower), through its subsidiaries, offers a range of commercial, personal and specialty property and casualty insurance products and services to businesses in various industries and to individuals. The Company provides coverage for many different market segments, including non-standard risks that do not fit the underwriting criteria of standard risk carriers due to factors, such as type of business, location and premium per policy. It provides these products on both an admitted and excess and surplus (E&S) basis. The Company operates in three segments: Commercial Insurance, Personal Insurance and Insurance Services. On July 1, 2010, it acquired OneBeacon Personal Lines Division (OBPL). On November 2, 2010, Tower acquired the renewal rights to the commercial automobile liability and physical damage business of AequiCap Program Administrators Inc. (AequiCap II), an underwriting agency based in Fort Lauderdale, Florida.

Purchased NSC

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When I want to initiate a position in a company I like to split it up into a few purchases every 3 or 6 months to average the price in over time.  This is my second purchase of Norfolk Southern Corp. (NSC).  I purchased 16 shares at 65.36 this morning so my average cost is 67.22.

I wanted to add to my position for a few reasons:

I wanted to further increase my exposure to Transportation
They are a 22B market cap company with a dividend of 2.9%.
They have a 5-year CAGR of 19.08%
They have increased dividends yearly for 10 straight years.  They actually have been increasing dividends about every 6 months.
I believe the loss of revenues from coal are already priced in and this provides for an attractive entry point.
Their earnings estimates for 2012-2015 are 5.81, 6.53, 7.26, 8.06 according to E-Trade.
Railroads provide the cheapest forms of transportation for many goods and this isn’t expected to change.

Purchased VZ

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I just purchased an additional 25 shares of Verizon Wireless (VZ) today.

They were already a core holding in my portfolio and now make up the largest % holding at a little over 10% now.  This will be my third purchase of VZ since starting the portfolio.  I bought 33 shares on 09/10/10 for 30.79, 27 shares on 09/27/11 at 37.04, 25 shares on 03/21/12 for 39.90 and have dripped the whole time.

A few of my reasons for purchase:
I have used them for services and been very happy since they bought out MCI Worldcom in 1998. (yes this one is biased)
They are the nation’s largest wireless carrier
They pay a nice dividend of .50 quarterly (about 5% as of today’s prices) and are expected to increase this by early November.  
VZ has their 4G LTE in about 200 markets and expects to double this by year’s end.
They have consistently increased dividends each year for the last 7 years even through the latest credit crisis. 
Their earnings estimates for 2012-2015 are 2.49, 2.78, 3.10, 3.22 according to Etrade.
With earnings growing in the double digits I believe they will be able to continue to increase their dividend for the forseeable future.