When it moves up 200,000 shares were sold today. Everybody who has bought this stock in the last 5+ years is on side so who is selling and when will it move up?
My experience is that a stock will lay around looking cheap until two conditions are in place:
1. The stock must have enough value in it that market forces can see their way clear to quickly at least doubling the stock price.
2. A new bull market must be starting to get underway.
Condition 1. seems to be in place. We have high earnings which are pretty much assured given our $60 investment portfolio. We are beginning to ride a good tailwind which will allow us to easily obtain ever higher earnings. The components of this tail wind are rising interest rates and a hardening insurance market.
If investment returns increase by 100 basis points earnings increase by 60 cents.
Improving the combined ratio by 3 pct will improve earnings by $1.20.
With ideal conditions '08 earnings could be north of $4.00.
I think the market has to see that a trend to rising rates and a hardening insurance market is firmly in place and will continue. At this point excitement will set in and a 15 times multiple on $4.00 earnings will be granted. In the meantime trade around a core position and enjoy modest returns with very little risk.