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TMFMmbop (37.72)

Confounded by ESGR

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February 07, 2007 – Comments (1)

Ever since a reader emailed me and told me to check out Enstar Group (ESGR), now Enstar Limited (ESGRD), but soon to be back to ESGR, it's name and relevant data points have been sitting at the top of my white board.

Months later, I still haven't been able to make a real money decision.

Yes, I've rated it outperform in CAPS, but the company has passed the threshold to warrant that designation.

As for real money, no not yet. After all the work I've done, it's boiled down to one of those "trust management" investment theses. And that's not good enough, I'm afraid.

Basically, ESGR is a black box. The company buys insurance companies in run off, manages the float and any remaining claims, and then funnels excess cash over to a series of funds run by former Goldman Sachs partner J. Christoper Flowers.

According to the scuttlebutt I've dug up, Flowers invests the fortune of former Goldman CEO and now NJ governor Jon Corzine. Corzine trusts him to do well. I take that as a ringing endorsement.

Another investor, when he called ESGR's IR dept. ended up getting CEO Nimrod Frazier (great name) on the phone. He said something along the lines of, "Son, I can't tell you much, but I can tell you you'll make money."

Basically, my analysis comes down to this. The company does a very efficient job of picking up insurance assets on the cheap and getting good cash out of them. Then, Flowers seems to be doing a good job earning returns. But what the heck is he investing in? It's very hard to find out. At Goldman, he seemed to specialize in emerging markets M&A. If that's still the case, that might be an overpriced market right now. But Flowers name also emerged as the guy who wanted to pick up Refco's assets on the cheap. So, maybe he's just a no-holds-barred value hound?

What is he investing in right now? It's unclear. And that's why I'm at an impass.

So....

Does this sound like a company you'd be interested in investing in? Know anything about J. Christopher Flowers? Please feel free to leave comments below.

Tim

1 Comments – Post Your Own

#1) On February 17, 2007 at 5:51 PM, LurkyLurky (99.80) wrote:

Oh--I thought I posted a response to you earlier, but I don't see it here. So please forgive me if this shows up twice...

Well, for what it's worth, I bought 10 shares of ESGR last December for $92. But I'm afraid I don't have any special insights to offer--it was just a leap of faith. So far it seems to have been fortuitous timing--but we'll see how it does long term.

I'll be interested to read your analysis of ESGR(D) in the Liquid Lounge!

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