Sequant Re to Liquidate, PDH – Premier Diversified Holdings Writes Downs Investment

Sequant Re & Premier Diversified Holdings

Sequant Re Logo
Sequant Re

Sequant Re sounded like a very compelling opportunity for Premier (PDH) shareholders. The company focused on the ILS (Insurance Linked Securities) market. By securitizing the financial burden of insurance ILS allows re-insurance to be easily distributed among many investors. Typically before ILS re-insurance was handled by a few specialty insurers. ILS also offer investors a product with low correlation to other assets such as bonds and equity.

Sequant aimed to underwrite re-insurance through ILS and provide easy access to ILS portfolios for investors. Guy Cloutier an insurance industry veteran started Sequant Re. He was formerly of American Safety Re. There is an interesting connection here because American Safety Re’s parent company American Safety was purchased by Fairfax Financial and Premier’s CEO Sanjeev Parsad has a long standing relationship with the folks at Fairfax. Fairfax eventually sold of the reinsurance business of the American Safety.

Sequant Re Liquidation

After three years the board of Sequant Re has decided to throw in the towel. Premier Diversified Holdings (PDH) owns almost 50% of Sequant’s equity and will be writing it down from 2.5M to zero.

According to Sanjeev’s message on the COBF board, Sequant failed to recruit any large institutional partners. That ultimately lead to stopping  the bleeding and calling it quits. Given Guy Cloutier’s history in the re-insurance biz and the connection Sanjeev has at Fairfax it seems like finding a partner for a good idea would not be so hard. Or maybe the idea was not compelling enough? It will be an interesting story to hear if we ever do.

In this Artemis article Guy was quoted as saying that their partner backed out due to US tax implications.

“We spent a considerable amount of time and resources in discussions with a potential significant strategic partner. At the end of the day, they did not proceed due to their perceived US tax implications.”


This is a big blow to Premier. The loss is a massive amount of money for a business of their size. On the plus side they have stopped the bleeding and will not need to fund Sequant any longer. Insurance Linked Securities are continuing to experience growth. It is an interesting area of insurance and finance that I will continue to keep an eye on.


ValueAshram Premier Diversified Holdings (PDH) Page

Can Vanguard REIT funds boost American Tower and Crown Castle?

Vanguard announced a change to their REIT Index fund’s investment objective. The fund has historically tracked the MSCI US REIT Index. Starting mid 2018 the fund will track the MSCI US IMI Real Estate 25/50 Index. Is it possible these upcoming changes present an opportunity?

REIT stock price chart
What will the price chart of these REITs look like with the heavy buying volume from Vanguard?


What are the major differences?

There are some big differences between the two indexes. Lets take a look at the top 10 weighted companies of each index:


Let’s take a look at the big changes in top 10 positions. As a result of these changes Vanguard will be making American Tower ($AMT) and Crown Castle ($CCI)  top 10 positions in their fund. American Tower and Crown Castle are highly correlated.  Combined they will account for 10% of the fund. A typical passive index investor would probably prefer to avoid this level of concentration. For our purposes one thing matters. Vanguard will be buying a bunch of stock in $AMT and $CCI.

Can index changes create a trading opportunity?

Yes they can.  Here are some examples:

Let’s try this again

Back in 2008 I started an investing blog called I knew almost nothing about investing and the financial world was crumbling all around us.

When I started buying stocks in the summer of 2008 I considered it a short term opportunistic trade. There was panic everywhere and it seemed like the perfect time to get in and then get out a few years later. Little did I know at the time that I would fall in love with investing. Learning about markets, businesses, valuation and a pile of other things got me very excited.

10 years later I am still investing, still learning and still loving it. With that I will kick off the new blog and see it where it takes me.

The Capitalism Distribution – Returns in stocks of the Russell 3000

At CGI Las Vegas I listened to a presentation by John Del Vecchio from Ranger Alternatives. John manages the Ranger short book and has a strong background in accounting forensics. Specifically finding stocks with low earnings quality before the market does and building short positions based on that information.

John referenced some stats from a Blackstar Funds paper on the return distribution of the Russell 3000 index between years 1983-2006. The paper calls this non-normal distribution the The Capitalism Distribution.

Russell 3000 stats 1983-2006

39% of stocks were unprofitable investments

18.5% of stocks lost at least 75% of their value

64% of stocks underperformed the Russell 3000

25% of stocks were responsible for all of the market’s gains

An enterprising investor after reading this might be diligently researching the 25% responsible for all the markets gains. Surely these are the cream of the crop.

What a difference a day makes

The paper also gives us a sampling of some of the best performing stocks during that time period and their performance after the peak:

Best performing stocks after this period.
Russell 3000 best performing stocks.


It would be interesting to see out of the 25% that made up 100% of the gain in 1983-2006, how many companies would still be worth owning today. Looking at that list there are a couple. Of course there are some that would have resulted in a permanent loss of capital and some that are not permanent losses yet but for which the immediate future is not bright. Lets take a quick look at a couple…


If you had bought GE on 01/03/83 at its closing price of 91.75, split adjusted (48:1) each share would be worth around $670 today. I figure thats about 8.3% compounded annual gain. If you had sold that share before the market drop you would have approximately 3x that amount somewhere around 12.5% compounded annually. Not including dividend payments. While GE is a mess today, its fair to say you could of done worse things than buying a share of GE in 1983.


If you had bought MSFT when they went public on 03/13/86 at $28, split adjusted (288:1) each share would be worth around $8000 today. Around %29.3 compounded annually. Not including dividend payments.


This data reinforces a couple of points that I need to remind myself of.

1. Don’t fall in love with cigar butts. Size the positions appropriately, sell them when they reaches intrinsic value and take your profit. 

2. Paying a fair price or reasonable premium for a great business with a great moat and management can pay off big over long periods of time. Identifying those companies is extremely hard to do well.

This post was written in November 2009 for my old blog I am working my way through importing the old posts.