Issue No. 30: "Uncommon Sense" at Verisk & Common Nonsense at Aspen Tech, Unusual Pricing Power at Dye and Durham
Quite a lot has been happening
Earlier this year I penned an article on developments at Verisk Analytics.
At the time Verisk was embarking on a familiar corporate turnaround strategy. As previously stated:
Unsurprisingly, there is scant public information available on the history of the business. In this (relatively) short piece I will aim to give a brief summary of it’s crown jewel - Insurance Services Office, Inc. - and how a management change looks like it will result in a general improvement in business quality. After a decade or more of mediocre M&A activity, returns are the meal du jour, not empire building.
From the outset I will also state that the valuation - even accounting for the positive catalysts at play - looks quite full, so by no means is this a recommendation - as always DYODD. I currently hold no shares.
The last paragraph is certainly humbling. If there is anything I have learnt by studying these very high quality businesses (defined as a company’s ability to generate earnings growth without needing to reinvest additional capital), is that equity multiples are an output - a consequence of what is happening within the business. In Verisk’s recent experience, the narrowing of the business’s focus toward it’s key insurance franchise, and the consequent inflection in ROAs and ROE’s has been a boon for shareholders:
I’ll digress - and try to blunt the pain I feel in my pocket book - the progress being made at Verisk requires review.
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