A few years after graduating from Rice University with a degree in cultural relativism, Toby Shute initially parlayed his budding passion for investing into a contractor role with The Motley Fool. He penned over 1,000 articles for fool.com over the course of several years. He also contributed investment ideas for a period of time to Motley Fool Special Ops, a special situations-focused newsletter helmed by Tom Jacobs, the Mentor of Marfa. Toby left the Fool in early 2011 to consult for Zeke Ashton at Centaur Capital Partners, the investment advisor to a long/short hedge fund as well as a total return-oriented mutual fund. He wrapped up his stint with Centaur in mid-2014, and has since performed contract research for a variety of funds and newsletters while seeking a new analyst/PM opportunity. He and his family currently reside in Washington, DC.
Toby Shute also presented an in-depth investment thesis on Westaim at Best Ideas 2015. Below is his thesis as presented in an issue of the Manual of Ideas.
Westaim is a Canadian investment company that partners with management teams by providing capital and strategic expertise to businesses, primarily within the financial services industry. Its goal is to maximize intrinsic value per share over the long term.
Book value is split ~50/50 between cash and a 37.7% interest in Houston International Insurance Group (HIIG), a private U.S. specialty insurer run by Stephen L. Way, the founder and former CEO of HCC Insurance (NYSE: HCC). Way skillfully ran HCC for over three decades before leaving in the wake of an options backdating probe. HIIG is his second act. Westaim already hit one homerun with Canadian specialty insurer Jevco, achieving a ~29% unlevered IRR on the investment. Given its discounted purchase price (~87% of book value) and Stephen Way’s track record, I believe Westaim’s HIIG investment will also compound at a very high rate. The firm is cashed up and on the hunt for opportunistic investments.
Following Jevco and HIIG, I am excited to see management’s third act. Cameron MacDonald led value-oriented investment firm Goodwood as CEO for a dozen years before dedicating his full energies to Westaim. He and other insiders own 15.9% of the company, making for strong alignment with outside shareholders. Importantly, Cam purchased the vast majority of his stake, as did Chairman Ian Delaney. I believe the opportunity to partner with this management team (and, indirectly, HIIG’s) at a modest premium to adjusted book value is a very attractive one.
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