Alleghany Corp (Y) shares are higher by 13% YTD and a $9.45B market cap that trades just 58,000 shares per day but trades above $680/share. It is a name listed as a P&C Insurance company but under the surface this is a much more interesting company and one that has generated steadily strong returns. Y shares rose from $180 in November 2008 to above $800 in 2020 before COVID sent the shares down to a low of $435. During the run higher shares closed above the 34-month EMA every single month.

Alleghany’s subsidiary Trans RE engages in the property and casualty reinsurance business while another subsidiary, AIHL, is in the property and casualty insurance business. Alleghany is exposed to catastrophe losses through its reinsurance businesses. AIHL’s principal insurance company subsidiaries are RSUI and CapSpecialty. The reinsurance and insurance operations are its primary source of revenues and earnings.

Alleghany also has an intriguing investment portfolio of non-financial businesses that are owned and managed through Alleghany Capital which include PCT; Kentucky Trailer; IPS; Jazwares; W&W|AFCO Steel; Concord; and Wilbert. It also owns other holding company investments through Alleghany Properties and Roundwood. Alleghany Capital’s strategy is to offer closely held or founder-owned companies in basic or durable industries, a source of permanent capital while allowing their owner/managers to remain invested and in charge of their companies. Y brings them all of the resources of a large public company, including capital and M&A support, to help them grow organically and through complementary acquisitions. Four of the companies are industrials addressing the $17 billion U.S. non-residential structural steel fabrication industry, $7 billion U.S. funeral products industry, $14 billion U.S. truck body and trailer manufacturing industry, $5 billion U.S. machine tool industry and $3 billion U.S. consumable tooling industry. The non-industrial businesses address the $89 billion global and $21 billion U.S. toy industry, $5 billion engineering, procurement, construction management and validation market for the pharmaceutical and industrial process industries, and $2 billion U.S. third-party management service industry.

PCT is an industrial tech company that makes precision automated machine tool solutions, waterjet orifices and nozzles, and high-performance solid carbide end mills. Kentucky Trailer is a manufacturer of custom trailers and truck bodies for the moving and storage industry. Jazwares is a global toy and musical instrument company that owns Wicked Cool Toys and Kelly Toy. IPS is a design, engineering, procurement, construction management and validation service provider focused on the global pharmaceutical and biotechnology industries. W&W|AFCO Steel is a structural steel fabricator and erector. Concord is a hotel management and development company. Wilbert is a provider of products and services for the funeral and cemetery industries and precast concrete markets.

Y shares trade cheap at 10X Earnings and 1X Book and recently blew away EPS and Revenue estimates with net premiums written rising 27%. Reinsurers returns on capital, assuming normal levels of catastrophes are likely to be favorable and healthy over the next couple to 3 years as the rate increases earn through and are reported in the results. Deutsche Bank recently raised its target to $915. Y is seeing a notable strong trend higher in ROE and operates with low leverage of 1.7X Debt to EBITDA with a strong history of rising cash dividends.

In closing, Y is a much more interesting company than meets the eye and should be levered to a strong recovery in the industrial economy as well as positive tailwinds for its insurance businesses.