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For proof that local sources give you and advantage over Wall Street, simply take a successful company and look at the information that was available on it during its rise. You're likely to find that the company was the subject of frequent articles in its local paper and aggressive coverage by nearby brokerage house long before it made a splash nationally.
I recently spent an afternoon rooting through the archives of one such company (whose public relations staff had the foresight to save every press clipping and brokerage house report published on it since its inception). The result is something every individual investor should see.
Market corp. is a specialty insurance company headquartered in Richmond, Virginia. A decade ago it hit on the idea of focusing on small, narrow, hard-to-insure niches like racehorses and karate studios. By studying the risks involved in these businesses, it's able to price its insurance more accurately than fill-line competitors. More accurate pricing means fewer underwriting losses and a more predictable profit. Not to mention, the company is quick to point out the satisfaction of serving clients who normally have trouble buying insurance.
This strategy has worked beautifully: Since 1990, Markel's premium income has grown steadily. Its stock price, meanwhile rose tenfold between 1990 and 1996.
But besides its obvious success, Markel is an unusually good example of local advantage for several reasons. First, the insurance business bores most people. So, without a compelling "hook," national publications seldom feature small insurance companies from the hinterlands.
Second, theinsurance industry is already dominated by an array of giants. So mutual funds and other institutional investors already have plenty of familiar, easy-to-trade choices if they decide to move money into this sector. Small newcomers - even those with good stories - have a hard time getting noticed.
Third, because insurance companies make most of their money by investing policyholder premiums, they tend to have massive investment portfolios that produce big, unpredictable capital gains. This makes their quarterly income erratic, often producing down earnings year-over-year because the prior year had a big capital gain. So understanding the underlying trends required reading beyond the headlines, which for most of us means access to frequent updates and analyses.
Add it all up, and you get a company that can do big things for a long time before anyone outside the immediate area cares.