How long does it take a collector car to climb in value?

[linjam]

Peaks and valleys: How long does it take a collector car to climb back from a dip in value? | Hagerty Insider

Gauging "the right time" to buy or sell - Hagerty Media

Most of us get into cars for reasons other than value, but doesn't hurt to take advantage of the cycles of when to buy or sell.

insider.hagerty.com

 

[Jlaa]

Peaks and valleys: How long does it take a collector car to climb back from a dip in value? | Hagerty Insider

Gauging "the right time" to buy or sell - Hagerty Media

Most of us get into cars for reasons other than value, but doesn't hurt to take advantage of the cycles of when to buy or sell.

insider.hagerty.com

Thanks for posting this. I feel like this piece is too short sighted. Hagerty is relying on its own pricing data from 2010 forward. Thats is not enough time. The entire world has been in a glut of liquidity since the 2009 financial crisis caused the world’s central banks to slash interest rates to zero or below.

Any fluctuatuons in art/luxury goods (i.e. collector cars) since that time have only been relatively micro events in nature that are reflective of temporary changes in demand.……Not boom/ bust cycles associated with evaporation of global liquidity.

‘Prepare for an epic finale’: Jeremy Grantham warns ‘tragedy’ looms as ‘superbubble’ may burst

A “superbubble” appears dangerously near its "final act" after the recent rally in U.S. stocks lured some investors back into the market just ahead of...

www.marketwatch.com

Perhaps I am too cynical - I am thinking Hagerty is trying to promote itself and assigning a high valuation on the usefulness of the data it has collected, perhaps trying to sell its data set to a larger insurance company….. raising cash right before the storm. I wonder how much corporate debt Hagerty has incurred.

 

[Jlaa]

I took a peek at HGTY. I didn't realize that they SPACed recently.
They are in the insurance business. Compare HGTY to Berkshire (GEICO) which is also in the insurance business.
OK, I very much NOT AN EXPERT AT THESE KINDS OF THINGS (probably @maw1124 is the expert we are looking for) but GEEZ!!!!!

• I try not to look at GROSS profit because there can be all kinds of one time activities that affects profit. I try to look at operating income, which accounts for income from operational activities. This excludes investments in other firms (because that's not an operational activity) and other nonrecurring items like cash exchanged for lawsuits, taxes, interest, etc. Operating Income for HGTY is negative. At the same time, Operating income for BRK is positive.
  
  
• Looking at the delta between GROSS margin and OPERATING margin - man HGTY goes from +55.94% (gross) down to -4.20% (operating)!!!!! Look at BRK - much more reasonable GROSS (14.77%) to OPERATING (5.92%). I don't think HGTY has figured out how to make money operating an insurance business...........Perhaps they are in "growth mode"??!?!? (see below approx 23-30% YoY revenue growth, but also similar growth YoY in cost of revenue......

Also why is the book value per share of HGTY only $0.22 while "Mr. Market" values its shares at $11.53? This does not feel like "insurance company" type valuations?

 

[TimL]

Fear not, @Jlaa, Hagerty’s balance sheet will be saved by the insanely high annual insurance premium they invoiced me for yesterday

 

[maw1124]

Yeah, I'm not sure what kind of "business" HGTY is in, but if insurance it won't be for long, as @Jlaa rather expertly points out. My best guess is they're trying to set up some sale of part or all of their business (e.g., the classic car insurance business) to one of the major players (e.g., GEICO). Time will tell, but I too put these types of articles into the category of "shameless self promotion."

maw

EDIT... is HGTY's classic car insurance business all or part of its business? I'm going to go with "all or substantially all."

 

[Jlaa]

Yeah, I'm not sure what kind of "business" HGTY is in, but if insurance it won't be for long, as @Jlaa rather expertly points out. My best guess is they're trying to set up some sale of part or all of their business (e.g., the classic car insurance business) to one of the major players (e.g., GEICO). Time will tell, but I too put these types of articles into the category of "shameless self promotion."

maw

EDIT... is HGTY's classic car insurance business all or part of its business? I'm going to go with "all or substantially all."

I just tried to read through the 10Q while waiting for my kid to finish "Dragon Boat Racing" practice. https://d18rn0p25nwr6d.cloudfront.net/CIK-0001840776/52ad4a57-c9fd-43a6-9052-ee7d463b1841.pdf

Description of Business — Hagerty, Inc. ("Hagerty" or the "Company") and its consolidated subsidiaries, including The Hagerty Group, LLC ("The Hagerty Group"), is a global market leader in providing insurance for classic and enthusiast vehicles. In addition, Hagerty provides an automotive enthusiast platform that engages, entertains and connects with car enthusiasts and its members.​

The Company operates several entities which collectively support Hagerty's revenue streams. Hagerty earns commission and fee revenues for the distribution and servicing of classic automobile and boat insurance policies written through personal and commercial lines agency agreements with multiple insurance carriers in the United States ("U.S."), Canada and the United Kingdom ("U.K.").​

...​

The Company earns subscription revenue through membership offerings and other automotive services sold to policyholders and classic vehicle enthusiasts. Membership offerings include, but are not limited to, private label roadside assistance, digital and linear video content, an award- winning magazine, valuation services, exclusive events and automotive third-party discounts. The Company owns and operates collector vehicle events, earning revenue through ticket sales, sponsorships, and event registration service fees through Motorsport Reg. The Company also owns and operates a peer-to-peer classic vehicle rental business for auto enthusiasts, and operates Member Hubs Holding, LLC ("MHH"), which are majority-owned world-class vehicle storage and exclusive social club facilities branded as Hagerty Garage + Social for classic, collector and exotic cars owners.​

In January 2022, the Company entered into a joint venture with Broad Arrow Group, Inc., a Delaware corporation ("Broad Arrow") that enhances the Company's portfolio of automotive-focused offerings for car enthusiasts under Hagerty Marketplace by offering new services for the buying, selling and financing of collector cars to compliment the Company's automotive-focused offerings. Refer to Note 18 — Subsequent Events for additional information.​

​

So yeah, mostly car insurance with some "other" stuff media stuff and event ticket sales. Look below. Most of the revenue is commission and fees from insurance. Like only 5-8% of revenue is from the "other stuff". Almost half of HGTY's revenue is from ASC 944, which I think is some kind of FASB treatment on short-term insurance contracts.





Check out this though:



Yikes. Translation to my uneducated self - "our accounting standards are weak and opaque". Yikes Yikes Yikes Yikes Yikes Yikes

Note here below "business combination". The gobbledygook below is that Aldel Financial Company was the SPAC entity (a corporation with no operations) that had attracted a bunch of capital from big names. Aldel (the SPAC - which was just a container with a ton of capital) and Hagerty "merged", which effectively took Hagerty public in 2021 and is now listed under ticker symbol HGTY. For a company wishing to go public, using the SPAC route, as compared to the traditional IPO route, allows for reduced degree of oversight from regulators and a lack of disclosure from the SPAC, burdening retail investors with the risk ......... okay.......



Note that State Farm owns 15% of the company, and Markel owns almost a quarter of the company below:



Look below:

• HGTY entered a joint venture with Broad Arrow - a collector car auction company.
• HGTY bought Speed Digital, a company that was owned by a director on HGTY's board!!!!!!! JEEZ!!! Is the board looking after shareholder interests, or is the board looking after its own interests??!?!!??!

I am not an expert (or even an amateur) at evaluation an insurance business, but this is not what I would expect to see from an insurance business below (discussion about cash declining). If you look at GEICO (BRK) their discussions in their 10Q often talk about having way too much cash. There's so much cash going into BRK that they don't know what to do with it. Of course BRK needs the huge cash reserve to plan in advance for catastrophe .... but HGTY doesn't look like they have the "way too much cash coming in" problem.....



And finally for the kicker, because I'm getting too bored with this and this is too dry, I note this below:


Oh Krist-almighty!!!! ARE YOU KIDDING ME?!?!?!?!?!?!

 

[dionphaneuf]

Thanks for posting. This article makes me aggressively angry.

• OTOH, calling the peak of a market is nearly impossible. Not shown amongst the heros of 'The Big Short' are the scores of those who lost their shirts aggressively shorting markets too early. Good luck calling the high. I worked in finance in the late aughts and I'd always chuckle when Maria Bartiromo would act as if the housing bubble was some obvious event that she had predicted. Yeah, right! If you had you wouldn't be working 100 hour weeks on squak box.
• That said, this absurd decade long bull run has to end at some point, if not in financial markets then in other assets like cars, shoes, art, baseball cards, etc. It's just a question of when and how severely.
• In particular, new and used cars don't deserve to be relentlessly appreciating as they are. The supply chain crisis will break, at some point, and 2003 Honda Accords with faded clear coat won't be worth $9k. It's not typical to be able to buy a sports car new, drive it 6 months, and then flip it for a substantial profit, and if I sound salty it's probably because I've been too much of a curmudgeon to dive into this so have missed out on the gold rush/fun.
• Some parts of this article are absurd. This last paragraph really got me: "Admittedly, the biggest limitation here is the relatively short time span for data collection. Data on collector car values thins dramatically prior to 2010 and is also muddied by dramatic "black swan" events in the broader economy, namely the terror attacks of September 11, 2001 and the global financial crisis of 2009." Oh really? If we just ignore the actual market downturns, you mean to tell me it only goes up? Great! WTF?!?! Also the part about 'no data' is absurd. I'm sure in a day I could comb the records of Barrett Jackson, Mecum, etc, and build a cromulent model of the car market that goes back to the 70s, and I guarantee you Hagerty has this too, they just don't want to show it to us.

 

[ace10]

How long does it take a collector car to climb in value?​

Fifteen months

June 2021

No Reserve: 41k-Mile 1985 Toyota Celica GT-S Convertible

Bid for the chance to own a No Reserve: 41k-Mile 1985 Toyota Celica GT-S Convertible at auction with Bring a Trailer, the home of the best vintage and classic cars online. Lot #49,169.

bringatrailer.com

September 2022

43k-Mile 1985 Toyota Celica GT-S Convertible

Bid for the chance to own a 43k-Mile 1985 Toyota Celica GT-S Convertible at auction with Bring a Trailer, the home of the best vintage and classic cars online. Lot #84,091.

bringatrailer.com

 

[a777fan]

In for dragon boat racing pics…

 

[Jlaa]

In for dragon boat racing pics…

Heh. This is just practice, not a real race with ornamental boats and drums and stuff.

But, it is interesting to watch and not really like crew which feels kind of genteel. Watching boat practice feels a bit like watching what I imagine to be Roman prisoners or Egyptian prisoners/slaves frantically rowing, in unison, a galley. It is gratifying to watch teenagers suffer so.

 

[maw1124]

Hence, "business" in quotation marks in post #5. I actually don't know what to call what they're doing, other than some sort of insurance pump and dump.

"Gratifying" indeed to watch the boys earn their testosterone. Give them something constructive to do with all that energy.

maw

 

[a777fan]

Heh. This is just practice, not a real race with ornamental boats and drums and stuff.

But, it is interesting to watch and not really like crew which feels kind of genteel. Watching boat practice feels a bit like watching what I imagine to be Roman prisoners or Egyptian prisoners/slaves frantically rowing, in unison, a galley. It is gratifying to watch teenagers suffer so.

Oh man! I envisioned like small toy boats for some reason. Derp.

Thats full on awesome!

 

[gsxr]

Fear not, @Jlaa, Hagerty’s balance sheet will be saved by the insanely high annual insurance premium they invoiced me for yesterday

Tim, assuming the same coverage before/after, what was the percentage increase on your premiums for your renewal?

Hagerty had been very good about not screwing me with annual premium hikes, but Jlaa's analyses above are downright scary.

 

[Jlaa]

Tim, assuming the same coverage before/after, what was the percentage increase on your premiums for your renewal?

Hagerty had been very good about not screwing me with annual premium hikes, but Jlaa's analyses above are downright scary.

Heh, all I’m really observing is that I would not want to invest in HGTY as a retail investor. Their balance sheet doesn’t seem unreasonable, but their transparency about underlying company growth/health/accounting seems opaque and I do wonder about the culture of the board of directors.

BTW did you notice the bit in the 10Q about State Farm offering Classic + Insurance starting 2023? There is a commission paid from SF to HGTY for this, and, interestingly, SF owns a stake in HGTY.

I wonder what the rates for SFC+ will be …. Especially for existing SF policy holders w multi-line discounts that HGTY itself cannot provide? Just another option…..

 

[LWB250]

Interesting about Hagerty. I've used them over the past 5-7 years for non-daily drivers that weren't newer and they used to be pretty reasonable for the coverage offered. They also had the least restrictive rules about use of the vehicle, such as no mileage limit, no limits on the type of use, etc. The only requirement they had was that there had to be fully insured cars for each licensed driver in the household besides the car you were insuring.

The last car I used them on was my former 1995 400E, of which they weren't so competitive on. I could have gotten similar coverage as a daily driver from Allstate for just slightly more, maybe another $100-$200/year.

Also, Allstate must have some sort of agency agreement with them, as my Allstate agent could write a Hagerty policy for me without me ever talking to Hagerty. No additional cost, so Hagerty must have been throwing some coin their way.

Dan

 

[Jlaa]

Oh man! I envisioned like small toy boats for some reason. Derp.

Thats full on awesome!

Just a one-time off-topic from me ---
We attended our first race. This is what a Dragon Boat Race looks like. Never did I imagine that there would be opportunities for teenagers to train and participate in Dragon Boat Racing outside Asia. Apparently there is a whole association dedicated to this in California. Its kinda like crew but jacked up to volume 11 - more rowers, bigger boats, and loud drums. Each boat has a drummer whose drums loudly set the beat for the rowers! Man those kids are SPENT after going through like 12 heats of 500 meters each starting at 6am!