Barry James is the president and portfolio manager of the James Advantage Family of Funds. WR Berkley is an insurance company based in Connecticut. Mr. James spoke to David Dalley of The New York Sun about why he believes it's a strong investment.

What does WR Berkley do?

They're a property and casualty insurance company, but they're a little unusual in that they have five different business groups and each is independent of the others. The do specialty insurance, alternative market insurance, regional property and casualty insurance, reinsurance, and international insurance.They're based primarily in the United States.

Why do you like the stock?

First, we like financial stocks generally. The sector has done very well, which is what we expect when the Fed stops raising interest rates. Current macroeconomic conditions favor these sorts of companies.

BER in particular also happens to be a very well-run company. If you look at losses versus premiums, they're at about 62%, which is good.They just announced earnings on April 24 and they were very, very strong.

In our stock analysis, we look for good relative value, strong earnings, and rising prices.This one really has all three. Earnings were ahead 34% last quarter and they've beaten consensus estimates six times in a row now.

What's driving growth going forward?

Well, because they're into specialty insurance,they don't have as much competition in their niche areas, so they can charge increasingly higher premiums. They're not your typical home/auto insurer.They know how to manage risk in their specific areas very well.

Their net premiums rose about 8% this last quarter and that's the 21st time in a row that they've increased rates.They've also done a great job generating good investment income with their spare cash.

The stock is currently trading at around $37.60. Is it a good time to buy?

Yes, it is. The stock has pulled back a bit from recent highs. It's now trading around what I would call a 'support' area. It's up 73% in the last 12 months, and 18% this year so far. We think that it has very strong potential to continue outperforming the market as it has been, and could possibly double the returns of the broader market. It's trading at 13 times earnings, which is cheap for the sector. Typical insurance companies trade at around 20 times.

What are the risks?

The company is decentralized, meaning that their business segments operate pretty independently, and there are a lot of moving parts. For example, their reinsurance business right now isn't pulling its weight. It's breaking even but not much better. The risk is that one of the business units suffers and the group doesn't catch it fast enough. The other risk is if they start making mistakes in their investment portfolio, but they're doing very well in that area at the moment.

BARRY JAMES
PRESIDENT
JAMES ADVANTAGE FAMILY OF FUNDS

COMPANY: WR Berkley
TICKER: BER (NYSE)
PRICE: $37.57 (as of 4 p.m. yesterday)
52-WEEK RANGE: $21.16-$40.95
MARKET CAPITALIZATION: $7.21 billion

____________________________________________________

By DAVID DALLEY

© 2006 The New York Sun, One SL, LLC.