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I tried to read his 2023 letter to client: - I find it really odd that the 2023 report spent 150 pages, but pretty much didn't explain their second biggest holding (DG) except for that it was (essentially) cheap that can be fit in less than one page. I stopped digesting it around page 50, and just fed it into notebooklm. No real insight came back from notebookLM either. Not sure if informing his client of his investment holdings is the primary goal of the letter.

Thanks, good stuff indeed. Dubious politics but I like the sound. Definitely some Rammstein overtones

Caught Pearl Jam earlier this week. Vedder’s vocals are ageless and Mike McCready still goes hard, a very enjoyable night out. The Pixies as a support act was an absolute bonus.

You guys just don't get it. Europe is finished unless it gets Margaret Thatcher in every country and kicks out those that hate the western way of life. A continent where most political leaders (except Germany, Hungary and Czech Republic) obsess with jailing Israeli leaders for waging war the way it has been waged since tirme immemorial rather than focusing on fixing their economies or preventing natural disasters from killing hundreds people (Spain) will not prosper. Historically societies that kicked out Jews did not prosper, and neither did societies that imported millions of Muslims. Europe is doing both. There is no freedom of speech in UK unless you call for wiping Israel of the map. In Germany they want to ban essentially the largest political party - Afd. Imagine the US being run by Harvard/Yale faculty, no freedom of speech/information control that would make old USSR proud and instead of Elon Musk + Indian/Chinese/Korean immigrants you have Muslim immigrants with no work ethic and many of whom hate and ready to kill non-Muslims. Now would the country prosper? US is being saved by entrepreneurs both domestic and imported, but why would Musk go or stay in Europe? To have Rachel Reeves tax him to death? Macron & Sanchez regulate him to death?

Aren’t they launching a nicotine punch with Tucker Carlson?

Thank you for your [personal] confirmation here, Greg [ @Gregmal ], What I really meant here, is to continously stay observant, situational flexible, 'non-frozen', 'and-ready-to-learn about-and-mentally-prepared-to-always-learn-new-interesting-stuff' to stay on top. With the rigth mindset, there is always something to do, somewhere! - To become a winner, one simply has to decide to become so! - And then do the work it requires! - Otherwise, nobody will never, ever get there! - Attitude, you know!

Thank you very much, I agree on your points. It‘s late here in Germany, but with the resonance here, we should open a discussion separate, I think (happy, that others are interested too in this discussion!) One thing came up in my mind; maybe we should focus more on the term „intrinsic value“; as you write here, at high roe companies, the iv tends to go up in value fast; I tend to agree, but than I think, if nothing really changed to the business, but iv moves up e. g. 30% from year 1 to year 2 (so 30% roe - let‘s say over decades), than iv can‘t be estimated right in year 1… But one gets to absurd levels e. g. of BRK, when you discount its value back from today to the 1970ies. And looked back from that perspective, BRK should have bought back a lot of more own stocks at every price there was, as the discount was just so absurd… But it didn‘t happen, Buffett hasn‘t bought back. But okay, let’s talk about that somewhere else…

All good points and thinking more about it reinforces the difference between good management and great management. as I said in another thread I think the capital return process benefits from management having skin in the game. Some final thoughts: 1. Overpaying Reduces Returns, But Context Matters: I agree that overpaying for buybacks locks in lower-than-optimal returns. However, for high-ROE companies, intrinsic value grows quickly. Even buybacks slightly above intrinsic value can yield acceptable long-term returns if better reinvestment opportunities don’t exist. For instance, a 6.7% buyback yield might seem low compared to a 40% ROE, but it’s still far better than holding cash or pursuing suboptimal acquisitions. 2. Alternative Capital Allocation Options: Your example highlights that high-ROE companies should prioritize reinvesting internally. However, if those opportunities are exhausted, buybacks might still be the best available option—even slightly above intrinsic value—because they are often more tax-efficient than dividends and can still generate competitive returns. 3. Valuation and Fair Value: I completely agree that high growth doesn’t justify buying at any price. It’s critical to estimate fair value based on realistic assumptions about future growth and returns. For high-ROE companies, this fair value may grow rapidly, meaning today’s “above IV” price might actually be reasonable if intrinsic value is compounding quickly. 4. Buybacks in Low-ROE Companies: You’re absolutely right that low-ROE companies with deeply undervalued shares can achieve outsized returns through buybacks. However, for investors with access to a high-ROE company—even buying slightly above IV—the compounding effect of high reinvestment rates can often dominate returns over time. Bringing the conversation back to Fairfax, while the P/IV is closer to 1, its not difficult to make the case that buybacks are still very accretive. What is interesting to ponder is the enduring effect of these buybacks at such a large discount. There is an obvious ROIC benefit but there are also perceptual benefits too. The creativity of the TRS is worthy of an academic paper or two.

Thanks Xerxes...will do! Cheers!

Good one @Viking, Musselwhite is straight from the Lassonde playbook: “1. Quality Jurisdiction Musselwhite is located in Ontario, Canada, a Tier-1 jurisdiction with a rich history of mining. This aligns with Lassonde’s emphasis on safe, predictable operating environments. With Orla’s existing projects in North America (Mexico, Nevada, Panama), this acquisition reinforces their focus on stable regions with excellent infrastructure and skilled labor. 2. Untapped Exploration Potential Musselwhite brings significant optionality to Orla’s portfolio: • The mine has historically underexplored deeper zones and extensions of known ore bodies. • The Superior Province, where Musselwhite is located, is one of the world’s most prolific greenstone belts, offering substantial upside for resource expansion. This exploration potential is quintessential Lassonde: invest in an asset with a solid production history and use exploration to unlock long-term value. 3. Strategic Capital Allocation Orla financed the acquisition with a mix of convertible notes and warrants, avoiding upfront equity dilution. This disciplined approach mirrors Lassonde’s focus on maximizing shareholder returns by maintaining ownership leverage while ensuring sufficient funding for growth. With cornerstone investors like Fairfax, Newmont, and Agnico Eagle, Orla also has the financial backing to execute this strategy effectively. 4. Strong Operational Foundation Unlike a greenfield project, Musselwhite is an established mine with a proven production record. Orla inherits a functioning operation with existing infrastructure, immediate cash flow, and opportunities for optimization. This de-risks the acquisition while setting the stage for growth—a hallmark of Lassonde’s playbook. 5. Long-Term Upside in Gold Prices Musselwhite adds another layer of leverage to gold price movements. Lassonde has often emphasized the disconnect between market and intrinsic valuations of gold, advocating for investments in assets that can thrive in both low- and high-price environments. If gold prices remain elevated, Musselwhite’s margins and reserves will compound Orla’s value exponentially.” It is fascinating to watch all this come together and you can see the themes and influences of prior investments and importantly the key figures involved. Reminds me I need to read Lassonde’s The Gold Book. https://archive.org/details/goldbookcomplete0000lass/page/n3/mode/2up

Overpaying for an assets is always a bad decision and it ensures that you will earn suboptimal returns. Whether you are an investor or a ceo allocating capital, it does not make any difference. Munger is of course right because he's taking into account the return on incremental capital reinvested. In your case, I think it's worth noting that: 1) if your company has excess cash for a buyback it means that it does not have enough internal opportunities for reinvestment At 40% 2) shares of such a company will hardly trade at a low price. If bv = 100, 40% roe = 40 in earnings, at 15x this equal a price of 600. A buyback at this level equates to 6.7% yield, way lower than your starting 40%. 3) if a company earning 10% roe is selling at 0.5 bv a buyback would be the best course of action as it would yield 20%. You can Pay a very high entry price and still get value, it all depends on your assumptions about capital retained and roiic. There are qualitative aspects to consider of course. If you think high growth lies ahead don't be too conservative in your assumptions. But this does not mean that you can any price. It must incorporated in your estimate of fair value. I hope I have expressed myself clearly enough. Hopes it helps, love the discussion. best, G

Absolutely awesome discusson and exchanges between @nwoodman and @Hamburg Investor here!, I hope you'll in personal cooperation agree on how - on a pratical level - please be each others friends via CoBF, by collaboration - to start a new CoBF General Discussion topic about what your are discussing. The basic understanding of it, is to me, personally, very, very important.

One of smartest things you can own is installed, working, and essential capital equipment; and the more that it costs to build the better (railroads, pipelines, tar sand facilities, etc.). Until it's built there will be all kinds of screaming around overspends, and periodic stock sell offs will generate opportunities; but once it's up & running, starts paying a dividend, and is past its payback period ....... Every year inflation raises the replacement cost further, throughput and technology typically improve, depreciation steadily rolls off, and you end up with an industry controlling asset operating at essentially variable cost. The best that a competitor can do is buy out the asset and its accesses, then continue to operate it while also twinning it with a state-of-the-art replacement; even if the original is utter junk. That's one hell of a moat ..... and even monkey proof! Lot of o/g companies were built via serial acquisition paid for with stock, but few investors realise that it's a 3 phase process; growth via exploding share count (1-3 yrs?), post party collapse and share consolidation (1-3 yrs?), and pennies on the dollar acquisition via a debt to equity swap (1-2 yrs?). Everyone has heard the growth stories, maybe a few remember consolidation, but the debt to equity swaps? Point? Look at today's darlings, wish them all the luck in the world .. then go shopping 5-6 years out. Or, which sectors were big 5-6 years ago ... and where are they today SD

LOL, totally. My life has changed very drastically in 8 years. Starting with the 8 year old I’m just getting back from the driving range with!

I tend to agree. Obviously the best case is to keep reinvesting in the company’s high ROE business but there comes a time when Capital should be returned to shareholders as cash build starts to drag on ROE or a myriad of other considerations. We can probably draw the following conclusions on whether the capital is returned via buybacks or divs as follows: •High ROE companies (30% or more) can justify buybacks above intrinsic value, provided the buyback returns remain competitive with alternative investments. • Moderate ROE companies (10-20%) should be more disciplined, as the margin for error is smaller. • Low ROE companies (<10%) need to focus on reinvestment or dividends instead of buybacks unless they’re deeply accretive (significantly below intrinsic value). It is interesting to consider what the reasons a High-ROE Company might buy back shares above intrinsic value and investors must draw their own conclusions as to whether it is the best use of capital: 1. Limited Reinvestment Opportunities • The company has few high-return projects to invest in and cannot reinvest all earnings at its high ROE. 2. Tax Efficiency • Share buybacks are often more tax-efficient for shareholders than dividends, especially for long-term investors. 3. Signaling Confidence • Management may repurchase shares slightly above IV to signal strong confidence in the company’s future growth. 4. Intrinsic Value is Growing Rapidly • For high-ROE companies, what appears “above IV” today might not be overvalued if intrinsic value is expected to grow quickly. 5. Defending Against Activism • Share repurchases can reduce the likelihood of activist investors gaining control or pressuring management. 6. Preventing Dilution • Buybacks can offset dilution from employee stock options or compensation plans, even if the shares are repurchased above IV. 7. Lack of Accurate IV Estimates • Management may not have a precise estimate of IV, especially in high-growth scenarios, leading to buybacks at prices above calculated IV. 8. Excess Cash with No Better Alternatives • Holding cash or reinvesting in low-return projects might be less beneficial than buying back shares, even at a premium. 9. Avoiding Poor Capital Allocation Options • Alternatives like paying dividends, acquiring other businesses, or holding excess cash may generate even lower returns than the buybacks. Probably preaching to the converted so apologies for the long answer. This topic deserves its own thread.

You are right, James [ @james22 ], To stay mentally flexible and responsible for new input is key. Don't freeze. Try to find your own way towards all these World and Market dynamics so you don't make your own life miserable by investing. The above statement by you is also the reason why I consider CoBF 'my classroom', the best place to learn a <fill in specimen here> new tricks, that actually works.

Supposing value is a woman, what then?

Then there is the relativity of investment process and attitude towards investing with regard to the time dimension, meant as 'change over time'. I see you registered here on CoBF on 28th September 2016, now more than 8 years ago. Eight years are so-so medium time-frame for an old bugger like me, 8 years for a relatively young person like you are 8 light years in time distance. I personally did consider you in your early innings here on CoBF very transactional oriented, and ambitious, hungry to get ahead. Do you remember that you actually once posted here on CoBF about : 'Don't pay for even a a lawn mower cash on delivery, if you can't get a discount on it, unpaid bills pulling no interest before due according to payment terms are your float, - Hold on to your shares, and do not reduce the amount of cash you are able to buy stocks for!' Do you remember it? Personally, I still remember running 'montly closings' on every last Saturday in every month in the last part of the accumulation phase ('14 and '15), being a PITA on The Lady of House by asking questions such as 'What have you spent, that is still not added as future payments in the bank interface?', to get totally anal about how much money is actually avaible for buying stocks, by anal [<- is this even a word in English?] doing monthly liquidity forecasts.

Orla Mining - Planting a Seed Orla Mining is Fairfax’s newest large resource/commodity investment. Fairfax quietly built up their position in Orla over the past 2 years (from Q3-2022 to Q3-2024), spending about $217 million. They own about 18% of the company. The investment today has a market value of US$261 million. The return on Fairfax’s investment to date has been about $44 million or 20%. The real play with this investment: That gold prices stay higher for longer. That the management team at Orla is above average. And will be able to expand the company from a single asset producer to a multi asset intermediate-sized producer. That the strong ownership structure (Fairfax, Newmont, Lassonde, Agnico Eagle) will also provide to be a competitive advantage. This allows the management team at Orla to be strategic and think long-term with its decisions. This should help ensure that the capital allocation decisions made by the management team at Orla are rational and very shareholder friendly (which is what we have seen with Orla's most recent acquisition). With its investment in Orla, Fairfax has planted another seed in its large equity portfolio. This investment has significant upside potential in the coming years. And if gold prices stay elevated, it could turn into a home run (a multi-bagger). Orla recently made a large acquisition - the Musselwhite gold mine in Canada. As part of the financing, Fairfax invested (not sure how much) in the US$200 million convertible note issuance: Coupon: 4.5%; Premium: 42%1; Term: 5 years Convertible at C$7.90 18-month non-call, callable at 130% of strike thereafter Warrant: 0.66x warrant exercisable at C$11.50 – Five-year term from closing This is likely a significant increase in the size of Fairfax’s investment in Orla Mining. The purchase of Musselwhite looks like another solid move by the Orla management team. There appears to be significant optionality to the purchase (significant opportunity for resource growth, which is part of the Pierre Lasonde playbook). Who is Orla Mining? Orla Mining Ltd. is a Vancouver-based company that acquires, explores, develops, and operates mineral properties to produce gold, silver, zinc, lead, and copper: Orla Mining's projects include: Camino Rojo: A 100% owned, operating oxide heap leach mine in Zacatecas, Mexico South Railroad: A feasibility-stage heap leach project in Nevada Cerro Quema: A pre-feasibility-stage heap leach project in Panama Musselwhite Gold Mine: An acquired project in Ontario, Canada CEO: is Jason Simpson, who has over 27 years of experience in mining engineering, project construction, and operations leadership. Non-Executive Chairman, Director: Mr. Jeannes served as President and Chief Executive Officer of Goldcorp Inc. from 2009 until April 2016. Orla recently announced a large acquisition: the Musselwhite Gold Mine Strategic expanansion into Canada. No upfront equity dilution, supported by cornerstone shareholders. Takes advantage of significant disconnect between forward and consensus gold prices. Significant opportunity for resource growth. https://orlamining.com/site/assets/files/6118/orla_acquires_musselwhite_nov_18_2024.pdf Bet on the jockey/partnering with outstanding investors It should be noted that Fairfax is not blindly throwing darts with their resource/commodity investments. They are partnering with other highly successful people / investors - some of whom have extraordinary long term track records. With Orla, Fairfax is partnering with Pierre Lassonde who is ‘recognized as one of Canada’s foremost experts in the area of mining and precious metals.’ Lassonde co-founded Franco-Nevada in 1985. Fairfax is also partnered with Lassonde with its investment in Foran Mining, a copper mining project in Canada. Jurisdiction The vast majority of the production for Fairfax’s resource/commodity investments is located in North America. This is a much lower risk jurisdiction than other parts of the world. My guess is this is not a fluke. All of Orla’s mines are located in North America.

And it is very, very difficult to recognize opportunities outside one's style.

Ouch. I'm good though.

One example of this type of investment (that has worked out great for some on this board) is Constellation Software. Although they haven't really issued many shares, which maybe disqualifies them from this list

Hope you have a couple of mil set aside just in case. I can't help but remember my brother, who, at age 22, managed to get some shares in an IPO in the dot.com era which 100x'ed. His investment went from 5000 to 500000 - life changing money, enough to buy a house. I told him various time on the way up to sell half and minimize regret, but he wouldn't. 24 years later with two kids and he still rents.

You think Merz will undo the damage of recent leaders ? He seems to have some promise