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Article #5 in our 6-part series. Tracing the DNA of Fairfax’s Investment Philosophy The Ideas That Shaped an Organization Fairfax's investment philosophy did not emerge fully formed. Like most successful organizations, it developed over decades as new ideas were adopted, refined and incorporated into the way the company invests, allocates capital and operates. Fairfax has never published a definitive account of these influences. Any attempt to reconstruct its intellectual history therefore involves some interpretation. Nevertheless, Prem Watsa's annual letters, public comments, long-standing relationships and the backgrounds of Fairfax's investment team provide important clues to the origins of the company's investment philosophy. At its core, Fairfax's philosophy appears to be a synthesis of ideas drawn from some of history's greatest investors and capital allocators. Although these influences are often discussed in the context of the company's equity portfolio, they extend much further. Together, they form a decision-making framework that can be seen across the insurance business, the fixed income portfolio, the equity portfolio, capital allocation decisions and the way Fairfax itself is managed. Benjamin Graham: The Foundation Every philosophy needs a foundation. For Fairfax, that foundation is Benjamin Graham. Prem Watsa's introduction to investing came early in his career at Confederation Life, where his manager had him read Security Analysis. The experience had a profound impact. Prem has often acknowledged Graham's influence and even named his son Ben after him. Importantly, Graham's influence extended well beyond Prem himself. Many of the original members of Hamblin Watsa—including Tony Hamblin and Brian Bradstreet—also came from Confederation Life, where Graham's principles formed the foundation of their investment training. Fairfax's investment culture therefore began with a team that already shared a common intellectual framework. Hamblin Watsa started life in 1984 as a classic Graham value investing firm. Intrinsic value, margin of safety, balance-sheet strength, independent thinking and buying securities for substantially less than their estimated worth became part of the firm's culture. Everything that followed was built on that foundation. Warren Buffett: Building a Better Business Model Benjamin Graham taught Fairfax how to invest. Warren Buffett demonstrated how to build a business around investing. According to Fairfax: The First 25 Years, fellow Canadian value investor Francis Chou introduced Prem Watsa to Berkshire Hathaway's use of property and casualty insurance float as an investment engine. Rather than managing only shareholders' capital, an insurance company could invest both shareholders' equity and insurance float, creating a much larger investment portfolio capable of compounding over long periods. That insight changed the trajectory of Fairfax. The company's investment philosophy remained rooted in Graham's principles, but its business model increasingly resembled Berkshire Hathaway's. Fairfax expanded into property and casualty insurance, adopted a decentralized operating structure, centralized capital allocation and focused relentlessly on increasing long-term per-share value. Buffett did not replace Graham. He demonstrated how Graham's investment principles could be embedded within a business model capable of compounding capital over decades. John Templeton: Expanding the Opportunity Set If Buffett showed Fairfax how to build a better business model, John Templeton broadened its investment opportunity set. Templeton was more than an admired investor. He was both a Fairfax shareholder and a long-time friend of Prem Watsa. Those relationships help explain why Templeton's ideas appear repeatedly throughout Fairfax's history. Templeton believed investors should think globally, think independently and buy when pessimism is greatest. He argued that the best investment opportunities usually emerge when fear has driven other investors away. Fairfax has repeatedly demonstrated those same characteristics. Whether investing in emerging markets, distressed economies or industries temporarily out of favour, management has consistently shown a willingness to act when consensus has become overwhelmingly negative. Templeton expanded Fairfax's opportunity set without changing its discipline. Like Graham, he believed fear often creates the largest gap between price and value. Henry Singleton: Capital Allocation Without Constraints If Graham shaped Fairfax's investment philosophy, Henry Singleton appears to have shaped its capital allocation philosophy. Prem Watsa has referenced Singleton numerous times over the years, particularly when discussing share repurchases. Singleton viewed capital allocation as a rational exercise rather than an ideological one. Shares could be issued when expensive and repurchased when undervalued. Debt could be used when appropriate. Businesses could be acquired, sold or restructured whenever doing so increased long-term per-share value. Equally important, Singleton relentlessly optimized his businesses. Stronger operations generated more cash. More cash created additional opportunities for intelligent capital allocation. That philosophy is evident throughout Fairfax. Management has employed virtually every capital allocation tool available—share issuance, share repurchases, debt, partnerships, acquisitions and divestitures—provided management believed the decision would increase long-term per-share value. At the same time, Fairfax has spent the past decade strengthening its insurance operations, improving underwriting profitability and increasing the amount of internally generated capital available for reinvestment. Like Singleton, Fairfax appears to view both capital allocation and operational improvement as continuous optimization processes rather than fixed sets of rules. Phil Carret: An Evolving Definition of Value Investment philosophies do not stand still. One of the more interesting developments in recent years has been Prem Watsa's repeated references to legendary investor Phil Carret. Carret believed exceptional management was one of the most important determinants of long-term investment success. That emphasis increasingly appears in Fairfax's investment portfolio. Valuation remains central to the investment process, but management today places greater emphasis on partnering with exceptional entrepreneurs and management teams, investing in financially strong businesses and identifying companies capable of compounding capital over many years. The evolution is subtle rather than revolutionary. Fairfax has not abandoned Graham investing. Instead, its definition of value appears to have broadened to place greater emphasis on business quality, financial strength and management quality. Peter Cundill: Carrying the Philosophy Forward Peter Cundill was one of Canada's most accomplished value investors whose investment approach was firmly rooted in Benjamin Graham's principles. He emphasized rigorous research, balance-sheet strength, international investing and disciplined risk management. Both Wade Burton, President and Chief Investment Officer, and Lawrence Chin, Chief Operating Officer of Hamblin Watsa Investment Counsel, spent part of their careers at Cundill's investment firm before joining Fairfax. Cundill did not shape Fairfax's investment philosophy; that foundation had already been established. However, through Burton and Chin, his investment approach has become part of the next generation of leadership responsible for allocating Fairfax's capital. Their backgrounds suggest that Fairfax's investment philosophy will remain firmly rooted in Benjamin Graham's principles, even as it continues to evolve. A Distinctly Fairfax Philosophy Fairfax's investment philosophy is best understood not as the work of one investor, but as an evolving synthesis of exceptional ideas. Benjamin Graham provided the intellectual foundation. Warren Buffett demonstrated how an insurance company could become a long-term compounding machine through insurance float, decentralized operations and centralized capital allocation. John Templeton expanded Fairfax's opportunity set through global investing and independent thinking. Henry Singleton shaped Fairfax's approach to capital allocation and operational optimization. Phil Carret broadened the firm's understanding of value by emphasizing management quality. Peter Cundill helped carry Graham's principles into the next generation of Fairfax's investment team. The relationships behind these influences are as important as the ideas themselves. Graham's principles came through Confederation Life. Buffett's business model was introduced by Francis Chou. Templeton was both shareholder and friend. Singleton's writings have been cited repeatedly by Prem Watsa. Carret's influence has become increasingly evident in recent years. Cundill's legacy continues through senior members of Hamblin Watsa. Taken together, these influences explain far more than Fairfax's equity portfolio. They provide a framework for understanding how the company thinks. Whether evaluating an insurance acquisition, managing the fixed income portfolio, selecting equity investments, allocating capital or strengthening its operating businesses, the same underlying principles appear repeatedly. The result is not a replica of Graham, Buffett or any other investor. It is a distinctly Fairfax philosophy—one that has continued to evolve while remaining firmly anchored in the principles on which the company was founded.

Article #4 in our 6-part series. Fairfax’s Investment Platform Comes of Age – Wade Burton Wade Burton’s comments on Fairfax’s Q1 2026 conference call provide a concise summary of how the company invests today—and how far its investment platform has evolved. Five themes stand out. 1. A simple but powerful investment framework Whether Fairfax is evaluating a public company or a private business, the underlying process is the same: Understand the company’s true economic profits and profit potential. Determine where those profits are going. Assess the balance sheet and its flexibility. Evaluate management. Consider the price being paid. This is Fairfax's investment philosophy in remarkably compact form. The framework is fundamentally value-oriented. Fairfax seeks profitable businesses with strong balance sheets and capable management, but valuation remains central. A great business is only a great investment if purchased at the right price. 2. Public and private investments each offer distinct advantages Public markets provide two important advantages: liquidity and the ability to exploit market volatility. When Mr. Market becomes unusually pessimistic, Fairfax can move quickly to buy attractive businesses at discounted prices. When markets become overly optimistic, Fairfax can reduce or exit positions and redeploy capital elsewhere. Private investments offer something different: control. Fairfax can select management, allocate capital, determine whether cash flows should be reinvested or distributed, and support long-term value creation without the short-term pressures of public markets. The ability to invest across both public and private markets materially expands Fairfax's opportunity set. 3. Fairfax can allocate capital wherever value is greatest This flexibility allows Fairfax to remain opportunistic rather than being constrained by a particular asset class. That is especially valuable today. With public equity valuations elevated, Wade notes that Fairfax is finding fewer "fifty-cent dollars" in the stock market. At the same time, attractive opportunities have emerged in private markets, including Sleep Country, Kennedy Wilson and Peller Estates. Fairfax does not need to force investments. Capital can be directed wherever the combination of business quality, valuation and expected return is most attractive. Size also works in Fairfax's favour. Despite managing a large investment portfolio, the company remains small enough to move efficiently into and out of opportunities while making investments that are meaningful to overall results. 4. The equity portfolio now reflects Fairfax's broader operating philosophy Wade's comments also help explain how Fairfax's equity portfolio has evolved. Fairfax increasingly partners with capable management teams and gives them the autonomy to run their businesses. This mirrors the company's decentralized operating model. The objective is not to manage businesses from Toronto, but to partner with talented operators who can create long-term value. The emphasis on "true economic profits" and where those profits are going is equally important. Across Fairfax, there has been a growing focus on improving operations, increasing sustainable cash generation and allocating capital where it can earn the highest long-term returns. Fairfax's reputation strengthens this approach. Forty years of fair and friendly transactions, combined with permanent, no-call capital, makes the company an attractive long-term partner for entrepreneurs and management teams. 5. Hamblin Watsa has built the team for the next stage Perhaps the most important part of Wade's comments concerns people. Over the past 10 to 15 years, Hamblin Watsa has quietly built a deeper team of experienced decision-makers with expertise across both public and private markets. The parallel with Fairfax's insurance operations is striking. Just as Andy Barnard spent years strengthening the insurance platform, Hamblin Watsa has been strengthening the investment platform. Wade's phrase—"especially important now"—deserves emphasis. Fairfax is far larger than it was 10 or 15 years ago. Its investment portfolio has grown dramatically, its operations have become increasingly global and the company is generating substantially more capital to deploy. The opportunity set has expanded accordingly. The significance of Wade's comments extends beyond Fairfax's current portfolio. They explain why the company is positioned to allocate capital more effectively in the future. Markets will change. Opportunities will change. Fairfax's competitive advantage is that it has built an investment organization with the flexibility and capability to adapt—and to act decisively when exceptional opportunities arise. Wade Burton — Fairfax Q1 2026 Conference Call “… I thought it would be a good quarter to give a discussion about how we look at investments in publicly traded common stocks versus investing in private companies. The underlying process is the same. - We work to uncover true economic profits and/or profit capacity. We think about where those profits are going. - We focus on balance sheet and balance sheet flexibility. - We think about the price we pay for those profits. The same underlying process for both public and for private. - In both cases, we know management is a key factor. As Buffett pointed out, a great manager can’t save a leaky boat, but what we have learned is that they make a huge difference paddling boats that do float. The advantages of buying public common stocks is: 1. the ability to capitalize on the moods of the stock market and 2. liquidity. The ability to enter and exit an investment quickly is a good thing. The advantages of making direct investments in private companies is we control the profits. That is, we can choose to reinvest the profits in the businesses we’ve invested in, or we can take the profits out and invest them elsewhere. In general, the flexibility to invest in either public or private companies is a huge advantage for us. It allows us to be opportunistic, agnostic, and truly seek the best possible investments. For example, today, with the Shiller PE at all-time highs, you would not expect we’d find a lot of fifty cent dollars in the stock market, and we aren’t. We have been able to make outstanding acquisitions on the private side, including Meadow Foods, Peak Achievement, and Sleep Country. We have the advantage of a history of being terrific long-term partners. 40 years of fair and friendly transactions with a long line of very happy partners, along with permanent no call capital, makes us an attractive home for many companies. To do all of this well takes a skilled and focused investment team, and I’m so proud of the team we’ve built over the last 10 or 15 years. Our people are decision-makers. They are analysts and value investors. We have skilled defensive players and skilled offensive players. All have experience in public and private investments. You know, having the independence to make decisions is so important, and they’re all doing it. We call them in where we need them on the bigger investments. With that, it is amazing to watch them come together as a group. Having this team in place is especially important now, given how big and globally spread out we are and how big we hope and plan to be in the next 50 years.”

I personally see willful ignorance as a major source of evil. The idea of standing firm in the face of reason has led to endless amounts of human suffering throughout history. It's especially sad because those who are willfully ignorant may not themselves be evil, but their ignorance fuels the powers of evil. It feeds off of them like a parasite to the growth of humanity. Read people. Your logic and reasoning are only as good as the data that you feed into it. Just because we live in an age of endless information, does not mean that all of that information is true and/or valuable. It is a skill to efficiently wade through this informational mess we've created.

What do you believe are Trump's greatest strengths? What are his greatest weaknesses? He is a human after all, so it a requirement that he must have at least some.

Probably not on the same level as all the other books discussed here, but an easy daily read is the daily stoic by Ryan Holiday. I liked to reach it each night, and then reflect on that night's reading. On the Shortness of Life: Life Is Long if You Know How to Use It (Penguin Great Ideas) was a good read as well.

Applied philosophy today in America:

- Meditations by Marcus Aurelius - and The Republic by Plato I think reading The Republic could be especially important today given the current political situation. The author of The Republic, Plato, was a student of Socrates in ancient Athens. Those men were brilliant beyond words. Politics to those two, later including Aristotle and even Alexander the Great, seemed almost akin to applied philosophy, which is interesting.

It almost makes you wonder how these idiots keep getting promoted to make these types of decisions when anyone who has attempted to use AI to vibe code anything could have probably foreseen to his outcome... AI may get there in the future. But as a user of it (including premium versions), I've largely been disappointed with just about every application of it. NotebookLLM has been the most useful to me personally, but is still rife with frustrations where I'd think twice about paying for it.

I agree with you - but even besides that the Biblical book of Proverbs is clearly exceptional wisdom whatever your religious beliefs happen to be.

Oh yea man I enjoyed those more than the episodes sometimes. Beavis and Butthead would watch these weird music videos and make sarcastic remarks that were sometimes pretty insightful and witty I come to this place instead of a place like a forum for, lets say futures traders because I've found those places are filled with guys who inevitably fight about who made more money - how many points did you take off ES today, what's your P/L for the month, blah blah - while 99% of them never make any money consistently and good chunk of them blow up their accounts, which is hilarious and sad at the same time. Sure value funboys talk shit too but at least you guys make money - and it comes down to how good your risk adjusted returns were for the year, etc.

yeah i have to agree with you on Poor Charlie’s Almanack - i’ve given away several copies to young people.

Tsk, tsk - so many TDS victims. Definitely love the silly comments about Trump being an “Authoritarian” - yup , just like the powers bestowed upon him by the voters & constitution. Board in need of a US Civics class.. in the meantime, Trump will continue to obliterate Iran after showing extreme patience and tremendous bravery in a needed event that may seal his midterm defeats. Unless of course, he continues to expose both voter fraud and more looting of the US Treasury, at the hands of the Democrat lunatics, who continue to lose out to their growing Commie base. Its so much fun to read the lame brain comments of a party without any political power.

Ha ha - I forgot you're a Beavis & Butthead fan. I found a great YT playlist of just their music video commentary from the 90s - magnificent stuff.

Thanks man Yea I'm not like you guys at on this forum. I mean you guys sit there and read. And I don't mean read the pamphlet on STDs at the free clinic, no - you guys sit there and read... Books! Who does that nowadays? Me, I watch Beavis and Butthead from 1990s on Youtube but I also happened to watch this last night:

LOL! Cheers!

The India government has approved the merger of Go Digit Infoworks Services Private Limited with Go Digit General Insurance Limited. I don't believe this will have any material impact on BV or reportable earnings at Fairfax. https://economictimes.indiatimes.com/industry/banking/finance/insure/cci-clears-go-digit-infoworks-merger-with-insurer-fairfax-entity-to-hold-57-28-stake/articleshow/132688730.cms?from=mdr Fairfax group entity to hold majority stake after merger Following the completion of the transaction, FAL Corporation will hold a 57.28% stake in Go Digit General Insurance Ltd.

If all this was about was safety and secure borders, everyone would be aligned. In fact, they already are, as the interviewer mentions. But the issue is Musk is supporting pseudo-autocrats and conflating that support under the guise of border security. Which as mentioned, is a point he totally dodges, because he is not a person to be taken seriously in any political context.

I bought PYPL DEC 2028 $90 Calls. Not a lot. 0.25% of portfolio. My base case is that PYPL isn't gonna get bought out at the current price and will climb to $100 by then. Earnigns seem to support this.

COBF etf is raging today

I enjoyed the economist musk interview a lot. Economist is probably my favourite news publication, read it cover to cover each week, and Musk is the business leader I respect the most so go figure. I think the economist is quite middle of the road and not some leftie rag as portrayed by Elon, I’d say he’d probably have similar viewpoints to the Economist on many topics. It’s quite interesting to read the analysis of these interviews after watching them, and how different the content is portrayed. I thought it was a very normal discussion where they built a good repoire, lots of interesting back and forths, a few heated moments like any long interview but nothing out of the ordinary. Then I see the news articles after “deranged Elon musk melts down in interview”. And yes as a fellow European I also think Europe has a bit of an immigration problem. In Ireland there has been a noticeable uptick in women violently murdered over the last few years, and a high proportion of these have been carried out by immigrant/asylum seeker. My wife is Canadian and non-white so I am sensitive to both sides, but I do agree with Elon that having immigrant men from cultures with beliefs massively in conflict to western values is causing big problems. And the trend of politicians of avoiding any reasonable discussion around this by just labelling anybody ‘far right’ is problematic. There are likely lots of sensible people who behind closed doors think this, but the public face of this ends up being people like Conor McGregor and Tommy Robinson.

Glad to have you on this forum - you don't seem like the typical CoBF Value guy - I think the diversity is good, so not too echo-chamber-y. Congrats on the Semi Shorts!

I think you have the right way of looking at it. Viking is right that carrying value (CV) does make some adjustment for retained earnings. But given the fact that the value of an associate or consolidated holding will typically go up as a multiple of those earnings, you have 2 choices that I think are mutually exclusive: count Fairfax's portion of those earnings (and eventually assign a multiple of those earnings in the valuation) OR count the added value of that associate, obviously with no multiple; that would be an increase in the value of the holding, not earnings per se. If you count the portion of earnings AND the added value of the associate, you are making 2 mistakes in my view: you are double counting the earnings, and you are counting all the increase in value of the holding as earnings. Of course, if the associate is sold, the increase in value really is earnings, but it is one-time earnings, as that earning stream will then be over. The associate is valued as a multiple of its earnings because there is a presumption that those earnings will be ongoing. And obviously, in the year when the associate is sold, it would also be a mistake to count its value both as a multiple of its earnings AND as a capital gain, which would also be double counting in the same way.

Ah well I'll always be a coward Covered all MU and SKHY Went long NQ futures

The History of Western Philosophy by Bertrand Russell (also a famous philosopher) is very good for an in-depth overview. But unlike Russell, I agree with Blaise Pascal in believing in the God of Abraham, Isaac, and Jacob and not of the philosophers and of the learned. Therefore IMO, the best book for studying truth, knowledge, and realty would be the Holy Bible and Jesus would be the best explainer of that truth.