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  1. This is one of my favorite things to rant about so let me apologize in advance. This isn't a comment about Brett Horn in particular - I don't know him, and maybe he's great. But what I strongly recommend is to look to the broker analysts as a gauge of popular sentiment (if even that) or to understand how brokers drum up business. Nothing more. It is not a coincidence that companies reliant on capital raising tend to get the widest coverage and the best ratings. But since the ostensible separation of research from investment banking (and the removal of skin in the game - analysts ability to actually buy stocks in their coverage universe - in the name of removing conflicts of interest), the job is basically a glorified sales job for trading volumes. And many of them, if they do get a real nugget of information or have an actual insight, share it behind closed doors with whichever client trades the most through their bank. In other words... I wouldn't think that hard about it. The analyst incentive is to not stand out in a bad way and keep making ~$1-2mm/year to keep their kids in fancy schools. Even if one is actually bearish, he/she almost certainly won't stick his/her neck out and risk embarrassment and losing that cushy gig. Sorry, I've done that job as a bright eyed and bushy tailed junior analyst and unfortunately saw how the sausage is made, so maybe I'm too cynical now. Maybe the general takeaway is to keep your expectations low and allow yourself be pleasantly surprised, but the clear and simple fact is that @Viking and others with real insight and skin in the game do a 10x better job than any broker analyst. Maybe this wasn't the case in Lee Cooperman's days at GS (though it was probably even sketchier then) but it is now. At the bare minimum, the pay and prestige aren't what they used to be. The real talent is elsewhere. Expect the sell side estimates to keep climbing higher as Fairfax executes.
    2 points
  2. I once saw a cheers-less post. Gregmal was being disciplined over in the Disney thread…
    2 points
  3. @newtovalue you are welcome. Nice to hear that others find value in some of the posts. I use writing as a way to get my thoughts in order. And i love it when people take the other side as i spend a fair bit of time trying to figure out why i am wrong. I think my track record is pretty decent figuring out the earnings part of the equation. I am pretty terrible at figuring out the multiple expansion part of the equation (i tend to sell my big positions too early).
    2 points
  4. At this point the guys best and highest use would be running charity auctions for the right to be punched in the face by current and former clients whom he's cheated with his antics.
    1 point
  5. I still occasionally dream of someone hacking the CPI and releasing a 15 print or something crazy just so we can see these mindless monkey boys who “brace” for these sorts releases have seizures.
    1 point
  6. As an American I’ve been disgusted by all the warmongering that’s been brought about by the current regime…but it gets to another level when the SOTU headlines are that we’re “determined to avoid sending troops to Ukraine”….huh???? Who TF was ever even talking about sending US troops? It’s bad enough we re wasting billions so a dementia ridden puppet can play stratego….now we need to kill our own over some foreign pissing match? Fuck these people.
    1 point
  7. What was the change in the value of Fairfax’s equity portfolio to Feb 29, 2024? Fairfax’s equity portfolio (that I track) had a total value of about $18 billion at February 29, 2024. This is an increase of about $496 million (pre-tax) or 2.8% from December 31, 2023. The increase two months into Q1 works out to about $21.45/share. I include holdings like the FFH-TRS position in the mark to market bucket and at its notional value. I also include debentures and warrants in this bucket. My tracker portfolio is not an exact match to Fairfax’s actual holdings. My summary contains no information from Fairfax’s 2023 annual report, as it has not been released yet. As a result, my tracker portfolio is useful only as a tool to understand the likely directional movement in Fairfax’s equity portfolio (and not the precise change). Split of total holdings by accounting treatment About 49% of Fairfax’s equity holdings are mark to market - this includes 'A.) Mark to Market' and 'D.) Other Holdings' - and will fluctuate each quarter with changes in equity markets. The other 51% are Associate and Consolidated holdings. Over the past couple of years the share of the mark to market portfolio has been falling. This means Fairfax's quarterly results will be less impacted by volatility in equity markets. That is an important development. Split of total gains by accounting treatment The total change is an increase of $496 million = $21.55/share The mark to market change is increase of $206 million = $8.94/share. Only changes in this bucket of holdings will show up in ‘net gains (losses) on investments’ (along with changes in the value of the fixed income portfolio) when Fairfax reports results each quarter. What were the big movers in the equity portfolio Q1-YTD? Eurobank was up $351 million and it is now Fairfax’s largest equity holding at $2.5 billion. Eurobank reports results March 7. It will be interesting to see if they initiate a dividend. The FFH-TRS was up $283 million. This position is now Fairfax’s second largest holding. The investment is up a total of $1.356 billion over the last 3 years, which is a gain of 185%. Simply an amazing investment. Thomas Cook India delivered a very strong Q4 to cap off a stellar 2023. Fairfax’s position was up $103 million. People are travelling again in India! Kennedy Wilson was down $48 million. The company has been hit hard by concerns in office real estate segment. The value to Fairfax from this holding is not its equity exposure. The value is the extensive partnership the two companies have established over the past 12 years, most recently in significantly expanding the real estate debt platform. I wonder if Fairfax does not use the current weakness in KW's share price to materially and opportunistically increase its stake in the company in 2024. That was the playbook Fairfax used with a number of holdings that were negatively impacted by Covid in 2020 - and these incremental investments have worked out extremely well for Fairfax a couple of years later. Blackberry continues to shrink in size, down $36 million. Blackberry is now a $130 million position = 0.21% of Fairfax’s $60 billion investment portfolio. In Q1, Fairfax also ended its $150 million debenture investment in Blackberry and Prem resigned from Blackberry’s board. The debenture was a $500 million dollar position in Sept 2020. This is another good example of Fairfax exiting from a poorly performing legacy investment (financially and also in terms of involvement from the management team). Capital at Fairfax continues to shift to better opportunities. The clean-up of poorly performing equity investments looks largely completed – understanding that there will always be a few underperformers. Excess of fair value over carrying value (not captured in book value) Carrying value in this section is understated by quite a bit as it does not capture Q4, 2023. I will update this once the annual report is released. For Associate and Consolidated holdings, the excess of fair value to carrying value is about $1.445 billion or $62/share (pre-tax). Book value at Fairfax is understated by about this amount (less the tax impact). Below is the split. Associates: $1.048 million = $45/share Consolidated: $397 million = $17/share Below is a copy of my Excel spreadsheet (next 2 pages) if you want a closer look. Equity Tracker Spreadsheet explained: The summary below attempts to track all equity holdings at Fairfax. Each quarter the spreadsheet is updated to capture any ‘new news:’ purchases and sales. We have separated holdings by accounting treatment: Mark to market Associates – Equity accounted Consolidated Other Holdings – derivatives (total return swaps), debentures and warrants We come up with the value of each holding by multiplying the share price by the number of shares. Are holdings are tracked in US$, so non-US holdings have their values adjusted for currency. Important: the list is not complete. Some information we only get once per year when Fairfax published their annual report. Fairfax also makes changes to their portfolio each quarter. Fairfax Feb 29 2024.xlsx
    1 point
  8. Alright, I know most of you guys are probably way too polite to point this out but I’m not, so here goes.... I am sure that some here noticed a sudden influx of new posters on this board immediately after Carson Block came out with his ill-informed garbage about Fairfax. Seemed like these new posters just couldn’t restrain themselves in pointing out that Muddy Waters / Carson Block had confirmed and exposed their ‘suspicions’ that obviously there was something shifty about Fairfax. Carson Block was beyond reproach and a force to be reckoned with. Some suggested that the $160 share price drop was only just the beginning. One even suggested he wanted nothing to do with FFH as the price drop had a ways to go yet. Well, if their appearance was driven by jealousy from not buying FFH sooner, it seems their error was compounded by not taking advantage of that substantial and very temporary dip. Unfortunately, as Fairfax once again set new highs, the rest of us will just have to bite the bullet and put up with the fact that ... well ... we will have to pay more income tax on our Fairfax profits. Meanwhile Mr. Block's insights remain ... let's say, Muddy.
    1 point
  9. No. Say what you want about Prem's investing skills, but he is not a particularly clear and cogent communicator. When he answers a question, he doesn't really provide a response, but instead tends to do what I call the "Prem fuddle" where he mumbles around in circles about something that is only tangentially related to the original question. If he only did this for the questions he wanted to avoid, I would understand and I would admire him for being so crafty. But he does it for EVERY question, even the softballs. What we need is for Jen Allen to give a 2 minute spiel about the rules for writing down assets due to permanent impairment, and FFH's annual process for doing this. There's a legitimate reason that Farmer's Edge or Digit have not yet been written down as much as Muddy Waters would contend should be done, and that reason is the actual accounting rules and the annual internal evaluation process. There's nothing nefarious there. So, we need Jen as the expert (and as a solid communicator!) to briefly walk through the rules and the process. After she gives a clear and cogent explanation, then perhaps Prem could chime in with his usual indecipherable "Prem fuddle." And so it goes with the IFRIS adjustments. Jen is a solid communicator and should walk us through the reason why FFH is now using IFRIS, how the rules work, and the outcome. She has already done this on past calls and did a great job of it. Well, it seems that she needs to do it again in the context of yesterday's report. And then after a compelling explanation from Jen, perhaps Prem can chip in with his usual few comments that go in circles. This CC is actually important. The only response that Prem should be making should be something that he reads word-for-word that was written by Jen and the rest of the C-suite. Keep the extemporaneous comments to a minimum and preferably have the stronger communicators provide technical explanations where they are appropriate. SJ
    1 point
  10. I'm surprised that CIBC, in their note on the MW report, didn't mention that MW chose only FFH's closely-held investments where fair value exceeds carrying value. What about those that trade publicly whose fair value exceed carrying value... like FIH? Taking my estimate for YE BVPS and adding to it the difference between fair value and carrying value for ALL closely-held investments and incorporating an appropriate haircut for taxes on the difference, FFH's FMBVPS ($987) is more like 8% higher than reported BVPS ($914). The IFRS change argument is ridiculous as all insurers are faced with the same set of accounting rules. It may work better for long tail liabilities than short in a rising interest rate period, but FFH didn't make up the rule to suit its balance sheet and it will suffer relatively if rates decline. What kind of market responds positively to this standard of analysis? How is Brett Horn still employed? So many questions.
    1 point
  11. The same kind of volume spikes happened last January - I assume it has something to do with the timing of the dividend, the counterparties to the TRS and the calendar year.
    1 point
  12. I agree with much of what you wrote, but Elon is clearly the most important founder of Tesla (and there is a legal settlement with the "real" founders giving him the right to the title "founder"). He was the only person willing to give the original two founders seed funding, hired its most important employee (JB Straubel, the CTO), and Tesla was only able to raise further funding because Elon lead every round. Most importantly, he was always heavily involved. He helped design the Roadster, and when the original CEO came up with a production plan for the Roadster that would have cost $250k/unit Elon fired him and took over, and saved the company by lowering those costs enough to price it at $80k. And then he led development of the Model S, which is really why Tesla became so valuable. That said, I agree he doesn't deserve any more stock, it's questionable whether he's still critical to their success, and he's heavily distracted with other projects and social media jihads.
    1 point
  13. I do. It's sort of an irish classic now. Many Irish folk bands play it.
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  14. You know, it's all a derivative of punk rock. I grew up on The Clash, Sex Pistols, Dead Kennedys, etc. Metal, grunge, black metal, etc...all came from punk rock. Cheers!
    1 point
  15. 1 point
  16. At this rate we will get the following funds 1) Charren Mungffet moatful fund 2) Buffger large cap value fund 3) Blumkin consumer staples fund 4) Pabshire Mohaway coffee can fund 5) Mungrai cannibals fund
    1 point
  17. Was a terrific movie! Benicio is one of the best actors of his generation. Still can't believe how he stole every scene as the honest Mexican cop in Traffic, and his best role ever was the assassin ex-lawyer in Sicario. Cheers!
    1 point
  18. https://www.globenewswire.com/news-release/2023/11/02/2772905/0/en/Fairfax-Financial-Holdings-Limited-Financial-Results-for-the-Third-Quarter.html "Book value per basic share at September 30, 2023 was $876.55" "We achieved an underwriting profit of $291.6 million on an undiscounted basis and a consolidated combined ratio of 95.0% for the quarter, reflecting significantly lower catastrophe losses and excellent current accident year underwriting margins. Gross premiums written grew by 5.0% and net premiums written grew by 4.8%, primarily reflecting new business and continued incremental rate increases in certain lines of business." "At September 30, 2023 the company's insurance and reinsurance companies held portfolio investments of $56.8 billion (excluding Fairfax India's portfolio of $2.0 billion), of which $6.4 billion was in cash and short term investments representing 11.2% of those portfolio investments. During the first nine months of 2023 the company used cash and net proceeds from sales and maturities of U.S. treasury and other government short term investments and short-dated U.S. treasuries to purchase $5.8 billion of U.S. treasuries with maturities between 3 to 5 years and $2.4 billion of U.S. treasuries with maturities between 5 to 7 years, and to make net purchases of $2.1 billion of short-dated first mortgage loans and $1.6 billion of corporate and other bonds with maturities primarily between 2 to 5 years. These actions should result in continued higher levels of interest income for approximately the next 4 years." "At September 30, 2023 there were 23,115,838 common shares effectively outstanding." FFH_-_2023_Q3_Interim_Report_.pdf FFH_-_2023_Q3_MD&A_section.pdf
    1 point
  19. Found it. Morningstar-MKL9.23.pdf
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  20. @mcliu, I have to say I'm actually more than just surprised to see this video clip by Mr. Stoltenberg. Huge red flag. What I'm curious about is a date / time stamp for this statement, and the written statement by Mr. Putin, and its date. I have to admit, that this somehow has skipped my attention.
    1 point
  21. I can’t be the only one who regularly reads these columns and think they are either fake or some of the silliest rich people on the planet: https://www.marketwatch.com/story/we-live-in-purgatory-my-wife-has-a-multimillion-dollar-trust-fund-but-my-mother-in-law-controls-it-we-earn-400-000-and-spend-beyond-our-means-whats-our-next-move-5e3d3820?mod=home-page This isn’t even that bad.
    1 point
  22. For anyone that is curious about Berkshire's Q2 activity in Foreign stocks other than BYD, here is Gen Re's Q2 activity - no equity purchases. Sales of Nestle, Munich Re, and Allianz. (one page pdf attached) gen re q2 page 159.pdf
    1 point
  23. I begged @Dinar to talk me off the ledge regarding Nintendo. The next day I found this in a used book I bought on Amazon: I'm fine.
    1 point
  24. As we begin Q3, this is a good time to update earnings estimates for Fairfax for 2023. And look ahead to 2024. I am also going to take a stab at 2025. I don’t like to go much beyond 2 years with earnings estimates - there are simply to many moving parts. But it useful to get a three year view on earnings to better be able to value the stock price today - so lets give it a shot. My first big learning has been: the GIG acquisition is going to be a material development for Fairfax when it closes. I need to get up to speed with GIG (I may need to revise my estimates below). Please chime in with your thoughts. Too optimistic? Too pessimistic? Any thoughts on what GIG is going to deliver? What important things are missing? Please get into the weeds. Conclusion: Let's skip ahead to the conclusion. My estimate is Fairfax will earn about $140/share, on average, over the next three years. I consider this to be a mildly conservative estimate - what i mean by that is i think it is more likely that earnings will come in higher than lower. The big ‘miss’ with my estimates is capital allocation. We don’t know much of what the management team at Fairfax is going to do with all the earnings (around $3.2 billion) coming each of the next 3 years. Looking at the last 5 years, the management team has been best-in-class with capital allocation. My guess is they will continue to make good decisions (on balance) and this will benefit shareholders - providing a tailwind to my forecast. I am also assuming interest rates remain roughly at current levels. Of course this will not be the case. But if rates rise - or go lower - Fairfax will have lots of puts and takes. I am also forecasting no impact from IFRS 17 (as I have stated before, I am still learning how this accounting change affects Fairfax’s reported results over time.) I love the following 8-year snapshot of Fairfax. It communicates really well the dramatic transformation that has happened at the company beginning in 2021. It is a pretty amazing story. What are the key assumptions? 1.) underwriting profit to be flat to slightly down. Estimates for both premium growth and CR are conservative. When the GIG transaction closes (Q4?) Fairfax will be getting a big boost to its insurance business. I think GIG might be adding $1.8 billion to net written premiums. GIG is the driver to top line growth of 8% in 2024. If the hard market continues into 2024 then top line growth at Fairfax will likely be +10%. I am forecasting Fairfax’s CR to increase from 94.7 in 2022 to 96 in 2025. Do I think this will happen? No. My guess is they will continue to deliver a 95 CR - until I learn something that tells me something new. The hard market will end at some point. But do things quickly turn ugly? Probably not, but not sure. 2.) interest and dividend income: Will increase modestly. Extending the average duration of the fixed income portfolio to 2.5 years largely locks in these numbers. Tailwinds: GIG: will add about $2.4 billion to total investment portfolio. At estimated total return of 4.5% = $110 million. I expect the majority of this would be interest income. PacWest loans: $100 million incremental ($200 million total) to interest income? Half in 2H, 2023 and half in 1H, 2024. Eurobank: likely dividend starting in 2024 = $60 million? Headwind: Short term treasury rates likely come down lowering interest on cash/short term balances. 3.) Share of profit of associates: Will increase modestly. It fell in 2023 because of the sale of Resolute Forest Products - who contributed $159 million in 2022. GIG purchase will subtract $80 million in 2024 (same as what is built in for 2023). growing earnings at Eurobank and Poseidon/Atlas will power this higher. My estimates for Stelco and EXCO are very conservative (a combined total of $110 million per year). 4.) Effects of discounting and risk adjustment (IFRS 17). Interest rate changes drive this bucket. I need time to learn how much. Given I am forecasting interest rates to remain about where they are today I am leaving this number the same over the forecast period. 5.) Life insurance and runoff. This combination of business lost $167 million in 2022. I am forecasting this bucket to lose $175 million in each of the next three years. We should expect Eurolife to grow its earnings nicely over time. 6.) Other (revenue-expenses): improving results from consolidated holdings. In the near term, perhaps we get write downs in both Boat Rocker and Farmers Edge. Recipe should deliver solid and growing earnings of better than $100 million per year. Earnings at Dexterra are growing again. AGT is a sleeper holding. Grivalia Properties is in its peak investment phase; earnings should grow nicely looking out a year or two. This bucket could really start to shine through for Fairfax in the coming years. 7.) Interest expense: modest increase. 8.) Corporate overhead and other: took the average of last 3 years and added 10% 9.) Net gains on investments: This is a wild card. My estimates assume: mark-to-market equity holdings of $7.8 billion increase in value by 10% per year = $800 million. there is a small bump of $200-$300 million per year in additional gains (equities and fixed income). Total return on investment portfolio is: 2023 = 7.5% 2024 = 6.8% 2025 = 7.0% (I get this by adding up the following line items: 2.) + 3.) + 6.) + 9.) and divided the total by the value of their investment portfolio). These percent returns, while high compared to recent years, are hardly heroic given Fairfax is currently earnings about 4% on their fixed income portfolio. 10.) Gain on sale/deconsol of insurance sub: this is where I put the really large monetizations. 2022 was the sale of pet insurance and Resolute. 2023 was the sale of Ambridge and the purchase of GIG (resulting in a write up of the existing holding). I am building in nothing for 2024 and 2025 and this is highly unlikely. We likely will get a Digit IPO at some point over the next year and this could result in a significant gain for Fairfax. We could get an event that triggers a revaluation of Eurobank (carrying value is currently $500 million below market value and this will likely widen significantly in the coming years). We could see an AGT IPO. Fairfax is likely to sell another large holding for a significant gain. Bottom line, this is probably where I will be most wrong with my forecast. Developments here will have a material positive impact to Fairfax’s reported results (earnings and book value). 11.) Income taxes: estimated at 19% 12.) Non-controlling interests: estimated at 11% (not really sure) 13.) Shares Outstanding: reduced by 500,000 per year. This is in line with a normal year from Fairfax. It would not surprise me to see Fairfax do one more big repurchase to take advantage of the low share price while it lasts.
    1 point
  25. Yes, he recommended a 2-3 year holding period for value stock buys:
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  26. Other than inputing individual trades into a spread sheet to figure out my rate of return, I didn't know how to see if I was doing better than passive investing and by how much. My brokerage shows you cumulative time weighted returns, which would give me an accurate answer only if I didn't make any additions or withdrawls to the account. So I don't have a good estimate for returns in my taxable account. BUT I just realized that my ROTH IRA hasn't had any additions in a while (I converted some of my traditional IRA to a Roth IRA during the temporary tax cut year, but haven't added since because taxes went back up). So when I used the tool, it's comforting to see that all my efforts aren't producing a result that is worse than passive investing. I have no desire to ever manage money for anyone, and honestly if someone was looking over my shoulder and questioning some of the dumpster dive stocks, I might be tempted to hug the index and underperform just like the pros. But I do think individual investors can play a different game than the pros and part of the positive returns are due to this website. The signal to noise ratio is very good here and reading up on a thread here is part of my process (along with 10-ks, investor presentation, trade mags, interviews with the CEO etc). I definitely make fewer errors by being able to bounce ideas off of smart people here and get their feedback. And talking with people with compounder mindsets is helping me look for more of them and avoid quick pops in commodity shitcos. So thanks to everyone on here for your help. I appreciate the culture of sharing and generosity on here. From July 1, 2020 to July 6, 2023 Showing prior-day close of business data Select to view help about how often this performance data is calculated Cumulative time weighted return 93.99% Select to view help aboutHow is this cumulative time weighted returnvalue calculated? S&P 500 TR View selected benchmark index help 49.23% Select a benchmark indexto compare with your historical performance from the dropdown menu in the layer
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  27. @UK i will give you a portfolio update as of today. But please note, i am ok with concentrated positions. This strategy has worked well for me for +20 years but it is not for everyone. Please note, I might decide to change my position tomorrow and i will not provide an update. I have no desire to provide daily, weekly or monthly portfolio updates. Because it messes with my head too much (i start to feel responsible for everyone else). People need to do their own research. And come to their own conclusions. And not get overly influenced by what some anonymous blogger is posting. Having got that out of the way, Fairfax has been may largest position since late 2020. ‘The story’ at the company continues to improve every quarter. As a result, despite the incredible run-up, i think the stock is still dirt cheap. So i continue to hold a concentrated position. I consider 30% to be a minimum position for me today (given what i know today). Currently i am at a 45% weighting. And I move around quite a bit (around the edges). I am also 35% cash today. The remainder is split pretty evenly between 3 other buckets: oil, banks and Canadian high yielding dividend stocks. I move around i these holdings quite a bit. ————— If you look at most successful investors most of their outperformance was the result of only a couple of holdings that performed spectacularly well over 5 or 10 years. My view is these turbocharged opportunities only come along every couple of years (something you understand very well that is dirt cheap with catalysts). So when you find one you have to be patient and ride it for as long as possible. Because the next one might be years away. My fear right now with Fairfax isn’t holding too much… it is holding too little. My fear is lightening up (locking in big gains) and then having the stock take off higher on me. My biggest mistake investing is selling my big winners too early. Selling because they went up a lot. And then they kept going higher… My mistake was selling using price as my guide. So i am trying to be more patient in situations where the fundamentals continue to improve - like the situation with Fairfax today. ————— My average return over the past 20 years is 19% per year. Over that 20 year span i have had two down years (of -4% each year). So my strategy works for me. I also spend LOTS of time on investing… because i really enjoy it. People need to figure out their own strategy. Something that fits their knowledge, emotional make-up, situation, interest, time etc. There are no short cuts.
    1 point
  28. I think it's reasonable to model a normalized EPS of $100 USD going forward, which is clearly not priced into the shares. Where I get stuck is on growth rate and where normalized EPS will land in year 4 and beyond ( @Viking focuses on 2 to 3 years out, but I happen to enjoy wasting brain cells on rough 5 and 10 year forecasts). Let's oversimplify and say after tax EPS breaks down neatly into 3 factors: $40 per share of insurance underwriting earnings at a combined ratio of 95 $40 per share of interest income at an average yield of 3.5% $20 per share of non-insurance/interest earnings growing 10% annually Total Baseline EPS: $100 ^ Notice $80 of earnings is tied to two CRITICAL variables entirely out of FFH's control; the insurance cycle and interest rates. Now let's setup a conservative scenario for EPS in year 4. First, for simplicity's sake, let's assume that in years 1 through 3 a total of $300 per share was reinvested and results in additional earnings of $30 per share in year 4 (we'll call this 'earnings on reinvested cash'. Then, let's assume we're in a soft, mid-cycle, insurance rate environment, and that short term interest rates have declined to a level more in line with long term GDP growth potential. Year 4 EPS Scenario: $30 per share of insurance underwriting earnings assuming modest premium volume growth and a CR of 98 $20 per share of interest income at an average yield of 1.5% $60 per share of non-insurance/interest earnings (including $30 EPS from cash reinvested in yrs 1-3) Total Year 4 EPS: $110 ^ Under that highly conservative, highly oversimplified, set of assumptions I can see a scenario where earnings remain relatively flat for at least the next 4 years. From years 4 to 10 let's assume EPS grows 10% annually. That gives us the following EPS projections for years 5 and 10: Year 5 EPS: $121 Year 10 EPS: $195 If we slap a 15x multiple on those conservative estimates we're looking at: Year 5 Share Price: $1,815 Year 10 Share Price: $2,925 If you buy at $700 per share you're looking at a decent shot at a 15% return over the next 10 years. Not too shabby.
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  29. The recession forecasting and stock market timing stuff is a grand illusion because on paper it’s so simple. Everything is with the benefit of hindsite. If you just followed a, b, c indicators and bought here and sold at this point on the chart, and then bought back here…voila! On top of this, well, short term, stocks will either go up or down, 50/50 right? Every time this has happened, that has happened…until it doesn’t. Then we debate of this time is different. There’s literally an academic playbook for everything. Except what makes the markets so awesome is they are adaptive and evolving and almost always 5 steps ahead of everyone. When you look at folks who make claims of forecasting success, the most successful ones are very often the ones who aren’t actually doing the buying and selling. Well, correction, they’re doing the selling but it’s in the form of newsletters and advice which to anyone who’s ever laced em up and stepped on the court knows…ain’t even close to the same thing. The majority of the business on WS is….selling! Selling investors everything they need to get rich. Selling companies everything they need to grow forever. Selling those in the middle whatever they need to get to where they need to get. But the great illusion is just that…the game is simple. Build your shit. Buy quality. Be disciplined. Do what’s unconventional. Bet on yourself. That’s it. You don’t even need to “beat the index”…just don’t do stupid shit!
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  30. I think China would be the one in the meat grinder if Taiwan puts up even a mediocre defense. Beach landings are archaic, and honestly I think China is smarter than that. IMO China is probably discussing how they can get Taiwan to WANT to re-unite. How to they make it in Taiwan's best interest to WANT to come back under Chinese umbrella. Brute force wont work here IMO, just like Russia would never be successful in holding Ukraine, just like the US in the middle east, you can come in and turn the place into a pile a rubble, sure, beat them into submission, but then spend the next several decades occupying with military and dealing with uprisings, guerilla tactics etc, just not a reasonable or desirable long term plan if the people dont WANT to be occupied. Also, if you're the smallest kid on the playground and getting picked on by the bully, you dont have to start lifting weights and taking karate classes, you just have to be friends with a kid that is as big or bigger/tougher than the bully. This is more Taiwans strategy I think. They would have support of the US and other neighboring countries. China knows this also and thats why I say the brute force tactic seems unlikely, sure threaten it to keep them on their toes and test defenses but the reality is China would get closer to their goal using sugar rather than salt. If there is any possibility at all. I thought Ray Dalio article was interesting and probably accurate on many points. Both sides dont want war and not in best interests, but both sides unwilling to back down, being spurred on by comments it almost becomes a self=fulfilling prophecy and can itself lead to war. both sides should be spending more effort on avoiding conflict and working together rather than posturing and preparing for what the other could do. the best offense is defense they say, pray for peace, prepare for war and all that, but I also worry that once the snowball takes off down the hill, building along the way (and arguably the snowball is already rolling) it can be very very hard to stop. You make a goo point though as to elements that may be there that havent been taken into consideration, in addition to the Taiwanese resolve to fight, the inverse of that is the Chinese will to fight and suffer tremendous casualties as well as those not fighting, dealing with sanctions etc. Xi wants common prosperity and a strong Chinese economy is how he gets that, is the juice worth the squeeze, is the cost of getting Taiwan back worth setting the avg mainlanders life back a decade, upsetting everything else. Dunno, tough to say. How important is Taiwan. Maybe there is a different way to approach it. China plays the long game, chipping away at the US, positioning themselves to control resources around the world until its in the best interests of Taiwan to WANT to join China, and they remove the teeth from the Lion (US) so that Taiwan doesn't have the big/tough friend on the playground. China is much better playing the long game and has the "advantage" of long term leadership that can implement a plan and spend a decade working it without a los in continuity from changing leadership.
    1 point
  31. @SafetyinNumbers great point. My deep dive into the equity portfolio excluded (on purpose) the insurance holdings. The equity portfolio at Fairfax gets most of the attention. The real jewel at Fairfax is the insurance business. It has grown in size by 420% since the end of 2009 (organically and acquisitions). Net premiums written increased from $4.3 billion in 2009 to $22.3 billion in 2022. Fairfax has demonstrated they are excellent at seeding new insurance companies/management teams and then getting out of the way. They are also good at integrating acquisitions. Andy Barnard was put into his role in 2010 - managing the insurance side of Fairfax. He manages the business through 200 profit centres… which indicates just how decentralized the insurance operations are… separate insurance businesses all over the world that are quietly growing year after year - some for decades. Lots of the value that has been building in this group for decades is NOT captured in book value - for people who need convincing see the list below. Over the past 6 years Fairfax has opportunistically monetized a few of their insurance businesses and has booked significant pre-tax gains on these sales of more than $4 billion (see list below). Yes, Digit, seeded in 2017, has become a home run. Ki, seeded in 2020, is growing like crazy. Gulf Insurance Group, seeded in 2010, has quietly grown into a very large insurance company in the MENA region. So much is going on under the hood with the insurance business at Fairfax. As i have said numerous times before: Fairfax has three engines that drive results and all three are performing exceptionally well right now: insurance (hard market), fixed income (high interest rates) and equities (much improved portfolio of holdings). Importantly, the macro environment has also aligned (value investing, cyclicals, commodities, energy). Investors in Fairfax have never had this set-up before (with everything working together at the same time). We are seeing the early benefits of the flywheel effect at Fairfax. Except their transition has not been one from good to great; rather, their transition the past couple of years has been one from bad to great (yes, the cumulative losses from the equity hedges from 2010-2020 were bad). The company is generating record levels of free cash flow. In turn, that is driving record levels of spending on (good) investments. My tracking sheet for Fairfax says they invested a record $2.4 billion in 2022 across 20 different companies. I expect more of the same in 2023. And more again in 2024. Compounding is a beautiful thing - when it is done well. I think investors continue to underestimate the results Fairfax is going to deliver in the coming years. The stock is trading today at 1 x trailing BV (Dec 31, 2022) and at 0.95 x March 31 BV (est $690) and 5.5 x 2023E earnings (est $120/share). Despite the run up the past 18 months, the stock still looks crazy cheap to me. And that is because the business results keep getting better. And the story keeps getting better. So, despite the big run up in price, the stock stays cheap. Yes, i know… makes no sense. Peter Lynch loved these situations. ————— The flywheel effect: The Flywheel effect is a concept developed in the book Good to Great. No matter how dramatic the end result, good-to-great transformations never happen in one fell swoop. In building a great company or social sector enterprise, there is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond. - https://www.jimcollins.com/concepts/the-flywheel.html ————— 1.) ICICI Lombard - India Seeded in 2001 Sold in 2017 (down to 10%) and remainder in 2019 for about a $950 million pre-tax gain Fairfax had to sell ICICI Lombard (down to 10%) to invest in Digit 2.) First Capital - Singapore Seeded in 2002 Sold in 2017 for $1.02 billion after-tax gain delivered a compound rate of return of 30% since 2002 3.) Riverstone Europe - runoff sold in 2020 & 2021 for proceeds of $1.3 billion (+$230 million contingent value instrument) 4.) Pet Insurance seeded with two purchases in 2013 and 2014 sold in 2022 for a $992 million after tax gain 5.) Ambridge Partners purchased by Brit in two transactions in 2015 and 2019 sold in 2023 for $275 million pre-tax gain (hasn’t closed yet)
    1 point
  32. They all must be mocked equally. I especially enjoy how much rage the underperforming value bros throw at Cathie. Deep down, they know she’s superior to them…the goal for neither is to really compound, but make money. And Cathie’s biz just had a run like few ever had and it eats at those fucks which is why she gets so much hate. Would I ever invest with her? Hell no. Although I’d consider investing in the parent company who generates fees off the crazy ARKs. But girl has a fuckin business and a brand, thats for sure. Someone like Hussman? Not so much.
    1 point
  33. Hey thank you for the link! It's refreashing to hear some real first hand opinion on china. Corresponds very much to my own travel experiences. Not the typical german "we do it right, so they have to follow us!"-twaddel. Usualy not a Jung & Naiv-Fan. But this is a good one! Bought the book "Zukunft? China!: Wie die neue Supermacht unser Leben, unsere Politik, unsere Wirtschaft verändert "
    1 point
  34. I think if you believe in God, you may as well believe in Santa Claus. You don't need god for anything - how life started out, to explain the Universe, or the foundation of ethics. Santa Claus is a convenient and comfortable belief for 4 year old and god or religion is convenient and comforting belief for adults. I also think ethics are developed evolutionary both on a biological as well as on a societal level. For example it is human (or mamal) instinct to care for our young, because it makes evolutionary sense to do so. If we would be a species that is programmed (by evolution) to eat the weak younglings to let the strong survive, the ethics of a society that this species develops, would likely indeed condone and reward this practice.
    1 point
  35. https://moralfoundations.org/ Jonathan Haidt has some interesting theories and research, covered in brief on that page but in more depth in his book "The Righteous Mind: Why Good People are Divided by Politics and Religion" The gist of it is that evolution baked into us a basic framework of "moral taste buds" -- we can tell when something is fundamentally unfair, or when someone is being disloyal or cheating, etc. Troops of monkeys with an overly vicious alpha will naturally form a coalition to do away with the tyrant. Sic semper tyrannis, since before humans walked the earth. I remember hearing about a study with monkeys where two monkeys are separated but they can see each other, and they each have to do the same task in order to get a reward. The first monkey is given some grapes, a favorite food for them. The second monkey sees this. Then the second monkey is given some cucumber slices instead of grapes for its reward. The second monkey brain must emotionally be screaming "UNFAIR!" because it takes the cucumber slices and throws them in the face of the lab tech. Being able to detect when things seem fair will tend to lead toward survival of the group, so genes which help us detect fair treatment have been kindly baked in through evolution, or they're god-given by his/her magnificent evolutionary process. We've got a lot of pro-social genetic behaviors baked in like that. We experience a thing called "Elevation Emotion" when we witness acts of moral beauty. Just witness this pizza delivery guy who saved a bunch of kids from a burning house and try not to feel elevation emotion. That feeling is baked in to most of us (minus perhaps the psychopaths) But that's just the beginning. Biological evolution gets you to cave man level where life is pretty much like the Hobbes quote "solitary, poor, nasty, brutish, and short." Then comes the cultural dynamics. By the power of language we have shared stories and myths. Using these shared stories, we humans have been improving on our genetic hardware by installing new moral ideas as software "Necktop Apps" (Daniel Dennett's fun term) ... we build agreed sets of guidelines and hard rules for the really important stuff ... but it has morphed over time. We have evidence that very ancient people used to kill children and bury them under the foundation stones of new dwellings. Perhaps their gods told them that it helped ward off evil spirits. Warding of evil spirits was an important concern through the ages. People in England during Shakespeare's time would put three big scratch marks on their fireplace mantles to repel witches who might otherwise descend into the house through the chimney. Even up through the middle 1800s in American folk religious belief, people used "Lamen parchments" with religious power words on them like "Tetragrammaton" and seven pointed stars and funky line drawings, and amulets on necklaces and coin shaped talismans. Why did they stop sacrificing kids? In the Abrahamic tradition it's arguable that they stopped because of the story of Abraham and Isaac and the ancient interpretation which is essentially: "This story proves it's okay to stop killing kids, and kill rams and sheep instead." To our modern minds it is so far out of context that it just looks like Abraham had a psychotic break and turned murderous on his kid. Just because something is "made up" as you say, it doesn't mean it has no power. Money is "made up" and yet Osama Bin Laden, a great hater of all things USA, had suitcases full of dollars. Why? Because if everyone else in the world agrees that you can trade suitcases full of green paper for real physical goods, then it's real. The superpower of humans is our ability to have millions or billions of people share the same ideas and act according to them. Take the story of Job in the Old Testament. I don't think that guy really existed and I don't think god and satan placed bets on how far he could be pushed, etc. But whether or not Job was a real person is like the least interesting question you could ask about the text. The interesting questions are along the lines of, "What were the authors grappling with and how did this story serve their community? What can we learn from the story?" Can anyone name one single way in which the story of Job is _more_ powerful if there is a real human versus an allegory. Our lives are uncertain and temporary. Against this backdrop, the human mind craves certainties. I admit I grew up believing Job was a totally real person, but I find the story so much more interesting when I'm not painted into that corner of believing an all powerful being did a good guy so dirty just because of a bet. There are plenty of hints that Job wasn't real, by the way, which is why I changed my mind. (There are multiple different endings to the story right there in the text of the old testament, for example -- and this is a pretty good indication that some editing was taking place.) One more way to look at it: Aesops Fable of the Tortoise and Hare. Does the power of that fable derive from the fact that a real tortoise one day had a race with a hare and won because he kept at it slow and steady? Nope. But when you're having a hard slog of it one day, you might remember the old story and feel a bit of inspiration to just keep plugging away at your task and eventually complete it. The inspiration came from the story, not from a literal physical race. At least when the atheists think there's a right thing to do they can be expected to give you their rationale. Because they aren't leaning their moral authority against the idea of a god, they basically _have to_ back up their arguments and try to be convincing. On the other hand, I have often experienced an exasperating form of know-it-all-ism where religionists think they get to declare "This is what is right, both for me and for you. Because god." And then they walk off like they think they just dropped the mic. I don't think any human deserves that much unquestioned loyalty. That kind of environment would be an incubator for religious tyrants. When you boil it all down, why would you say our sense of morality needs to be founded on a god, I mean the kind that exists even when nobody believes in him/her? Why does that provide anything better than what we've got which is a set of moral rules that have evolved with our civilizations? If there really does exist an unambiguous Absolute Morality with a real god backing it up, then which god is it and what are the North Star rules? And more to the point, why would those rules be _more_ valid if the god is real?
    1 point
  36. Sorry, didn't mean to turn this into a Chris Bloomstran thread. @Viking does an even better job in the weeds on FFH than Chris on BRK anyway. Bottom line is that to the extent it's true that the blowup risk is higher in FFH than in many peers - which I might push back on - I think we are getting paid more than adequately to take that risk with the current setup. A reasonable base case IV/share ~2 years out is ~30-40% higher than today's, driven by a high earnings yield and buybacks. And BTW the stock still trades at less than half of today's IV. IMHO.
    1 point
  37. It seems you a right. Though it is only a benchmark, in his case it would be much better to use just to SNP in EUR including dividends or some ETF (SXR8 or VUA1), available as real alternative for investor. At least this is how I understand a benchmark:). It is interesting that I have never spoted this issue with benchmarks myself, despite of following RV and his results for quite some time, maybe because it seems totaly out of character for him.
    1 point
  38. Well, I'm fully invested and prefer it when the economy is doing well. So, I hope you've got it right Greg.
    1 point
  39. Very good news for Fairfax on the reinsurance renewal front. Cha ching... Here is RBC's Summary: January 1 reinsurance renewal observations: January 1 saw a banner renewal period for reinsurers. For property classes, it was a true hard market rate with property catastrophe reinsurance rates up +37%, the largest rate gain since 1992. Casualty and specialty reinsurance rates were up around mid-single-digits and far higher for loss-impacted accounts. Reinsurers were able to secure better terms & conditions (retentions, deductibles, losses covered) and held back capacity in some areas. A vintage year alongside 2013 and 2006. There are few times we can say this but we think reinsurers got what they wanted (and possibly even more) at 1/1 renewals. That may not be true in every line or geography but it was as strong an outcome as we have seen since at least 2013 and probably back to 2006. Howden reported that global property catastrophe rates averaged +37% at this past 1/1, which was the largest percentage increase since 1992 (post Andrew). For comparison sake, property cat rates were up a solid +9% at last year’s 1/1 renewal period. Howden also noted +45% average rate increases for direct & facultative business and +50% for retrocessional cover. For casualty and specialty lines, it was more of a routine and normal renewal period with rates up around single digits give or take. The word “stable” came up consistently in the commentary we have heard thus far. Rates were generally described as being up somewhere in the mid- single digits so not that different from what is happening in the primary market and certainly nothing that is overly disruptive. Overall, appetites to write casualty reinsurance seemed high at this past renewal period and we expect capital was willing to be deployed to a fair number of accounts and risks... In all, this renewal period was everything that reinsurers had hoped for after so many years of high hopes but no material pricing actions. While last year’s 1/1 renewal period was constructive, this year was a true hard market for many classes and not just property cat risks. High cats, inflation, reserving concerns, and lower capacity drove measured changes in pricing as well as terms & conditions. We will be interested to see the extent to which our covered companies with reinsurance books (AIG, Arch, Fairfax, and W.R. Berkley in particular) pressed on the accelerator and aggressively grew their reinsurance books at 1/1. For now, reinsurance is having its day in the sun.
    1 point
  40. Amazing that FFH's NTM p/e is right around ~10 years lows given the performance of the past couple years. Maybe it's just confirmation bias as this imperfect metric squares with my view that the stock has gotten much cheaper relative to the growth in sustainable earnings power even as the stock price has nearly ~2.5x'd from pandemic lows. What a ballast for portfolios since the pandemic. It looks like they're set up better than ever to go from strength to strength... here's to a fairer low-teens multiple / $1,000+ stock in '23. Knock hard on wood.
    1 point
  41. Yes. That remains very true. Prem had appointed Paul Rivett as President. After Paul left, Peter Clarke was appointed President. Peter has been with Fairfax forever. So if something happens to Prem, Peter Clarke would take over as CEO with Andy Barnard overseeing Insurance as he does and Wade Burton leading Hamblin-Watsa. I would imagine Jean Cloutier would take over as President and COO...who has also been with Fairfax forever. You also still have many of the old guard like Chandran overseeing India...Brian (bond guru) Bradstreet overseeing Fixed Income investments...Jennifer Allen as CFO...pretty much all of the VP's at all of the insurance subs have been in that position for 10+ years. You have Lawrence Chin backing Wade at Hamblin-Watsa and if there ever was a pinch, Francis is a phone call away! Lastly, the board of directors retains a lot of the old guard experience like David Johnston, Timothy Price, Brandon Sweitzer, while adding newer, younger capable directors like Lauren Templeton. The Watsa Family would remain well represented with Ben and Christine on the board. I also wouldn't be surprised to see Paul Rivett back on the FFH board some time in the future, as Nordstar is now under arbitration and will be divided. I'm far less worried about Fairfax than I would be with Berkshire. The current team under Prem has shown years of success. If something happens to Buffett, Charlie and Ajit...that's three guys that are completely irreplaceable. Prem as a leader is irreplaceable, but the investment and insurance teams at Fairfax are as capable as him. Fairfax will keep rolling as usual, just shareholder's won't have that voice and face to lean on which is mighty comforting like Buffett & Charlie. Can someone run National Indemnity like Ajit? Can someone make acquisitions like Buffett? Maybe they will just roll all of the excess cash flow to Ted and Todd, and let the CEO's of each sub make their own acquisitions rather than leaving it to the parent company. It's simpler at Fairfax...everything flows through Andy to make insurance acquisitions or Wade to make investments. Prem and eventually Peter just gives the ok. Cheers!
    1 point
  42. It's also the investment vehicle or key holding for many long-term employees, shareholder friends of the Watsa's, extended family of the Watsa's, the current President Peter Clarke, long-time shareholder and fund manager Francis Chou, and yours truly! I know all of the Watsa family and I could not hope for better partners. It's why this site is called Corner of Berkshire & Fairfax and not Corner of Berkshire & Markel or Corner of Berkshire & Brookfield! They may not always do exactly what you might want them to do, but they do try damn hard and listen to their shareholders. Cheers!
    1 point
  43. I've found that the bottom in the past was always when more and more boardmembers (whether on COBF or the FOOL BRK Board) think there is no bottom or start to feel the despair. We aren't there yet, but I've certainly noticed more boardmembers thinking the world is about to blow apart. Cheers!
    1 point
  44. Powell !! Did someone said Colin Powell. it is a joke folks. No need to get all worked up.
    1 point
  45. The US has no problem doing business with authoritarian regimes. Biden just went to Saudi Arabia. If anything they are far more repressive than China, especially towards women. US is fine with manufacturing pivoting from China to Vietnam, another communist authoritarian regime. Plenty of examples throughout history of the US allying with dictatorships to further its self-interests. The problem with China today is not so much it's model of government but that it's powerful enough to challenge US dominance.
    1 point
  46. As for the intend of this thread, I found the issues with these wish list is that once those quality stocks fall to your target prices, a lot of other stocks have become so much cheaper relative to your quality list, so you end up not buying them despite lower valuations. In a way, valuations are always relative and there is an opportunity set of stocks out there that one can buy. That makes buying quality stocks always a bit difficult for investors with an inclination to value.
    1 point
  47. This podcast is pretty good on the Fed /interest rates and the impact on the economy: https://podcasts.apple.com/us/podcast/odd-lots/id1056200096?i=1000563964446 In addition, Aswath Damodaran’s recent presentations on YouTube regarding inflation and impact on equity valuations (discount rates ) are also very good. FWIW, when you listen to the odd lots podcast , the guests opinion is that the Fed has implicitly removed the Fed put, meaning that the Fed may ignore stocks going down for the time being, and just limit themselves to looking out for orderly credit markets.
    1 point
  48. Speaking for myself. Parsad, I thank you for sponsoring this board to share valuable ideas and information. Whatever you need to do to keep the site operation is probably okay with me, as my tolerance for noise is fairly high and the signal level is sufficiently high enough to keep me coming back. Maybe there are other high roller out there that where every second lost can mean the difference of a few million lost. I find that long term investing is fairly tolerant in regards to timing and think that if we can weed out short term thinkers by adding more ads, I’d welcome that. Again, thanks for keeping this site operational. From rolling my own sites, I know this stuff is not cheap, time and resource wise and I hope others can appreciate that.
    1 point
  49. @Gregmal In terms of actually answering my specific questions here is what i got out of your post: 1.) “The only exception I'd make here is Atlas” 2.) “Resolute is a piece of junk. The guy has owned it forever. I remember in 2013 hearing how Prem leadership and direction there was a bull case and the stock was at $16” Now I totally get why you think Fairfax’s equity holdings are dog shit. Learned tons. Thanks! ——————- This comment was especially insightful: “but I dont want to get into arguing individual names one by one because that misses the point” Got it! Wink, wink… —————— PS: and the Gamestop name drop was epic!
    1 point
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