dartmonkey

He clearly ruled out issuing equity, unsurprisingly, and he seemed to agree with your suggestion of having Fairfax India act as a general partner for 3rd party capital (“So that’s certainly a possibility.”) And by mentioning that (“Fairfax Financial wants to invest in India.“) and that 3rd parties might also invest alongside FFH (“There's a lot of people who'd want to be our partners.")

Yes. I hadn’t realized that FIH had such a big stake in IIFL Capital, but in May they announced their intention to go from 30.5% to at least 51%, so that would be possible, assuming they have acquired as many shares as they intended to. They own 49% of Go Digit so I presume they would need Kamesh Goyal’s approval to make Go Digit a subsidiary, but it’s possible.

Sounds like they would be merged: "offers to make GoDigit and IIFL Capital subsidiaries of the bank."

I respectfully disagree - it’s not really complicated. It just never made any sense, and even Buffett eventually abandoned that way of thinking.

I agree with your Fairfax India example. But I think it's a bit different from Atlas or Resolute. Fairfax set up Fairfax India so that shareholders could invest in Indian companies alongside Fairfax. I have no issue with Fairfax purchasing more shares of Fairfax India from shareholders who wish to sell, but I would have an issue with Fairfax taking out the company to the detriment of shareholders who would have wished to keep the holding. It would not be consistent with the initial promise, so in that way it would not be fair, and it would also make it difficult to trust management if they ever came up with another scheme (like Fairfax Africa, or Fairfax IDBI for instance...) Whereas if someone bought Resolute shares to coat-tail Fairfax's idea, and ended up being bought out at a low takeover price, that's just a risk everyone has to take with any investment and there would be no contradiction with any implicit or explicit prior engagement made by Fairfax, so I don't see anything unfair about it.

Whether the motto is marketing or not, I don't believe that it was intended to mean that they will pay more than they have to for acquisitions so that no outgoing shareholders in the acquired company are disappointed with the price. They wouldn't last long as a public company if that were what it meant.

I think you can even take realized gains on the bond portfolio, which is not part of the 5% return from the fixed income portfolio that Fairfax has quoted. From p.66 in the 2025 AR: (8) The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the fixed income investment to its gross carrying amount at initial recognition. The effective interest rate does not reflect changes in market interest rates that affect the fair value of the fixed income investment over time.

He's a very persuasive guy, and HHH is now my #4 position, after Fairfax, Fairfax India and Interactive Brokers. I don't know if it's a very good plug for Joe-like companies, though. When he mentions the HHH housing business that he intends to build his Berkshire-like company on, it is in comparison with the 'crappy textile company' that Berkshire Hathway is based on. In other words, a cheap, market-hated company whose decline can be managed while building something valuable on top. I don't think Ackman is really saying that HHH is a crappy company but it does have good assets that can be used for building something else. I'm not sure JOE can say the same thing, unless an Ackman-wannabe takes it over and uses its cash flow to buy things with higher returns.

My thinking is similar. They are unlikely to make 15% with this investment but if they establish themselves as reliable partners for retiring owners of good assets with steady returns, they might be able to do the kind of deals Buffett wished he could do but which Berkshire had become too big for. Fairfax can stay small for longer as Watsa has got the Singleton buyback religion far earlier than Buffett did, and this could be a competitive advantage for Fairfax.

It's a good question. I would venture that they are negative in the very short term, but no more so than for other insurance companies. In the medium term, they are good for all insurance companies, but in that sense, maybe not so good for Fairfax, since so much of its investments are NOT in fixed income. Higher bond rates would probably end up driving up combined ratios, as all insurance companies would be making more income investing their float. So low bond rates and good stock returns is probably a better environment for Fairfax.

I'm not sure of either these points. IFRS does require bonds to be marked to market, which means Fairfax would take a hit when interest rates increase, as they have (modestly). But as you say, the effect is not large, because of their short average duration, and in any case, its future liabilities also decrease because they are discounted at the new, higher rates, so my understanding is that it's mostly a wash. As for their fixed income portfolio, they typically invest their float in fixed income, but so do most insurance companies. The distinction with Fairfax is that they invest their equity in stocks and associate and consolidated non-insurance investments, providing for a higher return. Compared to other companies, they do not have more fixed income; float is 1.1x equity for Fairfax, for instance, and 1.3x at Impact, according to the RBC Capital Markets table that Safety has often posted here. So if anything, Fairfax is more diversified away from fixed income and should be less affected by bond rate increases, not more. But I would be curious to hear whether others here agree with this analysis.

I think most of us here are happy enough with the recent ~20% annual BV increases (or intrinsic value increases, if you will) and can settle for continuing 15-20% BV increases, regardless of the temper tantrums the market might take with its multiples. Multiple expansion is icing on the cake, but the cake is value expansion. Since we're at a low multiple already, multiple contraction looks unlikely, at least in the medium- to long-term, and if there is further multiple contraction, it will just make value expansion happen faster thanks to share repurchases. To get back to the original point about whether selling shares might be a good idea, I think this is what is setting this board ahum, as it goes against the instincts of value investors to sell low. It would be nice to have a small position that could be made bigger, but selling now is a horrifying concept for many of us, myself included. No wonder people are shaking their heads in dismay. I don't think it's denial - if the company were performing poorly, most of us would probably agree that sometimes it's better to take a loss than stick with a loser. But if the company is performing well, as is my belief, then it is naturally shocking to think about throwing in the towel at the exact wrong time, when multiples have just contracted.

Your are right, 15% is just average for me in the last 5 years or so because I have had half my investments in Fairfax, so I am spoiled. I don't really expect to get more than that in the long run. The 6% annualized from FIH has been a drag on my returns, and although is the average disappointing return from Indian shares, I really expected to do better, 11 years ago in 2015, especially given the unexpected bonus of having Modi continuously in power since then (beginning in 2014; now 2 more years in his 3rd 4-year term). Even better, considering that the book value return is much better than the FIH share price return, on paper, and that can't diverge forever.

I think the logic of holding this investment is not that another 75-100% might happen, just because it happened before. It is that 74% of BIAL might be worth about $5-10b, meaning Fairfax's 74% might be worth $22-$44/share including the after tax Anchorage gain. Assuming the other holdings are worth about $15, say $10 with the current discount applied, a successful Anchorage IPO might take FIH shares to $32-$54, a gain of 78%-200%. I should probably lighten up this holding which is way too big, with small gains, but I am terrified that the week after I do that, I will be looking at how many million % annualized I lost by selling half just before it goes from $18 to $45.

Yes, it's been a very long wait, but we may wake up one of these days to see that our shares have gone from $18 to $45, when the IPO gets priced, or maybe just when the IPO happens. Even that would only take this 11-year investment from being bad to being about average (I get 15% annualized if it went to $45 tomorrow), but it sure would make a big difference to my returns this year!