racemize

With respect, you've looked at the sharecount over the past 20 years, right? Do those numbers suggest to you that buybacks have truly been a goal, or do those numbers suggest to do that acquisitions have truly been a goal? So, yes Prem has talked about buybacks on several occasions and the sharecount keeps trending up. With that observation, I take his comments about Teledyne with a hefty dose of salt. As I said, my money is on more acquisitions rather than buybacks. And, as I noted, this isn't necessarily a bad thing. If your own shares aren't the best use of your cash, then don't buy them. Allocate cash to the best opportunity available. Finally, if the world does evolve as Prem has suggested, in the short term a good chunk of the $2.5b cash held in the holdco could be used for a buyback. I've thrown out the round number of a Bil, but it wouldn't be outrageous to bump that to $1.5 Bil which would still leave a respectable holdco cash balance. For that kind of magnitude there's a practical decision to be made about the vehicle. The normal course issuer bid is a boiler plate filing every year, but it could actually be used in this case. I just think a tender might work better for the potential volumes that I've posited. On the other hand, if it's just us$400m or something, the normal course issuer bid would probably work fine. SJ Just to be really clear what we're talking about here. You said this: He didn't talk about it anywhere close to 50% of the letters. He didn't promise a bunch of buybacks like he is now and not follow through as you suggested. That's all I was addressing as it didn't sound right to me. I'm not making any assertions other than to address specifically what you asserted with the facts of what he said in the letters. Moreover, I didn't say he didn't issue shares--he did. I'm saying he didn't before say "we are done with buying companies and are going to start reducing sharecount". In fact, as I quoted, in 2010, he said "Please do not think we have forgotten about common stock buybacks. We have historically purchased significant amounts of our stock, but have recently chosen instead to buy some excellent companies which became available and that we think will create significant intrinsic value in the future." So, to me, it seems pretty clear that he talked about acquisitions and then made some. Now he's saying those are no longer necessary, and he's talking about buying back shares. This all seems reasonable to me and does not show a pattern of talking one way and doing another with respect to share buybacks.

So, if I've understood you correctly, your money is on repurchases rather than acquisitions? I'm clearly on the other side as Prem always seems to find a target that he finds attractive.To buy back say $1b of shares, the normal course issuer bid hardly seems adequate. I guess we'll see whether there's a tender offer. Time will tell SJ Mostly, it seemed you were making a few assertions about how often FFH has talked about buybacks and whether they followed through, so I wanted to see if that was accurate or not. It seems to me they haven't talked a big game and not followed through before, as you suggested.

On the topic of sharebuybacks, I have all the letters, so I searched over the whole period for buyback/repurchases (similar to ourkid over last 10 years). Here's what I found: From 1988-1992 they repurchased 34% of outstanding shares. Discussion of this buyback happened afterwards mostly. Mentioned buybacks again in 1996/7, first mention of Singleton. Did not emphasize they would do it, just that they would consider it first. In 1999-2000, they talked about repurchase similar to 1988-1992 period. Looks like they repurchased ~1,000,000 shares. Then had to issue shares to 2005 due to the well-known issues. Repurchased 1,000,000 shares in 2008. In 2010, they said "Please do not think we have forgotten about common stock buybacks. We have historically purchased significant amounts of our stock, but have recently chosen instead to buy some excellent companies which became available and that we think will create significant intrinsic value in the future." Then in 2016 buybacks were mentioned and in 2017, there was a strong emphasis on buybacks that we all read. So, outside of 1999/2000 it doesn't seem like they overpromised and underdelivered on share buybacks given what they said.

Many of us want's to ignore their long term record (from the beginning) because they're influenced by their first two years in business which were anomaly (fraud). I realize you appear to only post in FFH to bash Prem and the investments, but just for everyone else who is interested, compounding rate for book value per share excluding the first two years is ~15%. Seems pretty good to me.

Right, I was saying the active investors cause it in that case (or just random perturbation in a smaller case). Perhaps this is the effect I mean--momentum clearly already happens, but if the passive indices reinforce or amplify that momentum, then it could potentially cause issues both during the bull market and the reversal after, since I'm assuming it would work similarly in reverse.

Here's Einhorn talking about it, which is a reflection of how I've thought about it. Perhaps this just isn't true though:

Well, so first off, I'm not confident on this, and I've been trying to wrap my ahead around various passive indexing thought-experiments for a while now. But for clarification on what I was saying: My Day 0 vs Day 1 example was to show that companies that had the same initial weight (and therefore the same initial allocation of dollars) will end up having different dollar demand based on price perturbations. Thus, I wasn't saying larger vs smaller, I was saying same IV, but price disparity ends up causing a change in the dollar amount of incremental demand by passive investors. Or saying this another way, if there are $75 going at the company that was $50 and $25 going to the other company that was $50, then the passive index is reinforcing the price change, not dampening it. However, I think vinod is pointing out that for every $100 it is just 1 share of demand, so in a "share demand" framework, there isn't any difference (rather than the dollar amount above). Perhaps though, the indices to exacerbate momentum, they just stabilize it. Or saying it another way, these momentum artifacts are just what happens normally in late stages of bull markets and don't have much to do with indices.

I think it makes sense if you continually add money and that prices are fluctuating. It effectively makes it a momentum strategy. Let's assume two companies in an index fund, each at $50. so Day 0: 50/50 When money is added in that day, then the index is equal weighted, so the extra demand from purchases would also be equally distributed, which I think is what you are saying. However, let's say earnings for company A are amazing and earnings for company B are really poor, so the prices of the two companies change in response (which admittedly requires some activists setting the price here) to $75 and $25. So Day 1: 75 / 25 Now, when new money flows in, it flows in 75% towards A and 25% towards B, resulting in higher demand for A than B, so the relative price change would not be the same for the two companies. So the demand for A has increased dramatically than B over the first day. If it increases price more, then it would get worse with each new dollar. I guess you don't even need the first day if you just started with the second day. But you could imagine a scenario that a small perturbation would cause an imbalance of demand for a company due to weight in the index. That's how I've thought about it, but perhaps I'm missing something.

I see where you get to this, but the market does not value other businesses this way (e.g., see MKL or BRK)

Interesting observations, and as it happens to coincide with better underwriting results in recent years, one cannot really complain. AWH ceding that much, yet performing so poorly this last Cat season is shocking however. I guess at the very least, it is not as much a gem as it was touted, and Andy Barnard has a lot of work to do whipping their systems and processes into shape. Again, they said that it was one casualty item, so if what they said is true, it isn't based on cats.

Yes, it’s in the DJCO section at the end.

Munger compilation with notes I found from value walk at the appropriate point: Edit: apparently this wasn't properly shared, trying again: https://drive.google.com/file/d/0BxTPR9eP5nWeeXd6X3hjMy1pZDg/view?usp=sharing

On the call, they said that adverse development was from one casualty claim (it must have been a whopper). Otherwise they are happy with underwriting and that standards are similar to FFH.

Or he just picked it up from Brookfield Business partners. That's where I found it.

Other favorites: MKL, BAM, FFH

No, I meant the unmarked gains on the various equity accounted entities (mostly the Indian investments). They list the amount in the shareholder reports.

Come off it! This selloff hasn't created the kinds of values that would make them go all in. Unless it's in the 2y treasury for a yield pickup over cash with little duration risk. They'll keep leveraging their position as a preferred provider of capital but the fact that the S&P is back where it was 6 weeks ago isn't going to tempt them. Agreed. We seem to have collectively forgotten what constitutes a sea-change in the markets. That's what FFH is waiting for. As you said, the bump in short term interest rates won't hurt them any, but I don't see many bargains yet in equities. The one exception to that might soon be FFH's own shares. Another few days of this fun, and we might be bouncing around BV, which IMO, would be a decent place to initiate a large repurchase. SJ If you add in the unmarked gains I think it will get you to book value or less.

I preordered it. I never read the old one, so I figure this is the one to read to catch up anyhow.

The last time I valued Amazon (last year), I made some guesses about future growth rates and margins. The result was that Amazon would either double or half. So, my answer is, "Things look uncertain". No margin of safety for me.

I've heard that Peyto is best in class in this space, and if they all got hammered, it seems like that would be the one to consider for those of us that are not experts in the area--any thoughts there? Also, when I started looking, it seems a lot of cash flow comes from the hedges--any simple tricks to figuring out what FCF is without hedging at current prices? I realize that the idea is that prices will recover (and hence the point of the hedging), but knowing the cash burn helps indicate how long they can survive it seems like.

added!

Ok updated and reordered--1999-current: https://drive.google.com/file/d/1iM_iPSg43o_MyZXr-E3TZPYdbGnTd9lL/view?usp=sharing

Ok, here's one PDF of everything so far. Missing AR from '15 and any ARs prior to 1999: https://drive.google.com/file/d/1iM_iPSg43o_MyZXr-E3TZPYdbGnTd9lL/view?usp=sharing

Does anyone have the set of ARs that are recent? I only see the last couple of years on the website.

From the Q3 report there are 27,940,806 - 166,300 = 27,774,506 effective outstanding. That adds $12.6 to BVPS.