giulio

@valueinvesting101 good points. BIAL growth plans were laid out in the latest letter. With the new terminal they have 2.5x more capacity. Plans are 3.5x by 2029 (70 million passengers from 20 million) and 4.5x by 2033 (90 million passengers). "These achievements lay the foundation for BIAL’s plans to grow non-aero revenue by five times over the next decade." Airports are valued at 15-20x EBITDA. Not too stretched for me, but I understand your point. I don't know how to find information about Chemplast parent company (or TCI sub) but these are fair questions to ask at the annual meeting. Time is on their side! This is worth highlighting too: "Over the eight years since Fairfax India’s inception, Fairfax India has significantly outperformed the Indian markets" (AR 2022) FIH book value per share +8.5% US$ S&P BSE Sensex 30 +5.8% G

The way I look at FIH is a dollar bill selling for 50 cents that will grow over time. These are the best investments you can make and the ones I prefer. Frankly, the discount does not bother me too much since they are not going to pay for an acquisition with undervalued shares. How much will the investment compound from here? 10% per share (considering dilution/buyback) seems reasonable considering past results, underlying companies economics and FX. BIAL, close to 50% of portfolio, should earned a guarantee return of 16% on equity non-aereo revenue, e.g. duty free, shops ecc, cargo revenue and real estate may provide additional upside I am not sure, but while UDFs (aereo revenue) are capped at 16% return, non-aereo revenues should not be capped and have higher margins What companies make up the other 50% of FIH portfolio? Small, mid-cap firms, with c. 15% ROE and mid-teens to HSD growth rate, operating in sectors that should enjoy strong tailwinds as GDP (and GDP per capita) increases. Examples: Finance and banking: IIFL Finance --> 16% CAGR in AUM (last 5 years), 29% revenue growth in 2022 and HDD ROE CSB Bank --> income increase 40% in 2022 but the bank will benefit from better management and higher efficiency in the future NSE --> I wished they bought more than 1%! Great business Shipping: Seven Island --> "Despite this volatility, SISL has mostly demonstrated stable and consistent revenue and EBITDA CAGR of about 25% in the last 10 years" Maxop and Jaynix --> precision die casting; this reminded me of an investment that WESCO made in the 80s, Precision Steel. I have no idea how these investments will play out; Precision Steel had its niche, earned good returns for some time but suffered during economic contraction. Not a "cinch". I was impressed by their Investment Selection section in the latest AR. I also like a lot their flexibility to invest along the capital structure, not just equity and management focus on finding great managers to partner with. Many don't seem to be as excited and/or do not believe that Fairfax has the right skills: this is a personal call. WRT the discount and when will it close? Listing of the airport will help but performance will be more important IMO. Mid-teens return should create demand, maybe some roadshow to raise more capital at a fair price? I have no idea. I like the setup and have lots of patience. We'll see. G

8.2M shares issued to satisfy performance fee so far. 42.5M shares issued to raise additional capital as they had good investment opportunities in 2016-2017. I hope someone asks questions about compensation at the annual meeting. I don't understand why FFH needs to take cash fee on unemployed capital + shares for performance every 3 years, since FFH already controls FIH through multiple voting shares. I would prefer that capital to remain in FIH until they find a new suitable investment. I don't think FFH needs more incentives than their big ownership stake. Guess we have to live with it. The investment is still compelling to me. G

https://www.ft.com/content/b556badb-8e98-42fa-b88e-6e7e0ca758b8?desktop=true&segmentId=7c8f09b9-9b61-4fbb-9430-9208a9e233c8#myft:notification:daily-email:content They went for an extra [0.4 percentage points] of yield and blew up the bank,” said the person, whose fund held a bet against SVB. “It is really sad"

The benefits of being part of Brk should accrue to Brk shareholders not Allegheny's IMO. If I buy something and am able to improve its results, why should the seller benefit?

FWIW

https://www.wsj.com/articles/jerome-powell-to-testify-to-congress-on-outlook-for-rates-inflation-e4e7f1e3?mod=itp_wsj&mod=djemITP_h "The yield on the two-year Treasury note climbed above 5% for the first time since July 2007. The yield on the 10-year Treasury slid to 3.974% from 3.981% Monday" Not too bad...this constant upward revision of interest income is making it harder to keep my emotions in check! I am going to read a couple of Howard Marks memos to refocus on being emotionless and rational. G

The only two podcasts I heard with Munger on are the one he did with cnbc after sbf was arrested and the one he did with professor Steve Pinker. I am not sure this is what Buffett was referring to though.

Yes, March 10th is what they said on the last cc

Fairfax have been around since 1985. It survived bubbles, short sellers attack, hurricanes, earthquake and most importantly the GFC and Covid. When natural calamities or pandemics have been in short supply they provided their own by shorting and hedging their portfolio during the longest bull market in history. They have avoided lots of blow-up risk so far and seem in good shape to me. To echo @Parsad comments, Mr. Watsa said various time that he would not do anything where he is "betting the company". His ego (in a positive sense) and his family's ownership stake are the most effective checks in place. I also believe that Mr. Watsa deeply cares about Fairfax stakeholders and employees. He's proud of Fairfax's compensation system and of the many employees who are now millionaires thanks to share appreciation. That said, catastrophes will happen and there will be (big) losses but that's the nature of (re)insurance. Mistakes will be made on the investment side as well, I hope the flowers will massively outweigh the weeds. G

Thank you for posting this gem!

Thinking about value on a per share level, buybacks will also mitigate some decline in earnings. And don't forget India! Fairfax India, BIAL and Digit are high quality business and should generate higher earnings going forward. Lots to like, on top of higher interest income. G

Very good news for shareholders! Succession does not seem to be a problem; talent bench is deep at FFH thanks to their culture and ability to retain top employees. Another advantage not much appreciated by investors.

I did this exercise and arrived at your same conclusion. I have not updated my numbers for 2022, but in 2021 I get net investment + capitalized underwriting profits = $1800 per share value, which seems too high. Calculating look-through earnings I estimated FFH earning power at $1.5B in 2021. At 13x it gives you $20B of equity. These two numbers should be roughly similar: either the BS is "inflated" or the company is severely under-earning. I believe the latter to be true and 2022 seems to be confirming evidence. FFH can easily earn $2-3B IMO. What multiple would pay for this streaming of cash? Highly subjective. "Adjusted BV" valuation and earning power valuation should converge thanks to good execution and lower number of shares, however I am not saying fair value is $1800 per share!

On IFRS17: I found this article helpful https://www.footnotesanalyst.com/prudent-versus-unbiased-ifrs-17-insurance-liabilities/ On Ffh: this discussion on rates, the fed cutting, portfolio duration etc is so boring. Fairfax was cheap in 2020, cheap in 2021 and cheap in 2022. I agree with what @MMM20 said. To own FFH as an "interest rates play" is ok but it misses the point. Earning power is there irrespective of the fed. Same for management, culture and capital allocation. G

https://www.wsj.com/articles/bitcoin-core-maintainers-crypto-7b93804?mod=itp_wsj&mod=djemITP_h "Bitcoin Core developers are bound by their reputations, Mr. Dobson said. Any maintainer who made harmful or unethical changes would likely suffer reputational damage and have his or her access revoked by other maintainers, he said." Sooo relieved!

Mohnish Pabrai highlighted multiple times that the risk of fraud in India is extremely high. You need to be there, have connections, meet people, know how things work (i.e., customs and culture, not bribes!). Fairfax has been investing in India for a long time. I believe this is a big advantage for Fairfax. Don't you think Prem already did so? He is a great sponsor of India and Modi, and said he wants to invest $7B more in the not-too-distant future. Maybe Fairfax has better chances now. Maybe it will look like a more reliable partners to others. I'm optimistic on this front.

https://www.bloomberg.com/opinion/articles/2023-01-26/chatgpt-is-not-much-of-a-pitch-robot?leadSource=uverify wall Matt Levine with an interesting story "DeWi rug pull". Essentially some projects MIGHT make some sense...except for the token part! Still can't understand what Ackman sees in something like Helium

I've been using this one https://draftable.com/compare It saves me time and helps spotting accounting standards changes.

AR 2021: "For our stock price to match our book value’s compound rate of 18.2%, our stock price in Canadian dollars should be $1,335. And our intrinsic value exceeds book value, a principal reason being that our insurance companies generate huge amounts of float at no cost. This is the reason we continue to hold total return swaps with respect to 1.96 million subordinate voting shares of Fairfax with a total market value of $968 million at year-end." AR 2020: "Investment returns are very sensitive to end date values, so with a stock price of only $341 per share at the end of December 2020, our five and ten year and longer returns have been affected. We expect this to change as Fairfax begins to reflect intrinsic values again. Nothing that a $1,000 share price won’t solve!" Also on the TRS, Prem said this in 2020: "since the latter part of 2020 Fairfax has purchased total return swaps with respect to 1.4 million subordinate voting shares of Fairfax with a total market value at the time of those agreements of $484.9 million ($344.45 per share). We think this will be a great investment for Fairfax, perhaps our best yet!" I don't see anything wrong with giving shareholders clues about intrinsic value, especially when the stock is trading meaningfully below IV. Buffett gave clues when starting the share buyback. Ackman provided a share price in its latest report. What's wrong is talking your stock up, with no regard to IV, like someone expecting 50% CAGR on her portfolio!

Hi everyone, this is Giovanni from Italy. I've been following the forum for 2+ years and I just purchased my membership. This place is awesome! I hope I can contribute to keeping the quality of the discussion high with some posts. WRT the TRS, I never understood why it is seen as a repurchase of shares. This is my prospective: if shares are worth $1000 and FFH holds TRS on approximately 2m shares @ $373, then I would expect the company to collect $1.3 billion ((1000-373)x2m) as long as this position is open, assuming they would close it once the share price converges to intrinsic value. What FFH decides to do with the cash flows is entirely up to them. I believe management thought their stock was a great investment in 2020, but they did not have enough money/cash flow to purchase shares. The TRS was a "creative" solution to both their problems: 1) make an investment with superb risk/reward, 2) generate cash flows. The reason I think this was a great move is simple: TRS cash flows can ALSO be used to repurchase shares, driving IV higher, which in turn generates more cash and so on, as long as the position is open. This is why I would be extremely disappointed if parties to the TRS are actually winding it down. Am I missing something? Isn't this the way TRS work? thank you all for the discussion, G