Hamburg Investor

I totally agree. If extreme things do happen (like a 1% to 3% rate on average over 20 years), CAGR of ROE (of intrinsic value) should be less than within a (in my eyes more lilely scenario of) an average yield of 4%, 5%. Okay, maybe 3% is not extreme, but 2% on average over 20 years would mean e.g. around 1% for nearly 7 years, 2% for 7 years and 3% for 7 years to get. And if interest rates would be above 3% for some time in those 20 years (we‘re at 4% today), then the rest would have to be even lower; in my eyes that’s really extreme (and you might feel it being normal and that’s just fine, we don’t have to agree on this one!) Interest rates will always act like a gravitational pull on returns. Similarly, there will be other outcomes if the global and US stock markets diverge significantly and deliver negative results, for example. Or if growth outperforms value over 20 years in a meaningful way. The whole idea is based on "between 15% and 20% / 16% and 18%" – i.e. on average – in reasonably normal times. If interest rates rise to an average of 7% over 20 years, then a result of "only" 15% would certainly be disappointing. Or if the stock market rises by 12% per year and value beats growth by a further 5% per year (and interest rates are relatively normal). The point is: I dare not predict whether the future will be more like the 1970s and 1980s (especially inflation and interest) or 1929 (and what came after) or the great booms. Over 20 years, however, I expect the average to be reasonably normal. That's why I'm looking at 20 years; 10 years can quickly end up being completely different. If someone knows what the next 20 years will actually look like, then it is certainly possible to find better investments than Fairfax, especially when it comes to extreme outcomes. But if you were in my shoes, it would be speculation to base investments on a scenario in which interest rates stabilise at 1%, 2%, (8%, 9%).

I completely agree with you. Growth rates were weaker, and for the reasons you mentioned. In my view, the fact that all three performed poorly shows that it was due to these external factors. The insurance business was extremely negative: there was a soft market for a long time. And yields were lower than almost ever before. This combination is, of course, a nightmare scenario for insurers. Has there been anything similarly bad for insurers in the last 100 years as a basis and starting point? I don't think so. For insurers, these were extreme years, and on top of that for value investors from Graham and Doddsville too. Moats were easier to attack because of cheap money. I agree with you: 16% seems like a lot. But my (and your?) feeling is certainly based on the experience of the last 15 years. You can also approach the topic differently: by comparing the multiple of the insurance business in relation to equity. In the case of Fairfax in particular, this reveals enormous potential. This is certainly different (lower potential!) at Berkshire and, to some extent, at Markel. I also agree with @Viking in that Fairfax's combined ratio will be better in the long term lookibg ahead than it was historically in the very good years. That is a major lever! Fairfax was able to deliver a CAGR of 19% although it had mediocre Combined ratios. And here’s another argument: Begore the very bad years with low yields etc. The track record of the Berkalikes was way better and in the 20ies percentages. I am not sure, but wasn‘t it lile 25% for Fairfax before the Voldemort years? In light of this comparison 16% looks not really ambitious. I mean: Isn‘t 11% Roe the average of all Americsn Companies over the very longterm? 26% was 15% sbove that, while 16% is just a third of that. Anyway: Together with "normal" treasury yields, predominantly good equity decisions and the value approach (which will not deliver significantly worse results than the growth approach in the long term; there are always ups and downs), I consider 16% to be possible. Less if conditions remain poor for Fairfax and Co; but also better if historically particularly good conditions arise. For me, the opposite of the 2010s would be the period of high inflation in the 1970s and 1980s: back then, you could get a high return on both premiums. But stock market valuations were also many times lower than they are today. In other words, purchase prices. That were Berkshires best years; and those are underrepresented in the 140 years analogy, as Gairfax and Markels track record just start at the end of the good years. I think the potential of the structure gets visible in the fact, where those Berkalikes stand in comparison to all other stocks. It just doesn’t feel like this could could shrink to an outperformence of e. g. 2% over the market (so 13%).

That’s a fascinating discussion here within the last days about normal earnings, cyclical adjusted earnings etc. Thank you, I learned a lot again! I would have to add something to that discussion too, but when writing I came out with another related topic. I would like to add a different perspective to the question and widen it to how Fairfax might perform in the further future. So please let me highlight a rather simple and even simplified analyses regarding: "What can Fairfax deliver as a return over the next 20 years?" To me, I find that question easier to answer, than the question of how we got there. Will it start with a bad insurance market, or will that happen in the middle or only at the end of such a 20 year timeframe? I just don’t know. Will we experience a spectacular stock market crash in the next five years or only in 20 years? I have no clue. Will we see a collapse or rise in bond returns, or will they remain relatively stable for 25 years („stable“ would be totally ahistoric)? How many hard markets are there to come within the next 20 years? Wild things happen all the time, and hardly anyone sees them coming. But they happen, and suddenly you (at least: me) are completely off track. In any case, I know what I don't know: Exactly that! So, what’s the bigger picture? Is there anything else, how we could get an idea, where Fairfax might stand in 20 years? First, we could ask: Will Fairfax Financial outperform the market? Are there arguments for such a scenario and which? To get to an answer, we could first have a look to the structure of Fairfax. And we even widen it, as the same structure could be found at some other companies. If the structure is good, it should not only have helped Fairfax, right? So we widen that view and ask, which structure helped Berkshire, Markel and Fairfax to beat the market? Let’s call them Berkalikes even though the original is included, but I don’t have any better idea. What are the ingredients, that give an edge to them beating the market historically? In - I think - a lot of peoples eyes, the Berkalikes are having structural advantages over all other companies. There are more, but within the framing of this ongoing discussion here about the future performance of Fairfax, the following points might stand out: They are value investors from Graham and Doddsville. They always try to find new investment opportunities and don’t limit themselves. So they are not bound to any industry, but are able to invest into other areas. They focus on the long-term results, backed by their shareholders (as opposed to quarterly focus; Markel may have a disadvantage in this regard) They are focussing on low combined ratios (instead of focus on growth; that perspective is rather „new“ to Fairfax, as they weren’t focussing that topic before 2011; and it‘s combined with argument 3 – you need a longterm focus; at least, that helps reaching this goal) They achieve higher returns from float by investing a more significant portion of assets into equity than other insurers. (plus culture …) So these are more or less the main ingredients helping the Berkalikes to beat the market. But by how much have they beaten the market on average? Maybe we find something helpful, if we look back? Together Berkshire, Markel and Fairfax have a combined stock market history of around 140 years: Markel and Fairfax have "only" 40 years, Berkshire 60 years (now the "youngsters" ar e two thirds of the original btw). What were the ROEs of these companies when viewed individually? Over a 40/60-year period, the CAGR of ROEs all range between 15% (Markel) and 20% (Berkshire), with Fairfax around 19%. So the average ROE of the Berkalikes over this time period should be around 18% and Fairfax is slightly above that. As a group it stands out, that although very different in terms of the concrete ingredients (e. g. Fairfax focussing on a Greek bank, Indian Airports and a TRS on itself; while BRK invests into Apple and Railway and Energy and Markel into BRK etc.), the outcome is big and fantastic in each case. They are all within the best percent of all stocks in their country over their own history (I think BRK and Fairfax are even in the absolute Top 10 of the thousands of stocks within American/ Canadian stock markets and BRK made even the best?). Each on its own and combined over 140 years. Mathematically this can’t be a coincidence. So we found out: The structure laid out above gives an edge to companies (Okay, I haven't proven, that the structure led to the outperformance, but there is an edge). Okay, but what can be expected for the future? If history is any guide, than the 15% to 20% CAGR they performed would be a good starting point to think of. But maybe we could narrow that? Yes, there’s more: Prem himself addresses this topic when he puts a return of 15% in the shop window; at the same time building in a margin of safety to what has been achieved (namely the 19% CAGR). Would Prem put 15% in the shop window if he assumed that 15% would be really hard to achieve? Everyone has to answer that for themselves. But I don't think so. Will it be easy to outperform the market by the same percentage (so 19%) with a larger company than historically and even larger in the future? I don't think so either, even though there are many positive developments. What is the bottom line? I find few arguments in favour of Fairfax achieving an average CAGR of less than 15% over 20 years in terms of ROE; Prem would be really crushed. An average share price return below a CAGR of 15% (dividends reinvested, calculated without taxes) is even less likely counting in the low valuation: after all, there is currently a significant undervaluation with a P/E ratio of less than 10 and it could go up significantly. The historical 19% is certainly unlikely to be achieved; in any case, that would be too little margin of safety for me. What remains? A CAGR of 16% including dividends can hardly be considered wildly ambitious, and 17% or even 18% if things go really well. According to the rule of 72, 15% would be a doubling every 5 years and 18% every 4 years. Anything in between would therefore be reasonable. In other words, a multiple of 16 or 32 over 20 years on the capital invested today. From the perspective of a private investor, that's enough of a forecast for me. And I'll be happy even if it's only a factor of 8. Especially since Fairfax is extremely secure and not dependent on any one industry. I see Fairfax more as a holding company that is diversified across a wide range of businesses, industries and geographies, with "relatively secure" leverage. A Greek bank. Shipping containers. A cat insurer (oh no, not that anymore... ;-)). An Indian airport. A company that is paid to hold float (as long as the CR is below 100) and a company that is paid to invest other peoples money in India.

"Voldemort period" Makes my day!

Wow, 4 insurance companies (some names I don’t know, so maybe even 5?). Davis was right; insurance is a good idea…

I would bet, that not only „in part“, but over 50 (maybe even a lot more) percent of all sells on this board are only, as the position got too big. I sold, when FFH grew to over 50 percent of my portfolio, I had to trim it back, so that it „only“ was 44 percent after selling. I see a hell of people here writing, that FFH is their biggest position by far, oftentimes highlighting, that they never had such a big position in any investment. My biggest position ever before FFH was BRK, which was maybe 30 percent. At one point you’re getting close to a single bet, if the rest of the portfolio doesn’t mirror FFHs returns. I don’t have new money to invest, so all I can do is sell parts and reinvest - or putting nearly all eggs into one basket. Anyway, with what was left after tax (around 80 percent) I bought shares of another insurance company. The idea was to diversify and buy another insurance investment, which I already had started a smaller position before: Protector Forsikring. They started to go to a new country (France) and roes were already around 30 percent. Price was at a higher multiple back than compared to FFH (normalized around double FFHs pe ratio, so 15). I am quiet happy, as Protector is up 105 percent since I bought in October 2024 and roe is up to 47 percent. They are now close to 9 percent of my portfolio. PB ratio is 6.5, which feels a whole (!) lot. That is not cheap (while one could ask, if a pe ratio below 20 isn‘t okay for a business with roe of 30). Anyway, expecting a roe of 30 percent on average means it should double 4 times in a decade (dividends reinvested). That’s a 16 folder, and even if valuations would drop to 50 percent from todays valuation, that would be still 8fold. The question is, if they can hold the roe, but they have done so for over 15 years (31 percent medium) on average and I trust them. So why not?

No Hurricanes over a long time should lower premiums; so the combined ratio is expected to increase within the sector in such a scenario. "Lumpy" is better than "smooth" if it gets to results, if measured over the years. I think it's important, that the probability of Hurricanes can be included into pricing plus a nice margin. No big hurricanes over a long time could bring in easy money underestimating real risk. So I would say it's important, that outside investors/money are getting the impression, that bad results are a real possibility. In a game, you are naturally not happy when the odds in a game are 5 to 1 in your favour, but you lose every time. So it would be equally bad if the 20 worst hurricane seasons of the next 100 years all occurred within the next 20 years. I don't think pricing would mirror such an unlikely scenario. But a random distribution of three very bad seasons in a row would certainly be good for the following years. So I would think a (very) bad year from time to time is good, but you need the good years in between too.

I am beginning to wonder what the interest rate cut means for Fairfax Financial. The following seems clear: 1. Profit in Q3 report: Lower interest rates lead to a higher reported value (= profit). 2. Lower interest rates lead to less income for the float in future (when it is reinvested) For Fairfax (and all other companies), this means that investments in fixed-income securities become less attractive compared to investments in companies (all other things being equal). But I also wonder: if the risk-free interest rate falls, then the interest rate claims on risky investments such as the insurance business also fall. So do lower interest rates play into the hands of a return to a soft market? At the same time, I wonder: according to my interpretation, won't the tariffs lead to rising inflation in the foreseeable future? All US imports will become more expensive. Sooner or later, this will be passed on to consumers. In this respect, I tend to assume that the current interest rates (which are not even that low) will remain at their current level, so 1% above where it should be. In recent months, everyone outside the USA has been happy to be able to sell to the US quickly; in case of doubt, they are even willing to forego some margin if it means they can sell a little more to the US. The motto is: There will soon be much less opportunities to sell into the US, so it's better to grab now, what you can while you can. They may even want to clear their stocks outside Europe, if the US is very, very important and no other buyer seems available. Anyway, wouldn't an interest rate cut indicate a massive weakness of the US overall? I mean: Interest rates are above your goal, and still you lower interest rates? So one has to assume maybe some "help" from another "thing". From the Fed's point of view, maybe one would then have to assume a (massive) weakening labour market in the future; or what else?! In other words, the Fed would then assume that the stimulus the government hopes to achieve with tariffs (more domestic jobs; that would mean more demand of labour, so higher wages, so an additional pressure on inflation) will not materialise; but the opposite. Maybe I am wrong, just trying to find a read for interest rates to come down. At least that's what I remember from studying economics 25 years ago. In any case, doesn't this mean that future investment opportunities for Fairfax now lie primarily outside the insurance (at least outside the US) and outside the bond business and more in equities? Is this directionally the right way to think, or am I making mistakes in my reasoning?

Thank you for the inside. I am just an amateur investor, reading everything I could from e. g. Buffett, Munger, O‘Shaugnessy, Fisher, Pabrai, Hill, Antonscci, Graham, Mihaljevic, Loomis, Clark, Risso-Gill, Otte, Kommer, Browne, Sheran, Diz, Schwager, Lynch, Greenblatt, Spier. What you write from experience (having to win shortterm) is something a lot of people (not only Buffett) think being the reason, that longterm (amateur) investors having an edge over the professionals. If you have to win every quarter and all professionals do have that problem, than there’s so much focus on that, and so less on the longterm. So finding longterm winners is a sport, that not so many people are doing, than one would think. Like Buffett said, there are so many people trying to rich fast, but they don’t know how to do that. I think, there are some ways (like searching for cheap growth stocks with momentum), but rhan yoj have to move in out, paying taxes (26% in Germany), spreads, the bank. So I decided to focus ob the longterm winners and sticking to them most of the time with a forever holding period in mind. That‘s why my biggest holdings are FFH, Fairfax India, Berkshire, Markel, Danaher, Brookfield, Protector Forsikring, Rational AG, Hermle (two German stocks; very good in their small niches). Just as a sitenote: There are not a lot of games, where amateurs have an edge over professionals of course. You want win a prof in table tennis, nor basketball, nor a musician or an it nerd. I just found one other example recently: Archeology. Archeologist have so much to do with looking under the ground, whenever there’s something being build (streets, buildings…) and to safe what lies there, that there’s nearly no time for them to look at all the interesting spots. So an amateur with time is able to check different old maps etc., while the archeologists have to run from one spot, where the ground is opened, to the next.

Even though one part of me thinks, that predicting Mr. Market is nonsense, another part finds this interesting. Do you have like the results of the other quarters or monthly performances of the last 5 (or 10) years)? I am less surprised about the absolute performance of FFH in Q3 over the whole timeframe; but I am surprised about the relative underperformance since 2020 until today against the TSX and the negative performance from 2020 until 2022 (okay, I am less surprised with 2020. I remember, that was a bad performance; but negative in both 2021 and 2022?!). Yes, the TSX is about all financials and insurance obviously should be the underperformer in Q3 within any "financial" index. Nonetheless I admit, that I have missed four things, that I learn from your tables, @SafetyinNumbers: 1. My guess would have been a positive performance since 2020. While in reality, if accumulated, It's minus 1% over this 5 year time span. So let's call that flat. 2. And I am even more surprised, that FFH lost 22% (accumulated) against the TSX in those 5 years Q3s. I would have guessed at least a head to head race between the Q3s of FFH and TSX, if not a small win for FFH. Aren't Q4 and Q1 historically the best quarters for financials and Q3/Q2 the worst? So my guess would have been, that Financials outperformed insurance in Q3s by a bit or maybe a bit more (as insurance's q3 should be even worse than Financials Q3). But my guess would have been, that FFHs outperformance against the market would have brought FFH a (maybe small) win. 3. In fact the Q3 performance, when measured against the TSX Financial, was literally at the same level in the (bad) 5 years timeframe from 2015 until 2019 (25% accumulated losses) than within the "good" years 2020 to 2025 (minus 22%). 4. And even the absolute performance of FFH was only slightly worse in the bad years against the good ones (an accumulated loss of 12% in the five Q3s from 2015 to 2019, while minus 1% accumulated from 2020 until 2024). I think I would have thought, that FFHs outperformance would have no clear seasonality, other the one to be expected between Insurance and Financial stocks overall over the years since 2020. But it seems, that FFH brought a hefty underperformance in the Q3s, so that the whole outperformance (and the compensation for underperformance in Q3) since 2020 seems to be spread over the other 3 quarters. Looking at 2025 I think the picture hasn't changed. @SafetyinNumbers: Would be interesting to see, what the other Quarters delivered since 2020. I would guess, that Q4s are the best quarters for FFH since 2020, followed by Q1s and than Q2s (all positive). The outperformance against the TSX might be biggest in Q1s, followed by Q4s and Q2 (all positive). I've never seriously analysed this, so I'm probably wrong.

That makes sense, thank you!

BTW: If FFH would be added to the TSX today, it would be a bit above the median component in terms of market cap (54bn CAD versus 45bn CAD), and a bit below the average market cap (54bn CAD versus 61bn CAD). It would be on position 26 out of the 60. It would be about 1.5 % of the TSX60, while the average component is 1.7%. So all in all: FFH would be pretty average. Not big, not small. RBA with a market cap of 29bn CAD would be around two thirds of the median component and half the average company and it would be on position 41 of the 60 and around 0.8% of the TSX60. So all in all, that’s the description of a rather small new component. Looking at it from that perspective I see two things: 1. SIZE: FFH and RBA are clearly different in terms of size: One is among average, the other underaverage/small. FFH is not so far from double RBAs market cap. That’s a big difference. 2. SECTOR WEIGHTING: Although different in size with 1.5% and 0.8% of the TSX60, both are clearly not big enough to move the needle in terms of sector components in a meaningful way. That’s true, even though RBA would bring the sector weighting to a more wanted direction, as @dartmonkey has shown above (thank you!). From this angle I tend to think, they‘d have to add FFH. There is clearly a meaningful difference between RBA and FFH in terms of size. But both only have little impact on the sector weighting; it’s not perfect now, and won’t be perfect after an addition of any of the two. It would be a bit worse with FFH and a bit better with RBA. Not meaningful in my eyes. So as long as size is the main criteria with only „a view“ to the sector balance, to me it would feel wrong letting out FFH for a company nearly half its size, letting out the 26th biggest Company of Canada out of an index, that wants to mirror the 60 biggest companies of the Country. But this is only my thinking. They do what they do (and again I am happy for a low stock price below intrinsic value over a looong time).

At the pace of August, I hold the very last FFH share 12 years down the road.

I don’t know if I get you (what do you mean with „relative size“?) and the whole thing right; but anyhow here’s just an additional thought: The difference between FFH and RBA (which seems to be the most likely concurrent to FFH) is 10bn now and it has been 6bn last year to TFII, if I get your screenshots right. So while the spread today is less in relative terms it is wider in absolute terms (or nearly the same than last year if compared to CLS). I know „spread“ normally refers to relative numbers. But still I think it’s worth noting. BTW: I don’t get, why FFH seems to have doubled in value, following your screenshots, while it hasn‘t in reality? Or is one in US dollar and the other CAD? Another perspective: While the index is up around 23 per cent within the last year, FFH is up double that number (46 per cent). So if „size“ should be more important than sector (which is what they say), than the pressure of taking in FFH today should be bigger than last year. FFHs size has outgrown the average index component again by far, so it would be less understandable today than last year, if they are not getting part of the index; at least, as long as size matters more than sector, which gets only a „view“. Which does not mean I want them to put FFH into the index… As a longterm holder I am happy for every cheap share, that FFH is able to buy back.

Well, what could I say again, but a big „thank you, @Viking!“ I like resdibg all that stuff and by thinking about Fairfax from a lot pf different angles, different perspectives, reading theough rhe „1st 25 years of Fairfax“ the colour of the picture gets richer, one finds more and more small additional details, and it gets more like a movie. So having written that, just one small remark: Of the best invesents I also own Danaher and it’s one of my favorites non-insurers, after the insurers like BRK, MKL, FFH and some others. As United Health even is before FFH, and as it has lost nearly 50 per cent in market value recently, and ss somewhere I read, that BRK started a position, I just thought about taking a closer look. But it’s crazy: United Health has fallen from a pb ratio of 6 to 3. So it’s still around double FFHs valuation. And there’s trouble ahead for them, ROE is shrinking and at 14 per cent now, politics seem not being a tailwind for them at present… So that was enough for me to just stop analyzing… This is not saying, United Health being a bad investment; I just don’t feel it beating FFHs ROE within the next years by miles. So why dig deeper - at double the price of FFH it won’t be the better investment, at least for me.

@Viking Yes, it’s always good to learn and discuss - and reading your input here at cobf is one of the best examples I could imagine - thank you! I think, you read over, that I agree on the 2014 investment in Eurobank being a bad investment. You write „Fairfax didn’t exit Eurobank - Fairfax decided back in 2019 that it was one of the keepers.“ snd that that was a good decision. I agree, that that was a good decision, but it even was a good decision to buy Eurobank in 2015. At least, the returns are good over that decade until today. Maybe we disagree on how we value investments as good or bad. My thinking is, that Prems buying decision in 2015 was a good one. To me it seems a relatively natural view to look at it like this - Prem bought Eurobank end of 2015 at a fraction of book value. Classical value investment. - But it could have been a value trap. But it clearly wasn’t - I don‘t see Eurobank being overvalued today, so looking at the overall returns, seeing the progress my resumee is: That was a good decision. Prem was right in his estimate, that this investment in 2015 was cheap and not a value trap. That to me shows his ability. He is not right all the time (see the Eurobank investment before..), but often enough (if you’re right in 51 percent of all decisions, you’re better than average - Prem clearly is way better than that) - the overall outcome of the buy decisions (excludibg the first one) brought a positive outcome. And management of Eurobank delivered; so better than written before here by me, it not only was a value investment, but Eurobank tirns out to be a compounding machine. Prem nailed it - Until 2021 the investment not really performed well as you say and I agree. But for me the reason was Mr. Market. He was so sure, that greek investements would be bad ones forever and interest rates would stay low forever. He wasn’t anticipating crisis (covid, russia going war with ukraine) and inflation popping up and interest following. I am pretty sure, that without that crisis (or another inflation bearing crisis in the meantime) kicking in, we wouldn‘t look at such a clear turning point like we have with 2020/2021, when looking at Prems performance. He was right, that interest rate wouldn’t stay low forever. But it wasn‘t clear to him or anyone, that things would turn so rapidly. But when it happend Prem anticipated and took his chance brilliantly.

While I agree, that such a view has a lot of information in it, we maybe should be clear, that the decisions made are not only 5 years old. Eurobank was a bad investment in 2014. And a good one in the next years (all before 2020). You are not saying anything else to be clear; I just want to underline, that this timeframe shows the results of "new FHH" from its best site. But clearly some of the big investments were made in 2015 (e. g. Eurobank, Fairfax India). Thomas Cook and Metlen were first purchased in 2012 (2013?), Waterous Energy in 2017. The BDT investment began 2009. So there were bad investments and good ones. I agree, that Prem learned and that it would be a bad idea to extrapolate his bad decisions. Still that doesn't mean, that all decisions in "the bad years were bad". E. g. 2009 and 2012 were "bad years" - but see above: Metlen, Eurobank, Thomas Cook are the 3 best stock performers - and all have been initially been bought in the bad years (while he bought more over the years; but my point is, that Prem was able to make good decisions even in the bad years). Some are only really starting to shine after 2020. But Prem discovered the investments much earlier. We shouldn't forget that. And I know I'm repeating myself: In many of what most of us see as "the bad years", almost all value investors performed quite poorly because growth stocks benefited greatly from extremely low interest rates; and nearly everything else was performing bad. And with growth I mean the few tech stocks. But today we see Eurobank was a great investment (while not the very first investment into it... ;-), but Mr. Market didn't like it until 2021 or so. I would find it weird to think of Prem having made a bad decision in the bad years by not buying the strong tech performers and sticking to Eurobank, Metlen, Thomas Cook. If interest rates would have gone up in - say - 2017, we wouldn't look at 2020 as the turnaround year for FFH. In others words: Some of the great stock findings of Prem are going back to the bad years. But until 2020/2021 even the good decisions weren't performing (and the bad weren't performing good before and after and it was good to get rid of the bad ones). Interest had to get higher to normal levels first - and that was the point, where Prems great stock investments began to shine. Was it predictable that interest rates would remain so low for such a long time? And that virtually only tech stocks would benefit? I don't think so. It's always easy to say in hindsight. Did FFH go too far by making particularly bad investment decisions? Definitely. Was every decision made by Prem bad in "the bad years"? I don't think so (Eurobank, Metlen, Thomas Cook, etc.; those initial buy decisions are coming from that years; the top3 performers in your chart). And it was a great decision to buy more of some over the years by Prem. Has Prem learned from his mistakes? I think so. (and btw: Has FFH's insurance business improved significantly since 2011? Definitely)

+1 And the geographical footprint of FFH is widely underdiscussed in this context not only with insurance, but with its business investments too. FFH was able to invest in the cheapest markets worldwide around 2011; that were Greece and Ireland. The average greek stock had a pe ratio of around 4 and Irish stocks were just as cheap (from memory). So today FFHs main investments span over three continents with a focus on North America, Europe (Greece) and Asia (India). That's totally different worlds and by building expertise over such a long timeframe outside NA, FFH today is able to opportunistically use crashes and mispricings on the stock markets for its (and our) favor. BRK tries to expand to Japan, but those investments are way smaller.

Thank you @Viking, agree. That are really important points this quarter. Below I marked the topics, that I personally find being more "news" than the others and/or have questions or remarks. So the yearly run rate grows from 4.0bn to 4.6bn - correct? So what is this worth? A company producing 0.5bn earnings/year and growing strong? I think a multiple like 12 wouldn't be aggressive. But I am unsure, if/how the 126mn dollar should be adjusted and applied to EBITDA; like at Markel Ventures.). Pac West is just breathtaking! Blizzard Vacatia sounds very good, but I don't understand the dynamics of the business (10%, 20%, 35%). Is someone able to explain what that development means? Do we see normal seasonality in their business? Or is it as they just start so need to find customers, build up structure, Marketing etc first and that needs time? What is to be expected here in earnings for the full year? Any ideas? What's the investable cash FFH has? Is it like 3bn (holding) plus 3bn (insurance subs) + 1bn per quarter, so like 7bn end of q3? My guess would be, that we should subtract a number (2bn, maybe 3bn), as FFH - as Buffett - might be happy having cash on hand as a lifejacket, when things suddenly go into the wrong direction. A than they might find partners or other leverage again. Any thoughts about that "elephant gun"? Bottom line for me: I think earnings of subs, load of elephant gun and the earnings run rate accelerating being the most fascinating stuff this quarter.

Congrats to the winners! @Viking, over the longterm - if you would repeat this survey each quarter over the next 10+ years - it might be a good idea to include that votings into the question, if the mob of cobf is a good proxy for eps over the longterm. As you write yourself someday hidden assets will come to the surface. This will be called "surprise" wildly, while I'd disagree (and my understanding is: you too). It's just a surprise when that happens, but not if. So I will name that "not really surprises" in the following. So with rising hidden value on a lot of different assets (.... FHAPS... another 900mn dollar in q2 FV/CV...) the outs for such "not really surprises" are growing each and every quarter. In other words: While it's possible to be approximately right ignoring this not really surprises, as long as hidden assets stay hidden, it's also clear, that such not surprises will boost eps dramatically in any given quarter, when getting realized. E.g. just trimming the new FV/CV part (2.3bn or 2.4bn dollar) in any quarter by around 8 percent (might be 6 percent or 10 percent, but you get the point...) would give an extra 10 dollar per share. So e. g. in this quarter, that would have brought the 70 to 80 dollar range in as winners. And this is only FV/CV. There might be a little pet insurer here and another asset there, that we just realize with the quarterly earnings reports. If it's not as big as the pet insurance business in 2022 was, my best guess is, that they don't have to inform the public (but I am not sure - when do they have to write a press release - is there a specific number or such thing?!). My best guess is, that directionally who voted between 40 dollar and 69/79 dollar was betting on "no materially hidden assets flow into earnings this quarter", while a lot of the ones betting above 70/80 dollar were thinking just the opposite. At least that's true for me. (... and I was wrong... ) Am I correct, that "not really surprises" get more chances in the Q4s, as e. g. reserves flow into earnings only in q4?! Any other hidden assets, that we'll only see in Q4s?

BRK is my longest holding since 2007; I trimmed it over the years and shifted a lot into FFH, but not only. As you mention Davis and I am a big fan of the Shelby Davis story and have read that with multiple times; do you think there's a cluster risk, if investing 76 per cent of ones portfolio into Insurance? That's were I stand. Sometimes I am asking myself, what the world might bring. There are whole sectors getting blown away by progress from time to time. Or there ROE was materially affected by progress. Think of Kodak etc. And today especially AI is a topic, that from my point of view is very hard to predict. My gut feeling is, that AI will change the world in a way we haven't seen since the industrialization; it will just be in a shorter time frame. So a lot of sectors should change in a way, that is not easy to anticipate. AI just changes the world at so many aspects and really deep, that you not only need first and second level thinking, but need to dig into the third and fourth level; there's simply too many variables changing at the same time and in-depth to be really sure to get approximately right. A typical human bias is to think things are safer than they really are. And I think this danger exists now more than ever. Concrete: Let's say you are a niche insurer having a lot of data. Today AI helps you, as you might be able to drive the cr down. But maybe the moat shrinks at the same time, as it might be easier to get the risk analysis approximately right for competitors with less data? From a pr and Marketing standpoint, being found over Chat GPT, perplexity etc. might get more and more important for companies (in contrast to today, where a good sales team, that's incentivized longterm cr focussed). And for the customer it should get easier to find good value for money, when looking for the right insurance policy; transparency wins in an ai world and that might help customers more than companies. So price competition might get up. And there might get new players on board that today no-one is aware of. Maybe ai will be used to put together a portfolio of risk, communities organizing themselves and writing out insurance together, so insurers might have to bid on portfolios of individual risks rather than how it's done today. New Software is just so easy to be build, so the effort is really low starting such a thing. Don't get me wrong: I think the chances are below 5 percent, that exactly this will happen; it's just there might be so many possibilities, how AI could change the insurance sector as a whole and although each idea has a probability of only 1, 2, 3 percent happening, putting that together the outcome might be high, that something materially could change. The whole process might change and at different points and at the same time. I mean: Who would have thought in 1999, that Amazon would get like a postal service itself or that they might get into cloud getting a competitor of the it giants back than? The probability might have seemed like 1 percent back than to investors; and now we're here. And that was "only" the internet revolution, which was smaller and needed more time to change the world. I started with cluster risk, now I end here. Any thoughts anybody?

Well, as always, you are way more versed on the details than me. I have a vivid memory to the pet insurance surprise some years ago. In fact, that's why I voted for the "above $100" in your survey. Say they might trim the TRS or Eurobank or whatever; we know a lot, and we know, that we don't know everything. So there's more than we know: It's just so much value everywhere and although I think there's good reason to just let a lot of things roll, maybe not everywhere. One weakness of hidden value is, that it doesn't increase your price (which would be good for the TRS) nor your credibility. In other words: Isn't it easier to borrow money on the cheap, when your equity is visible? And as we learned from you, FFH has done a fortune with leverage again and again. So if they'd found really big investment opportunities again, then they might need to make that hidden values (partially) visible. Of course, they'll get a lot of cash these days, but still; if somethings really big... Let's just imagine for a moment, there were a financial number established called "FHAPS" (financially hidden assets per share). That would have increased dramatically at FFH within the last years and it's definitely hard to find another company with that much hidden value. Than FHAPS would be correlated positively to earnings surprises - both the probability and the magnitude. On the other hand FHAPS masks the financial health and true economic value. So the bigger FHAPS, the harder to access borrowing and leverage.

@Viking Thank you again for another deep dive. What you share to me feels like different parts of a mosaic, together building a rich picture; more than I have with any other investment. Regarding q2 earnings: My guess is, that you have a relatively clear picture yourself about the mininum to expect (and I guess, that this is above consensus… ;-)). My general thinking is: There’s so much hidden value (and growing!!!), that we will have so much upside from time to time, when something is sold, which doesn’t regularly run through the earnings. So there’s something like a minimum, that can be anticipated; but the upside potential is just so much bigger than 1, 2, … years ago, as the „hidden value per asset“ has just grown so much on average. Do you agree?

+1 I am not doing any quarterly maths, but that are the main reasons for me to answer „a whole lot“. I am anticipating a very good cr (might be wrong, just a guess.. No major catastrophes). And FFHs equity, Float etc. has grown, while shares have been reduced. So the earnings base is broader and the results are pinned on less shares. BVPS stands above 1.000 dollar. I assume above 20% roe at present. So around 60 dollar per quarter is my guess on average. Q2 should be better for the reasons outlined - so maybe 80, 90 or even more. But that’s just a very rough guess.

It should be the best quarter earnings wise in a while, so I voted for the maximum. Just a gut feeling, I don't do the math. I don't think it'll be below 60$. Maybe in between. But by voting above 100$ I have more outs than with voting 80 to 90 or 90 to 100: 101$, 111$, 121$, $131... and so on...