gamma78

@Viking i suspect quiet in India primarily because it is actually challenging to establish a position in large enterprises given restrictions in a variety of industries. It will be a long game, but as India continues to open up (has been opening up since 1990 incrementally) there will be a larger and larger opportunity set in a country where incomes will be increasing at the pace (and faster) of China in the 90's and Western Europe in the 60's/70's. I think the spring getting loaded might well be the correct analogy. And while the India story today seems tied to Modi, the reality is we are talking about a development that has been in the works for 25 years and that has another 30 to run, so compounding like.......bunnies?

@juniorr "this is what makes you want to hold FFH for a long period of time" yes absolutely, I am in this since 2020 and for the very long haul, and I see a huge opportunity here. My observation (which is not a critique) is that BRK moved over time from cigar-butt investing (similar to turn around) to choosing compounders and letting 'em rip in large part because over time size dictates that methodology. Finding increasingly large and numerous turnarounds won't work. Letting high ROIC investments work for you instead is magic, because stock returns over a long period will be a proxy of ROIC - when held long enough even multiple paid actually makes little difference. We can and should be interested in FFH being more "levered" via float than BRK - but the rapidly increasing float size means the team needs to find more equity investments. Better have a few large high ROIC companies than a bunch of Poseidons in my opinion. Otherwise we will rapidly find that 15% is unsustainable. I agree with @Viking that capital allocation has been great at Fairfax in the last years. But that, while not fully recognised by the market - is actually still rear-view mirror (as in it means nothing towards the next marginal investment). I am talking about what has to come next mathematically for their track record in allocation to hold true to recent performance. India is the third or fourth largest position. I think it might be the one to grow.

I think its singular that Prem actually called out the lesson he says he learned from Munger in the AGM, meaning that finding compounders you don't touch for a very long time is important. The reality is that as Fairfax grows their capability to turn over their equity portfolio and consistently find new winners will decrease very very very rapidly due to sheer size. And that will mean that finding companies that retain earnings and compound at high rates for long periods of time with no further intervention will be a necessity for sustained growth. That is the genius of the BRK model, beyond the leverage. "never interrupt compounding unnecessarily" was Charlie's rule. I would certainly accept the point that compounders are somewhat seen retrospectively - with survivorship bias. And in this regard BRK's compounders are obvious today and were less so 20-25-30 years ago. Even Buffett himself says that ultimately his returns are largely dependent on only a handful of investment decisions held for a long time. And holds up Sees Candies as a company that - beyond its current worth in the books - has spun literally bilions in cash used elsewhere. Some traits though - capital light, significant reinvestment opportunity with high returns on capital - should be visible immediately. Where do we see businesses like that in the Fairfax portfolio? Eurobank is a brilliant decision over last 5 years, and banking can be a good business when well run. Poseidon? Does that have high ROC across a cycle for good? CIB? Doesn't sound the same. I am intrigued by the expanding investments in India. That sounds a bit more like what in retrospect 30 years from now looks like "long term compounders". BIAL and India airports in general are a generational opportunity. Prem has clearly said that banking / financial services in India should grow at rates well above GDP growth. That sounds to me like signalling that Fairfax India and indian investments have an outsized role to play. I know that on a retrospective basis things won't look like KO, AAPL, MCO, AXP. But the question is, what do we think the equivalent will be? To me it looks like Prem believes India is a big contributor to continuous compounding.

wow i didn't realise the scale of some things until I read @SafetyinNumbers article. BRK has 5x the float of FFH but 33x the market cap. Really points to the importance that choosing continuously compounding equities is going to have going forwards. To replicate BRK returns in the future FFH can't really be trading in and out of companies with cyclicality and otherwise poor economics. They need the compounders over long periods of time. My reflection on FFH is that I don't really see these just yet - and more importantly in the past that mentality of owning the type of business hasn't really been there (i.e. more focused on "trades" than compounders). The investments in India are pretty intriguing with regards to long term high return on capital compounding.

@Viking am I right in saying that taking out the minority interests actually has a benefit on capital allocation as well? I think I recall Prem saying that when an insurance sub is majority and not wholly owned then Hamblin Watsa does not manage their float investment. If that is the case then an associated (not small) benefit would be management of the float (not just consolidation of result). Not 100% sure I'm right.....

Oh.....and this came out today which is worth keeping an eye out for... https://www.thehindubusinessline.com/economy/logistics/adani-gmr-and-fairfax-in-pre-bid-process-to-develop-puri-airport/article68110793.ece

Hey guys.....newbie to writing on this board (though I've been following for ages and ages.....thank you so much for the wonderful learning opportunities here). There was some time ago discussion about "high quality" investments vs low quality investments that Fairfax has vs the Berkshire portfolio. One of the statements by Prem that caught my eye in the Fairfax AGM was the following, on what he learned from Charlie Munger.... to me it sounds almost like they are thinking about how in the future their returns will depend increasingly on operating income from high return on capital investments they can carry for a long long long time rather than only on float increase and investment (with great CR%). Sounds like replication of Berkshire over time. "The big one was just -- Charlie made this point years ago, 2 points. One was that, earlier on, like us, they depended on stock gains, bond gains. In fact, it's like when they began years ago. And then they got the ability to be a railroad company, Burlington Northern, to get operating income, but one of the biggest [ pluses ], biggest questions that -- answers that you suggested was that you have to have patience. And when you see an opportunity, you're going big when you understand it. And when you don't understand it, just stay away. So all insurance people, of course, when they saw that opportunity, we double our premium, right? Interest rates, when we saw the opportunity, [ we went 4 years ], but going forward -- it's a very good question. We're big now. And the idea of buying good businesses at fair prices, big positions, compounding for a long period of time, we're focused on that, looking at that. We've got good investments like we've had with Kennedy Wilson and with Seaspan Poseidon, but we'd be looking at -- and this is not an environment right now that you can find them because the prices are high, but we're looking at getting positions in companies where we can compound for a lot of -- without any tax, as they say. But we learned a lot from Berkshire and Charlie. I mean we followed them for a long, long time."

Interesting article this morning. Wonder if they will start to get concessions after all.... https://www.thehindubusinessline.com/economy/logistics/adani-gmr-and-fairfax-in-pre-bid-process-to-develop-puri-airport/article68110793.ece