giofranchi

Moreover, why do you assume the HWIC Asia Fund results are all we should be looking at? Fairfax invested very successfully in Thomas Cook, in IKYA, and in Sterling Resorts too, which are not included in the performance of the HWIC Asia Fund. Gio

Packer, let me understand better, because I think I am missing something. If you are not willing to pay a premium to NAV, it means you think the 22% gross CAGR I hinted at is not achievable (not even a 20% gross CAGR for that matter! Which is lower than what the HWIC Asia Fund earned NET). Why? You are saying that performance of the HWIC Asia Fund is distorted by last year results which have been too high? Thank you, Gio

--the Demon --[amazonsearch]Born to Run[/amazonsearch] by Christopher McDougall --Lao Tsu, Tao Te Ching Last Saturday I ran 10 km in 50 minutes, and I could have run longer… Who on the board does better than me? ;D ;) Cheers, Gio

I don’t know the answer to this either… But I know: 1) Fairfax thinks the new Indian government has taken the right measures to check inflation, 2) The 20.5% CAGR net of fees and expenses of the HWIC Asia Fund was in USD, therefore they did quite a good job to shelter themselves from an inflation environment that presumably has been far worse than the one we should expect in the future. Cheers, Gio

Packer, I don't know the answer to your question... But please consider: 20.5% is net of fees and expenses... Therefore, gross CAGR should be higher. How much higher? I don't know... To be conservative, let's say 21%. That was before the government of Mr. Modi was elected. How much could a pro-business environment help? I don't know... Let's say another 1%? I think that assumption might turn out to be conservative too. If we could except a 22% gross CAGR, I think you might agree this is a very good vehicle and a worthwhile investment. Cheers, Gio

By the way, Fairfax will receive the Performance Fee in the form of Subordinate Voting Shares if their price is below 2xNAV… To me that sounds like Fairfax doesn’t think any price below 2xNAV is too high… Of course Fairfax doesn’t pay any fee, therefore the price it is willing to receive and hold shares might be higher than outside investors… Gio

—Charlie Munger Nothing new, of course... But find a very good presentation in attachment! :) Cheers, Gio IIM_Ranchi_Lecture.pdf

I would like to start this thread, in which anyone can post interesting thoughts they have happened to read. I think few are the truly memorable sentences in a book. Even a book we have liked very much! If everyone on this board might be willing to share those sentences which have most resonated with her/him, I think all of us cannot but benefit a lot! First by those useful ideas themselves, and second by the reading suggestion that follows as a consequence. So, here is one to start: --Armando Fuentes Aguirre “El Catón” (The Wise Man) [amazonsearch]Thrive, Finding Happiness the Blue Zones Way[/amazonsearch] by Dan Buettner. Gio

I get 7 hours of sleep from Sunday to Thursday, then I get 9 hours on Friday and Saturday night. I have voted 7 hours. Gio

muscleman, I have always wondered... You are not the guy in the picture, are you?!?! ;D ;D Cheers, Gio

Very good question! ;) Here are mine: 1) Why a picture of yourself in each store? What do you think it could accomplish? 2) Managers we admire and respect a lot, like Warren Buffett, John Malone, Howard Marks, and Prem Watsa, practically work for their shareholders for free. Of course they all own a large percentage of their companies. As the percentage of BH you own increases over time, do you see your compensation and the incentive agreement coming down? 3) Rights offering: it is the second year in a row you have decided to issue rights and raise new capital from shareholders. What are the reasons behind such a choice? And what are shareholders to expect in the future? 4) Franchisees: in the 2014 AL you have written that in coming years domestic and international franchisees have already committed to opening a total of 239 units. Yet, recently we have heard some SNS franchisees complaining of too low, if not utterly non-existent, margins. Do you think this ill disposition of existing franchisees towards SNS might cause problems and ultimately decrease the number of new units that will be actually opened? If that happens, how are you going to deal with the matter? Gio

10yr US Treasury Yield back below 1.85%. VersialleinNY has recently posted the following quote: --Charles Munger Know who predicted this?... Mr. Gary Shilling If you want to spend some time thinking about the macro picture, I would strongly suggest to read The Gary Shilling Insight… You probably don’t need much else! ;) Cheers, Gio

Thank you for posting this! :) Cheers, Gio

Maybe :) Well, what I mean is that it just boils down to a business judgment: if those businesses can increase NAV per share at a CAGR of 15% for many years, and they always sell at NAV per share (or below), then it automatically follows that their owners will make a disproportionate amount of money. The role of valuation in investing in this case ceases to be meaningful… Gio

Not at any price. It's being reduced at 1.3x current book and 12.5x 2016 eps which is cheap if it can make 15-20% roe's as the poster above implies, but not otherwise, and he's keeping a holding for that time. No-one (sensible) makes long term investments regardless of a) the size they grow to and b) valuation - least of all Prem who is very value-oriented, and especially not in highly levered businesses when your macro outlook is gloomy. Pete, very well said! :) Cheers, Gio

Just bought it! ;) Gio

5 businesses in 5 years which become a 3x investments in 2 to 3 years won’t justify a 2xNAV price?! Sincerely… I have not done the math! Therefore, I trust what you say, and I hope this ends a discussion I guess no one really cares about! ;) Cheers, Gio

And it is also the same reason why investors in PSH (and FIH) will make a disproportionate amount of money! :) (imo!) Gio

No. I repeat what I have said: if FIH can find one investment like IKYA each year for the next 5 years… than 2xNAV could probably turn out to be a good investment. FFH bought IKYA for 10x fcf while IKYA increased net earnings more than 200% YoY for the next two years... IKYA's net earnings in 2014 have been 3 times its 2013 net earnings! And revenues have doubled last year! Gio

Usually I like neither faith/optimism nor skepticism. If I am wrong about the business, I am ready to make no money or to lose some. But, if I am right, I think I deserve to make some. That, of course, is not the way I think about the business. Of course I don’t know either… But Thomas Cook and IKYA are two wonderful examples, and as I have said, you just need a few more choices like those two to build lots of value. The demographics are there, a new pro-business government is there, India’s overall debt level is quite low: those are three wonderful tailwinds for business! The stock market is ebullient right now? Well, we have lots of cash, don’t we? And will be ready to use it when opportunities come. Imo they will. Then, again, if I am wrong and great opportunities won’t come FIH’s way, I am ready to accept the consequences. Gio

Of course, you are right! :) Gio

Pete, this is my idea of a fair price today: the value I will own 20 years from now discounted to the present with a sensible rate. If I am right about the business opportunities, NAV might grow at a CAGR higher than 12%, and a discount rate in between 9% and 10% seems sensible to me. Cheers, Gio

In theory... But, when they bought into Thomas Cook, I didn’t follow… When they bought into IKYA, I didn’t follow either… Who was smart enough to do so? Recognizing how mispriced their prospects for growth were? Gio

Of course it might come down to NAV, and it probably will (great opportunity to buy more!). But that doesn’t mean I agree FIH is a hyped investment right now. Gio

Yeah thats fine, after some years of operating and buying private businesses it might trade at a premium to NAV because NAV doesn`t reflect the reality anymore. But not in the first years of operating and surely not before they bought the first business. The fact NAV reflects reality is a generalization… Instead, imo, it depends on how efficiently priced the growth FIH is going to buy in the near future might actually be. Of course, my best guess is it will be very inefficiently priced! (Like it has been for Thomas Cook and IKYA) Gio