giofranchi

I have at least doubled the capital invested in VRX, ENDP, and Third Point Offshore. I have made a lot of money with LMCA and OAK. I also have more than 150k Euros of capital gains in Fairfax, with 30k Euros more received as dividends. I have made some money with GLRE. Most of all I have lost practically no money (with the only exception of LRE, which took me by surprise…). My portfolio today: 33% Fairfax, 15% LMCA + LBRDA 15% BH (way undervalued imo!) 9% GLRE 28% very short term US treasuries Gio

My family owns it (me, my parents, and my sister). :) Gio

Well, that is easy to answer: good luck!! Two operating businesses that require almost no capital and generate very satisfactory levels of free cash flow. :) Gio

Yes, of course I have continued adding operating earnings to my investments! But since 2011 operating earnings and investment returns are of comparable amounts. ;) Gio

I started my company in 2004 with 25,000 Euros in equity. Until the end of 2010 operating earnings were much larger than investments. At the end of 2010 investments reached 1 million Euros for the first time, and truly started to matter. I have zero debt. Yesterday the value of my firm’s investments exceeded 2 million Euros for the first time. Little more than a 20% cagr during the last 3 years and 10 months. I am particularly satisfied by the way I have reached such a goal. Always behaving very conservatively and keeping as detached from stock market gyrations as possible. 30% of my capital has always remained invested in Fairfax, and another 20%-30% always in cash. On the contrary, of course, if I had been more aggressive, by now I would probably be at 2.5 or 3 million Euros! ;) Cheers, Gio

Yes… Obvious… Then why when I asked if it were time to buy FFH again I got almost ridiculed??! ;) Gio

I think we have been witnessing more than 10 years of disciplined underwriting by now, that have been basically unrecognized because of acquisitions which suffered from problems of the past. Anyway, I agree: just keep behaving carefully and avoid becoming complacent! ;) Gio

Instead I simply thought that the assets of a company as reported on the books might have been undervalued for whichever reason, while instead Carnegie knew the value of its shares was worth far more because of the earnings the company was going to generate… But I admit it is not very clear… Gio

Of course I had the same thought! ;) At the end I decided NOT to buy the apartment... So, no more need to know what Carnegie would have done! ;D Gio

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Yes, exactly! They could be using retained earnings to invest in the stock market, instead they are using them to buy whole insurance businesses. That will most probably change, but right now it seems to me a good strategy. Gio We're saying different things. I'm saying the strategy is unchanged by the market level of stocks. They buy the company, then buy more stocks with the float. If market is high, they hedge. It might be... But: 1) it seems to me the trend of purchasing wholly owned insurance companies has accelerated in the last few years, expecially in emerging markets; 2) many seem to think FFH is much more static than I think it will turn out to be: if the P/E of the S&P500 were 10, I highly doubt they would be using earnings to buy insurance companies... Gio

Yes, exactly! They could be using retained earnings to invest in the stock market, instead they are using them to buy whole insurance businesses. That will most probably change, but right now it seems to me a good strategy. Gio

I love their strategy of concentrating more on buying whole insurance businesses rather than investing in the stock market right now. Especially emerging market insurance companies, where insurance penetration is still much lower than in developed countries and therefore revenue growth might be much faster and margins more satisfactory. Just look at Fairfax Asia with a 74% combined ratio in Q3 2014. If it builds scale, Fairfax Asia could become an very valuable source of both float and operating earnings to Fairfax shareholders. Gio

Conference Call Transcript Gio fairfax-financial-holdings-Q3-2014-conference-call-transcript.pdf

+1! ;) And I have just bought more today. Cheers, Gio

I think the fact is there is still a very real possibility of a melt up in stock prices, before the bubble bursts. Think of a Shiller P/E for the S&P500 that goes from 26 to 30. This is how bubbles usually behave towards their end. And I guess this is the reason Fairfax is keeping its hedges, but not increasing them. Btw, I am doing the same! ;) Gio

I believe you are right! :) Gio

I agree, and it is exactly what I was saying a few days ago in another thread about FFH. Also Q4 looks good until now, with US government rates that have come down substantially since the end of Q3. Gio

[amazonsearch]Andrew Carnegie[/amazonsearch] What Andrew Carnegie learnt when he was 16: I am reading [amazonsearch]Andrew Carnegie[/amazonsearch] by David Nasaw: a brilliant piece of financial history. Highly recommended! Cheers, Gio

I am aware Fairfax might declare a loss for Q3 2014 in a few days. If that happens and the price declines, I will buy more gladly: I have never had so much cash before! ;) Gio

Because I am getting nervous… During the last few weeks we have witnessed a short market correction… Which nonetheless was painful enough to prompt the FED into saying it is ready to stop the slow unwinding of QE and therefore to resume its stimulus… And the market promptly recovered… I like it less and less… And I demand more and more protection, meaning insulation from the general market. Gio

I am selling other investments to buy more Fairfax today and to keep a large cash reserve. Cheers, Gio

Yes, this is clearer now… but again I don’t see what’s wrong with it…! ??? - For his job as CEO of BH he gets a compensation based on BH operating earnings, a compensation that is still capped to a maximum of $10 million, - For his work as a fund manager he gets a compensation based on how well the investments he chooses will perform, which is exactly how any fund manager gets paid! - How much does the Lion Fund charge BH for managing its investments? Where can we find that agreement? - I think (or at least I hope…) the 2% in the classical 2 & 20 formula is still not there. If it is like I think (hope), the Lion Fund remains cheaper than most hedge funds out there. - I wouldn’t underestimate the importance of operating earnings: from 2008 to 2013 they amounted to $194.3 million, while investment earnings were $269 million. In other words, operating earnings have been circa 42% of total earnings. As Biglari keeps buying whole businesses, operating earnings might even get a larger percentage of total earnings. This means the share of the compensation incentive he receives as CEO of BH, that he has to invest in BH shares, won’t be negligible. Gio