modiva

There are any number of reasons why a stock is cheap. Fairfax Financial was trading ridiculously cheap for 5+ years. Microsoft was trading ridiculously cheap for 10+ years. Many 5-10 baggers were trading ridiculously cheap when brilliant investors picked them up. The thesis can be wrong or right, but can only be ascertained in hindsight. Therefore, it’s important to build your own thesis not blindly follow someone else’s.

I recently added and now have 22% of my public portfolio in FIH. I started buying 3 years ago so I am sitting around 12% IRR. I believe it is cheap, downside is limited (20-30%) but upside is big (200-300%). I’d call this as an asymmetric opportunity. The fundamentals are very strong with BIAL traffic expected to double in the next 5 years. Besides, it’s a good hedge against US markets and inflation. I am prepared to add if the price drops materially and hold for 3-5 years.

Gold, Fairfax India, Physical Assets (Land, Commodities). Interest rates going down (very likely) is good for physical assets.

+1. Congratulations to the Fairfax team and the shareholders!

+6% YTD. FRFHF & FFXDF (50%), Cash (28%), Gold (7%), Bitcoin (4%), remaining 11% in 4 equities.

Thank you @Viking for generously sharing superb insights and willing to debate. Thanks to @Parsad for creating this wonderful forum with such a group of intelligent and wise individuals. Looking forward to continued great run for all the Fairfax stakeholders!! Hoping 2025 to be a break-through year for Fairfax India.

The outlier events apply to any business, and so to the entire stock market. The only protection is perhaps having a % in safe assets like cash/gold/treasuries. Although, today’s safe asset might turn out to be unsafe tomorrow. @Parsad @Viking what are your safe assets today and what % of portfolio do you generally keep in them?

Thanks @Parsad! Greatly appreciate your thoughtful insights and risks to be aware of.

@Parsad @Castanza thanks for sharing your perspectives! I needed to add a caveat to my statement. Fairfax Financials and Fairfax India make up 55% of my portfolio (35% and 20% respectively). My goal is to keep it to around 50% for long time, as long as three conditions are met: 1) The investment thesis doesn't change. Long-term market and company fundamentals, differentiators such as culture, >15% growth 2) Do not exceed any single business sizing to go above 30%, ideally 25%. I view Fairfax Financials and Fairfax India as two different businesses. 3) Stock doesn't get too expensive or too cheap. Consider reducing if it gets too expensive and adding if it gets too cheap, as long as the first two points holds good. What is expensive or cheap can be subjective and varies from one investor to another. I am comfortable with the stock price range: 1x (cheap) - 1.5x (expensive) of book value. Based on the estimated book value for 2024 end ~USD 1100, I am comfortable with making no changes to my portfolio as long as the stock ranges within $1100-$1600 in the next year; and adjust these numbers and review hypothesis every quarter. It's not easy to find undervalued businesses that have strong investment hypothesis as above. All I need is to identify 1 such business in a year but I struggle. 80% of my portfolio is in Fairfax Financials, Fairfax India, Berkshire, and Cash/Gold.

Fairfax Financials and Fairfax India make up 55% of my portfolio (35% and 20% respectively). My goal is to keep it to around 50% for long time.

That’s what I just did. It didn’t work out yet for early investors…but the odds are in favor of recent investors. It may take a few years for the upside to pan out but the downside is limited.

That’s great! Congrats to you and to your daughters for getting into the investment world at a young age guided by their dad!! It can’t get better than that.

Thanks @Viking for generously sharing excellent insights, very much appreciated!

@Viking Thanks for very insightful analysis. While I agree with all of your points, I think the CAGR since inception is misleading metric to look at. What do I mean? If we remove the first 5, 10, 15 years, it is very clear that the numbers don't look stellar but rather average. The low starting point gives a high boost, but once we normalize it, the numbers look average. For example, the float/share since 1985 grew at 18.4% compounded, the growth rate reduces dramatically once we exclude the initial years. The float/share since 1995 grew at 11.4%, and since 2000 grew at just 5.5%. Disclosure: I have 35% of my portfolio in Fairfax, and 15% in Fairfax India.

Thank you @Parsad for the commentary!