wondering

Jamie Lowry, head of european investments at Fairfax. Discussion is not specifically about Fairfax, but it gives a little insight into how Jamie approaches his investment decisions. Good talk. A case study of the turnaround a Fiat under Sergio Marchionne.

I know its still a bit early (2 months away) but I thought I would start the seemingly annual debate on the Fairfax dividend. If you would have asked me 18 months will Fairfax increase the dividend from $10/share US - my answer would have been - No way! Surprise, surprise - Fairfax increased the dividend to $15/share US last year. Now if you asked me the same question this year, I am not so sure. I think there is a good possibility (50%?) that they raise the dividend to 17-20/share. I know Fairfax will never be known as a huge dividend-payer, but since the stock price has rose so much in one year, I thought the probability that they raise the dividend again so that the dividend yield is 1.3 - 1.6%. (currently hovering around 1%). Thoughts... Related to this is that I listened to @SafetyinNumbers podcasts recently. Part of his argument of why the Fairfax price remains low is that the stock doesn't screen well with the quants. Based on this argument I was wondering if a few years of dividends increases would be looked on a favourable with the quants?

I was wondering if I could get @SharperDingaan's or anyone else on the board opinion on peak oil production. What spurred this thought is a few YouTube videos I have watched with Art Berman, geologist and Doomberg (green chicken guy). In short Art Berman's argument is that the US oil shale production is peaking and should be declining within the next few years. When this happens oil prices should increase substantially because of the inelastic demand nature of oil. The counter argument from Doomberg is that because of technical efficiencies (for example China converting trucks to run on natural gas and thus decreasing the need for diesel fuel), and lots of untapped or not fully exploited sources of oil in the world (for Argentina, Venezuela - if they sort out their political mess), peak oil production is a long way in the future - 50 - 100 years. Doomberg argues because oil is so crucial to our way of life and to our standard of living, governments, companies, and engineers will extreme lengths to ensure the supply of oil is kept plentiful. Here is a video from Art Berman explaining his position. Here is a video with Doomberg debating with another analyst (taking the same position as Art Berman).

The polar opposite analyst of Brett Horn appears to be National Bank's Jaeme Gloyn. New price target $2200 Cdn "Fairfax Financial Holdings Ltd. ( FFH-T -1.16%decrease ) with an “outperform” rating and $2,200 target, up from $2,100. Average: $1,995.65. Analyst: “While one of the strongest performers in our coverage year-to-date, up 44 per cent vs. the TSX Financials index up 20 per cent, we continue to see upside for FFH. With Q4-23 results FFH upgraded its annual operating income guidance by over 30 per cent to $4-billion, consisting of $2 billion from interest and dividend income, $1.2-billion in underwriting profit and $750-million from associates and non-insurance. Two quarters later, the conservatism in this guidance has become clear. As of Q2, run-rate interest and dividend income has already reached $2.2-billion, plus underwriting income and associates and non-insurance are tracking above guidance. Strong H1 results and deployment of excess capital to drive ROE accretion increase our confidence that operating ROE in the mid-teens is sustainable and a valuation re-rate is warranted.”

Article about speculation of Fairfax being included in S&P/TSX 60 https://www.theglobeandmail.com/business/article-this-goose-could-fly-south-straight-out-of-canadas-main-stock-index/ because of lower trading volumes/float several companies could be delisted from the S&P/TSX 60 names mentioned in delisting Canada Goose, Ballard Power Systems, Africa Oil Corp, Westshore Terminals, Algonquin Power according to Jean-Michel Gauthier, analyst at Bank of Montreal names mentioned as possible inclusion into the index include Bird Construction and Fairfax article discussed the fact that the index is already heavily weighted towards financials and natural resource companies "S&P has a degree of discretion in decisions around which stocks go in its indexes. The key criteria it uses is known as “float” – the value of shares that aren’t held by insiders and that therefore trade frequently and are easily available to the public. The index provider does not release its proprietary float calculations. To stay in the composite, a company’s float must not drop below 0.025 per cent, or 2.5 hundredths of a percentage point, of the total value of the index"

Obsidian

https://www.theglobeandmail.com/business/article-ccm-bauer-true-hockey-sale/ " CCM Hockey, Bauer Hockey LLC and the hockey division of True Temper Sports are all being auctioned by their long-time owners, according to two sources involved in the sales process. The Globe and Mail is not naming the sources because they are not permitted to publicly comment for their employers. Bauer and True Temper are attempting to take advantage of buyer interest generated by CCM, the first business to hit the market, according to the sources" " Sagard and Fairfax acquired Bauer out of bankruptcy in 2017 for US$575-million and are targeting a US$800-million exit, according to one of the sources. Bauer’s EBITDA is just more than US$100-million annually, the source said. In early August, Bauer’s advisers received expressions of interest from 11 potential buyers and moved to the next stage of the sale process with eight players, including several U.S. private equity funds, according to the source, and several bidders for Bauer also looked at CCM." "Bauer set a Sept. 16 deadline to move forward with a maximum of four bidders, and plans to be in the final round of negotiations with one buyer by the end of October, the source said" According to the 2023 shareholder letter Peak Performance (Bauer) has a carrying value of $129M and a market value of $226M. They actually paid $154M in 2017. They received $54M in dividends which I guess brought down the carrying value to 129M. At the moment, I can't find their percentage share of Peak Performance.

@Viking Thanks again for all the great posts. A further discussion point on Volatility part II post. Is it your argument that Fairfax is changing the way they hold equities on purpose (ie to reduce volatility on earnings). For example, buying less minority interests on publicly traded stocks, and owning more companies privately. My thinking was always Fairfax are value hunters and they will go where they see value. Period. The way they hold the investment in secondary. They took Atlas private, but it was my thinking that they would bring it back to public markets when they felt the time was right. I figured owning publicly traded stocks makes things easier for Fairfax since they have to comply with regulators etc... Any thoughts?

new Francis Chou video released. He discusses how to analyze an insurance company and other topics related to Stonetrust

For those who couldn't attend the various meetings before Fairfax's AGM, below is a recent video of Fakion Karavias CEO of Eurobank

The gross premiums written / # of outstanding shares is an interesting way of gauging the value of the insurance company purchases which I never thought of. As always, excellent analysis.

Does anyone have any knowledge how the float is invested in the smaller markets where Fairfax operates in? For example, what type of investments do they have in South America or Eastern Europe? Or is this so small, its not worth bothering about? I asked Peter Furlan (one of Hamblin Watsa guys) years ago at an AGM about the international investments. He mentioned that they don't play on FX, meaning that the float from, say Colombia is invested in Colombian stocks and bonds. At least, that was my understanding. Can anyone shed some light on this? Am I thinking about this the right way? My guess is that it is a small percentage of stocks, and mostly government bonds. PS - how the hell do you invest the float in Argentina?!

I went to Bangalore for two weeks for work. I was there 10 years ago. Terminal 2 is absolutely spectacular. Not good, not good for by Indian standards. Burt good by world class standards!!! A tourist destination in of itself. Also used Terminal 1. They have streamlined the enter process since when I was visited 10 years ago. Not perfect, but certainly better than it was before. My Indian colleagues said the Modi "rigged" the system ensuring that the BJP party will rule for the next +20 years. Previous Indian political parties were not really align in the typical left/right model. My Indian colleagues said now that has changed and BJP is the party of the right Please if anyone disagrees, please speak up. I just reporting what my Indian friends told me. Nothing really more insightful to add - Bangalore is growing by leaps and bounds, traffic is worse, and it crazy that FIH is selling at 60% of book when there is such growth and growth potential. The Airport will continue grow nicely.

Norman Rothery's two articles in the Globe and Mail give excellent ratings to Fairfax. https://www.theglobeandmail.com/investing/article-meet-the-megastars-the-best-20-tsx-stocks-for-a-blend-of-value-and/ https://www.theglobeandmail.com/investing/article-the-globe-250-megastar-ranking-2023/ Also mentioned in these articles was other FFH notables (good ratings for Stelco and Fairfax India, poor rating for Blackberry). My question is with articles such as these and analysts upgrading Fairfax, when do we start to see the general investing public (I guess that could include both institutional investments and individual investors) start to change their mind on the prospects of Fairfax. In my work, I see the investment portfolios of clients. Almost all of them have some Brookfield, rarely does a client have an investment in Fairfax.

Truly a great man. I will continue read his nuggets of wisdom.