bargainman
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Posts posted by bargainman
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I bought some CNA today - as best I can tell, the stock trades at a huge discount because no one really follows this stock. However, at BV of $35 and the stock at $22, I feel there is enough of a discount that I am comfortable.
FYI - The company sold its entire stake in the Verisk IPO - for about $370 million before tax. The deal went down in Q4 though.
The company seems to have also repositioned its portfolio, although there is still some reliance on LP investments (which I am assuming are hedge funds).
Relative to my other holdings, I hold a ton of Loews stock as well. There are 429.6M shares O/S, so at $33.50, the market cap is less than $14.5B. Back out the $2B in the holding company (net cash) - and you are buying assets of $12.5B
With Loew's stake in CNA worth approximately $10B (using book value), the remaining $2.5B gives you a 1/2 stake in DO, 75% stake in BWP, and other assets (hotels and energy holdings). I am not a huge fan of hotels either - but there is no doubt in my mind that the FMV of the hotels is higher than the cost (book value).
Loews is conservative and undervalued. Management owns a ton of stock, so they have a vested interested in the performance.
Good luck to all.
Can you give me the info on how you calculated CNA's book value?
I was looking here at their latest 10Q:
http://sec.gov/Archives/edgar/data/21175/000095012309056086/c54348e10vq.htm
and they say:
Total CNAF stockholders’ equity: 10,769
Noncontrolling interests: 486
Total equity: 11,255
10,769/269 shares outstanding = $40
11,255/269 shares outstanding = $41.8
So where are you getting $35? Also what is the Noncontrolling interests item? Do you know?
Thanks
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The thing I wonder about is "What exactly is broken?" Obviously companies and funds still need the ratings. Today the problem is that the ratings, if I remember correctly, are paid for by the funds that are being rated. That's a terrible conflict of interest. But those companies/funds buying funds still need ratings. One idea I heard thrown around was that the companies who are buying should pay Moodys and others for the ratings. That would remove the conflict of interest. So if Moodys can change the payer, maybe the business still works?
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Rather frigging tortorous isn't it? ???
Are you all kidding me? This is one group of the most dedicated value investors I know of. And yet there are messages bemoaning the mood swings or lack of mood swings of mister market? Suck it up guys and gals! The intrinsic value of FFH just went up, while the price quote didn't. That means we have yet another arbitrage opportunity. We should be celebrating that we can still get FFH at below book, and that FFH just 'went on discount at the mall', not bemoaning that Mr Market hasn't recognized the boost in book value. Come on! You are all one of my sources of inspiration and encouragement, don't be getting into Mr Market's moodiness! :-)
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Ben, I was also sort of dismissing Roubini as a broken clock economist. I had recently read "Fooled by Randomness" where Taleb is borderline spiteful towards economists and the 'sound bites' they produce. His point was that they are just commentators not traders, so really what they get paid for is sounding good and maybe being right, but not making money. And there is a big difference between being right and making money, and also between sounding smart and making money. But I digress. The thing that sort of flipped it for me was that I read Taleb say that Roubini was one of the only economists he thought did a good job. That's about as high a compliment as I could imagine him receiving so it gave me pause...
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I received the money on October 27th.....and I will have a nasty income tax bill to pay on April 30th!
SJ
So what was the justification for making this a taxable event instead of just giving ORH shareholders FFH stock? FFH sold more shares to raise capital for the transaction no? I could understand it if they didn't raise money through issuing shares, but this seemed like a bad decision for shareholders of ORH from a taxation standpoint no? (I remember this being partially discussed before but can't remember what was concluded)
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I'm personally happy about the split. This way options trading will become available to the little guy (selling puts to acquire for example). Also since there are A shares won't there be a built in kind of arbitrage that will keep the B shares from getting too volatile? (I don't think you can exchange Bs for As, but still the arbitrage is implicit in the value of the shares no?)
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Sanjeev, I believe what you said. I just want documentation if there is any. Do you or anyone else know of any?
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Thx for the article oec. The idea of doctor patient relationship is the key and giving the patent the economic resources directly (not via a third-party (be it insurance cos or the govt) is the key to cost control. If the patient does not have direct control of the economics of the situation, the pigs start lining up for favors and those who can lobby the best get the best deals (be it from the insurance cos or the gov't)... If you want to subsidize health care that is fine but let the consumer decide where to spend that money not the third-party... The solution is to let the consumers have the power to decide what a service is worth and provide as few general subsidies as possible...
Yes and no. This is the same argument used by those who advocated the destruction of pension plans in favor of consumer directed 401ks and the like. "let the consumer decide". All good until a year like 2008 where all the baby boomer's 401ks get wiped out. Also it's been proven time and again through behavioral finance studies that consumers and people in general are not rational. I mean that's the whole assumption of value investing. Maybe I'm taking what you wrote and misinterpreting it, but basically it sounds like it would discourage preventative care and encourage people to wait till they had a really costly illness. It would also discourage collective bargaining. A large organized company is a lot better at bargaining than a consumer.
A good friend of mine who is American once explained this to me: "The thing about the US is that people here have an inherent distrust of government. It's in the blood and in the history of the country. I mean we still celebrate overthrowing the British". To me that is a very interesting point. Some people in the US are so distrustful of government it's truly amazing. Honestly I don't know where I fall in that camp. After living through the last election and seeing all the government shenanigans and posturing during the credit crisis, I can't say I blame them. On the other hand the insurance industry is clearly broken. So shouldn't we distrust large industry as much as we do government? Remember Eisenhower's warnings about the Military Industrial complex? (originally he actually wrote it about the "Military Industrial Congressional complex" but he valued his relationship with Congress too much). It seems to me like large companies control government more and more these days. Especially militarily contractors, but also health insurance.
Anyway, sorry for rambling, but my point is that at some stage shouldn't we start trusting our own government? I mean our government is supposed to be our advocate. Industry is supposed to make profit and is selfish by design. But our government is supposed to be on our side no? If it's not then how is private insurance on the people's side? It seems to me that the incentive system is really really broken right now.
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I'm curious, I remember reading things here and there about Buffet and Watsa. Watsa attending all the BRK meetings back before they were popular, and Buffet mentioning FFH at the annual meeting one year. But I was looking for 'documentation' of sorts. Does anyone have any links that document Watsa and Buffet's interactions at all? Surely Buffet knows who Watsa is, but has he ever publicly mentioned him? Just curious..
Thanks.
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What I don't understand is this. People argue against having government run healthcare because they say it will be too expensive, that government is inefficient, and that capitalistic competitive private insurance works better cause capitalism rules. But on the other hand these same people argue that having a large government insurance presence will bankrupt the private insurance companies because then the private insurance companies won't be able to compete.
To me these seem like totally contradictory statements. If private insurance competition is the best most efficient way to go, then they are the cheapest, they will lower costs, and then having the big inefficient government compete against them shouldn't matter one iota, since government is supposedly inefficient and the private insurers will be able to compete against big inefficient costly government. I don't see how someone can rationally argue both statements above, and yet many are doing just that...
Any thoughts?
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Well for something like $60 you can see this other value investing conference online.. Going on right now. They'll also have archives for watching the session later. Their stocks include Biglari, FFH and BAM. Someone else posted this earlier. I was there at the last one 2 years ago and it was quite good.
http://www.completegrowth.com/index.php?option=com_content&view=article&id=98&catid=97&Itemid=22
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Speaking of electric cars you should watch the move "Who killed the electric car?"
http://www.sonyclassics.com/whokilledtheelectriccar
Very interesting movie (although obviously a bit biased). Basically there was a huge surge of electric cars, then all of a sudden they were pulled off the road and crushed, literally. GM never allowed people to own them, only lease them, and never promoted them to a high degree. Then California pulled their no emission vehicle standards because one of the top guys was involved in hydrogen fuel cells (which by the way is supposed to be a complete pipe dream). Oil companies spent money advertising to create FUD about electric cars, and the rest is history. Many many people/companies/industries have a huge interest in seeing the electric car NOT hit the road. Now it'll be interesting to see BYD and maybe others which do have an interest in having electric cars hit the road. Plus back then people hadn't yet suffered the latest peak oil scare, so the public wasn't as interested.
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Ask your broker to request that the options be listed. Sometimes the market maker will add options on request.
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So normally, this divergence should not exist due to the put-call parity rule and arbitrage.
The only rational explanation why it is not happening in this case seems to be extra high lending cost for the shares as Ben pointed out.
Yup that's it. This has actually been going on for quite some time. SHLD is very difficult to short. That's why you can't arbitrage this. I asked a guy who used to be a market maker about it a while ago when I noticed the discrepancy (this was back in April 2009) and he said that that was the case. "the reason the reversal (buy call, sell put, sell stock) is trading so high is that the stock is very hard to borrow…"
I looked at other stocks that had a high short ratio at the time and noticed that some of them did not have as much of a discrepancy. He said that it "Will all be based on how hard the stock is to borrow and the probability of getting called in on the short stock."
So basically if you're willing to be long the stock and take the downside this is a pretty nice 'inefficiency' to take advantage of.
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Yes. The last one was awesome. Small crowd and great speakers last year. They follow SNS, FFH and others. Mostly deep value, smaller cap. This year the speaker line up is different but it still sounds like a really good group.
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Can someone walk me through the tender offer mechanics. I have some shares of ORH. I've been told that i would have to tell my broker that I want to tender my shares to FFH if I want to sell them. Now what happens if I don't tender them? Will FFH still end up buying them out? Presumably there will be some people who just have ORH and just aren't aware of the Tender offer or too lazy/busy to tell their brokers to do it. What happens to those shares?
Thanks.
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LVLT, (equity&debt) especially bought in the last 2 years (Prem did) has a very good risk-reward profile. To me, LVLT is akin to the buildout of the US interstate system which is one of a handful of initiatives that brought the US out of the 30's depression and left an ecosystem for economic growth in the 50 years hence. Now I expect many to write back about the last 10 years of LVLT (all failure, from a ROI view) but I'm all-in. I have learned the key virtue of value investing, patience. Me thinks this is 2-or-more bagger from here over the next 5. How much more is what I salivate about. Risk of going to zero? Well not for 3 more years. Prem, Scott and Hawkins et al have the keys to the company. I really like that!
I'm really curious about Level 3. I've seen them mentioned on the board from time to time. although I can't seem to find many posts on the board now that I'm searching. What is the thesis on these guys? Looks like Longleaf and FFH are two major holders, and looks like they went from 100+ to a buck, but I don't know much else. Has anyone posted a more thorough investing thesis/valuation on them that I'm not seeing via search?
Thanks!
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The question I have, after reading more than half way through "Fooled By Randomness", is: Is Buffet's method for demonstrating the non-randomness really valid? In the book Taleb talks about survivorship bias, and how many times people aren't looking at the full sample set. In the article Buffet specifically only picked 7 *successful* managers. He never talks about all the managers that went through Graham's class and used his methods that were unsuccessful. If they were unsuccessful they never would have made it in the business and would have just dropped out. So that leaves me wondering. The first time I read Buffet's article I agreed with everything he said But this time I'm not so sure. According to Taleb you can't just look at the successful people and draw this conclusion. I mean there are a *lot* of Value funds out there. How many of them actually outperform? is it statistically more than other index and growth funds? Makes me wonder... Thoughts? Has anyone else out there read Taleb's book?
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Here's a dumb exercise: just see what the top of the market cap is going to be 20 years from now. Say we take Exxon, which is about 300 billion in market cap. Say they grow at a rate of 5% a year. They'll end up being about 800 billion. If they grow at 10% they'll be 2,018 billion (2 trillion). So if BRK is about 150 billion today which is about 1/2 of Exxon, it's not unreasonable to think that they'll end up at 1 trillion in 20 years right? (very broadly speaking with hands waving all over the place :-) ) Still that's between a 5 and 10 bagger from today. Which isn't bad but won't make you rich.
Now FFH has a market cap of 6 billion.. Say they are able to grow at 15% for the next 20 years. That would make them a 98 billion market cap company. Seeing that the higher end of the market cap range might be from 800 and up, that's not too unreasonable. That would be more than a 10 bagger, closer to a 20 bagger. Not bad again..
Now say we take SNS. MCD is about 59 billion, at 5% for 20 years it will be 156 billion. If SNS at 336 million market cap today grows at 15% for 20 years we're talking 5.4 billion, so again more than a 10 bagger closer to a 20 bagger. With a lot of room to grow still since that would be no where near the size of MCD even today. If Sardar pulls a 20% a year for 20 years a la Buffet and Peter Lynch SNS will be a 12.8 billion company. Again, not out of the realm of possibility even compared to MCD's valuation today...
Speaking of FAIRX, he has about 9-10 billion in assets today. I'm not sure how much more he can take and keep beating the averages. I think that the largest mutual funds that are actively managed like Fid Magellan and Fid Contrafund are around 50 billion so that's at max a 5 bagger. Say Contrafund goes from 50 billion and grows say 7% a year, that would put it at a 200 billion fund. So if FAIRX got up to that it'd be at most a 20 bagger.. Of course at the way FAIRX keeps gathering assets I'm not sure they get to grow that fast from actual appreciation..
Anyway, like I said, lots of handwaving, but I like testing the boundaries of possibility.. Like back when we had the tech bubble and we had CSCO and MSFT trading way beyond those boundaries...
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Say you were going to retire in 20 years. What 5-20 stocks/funds would you buy and hold/trade around during that time? Just curious what people here thing. A few reasonably obvious choices are:
FFH, BRK, LUK, MKL, SNS. I've heard people say Bidvest too.
Funds
FAIRX, TAVFX.. any others?
20 years is a pretty long time for compounding to work it's magic.
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There are many ways to interpret data. Even Jeremy Siegel the bull stay in equities forever and ever wrote in his book that following a simple 200 Simple moving average ended up lowering volatility significantly while matching the gains of equities over all. The problem with buying and holding an index is that it can be very volatile and that the long term is ok if you're investing for 150 years but most of us don't invest that long. Here are some interesting links:
http://chinese-school.netfirms.com/Warren-Buffett-interview.html
Dow Jones Industrial Average
Dec. 31, 1964: 874.12
Dec. 31, 1981: 875.00
Dow Industrials
Dec. 31, 1899: 66.08
Dec. 31, 1920: 71.95
There's an interesting article here:
http://news.goldseek.com/MillenniumWaveAdvisors/1235315243.php
skip to the bottom: "Living in Paradise"
here is the 20 year commentary:
We can divide the 20th century into 88 twenty-year periods. Though most periods generated positive returns before dividends and transaction costs, half produced compounded returns of less than 4%. Less than 10% generated gains of more than 10%.
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There were only nine periods from 1900-2002 when 20-year returns were above 9.6%, and this chart shows all nine. What you will notice is that eight out of the nine times were associated with the stock market bubble of the late 1990s, and during all eight periods there was a doubling, tripling, or even quadrupling of P/E ratios. Prior to the bubble, there was no 20-year period which delivered 10% annual returns.
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In the 103 years from 1900 through 2002, the annual change for the Dow Jones Industrial Average reflects a simple average gain of 7.2% per year. During that time, 63% of the years reflect positive returns, and 37% were negative. Only five of the years ended with changes between +5% and +10% -- that's less than 5% of the time. Most of the years were far from average -- many were sufficiently dramatic to drive an investor's pulse into lethal territory!
Almost 70% of the years were "double-digit years," when the stock market either rose or fell by more than 10%. To move out of "most" territory, the threshold increases to 16% -- half of the past 103 years end with the stock market index either up or down more than 16%!
Read those last two paragraphs again. The simple fact is that the stock market rarely gives you an average year. The wild ride makes for those emotional investment experiences which are a primary cause of investment pain.
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Not understanding how to manage the risk of the stock market, or even what the risks actually are, investors too often buy high and sell low, based upon raw emotion
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Just keep refreshing and looking at the Ads on this page. She'll pop up eventually in one of the served up ads :-)
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In the recent youtube video of Buffet in the furniture store, he pointed out something relevant I think. He said the US is creating some reasonable number (I think it was 1.3 million?) households a year. There is currently an oversupply of housing since we were building 2 million a year for a while due to artificial demand. But a few things will happen. The growth in households will eventually catch up with the oversupply, and people who are deferring purchases will eventually push that demand higher in the future. I think with Japan, not only was the population aging like in the US today, but population was stagnant if I remember correctly. Also they have a very stringent immigration policy from what I've heard, so growth from that angle didn't help things. So not only was the RE bubble worse and the stock market more inflated, population isn't going up and it's getting older...
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Really interesting call transcript here:
http://www.kineticsfunds.com/pdf/Conference_Call_6_30_2009.pdf
These guys are really interesting. Talking about the exchanges, China, ETFs, the forced selling that went on earlier this year among other things. They have a very unique perspective. They seem kind of like macro value investors.
List of FFH Holdings
in Fairfax Financial
Posted
Is there an easy way to get this for any company? I was thinking I could potentially seek out the CIK and the name, but was wondering if there was a way to just go from ticker symbol to this holdings screen?
Thanks.