Parsad

Sanj, You need to go back to the posts in approximately February in this thread where we noted that earnings in the past three years have been characterized by a quality problem. It's all fine and good to note that FFH had a 11% ROE in those years, but then you should probably qualify that statement by noting that a good chunk of that consisted of paper gains (ie, marking the airport to market last December, merging Grivalia and Eurobank, Thomas Cook/Quess etc). FFH management should be given full credit for having created value in all three of those companies, but the value was created long before the paper gains were booked. Thrifty's table, while depressing, is a long enough period to smooth out those lumpy transactions. SJ Hi Stubble, you are correct, but that cuts both ways. You have to also assume that Fairfax's insurance businesses are worth a heck of a lot more than they are carried for in their books. In other words, you could assume that book value per share may be closer to $625-650 USD in reality. So you can't take away growth in book value on one hand and not give credit on the other hand. I'm the first one to say that Fairfax has underperformed over the last 10 years. That doesn't mean that the next ten years are going to be the same. I'm buying at today's prices essentially after the pandemic at $380-430 CDN...not two years ago at $650 CDN per share. I never owned BAC until it fell to $5 in 2008/2009...I still own most of those BAC shares...ten years later. I'm not looking in the rearview mirror when I invest...I'm always...ALWAYS...looking forward! Cheers! Sanj, You are suggesting that FFH is worth ~1.4x or 1.5xBV. I might actually believe 1.2x, because most of the value is in the insurance subs. There's really only about three ways that the insurance subs would be worth much more than book: 1) The subs' underwriting results are so spectacular that their ROE is high enough to merit a multiple; 2) Hamblin-Watsa's investment results are so spectacular that the subs' ROE is high enough to merit a multiple; 3) There is a "hidden" asset that is carried on the books for less than BV. So, in your view, which of those three is currently the driver of a 1.4x or 1.5x multiple? I don't doubt that the market will swing and FFH will eventually become overvalued again and might *trade* at some ridiculous level, but we are talking about value, not market bullshit, right? SJ Hi Stubble, No I'm saying that Fairfax is worth 1.1 times. My numbers are based on book today being back close to where it was at year-end 2019...around $486 USD...or about $610 CDN at 1.25 exchange. 1.1 times $610 CDN gives around $670 CDN per share. And as you know, it's trading around $430 CDN. Just getting back to fair value would be a 55% gain. In regards to the value of the insurance businesses, I was simply pointing out that if you say they benefitted in recent years from the realized value of certain assets, then you have to give some unrealized value to other assets, including insurance. What was Fairfax Asia carried as on the books...what was the total realized sale price? What about Riverstone Europe? You are at zero interest rates...you don't think other insurers will pay up for Fairfax insurance assets? Especially now that they are operating so well for nearly a decade? Cheers!

Sanj, You need to go back to the posts in approximately February in this thread where we noted that earnings in the past three years have been characterized by a quality problem. It's all fine and good to note that FFH had a 11% ROE in those years, but then you should probably qualify that statement by noting that a good chunk of that consisted of paper gains (ie, marking the airport to market last December, merging Grivalia and Eurobank, Thomas Cook/Quess etc). FFH management should be given full credit for having created value in all three of those companies, but the value was created long before the paper gains were booked. Thrifty's table, while depressing, is a long enough period to smooth out those lumpy transactions. SJ Hi Stubble, you are correct, but that cuts both ways. You have to also assume that Fairfax's insurance businesses are worth a heck of a lot more than they are carried for in their books. In other words, you could assume that book value per share may be closer to $625-650 USD in reality. So you can't take away growth in book value on one hand and not give credit on the other hand. I'm the first one to say that Fairfax has underperformed over the last 10 years. That doesn't mean that the next ten years are going to be the same. I'm buying at today's prices essentially after the pandemic at $380-430 CDN...not two years ago at $650 CDN per share. I never owned BAC until it fell to $5 in 2008/2009...I still own most of those BAC shares...ten years later. I'm not looking in the rearview mirror when I invest...I'm always...ALWAYS...looking forward! Cheers!

Also, one thing Thrifty didn't show, was that FFH's earnings in the last three years (2017-2019) was roughly $63 CDN per share...$64.98 USD in 2017, $11.65 USD in 2018 and $69.79 USD in 2019. That's about 11% ROE over those three years. I think if Fairfax keeps things simple...focus on strong, growing, conscientious insurance businesses...a diversified portfolio of quality bonds (not going to second guess whatever Brian does) and undervalued, quality stocks...complemented by quality, wholly owned businesses. With their leverage and acumen, if they just do that, they'll hit 15% ROE long-term. Keep it simple Prem! Cheers!

Is this supposed to be supportive of the bull case? Doesn't look that way to me. 12% ROE gives you a $70 per share net profit...that's today...gives you a 10 times multiple of around $700 per share or 1.2 times book. If they compound at 12-15% ROE for the next 15 years...what would you say is fair value for that business on a per share basis? From a price of $430 CDN today. Cheers! The chart I quoted showed that the EPS in the 5-year range from 2005-2009 was greater than the EPS a decade later during the 5-year stretch from 2015-2019. An earnings/share decline over 10 years isn't bullish in my book. You give the bull case - that they'll today generate good profits. I haven't verified your numbers or Thrifty's, but your estimate is double the recent past EPS given by Thrifty. Sure, if they now start producing double the EPS, the shares should be worth a lot more. Of course. Fairfax hasn't had a problem projecting gains (15% in fact). It has had a problem avoiding stumbles so that they actually achieve them. Sure. I agree with you. But if they have somehow learned from their mistakes (a great deal of which was being too conservative and macro-based), would an investor supposition that the numbers I provided above are relatively realistic? I believe so. Cheers!

Is this supposed to be supportive of the bull case? Doesn't look that way to me. 12% ROE gives you a $70 per share net profit...that's today...gives you a 10 times multiple of around $700 per share or 1.2 times book. If they compound at 12-15% ROE for the next 15 years...what would you say is fair value for that business on a per share basis? From a price of $430 CDN today. Cheers!

Haha! +1! Maybe you are right. The only CEO I've seen as much love and hate for, constantly flipping back and forth, is Elon Musk. And presently, everyone loves him! Cheers!

Hi Libs, You did see the smiley face after the sentence, correct? It meant as a joke between me and Greg. Cheers!

Sanjeev....I was wondering how long it was going to take you to respond to my post. I now have my answer. You are loyal to Prem and I get that. I do however believe that you are not as objective as you could be when it comes to discussing his investing results. BTW...that's okay...this is your board and you can do with it what you want. The job/role of any investment manager is to respond to the world they encounter. Holding onto positions thinking that you are right and the rest of the world is wrong year after year after year makes no sense. At least not to me. We must all adapt. This is a point Gregmal has made on numerous occasions and I happen to agree with him. Yes the amount of government intervention in this magnitude has never happened before. So what. It did happen. It was happening before our eyes. We all had to respond to that. Prem does not get a pass on this simply because of his past successes. Or because he is a great guy and a wonderful friend. Prem often quotes Ben Graham. Did Graham sit on losing "bets" or positions for 10 years? If I recall correctly Graham had a 2-3 year hold period and then he got out of the position if his original thesis did not play out the way he thought it would. Either you follow Graham or you don't. I feel at times that value investors love to sit around with each other and tell each other how smart they are. How stupid everyone else is for not getting it. They seem to take comfort in holding onto their positions in the face of all evidence to the contrary. When Prem says that the last 10 years has been tough on value investors. What does he accomplish by saying this other than being part of the misery loves company bandwagon. For what its worth...I thought Prem's deflation bet was brilliant. The amount invested (I believe something like $500-$600 million) for the potential payoff made sense to me. The fact that it did not work out was okay. I do not however agree with him doubling down over and over again on losing positions in Blackberry, Eurobank and Resolute Forest Products to name just a few. Holding onto these positions year after year because value investing will prevail makes no sense. Gates is a wonderful example. I am glad you brought him up. What about the old man himself... Warren Buffett? He seems to have done okay over the last 10 years. Bill Ackman is also someone who comes to mind. After a tough few years he pivoted and reacted to the way the world was and not how he wanted it to be. I really do not want to go back and forth here. I know I will never convince you of my views and I can assure you that you won't convince me of yours. I still hold a smallish legacy position in Fairfax and hope it does well. I was just frustrated by some Prem's comments in the G&M article and decided to respond to them on this board. Thanks for providing a place for me to do so. First, my friendship with Prem, Mohnish, Francis, whoever else, doesn't make me blind to their faults. So that's one supposition that is incorrect. Other than accounts managed for my brother, mother and niece and nephew, and one personal taxable account, I've owned Fairfax for maybe 8 of 20 years. I don't own any stocks for long periods of time other than PDH...and that's another discussion altogether. Not even Berkshire Hathaway. I buy below intrinsic value and sell above intrinsic value in my non-taxable accounts and my personal holding company. Second, you're comparing two different things: Money management is not what Prem and Buffett do. Their hold period is not 2-3 years...it's forever, so making the comparison to money managers is like comparing apples to oranges. You should be comparing Prem to other corporations...not money managers. Markel would be an ideal comparison for better or worse. Third, you use Greg's comments about adapting. Unlike public corporations and public money managers, their records are exactly that...public. Greg may be full of shit and hasn't outperformed anyone other than Dane Cook. No offense Greg...just saying! ;D Lastly, again you compare to Ackman who uses his fund and SPAC's. Ackman lost nearly 100% of his Target SPAC a few years ago...how do you account for that mistake? Dare I say "FELP". Again, no offense just that Ackman put nearly 100% of the capital into one stock. That's effing crazy! So, let's keep comparisons on a level playing field. Also, you haven't provided anyone who actually got it right. Even Microsoft was in a deep 10-year funk a while ago until they got rid of Ballmer, and like I said, they had access to the one guy who studied both technology and pandemics! Cheers!

Now for the comment about a tough decade for a value investor? How utterly ridiculous! How about he misread the impact of low interest rates and Fed policy intervention? How about he didn't understand the impact of technology on so many industry and sectors. Sitting around waiting for 10 years "patiently" waiting for value investing to be back in vogue means you were wrong with your stock selection. Its as simple as that. Even if his picks shine for the next 10 years on average over 20 years he will be lucky to breakeven on many of his selections. In my view, Prem did not adapt and is now unable/unwilling to admit he was wrong. Did anyone...anyone at all in the entire world...expect this much government intervention over 20 years? From the original Nasdaq bubble popping, to the huge amount of asset buybacks during the Housing Crash, to finally the massive amount of stimulus being applied by almost every country during the Pandemic. History, if it does truly rhyme, told us that the intervention in 2008 would have led to deflation. Prem was more ready for that period than anyone else in the world...they had cash, shorted markets, collateral bonds betting against housing and then were ready for the eventual deflation that never arrived. Theoretically it should have...Jeremy Grantham has laid waste to all the reasons why it should have happened...but it didn't. Now, during the Pandemic, we are witnessing the greatest debt explosion in history with the average consumer having no safety net, nor can they afford any reasonable spike in inflation. How do you get this right? How do you prepare for this? For me, after the housing crash, that was my last macroeconomic bet and I decided I will just buy cheap stocks and forget about macro...and we also pursued PDH at the time. Macro is just too hard to get right! Especially in unknown territory where history no longer rhymes. I'd like to know one guy who actually got it right and understood the disruption that would occur from technology, as well as expected a global pandemic to hit! If you can find that one guy Bearprowler, let me know. The only person that I can think of that may have gotten some of it right was Bill Gates. Cheers!

My friend, Tim McElvaine, who runs the McElvaine Trust sent out his annual holiday greetings. I thought this was probably the best card I've ever received from a peer/business/fund...very funny! Also incredibly well-timed for value investors in general. Enjoy! https://www.valuefund.ca/a-christmas-carol-for-value-investors.html

Arguably, the greatest pilot in history! Should have been the first one in space. Cheers Mr. Right Stuff!

That's all you had to say. I'm fine if you want to critique his performance...but critiquing his integrity just doesn't fly based on what he's done and how he treats everyone around him. Cheers!

You know Greg, that's the dumbest thing you've ever said! I know Prem really well, and he has never acted in a way that would be a "fuck you" to shareholders. He could...but he never has. He's actually one of the most humble people you will ever meet...a perfect CEO in terms of leadership, integrity and honesty. And you can forget about my opinion...Ajit Jain would tell you that! David Sokol would tell you that! The numerous executives who have worked with Prem would tell you that. The hordes of shareholders who know him well will tell you that. By the way, the media came up with the "Warren Buffett of Canada" moniker. Prem has never liked that. Does he make mistakes? Sure. Is he as good as Buffett...he would be the first to tell you he isn't. But he keeps trying...keeps aiming to live up to that standard. That's all you can expect of anyone. So please refrain from talking like an asshole about something you know absolutely nothing about! Critique all you want, but keep the slander to a minimum. Cheers!

Stock market capitalization is closing in on 185% of GDP...long-term interest rates are near zero...you have bubbles in other assets classes...tech stocks are frothing at the mouth with Tesla leading the way at a 1,000+ P/E...government debt as a percent of GDP is hovering over 100%+ for most developed countries...consumers while paying down debt in 2020, still live hand to mouth for the most part...what happens when stimulus stops...I'd say the short position this time may have some legs going forward compared to after the tech wreck when they didn't invest heavily and held short positions. Cheers! After posting my last comment and thought about it a little more I also wondered if shorting Tesla right now actually makes some sense (not that we know that is the name FFH was short at end of Q3). So, yes, I agree with you :-) I’m not a fan of shorting...but if I had to pick one, even though I really like the company and Musk...that would be the one. Extremely overvalued...one miss and boom! Cheers!

Stock market capitalization is closing in on 185% of GDP...long-term interest rates are near zero...you have bubbles in other assets classes...tech stocks are frothing at the mouth with Tesla leading the way at a 1,000+ P/E...government debt as a percent of GDP is hovering over 100%+ for most developed countries...consumers while paying down debt in 2020, still live hand to mouth for the most part...what happens when stimulus stops...I'd say the short position this time may have some legs going forward compared to after the tech wreck when they didn't invest heavily and held short positions. Cheers!

I've never changed my mind about a stock purchase or sale in a day, and then executed on it. That being said, other than non-taxable family accounts, I don't sit on a stock forever...even if it's Berkshire. I buy below intrinsic value and I sell above intrinsic value. You should also think twice about what you call a "turd"...the differentiation between a success and failure is not as black and white as you may believe. See the attached pictures showing Fairfax vs the S&P500 over 10-12-14 years. That dramatic shift between "turd" and "blossom" would only take a reasonable drop in the S&P500 and Fairfax returning to book value...which is pretty likely to occur! Cheers!

You're kidding me right? You were being sarcastic...did you actually sell a day before and bought back today? Cheers!

Happy Thanksgiving All! Cheers!

I just listed the BB convertible debs on my spreadsheet with no value/change in value. Any increase in value in these should be added to the $1 billion. Is it correct the increase would fall in the ‘mark to market’ bucket? Those particular securities are not traded, so they would need to be marked-to-model rather than marked-to-market. I presume that they would be included in the "mark to market" bucket in the same way that the value of the CPI derivatives are adjusted every quarter based on their modelled value. However, we probably wouldn't even notice a ~$50m mark for the debs when they are included with all of the other changes in the $30B fixed income portfolio.... SJ Got it :-) Thanks With the spreadsheet i am trying to group the equity holdings based on how changes in their value show up in Fairfax’s reporting: 1.) holdings where changes in stock price/value flows though to earnings and impacts BV each quarter 2.) holdings where changes in stock price/value do not directly impact BV each quarter ————————— Could be a busy 5 weeks for Fairfax to finish 2020. 1.) Does BAL / Anchorage transaction close? 2.) Does Fairfax Africa / Helios transaction close? 3.) Does Fairfax purchase OMERS stake in Eurolife? (2019 AR said this would happen in 2020) I also wonder if they do not monetize something large to realize some cash. Last year it was Riverstone and ICICI Lombard. Before that it was First Capital. There is also talk about Chen selling Blackberry's telecommunication patents in the range of $350-500M...which if it happens, may push BB's price up further. Cheers!

Dark Waters was pretty good...if you like corporate intrigue, the law, etc. Mark Ruffalo is terrific as a lawyer who takes on a corporate giant...very easy to give away what this is about if I say anything. Also for my Canadian compatriots, CBC's War of the Worlds is a terrific take on the old story. Cheers!

God, talk about you guys blowing stuff out of proportion. The world won't end tomorrow and Covid-19 will be part of history next year. All of the chicken little stuff about lockdowns, etc is just political posturing again by certain people and posters. The real shit will hit the fan when interest rates eventually rise and debt loads explode a few years down the road! Cheers!

Yeah, your out of the contest! If your post's timestamp were only 10 minutes earlier, you would have won. ;D Cheers!

One of the greats! Unfortunately passed away over a decade ago...but his music is still here. Suffered enormously with racism during his life...including even near the end in this day and age! People can be so ignorant and stupid. But truly an amazing artist! Cheers!

Please don't repost the same thread...I've removed the two previous threads with the same title. Simply bump up the old thread with a new post, rather than reposting a whole new thread under the same title. Thanks! Sanjeev

Hey, that's worth a prize too if you are right. ;D Cheers!