Parsad

If you have a 80% chance that the stock rises and 20% chance the stock falls, would you not take that bet every time? And if it does fall, would you not simply double-down? No zero, double zero popping up! Cheers!

Sometimes reputation gives you the opportunity to make a ton of money because markets/analysts ignore a company regardless of fundamentals. The three companies I've made money on over and over at different times without holding the stock through dead money periods are Overstock.com, Fairfax Financial and Biglari Holdings (and its predecessors) in order of magnitude return. Notice anything similar between them? Misunderstood or eccentric CEO's with businesses that were not completely easy to understand. And they went through several periods of challenges (self-made and otherwise) where markets discounted them significantly and there was an opportunity to buy cheap, and then sell again as markets recognized fundamentals were improving. I'm not saying hold Fairfax forever...but it was dirt cheap last March/April and into the winter of 2020, remains significantly undervalued as fundamentals show dramatic improvement, and will end up above book at some point in the next year or two, where I will cut my position in half or more depending on how high it is valued. Cheers!

Yeah, this makes zero sense to me. After Berkshire bought GenRe, Berkshire's earnings were killing it for the 1st year...even excluding GenRe...yet the stock traded at the lowest P/B in its history. That's when I first bought Berkshire. And guess what, the stock didn't move until the tech bubble ended where it went on a tear. Fairfax has been here before. Just because it didn't move on a good earnings report, doesn't mean the stock is dead money. If you are a value investor, you know that at some point in time, the market will eventually reduce the spread between market price and intrinsic value. IT ALWAYS HAPPENS! ALWAYS! The emphasis is that this contraction is as consistent as gravity. Sometimes it happens as a company performs poorly, and intrinsic value decreases to where market price is. Often, it's the reverse, and completely out of favor stocks with good fundamentals find their valuation increasing closer to intrinsic value. We saw this in the fall/winter of last year and into spring of this year. It wasn't simply Reddit investors, or millennium money, but investors rotating to undervalued stocks...sometimes well exceeding fundamentals and intrinsic value. The market does this. It is efficient over time, but extremely inefficient during shorter periods. When people were buying earlier last year, you said that FFH was a dud. Then it ran up a bit and earnings started to prove real. Now you are saying you almost bought now after the earnings release. Please don't buy once it is over $750-800 CDN, because that would be the wrong time to buy and add a position! Cheers!

This is astonishing. The share count was diluted by ~10 million shares. It translates to ~$5B dilution or ~50% of the market value. Imagine what it would do to the share price if there was a buyback vs. dilution of the same. I think this is one of the biggest reasons for underperformance over the last 10 years. I hope the situation reverses in the coming decade. There was a lot of dilution at Berkshire when GenRe was acquired...about 25%! And GenRe was not a good investment for a few years, whereas Allied is double the size since Fairfax acquired it and writing good business. While the Fairfax shares weren't overvalued in the Allied transaction, they were also acquiring a good insurer at fair value. After years of shareholders complaining about Fairfax buying shitty insurers and trying to turn them around, once they actually pay fair value for a good insurer, you guys complain about dilution! Cheers!

When the largest shareholder is the CEO, dilution is always going to be of paramount interest to him/her. There were some shares issued for the Allied purchase and then there were some incentive shares issued for employees, as well as a slew of new directors added to the board. I'm pretty certain the board and Prem is careful about this stuff. Cheers!

Due to my sheer laziness, I don't bother doing these calculations! They are aiming for 15% ROE annualized...I assume in a bad decade, they hit 10% ROE annualized...$546 USD book value...$55 USD per share earnings. Simple and easy! No fuss, no muss! If I can do 10% ROE with no leverage in my sleep, Fairfax should be able to do 10% ROE with a leveraged, conservative portfolio and good underwriting. Cheers!

One caveat: The industry will start to fail on #1 probably some time late next year around when renewals start. You will see insurers start writing lesser quality business to make up for low rates, and to beat topline returns year-over-year. It always happens. Thus the growth you are seeing at Fairfax. They will write massive amounts of business relative to their size and their peers, but will slow when prices aren't as good. With Andy Barnard at the helm, you won't see Allied or Brit fall into this trap going forward. They will not write bad business to retain business. Other Fairfax subsidiaries have already proven this in the past two cycles. Cheers!

It was Alan Parsow who asked the question. His family has known Buffett for decades...Buffett used to buy his suits from Alan's dad at their store. Alan has also known Prem for a long time. So he asked what all shareholders wanted to know! I don't know who that guy from the Q1 call was, but he was an ass! Cheers!

I would imagine if you believe assets are overvalued and rates won't stay low for much longer, you will get to deploy capital/float at much better long-term investment terms. If they were only writing short-tail business like a general insurer, yeah it wouldn't make sense. But Fairfax writes a ton of long-tail insurance where they will have that float for 10-20-30 years. I remember Francis telling me a long time ago, "People don't understand how much long-tail insurance Fairfax underwrites." Cheers!

Nice take away...that's about what I got from hearing the call. Regarding the hard market, they expect double digit growth into 2022. It was clear from the conversations between management, what we've read from CEO's of other insurers, this hard market has real legs. They also pointed out that their portfolio is well-positioned to capitalize on rising rates without rising rates having any significant negative impact. Cheers!

I have a feeling BB will be taken out, and Fairfax is waiting for that type of opportunity to monetize it. They've never been the type of company to cut bait and run. They are going to see the process through. But from what we can see with other assets, they are trying to monetize what they can. I suspect they are waiting for someone (perhaps OMERS at some point or someone else) to make an offer for BB and take over the reins. Rather than simply sell the shares and leave John Chen and BB to fend solely by themselves. As a shareholder, it is hard to watch and see them forgo an opportunity to capitalize on the BB price rise, but at the same time, the integrity is why I like the company and management, and people want to do deals with them. Cheers!

Probabaly! The analysts have an average target price of $569 CDN. They'll talk to Prem on the call tomorrow and then raise their target prices early next week. I would imagine the current high target at $626 CDN will become the new average target price next week after the stock overshoots the current $569 CDN average target price. That's how it works sadly! Cheers!

Their average cost on the buyback in Q2 is $50 USD per share higher than where it is presently trading. I would expect them to be buying back shares tomorrow and next week if they are allowed (no blackout), and the stock doesn't jump $100 per share. Absolutely no reason why the stock shouldn't be trading at $640 CDN or better. Above the current highest analyst target of $626 CDN. Cheers!

Should surpass $600 USD a share by the end of the 3rd Q in book value. My average cost was $450 CDN, but it has risen to about $485 CDN after adding 33% more to my stake last week and this week. Cheers!

And all of this with certain businesses still struggling and recovering like BIAL, Recipe, retail businesses, etc. $19B in cash firepower ready to do some damage in bonds and equities when the opportunity arrives. Then finally you have the total return swaps on the FFH shares...what are the gains if they hit $850-900 CDN per share by 2025? Based on 3rd Q book, even if you mark their shares at 0.85 of book value as presently they are...you are talking about $630-640 CDN per share now. Trading at book now would be $735-740 CDN. Could be a homerun like the CDS investments in 2009 by 2024-2025! Cheers!

Just killing it! The two best turnarounds I've seen in the last year have been Handler at JEF and Prem at FFH. Nearly doubled Viking and my expectations! Nice job Fairfax! Cheers!

+1! Cheers!

Ok, my friend Andrew Wilkinson was an early investor in Shopify...so I've known about Shopify for a long time and followed it. But the valuation was always a huge problem for me. I wasn't making fun of it or anything, but I couldn't and still can't accept the probabilities that it can continue growing at the rate it does and that any investment will be worth that risk. This is the problem Prem has...and to a lesser extent Buffett has. Prem was happy to buy a mature GOOG, as did Buffett with AAPL. I had no problem buying AAPL shortly before Buffett did. So that's the first problem. Second, whether it's Shopify, AAPL or as I did with OSTK, if the P/E jumps over 40...I'm out! That's just my nature, and I find it distressing to hold onto positions that become fundamentally expensive. Meanwhile, my friend Andrew keeps increasing his net worth by the ten's of millions every quarter. He's built that way! I'm not. Incidentally, Andrew is a keen student of value investing, owns Fairfax and Berkshire...but he's built differently...maybe he's the next evolutionary step for the value manager of the future! Cheers!

If only we could...if only we could! Cheers!

Eric & Greg, do you guys own Shopify?

I fully agree with this. I wish Fairfax was capable of this...but they aren't. Doesn't mean it isn't a great investment from time to time. Nor does it warrant the denigrating comments by many about Prem. He's built a friggin' empire from nothing...copying Buffett's wheel to the best of his abilities...at 18% compounded since the beginning. If he can do it at 15% for another 25 years...it may not be Berkshire, but it would be closer than almost anyone else. That deserves a bit of respect in my opinion! Cheers!

ORI is more of a general insurer and does a lot of title insurance...as far as I know, they do very little, if any, reinsurance. Quite different than Fairfax...more comparable to First American or Fidelity National. They will do well most of the time and then get killed when housing corrects. It is more stable than FFH and most other reinsurers. It will get you a steady 8%-9% over time, but it will never do 14%-15% ROE simply because it isn't as leveraged...4-1 versus 6-1. Cheers!

All these transactions have to go through Ontario's securities exchange and the TSX legal department for approval before Fairfax can move ahead with the transaction. For example, even with us, when PDH does anything like loan capital to subsidiaries, transactions with parties that are not arms length, etc., our legal counsel needs to send a letter to the BCSC and TSX for approval. That means before Prem does any of the above transactions with related parties, it went through Paul Rivett (President), Peter Clarke (COO and compliance), the OSC and finally the TSX. So to blame Prem solely for any lawsuits seems to be a bit of a stretch. Yeah, he's the CEO, he was the star witness, so he gets the blame. I'm not saying they were in the right. If the judge says they were wrong, then they were wrong. But there are more voices and hands in these decisions than just one person. By the way, Buffett had his similar run-ins as well. The SEC investigated Berkshire and Buffett when they acquired Wesco and they paid a $115K fine. They also had a similar run-in when they acquired the Buffalo News and anti-trust charges were filed. Buffett also got dragged into the middle of the Solomon's failure and GenRe's dealings with AIG on finite insurance where they paid a $95M fine...neither of these were Buffett's fault, but he was CEO when the problems happened. Cheers!

Me neither. I don't think Prem knows either. But I'm often pretty comfortable with the ones I know are 90%...and I'm guessing Prem does too. You and I made two substantial bets at the same time...ORH Preferreds being bought back by ORH...that looked like a 90% winner to me, and I'm guessing you felt similarly. The other was our bet on BAC...which we both did extremely well on (you just killing it)...but I would say at the time, that was a 30-40% probability of success. Again, going back to an insurer...which bet would they make in a big way, and which would they maybe bet smaller on? Using that example, I do agree with you, Prem could make a number of smaller bets on some growth stocks like they did with GOOG, instead of the large single bets like on a BB. Maybe base hits is what investors want to see more of rather than the occasional homerun. Food for thought for Hamblin Watsa! Cheers!