Parsad

Looking at the chart below, we don't really need a catalyst. As we can see, the main competitors for FFH were priced similarly pre-March 2020. Then you had a substantial drop where Fairfax was hit the worst and then Everest Re. White Mountains, Renaissance Re and Markel got hit about the same. White Mountain and Markel have essentially recovered. Everest Re has recovered much of its loss. Renaissance Re and especially Fairfax have a much more substantial distance to go yet. Thus in an insurance industry where all insurers are doing good business and writing 20-25% ROE's I would imagine the market will automatically close the gap between them as institutions and funds reach for yield in a mature stock market. Cheers!

Would you rather own a 40x P/E company with the probability of growing at 25% a year for 10 years being 30%, or would you rather own a 10x P/E company with the probability of growing at 10% a year for 10 years being 90%? Essentially, this is what it comes down to if you are Prem. He wants certainty, a margin of safety and a high probability of success...not high returns with high risk. And with the leverage they utilize, they don't want to see a 40-50% drop in their equity portfolio (for those that argue about just owning SPY), which reduces their ability to write insurance business. We all know that with leverage and float, they only need to hit 4% on their investment portfolio to surpass a 15% ROE if the insurance subs are writing good business. Cheers!

+1! And yes, I did buy a ton when they were in the toilet...and not just FFH. But I continue to buy more FFH even now, because it is relatively cheaper than most other stocks. Cheers!

I thought I would start a new thread in preparation for tomorrow's release. I'm expecting about a 5% ROE based on everything I've been reading from other insurers and reinsurers...so book somewhere around $520-525 USD for Q2. That's on top of any gains from Digit that would be recorded in the 3rd Quarter...which should round book to about $600 USD assuming similar gross premiums written and a $60 gain on Digit. Ending Q2...stock should be about $650 CDN based on book. Ending Q3...stock should theoretically be valued at $750 CDN based on book and peer valuations. Cheers!

No one understood it then. To imagine that a money manager could have the foresight to invest in MSFT because of the development of Azure is like imagining a money manager to be able to pick the winning numbers in the lottery. Especially a value investing money manager who would sell the stock every time it got to a 35-40 times PE. Even Buffett, who is best friends with Gates, didn't have that insight. Also, it's not always we mock what we don't understand. Competitive behavior and market forces can help or kill any business. Look at Beta and VHS...the better idea went the way of the dodo because of the porn industry. AMZN would have lost if Barnes and Noble simply added porn as one of their offerings! Cheers!

I agree with you that I wish they had monetized their BB holding somehow. But I'll defer to Prem to see if there was anything legally holding them back. If not, it was a lost opportunity! That being said, if they see BB being worth far more than $20 a couple of years down the road, I'm ok with that. Although it would be nice to hear them say that. Cheers!

No one was buying MSFT when Ballmer was running it. MSFT went sideways from 2001 to 2014...it's only now with the changes Satya Nadella has implemented and restored growth that everyone wants to own it again. Cheers!

+1! Cheers!

It wasn't their investments like BB that lowered returns. It was their shorts and bets against the market that limited their investment gains. What about Atlas Corp...what about KW...and STLC. The cost of BB is now well below the market price. If it gets taken out by someone at $20+, it will be a pretty good investment...and it's likely it will get taken out as they continue to secure more contracts and deals. Africa didn't turn out well so far, but it's based on the same playbook that built Fairfax Asia and Fairfax India. The only insurer in recent history that has grown like First Capital (Fairfax Asia) is National Indemnity...that's pretty damn good company! Cheers!

Three important things here: - The insurance subsidiaries and operations between 2000 and 2010 were subpar to the likes of WTM, BRK, MKL, WRB, etc. Different story today. - Fairfax spent too much time on macro issues...made them money in 2009/2010, but cost them even more between 2012-2019. Different story today. - One of the most studied periods by Fairfax's team was Japan circa 1980-2000. They've seen what happens to insurers in low interest rate environments. I think they will do better in this environment than most of their peers. I'm not going to lie to you. Other than my taxable account, I've never held Fairfax from 2000-2020. I've never held Berkshire consistently during that period. I don't fall in love with stocks, no matter how much I admire the operations or manager...I put focus on the value of my portfolio...there is no forever hold stock for me. But the periods when I've held these stocks, I've done very well and I believe we're in for another period where Fairfax will eventually be priced 1.15-1.25 times book. Cheers!

Just goes completely against the grain with me. I'm ok with easy money, if it is fundamentally easy money...buying in March of 2020...buying in late 2008/early 2009...buying value stocks in late 1999...buying Overstock at 0.1 of sales...buying WFC because everyone hates it at 0.6 times tangible book...buying JEF at 0.5 times tangible book...and buying FFH at 0.6 times book. But the other easy money today...other than buying a ton of puts on AMC at $67...or a certain Greek bank at 0.2 times book (no, not Eurobank)...not the type of stuff I can hold any conviction for. Cheers!

No idea! I just keep adding and adding. Unlike the past, I don't think there is anything nefarious going on. If anything, I think institutions don't want to be on the wrong side of the trade, and are selling value stocks to add more and more high-flying stocks. As well, you have a ETF's pumping and buying more and more of the stocks in their indices. They have to allocate the huge influx of capital into ETF's and it's a self-propagating cycle pushing up prices in those stocks. Finally, you have millennials and their supporters pushing up heavily shorted stocks with poor fundamentals and high-flying stocks like Tesla, Amazon, Google, Facebook, etc. It's just a wacky irrational market right now! Cheers!

The market disconnect presently is the craziest I've seen since the 1999 bubble, which ended badly by March of 2000. I remember when Berkshire was selling at 0.75 of book value, while internet stocks were ridiculously priced. Today, we have Fairfax trading at 0.75 of book value in solid shape with insurance churning out cash, while meme stocks like AMC with a business being disrupted by streaming, will lose close to $1.5-2B this year, and carrying enormous debt being valued at $20B market cap...down from $35B recently. Just plain silly! Cheers!

Jordan is one of the friends I made due to Buffett and Prem. I met Jordan the first time when he was maybe 25...probably younger...he came to our very first COBF dinner in 2005 in Toronto. Our stories as similar as they are, are only two of probably hundreds we know of on a personal basis. The number of people directly influenced by Buffett and Munger, where it is a life-changing event, may be in the thousands by now. And I mean life-changing...perhaps monetarily for some...perhaps psychologically or career-wise for others...but the numbers are staggering. I can only imagine how many people would have been touched by Buffett's teachings, examples and generosity during his lifetime! Cheers!

PS: I am not sure how to weave Fairfax India into this post. The group managing Fairfax India are doing an outstanding job. IIFL was separated into 4 companies. Management teams were inserted into BIAL and CSB Bank (once they got control). Privi and Fairchem restructuring has been fantastic for shareholders. Sanmar and Seven Islands IPO's look promising. Anchorage looks promising. $100 million Dutch auction. Lots to like. Eventually Mr. Market will figure it out You can thank Chandran and his team for this, as well as Prem's commitment and belief in India's long-term potential. They really have some great investments in India...I've seen them first-hand...and they will add a lot more over the next decade. Cheers!

No, it wasn't anything like that. I believe Paul just wanted a change of pace and to slow things down. He had been working 16 hour days for Fairfax for like 15+ years. I'm a night owl and don't sleep till 1am or so in Vancouver, so I tend to send out emails late at night. On numerous occasions, I've sent out such late emails to Paul and I've gotten responses right away...meaning he was responding to emails at like 4am in Toronto! Paul was literally overseeing everything the last few years after becoming President. So he had a ton on his plate. I think he probably realized that the Torstar opportunity wasn't going to come around all the time, and he had to make a hard decision for himself and his family. Cheers!

Hamblin Watsa gives a certain amount of capital to its analysts and portfolio managers. Do you see any high-growth stocks with a high P/E bought in large amounts? No. Of the high-growth stocks with high P/E's in the portfolio, almost all would have been bought through the small portfolios that analysts manage. The exception being Google which they put roughly $20M into during the 1st Q 2020...they bought it for about a 15 P/E. Now, over time if some of these analysts become portfolio managers, and are given much more capital like the top six guys, then you may see a change in investment strategy. But the core guys...Roger Lace, Prem, Brian, Wade, Lawrence, Chandran, etc, aren't built that way...they are hard-core distressed value managers. They just won't pay a 30+ P/E for something. It runs completely contrary to their psyche! When I say that they are distressed value investors, it doesn't mean they won't look at other things. But if they have a choice between putting $1B into Atlas Corp at a 7 P/E or $1B into Amazon or Google at a 35 P/E...they will chose the 7 P/E investment every time. They understand growth, but they value margin of safety more. Cheers!

Nearly all of these investments (other than Digit) occurred through Fairfax's venture arm. The venture arm and lab are being eliminated, as Fairfax streamlines their investment and acquisition side...something that many shareholders have wanted to see for a long time, and perhaps is occurring after Paul Rivett's departure. Paul had significant influence at HW and over Fairfax acquisitions. See link below that no longer works. https://www.fairventures.ca/ A simpler, smoother Fairfax will allow the company to get back to 15% annualized compounding...to what the team knows how to do best...and it allows new leaders to work to their strengths like Wade Burton and Lawrence Chin...Cundill guys that are pure distressed investment managers. But that comes at a price...these are pure distressed investment managers! Cheers!

Discussion about bonds, rates, stocks and the U.S. dollar. Cheers! https://www.marketwatch.com/story/bond-king-jeff-gundlach-says-there-is-a-simple-reason-treasury-yields-are-so-low-even-as-inflation-surges-11626371005?siteid=yhoof2

Prem cannot invest in AMZN, FB, etc. At least not when fundamentals depend on 20-25% annualized growth rates. Their mind, the mind of a distressed value investor, just doesn't work that way. Neither does Buffett's...how many of these technology companies did Buffett invest in? Just Apple. When it had become a mature, cash flowing dividend stock! Munger is about the only distressed value investor, who I've seen that can truly wrap his head around growth and value...I certainly can't! As much as I would like to have been a holder of AMZN or FB, every time valuations would go over a 30 P/E, I would be selling madly. And that's if I could ever find them at a 15 P/E to buy in the first place. Just not something I can do psychologically because distressed value investing with a margin of safety is so ingrained in my head. Fairfax is the same. Francis Chou is the same. You will never see these guys buy anything but distressed investments. That may be perceived as a weakness or downside when you are in the midst of one of the greatest bull markets in history, where growth at a fair price or outrageous price is fair game, but these guys are built for distressed markets. They make money when others panic, not when sunshine is coming out of every derriere. And like any distressed value investor, I'll sell most of my Fairfax stock when it hits 1.1 times book or better. But I'm ok with that, because I bought it at 0.6-0.7 times book. I'm not going to hold on when it hits intrinsic value, and I'll be buying like crazy every time Mr. Market drops it to a distressed price. That's the only way I know how to invest! Same with Prem! Cheers!

What will it take for it to be priced appropriately? Time. Be patient...it's coming, and this time not for a couple of years, but they are finally in a position to take advantage of a good economy, bad economy and even a drastic market correction. Prem finally has his groove back! If he bet $150M, he expects that to double based on what FFH can do. That being said, yeah I would love to see someone take out Blackberry at $10B US! But if Prem thinks BB will be the engine for all future auto security including autonomous vehicles and will be worth $50-60B one day...I'm ok for him to be patient. Cheers!

The only person who has had more influence on me than Warren and Prem was my father...no teacher has had more impact than those two. How has Buffett changed my life: - He changed everything for me from when I turned 29...the first time I read the 1998 BRK Letter to Shareholders, literally a light went on inside of me. I had been extremely depressed since my father had died when I was 21 and I was helping my mother raise my brother who was only 9...I was a functioning depressed person wondering what I was going to make of my life. - That letter and reading subsequent letters and books changed my whole investing framework and how I thought about money, life, happiness and integrity. - It lead me to Fairfax Financial and Prem Watsa who became a mentor and very good friend. - It lead to the creation of the initial version of this website and now COBF and all of the wonderful friends and posters on here...especially lotsofcoke and Ericopoly...two that played a significant role in my life and learning. - After meeting Buffett, I came home and quit my job and began my journey in the financial world. - That lead to finding other more accessible mentors and friends who were equally influenced by Buffett and others like Tim McElvaine, Francis Chou, Mohnish Pabrai, Larry Sarbit, Jeff Stacey, Wayne Peters, Andy Kilpatrick, Guy Spier, etc. - It lead to me starting my own fund company with my cousin who was like a brother to me. - Which led me to build PDH...for better or worse! - All of this lead to the wonderful experiences I've enjoyed and my family has enjoyed...trips to Toronto, Chicago, Los Angeles, China and especially the Fairfax India trip...also meeting Wayne Gretzky, who was a childhood hero for me and my brother. - It lead to raising nearly $300,000 for Crohn's & Colitis Canada, roughly another $2M that I've helped raise working for Cystic Fibrosis, The Center for Child Development and other charities. - Finally, Buffett was the seed that allowed me to learn and also influence so many others...via coffees, lunches, dinners, our Toronto dinner, the funds, PDH, COBF, charitable work. I turned 52 a week ago...Buffett has influenced me now for 23 years, 2 years longer than my father did! I owe my father and Buffett everything...everything! Cheers!

Here's an example in Canada: https://www.pentictonherald.ca/news/article_6f7286de-ff86-11ea-8152-97e80e029848.html

Hey politicians serve a purpose and do a job 95% of us wouldn't want to do. That being said, I don't know about the U.S., but here in Canada, if you are a Member of the Legislative Assembly in a province, Parliament, a Senator or work for a municipal government, you get a gold-plated pension plan that kicks in after like 11 years, and superb long-term health benefits. I would guess that happens in the U.S. also. So to crack down on people trading in their ROTH IRA's and making money, while quietly trading on insider information in their own accounts...stinks of hypocrisy! Cheers!

Doesn't matter which party, they all trade while knowing important inside information revealed in government votes, committees, reviews, etc. Cheers! https://finance.yahoo.com/news/house-speaker-nancy-pelosi-husband-122625921.html