Txvestor

I am a little concerned that they reported only 83M of losses related to the pandemic. Whereas MKL reported 325M in business interruption etc. I am wondering how well they are reserving. Their investment returns have been abysmal for this entire cycle everything from hedges to wrong stock picks to poor long term holdings here. So by now we have a balance sheet that is the most leveraged it been in a long time and I am not sure how well prepared they are for a big hit.

Wonder where are all the buybacks. The stock is languishing barely above TBV and I guess we will be hearing more in the next Q but I am not sensing that there is much activity. For all the talk of Singleton etc. Actions are proving increasingly worrisome here.

Modi reforms considered to favor the billionaire class and hurt the middle class. So some sheen has come off d agenda. In addition as mentioned here progress has been slower than people had hoped. It is correct that Congress and Gandhi unlikely to do anything positive. Most sensible people do realize that. Most likely scenario is a Modi minority gov't.

John Deere. I can't beleive they have not yet.

Not sure if you all heard the Shakespeare joke. Shakespeare's wife was apparently a looker, and Shakespeare of course is a literary genius. One day frolocking in bed, she said to him, if we were to procreate, just imagine, your brains and my looks, we would have a wonderful child. Shakespeare looks at her, smiles and says indeed love, but imagine the horror of one with my looks and your brains. As this was about Munger and he is the "Invert, always Invert guy", I could not resist. Babies and children don't always turn out as expected, and I think there are too many variables, genetic, environmental, cultural, luck etc. to do much more than try to get a mediocre level of success, if that. The randomness of life is astonishing and complex, and those of us with a number of adult years under our belt, know it too well.

ICUMD, Drinking the Modi KoolAid eh? In the end it all delends on the India thesis. If oil spikes as seems likely, and if there is a global slowdown in trade of goods and services, which is also a real possibility, then the Rupee will likely crater. Mr Modi's policies are centralizing power and control and I just do not see that as a recipe for economic success in a country as vast as India.

I believe they sold down most of that converted equity stake in 2012 at around $20. They more recently picked up a smaller $60M position in the low $30s area but their irigibal stake was much larger.

Thought he should have made a run on DE last year when it was trading in the 70s, but obviously he didn't and, i know it was on his radar cuz he had a stake in it, since sold. Felt like it was close to his agricultural roots, had a successful brand, a decent if not wide moat, a sizable financial arm, good management and was at a cyclical low. It has since doubled, but can't see it going anywhere in the next 25-30yrs. The agriculture economy is essential and its products indispensable. Its global foorprint can only grow from its home base.

Agree Cevian. Its crazy that this far into an economic expansion cycle, we have not come close to seeing a balanced budget, and the debt to GDP ratio is rising. We are yet to have most of the baby boomers hit retirement and draw medicare and SS, and we are not even close to discussing entitlement reforms in a serious way. Mr Buffett has made this choice consciously, but one wonders if it is really the right thing. I wonder if his social liberalism is what is preventing him raising his voice. In the past he proposed some ideas to curb the trade deficits etc. but has gone stone cold quiet about these topics since the GFC. Ironic since like you said, he has both brainpower, the perch as well as the respect of wide swaths of society in addition to a disarming communication style. I fear just like the blame everyone scenario with mass stupidity identified as the cause of the GFC, ie Lax lending, stupid borrowing, poor politicking, turn the other way regulating, and self serving corporations was the cause. Ie Multi factorial. Sound familiar? We will ironically come to the same situation on a much grander acale eventually as numbers are very concrete and the clock is ticking. Its really an unfortunate scenario for someone who manages their affairs prudently, just as it was in 2008/9 for the do it right homeowner, but everyone flushed "moral hazzard" down the toilet like it didn't matter. I guess immoral isn't so when done on a grand scale.

It hasn't been a buy and forget, because of all the missteps HW has made. Were it not for the equity hedges and deflation swaps, BV would easily have been 50% higer. And the multiple to BV would likely have persisted. If you buy here, you are betting that Prem will not do anything value destructive in the next few years. The market has not ruled put that possibility and I think the market is probably right. They jury remains out on the AWH purchase alone. To the poster stating he mentioned 2B and $70 per share, I was on the call as well. When an analyst asked, he was clear that this was not guidance. On that I would just say he has also touted 15% annual gains in BV for many years, and keeps saying over the long term, that hasn't happened in post crisis era either.

Cardboard, two or three days ago, FFH was trading pretty much bang-on at book value. My heuristic for BV (or at least a BV that is mostly tangible) is that this is the point where the business as a going concern offers zero value. This is the point where, if one could liquidate the assets for a "fair price" and put the business in run-off, you'd be equally well off to do so. So, I'd say that FFH deserves to trade above book. There's plenty of room to debate about how much above book it ought to trade, but my take is that this thing is not worth more dead than alive. SJ Agree with you on this stuble. In addition the recent subsidiary sales transactions demonstrated value above BV as well. I think the market here is discounting recent poor investment performance and extrapolating that into the future. I can't say that is unreasonable. MKL deserves their stock price being above BV. They have invested well, acquired non-dilutively, and outperformed the markets consistently. If Fairfax does that for 5 yr, they will rerate as well. Will that happen? I am not so sure. But the investment thesis here is thet even without hitting it out of the park, they should be able to consistently grow BV 10-12% a year, a feat that has eluded them over recent times. Even that would get them to a higer multiple than 1BV. Prem just has to make sure he doesn't trip over his shoelaces yet again.

Interesting observations, and as it happens to coincide with better underwriting results in recent years, one cannot really complain. AWH ceding that much, yet performing so poorly this last Cat season is shocking however. I guess at the very least, it is not as much a gem as it was touted, and Andy Barnard has a lot of work to do whipping their systems and processes into shape.

I think that is pretty rude. Thanks for stating the obvious. This is a free discussion here and nothing stubble said is out of bounds. Asking that question is not unreasonable given the recent vote consolidation. Remember even if ~1B is watsa family money, the vast majority of the market cap belongs to other shareholders. The fidjuciary responsibility is to them. As to the 600k annual salary, that cannot be the defense of every action. Prem is free to take what he deems a market appropriate salary, but then would be judged on those metrics. He chose not to and I can see why given his large ownership stake. All these questions do arise because for the past 8-9 yrs he has not distinguished himself during arguably the greatest bull market of many of our lifetimes. He was flat out wrong, and BV has suffered tremendously as a result even as he kept touting 15% PA as a longer term objective. Let's be clear, 8-9 yrs is not a short time either. Finally he has wagered pretty big on a market and economic turn upward at an interesting time in the cycle. In addition he has bet large ie over 50% large, on a couple of huge insurance acquisitions, on which the jury is still out. If the latter two things go against us, it would not be clear to me that his position is tenable, despite his fabled past.

Well said and absolutely true. I would be skeptical about anyone stating that they know AWH book inside out 100%. Its not possible. The Cat losses were higher than at other fairfax insurance subsidiaries and Prem hinted at some modifications to underwriting. The part that concerns me is the $50M adverse development from a claim(s) they took this Q. That is over and above the Cat losses. Based on the worse than Fairfax Cat losses and this additional adverse development, if anyome can cleerly categorically why it would be wront to question AWH I would be interested. The jury is out as far as I am concerned. This is a sizable and dilutive acquisition mind you. I think barring wacky investments by Prem(which he appears intent on tempering) and things going terribly wrong at AWH, the path to $2B a year in BV gains is not terribly difficult to envisage. At 8% equity gains, an average 3.5-4% bonds return, and 95% CR on 15B in written premiums gets you there. And as Prem pointed out thats $70/share/yr. on that basis in the current market Fairfax should be a stock closer to $1000 than to $500, but to my mind the unknowns stand in the way, which is why it teades where it currently does. The good part is fixing that is within grasp. I'm not sure that it's a simple question of being negative. The adverse development is definitely a concern. Does it end in Q4 or do we see more in the future? Was it caused by bad luck, or is it a symptom of bad underwriting (under pricing and poor adjustment practices)? Is it something that fixes itself, or can FFH find somebody to go in and fix it? Those are legitimate questions. Allied might be a decent deal, but the first few quarters are harkening back to the massive reserve adjustments of TIG and C&F. But, this time FFH doesn't have the SwissRe cover, right? The good news is that TIG and C&F were long-tail which is where the worst adverse development tends to appear. But, I'd say the jury is still out (this is true of all acquisitions -- it takes a bit of time to determine whether you bought a lemon or a turd). SJ

I agree, and I hope he has come to terms with his wackiness! I also worry a little about the Underwritig at AWH and hope there are no roaches in that motel we have taken over.