treasurehunt

I missed posting mine last year as well. -11% overall, -15% in my IRA that has no additions or withdrawals.

I ended the year with a return of just over 30% on my entire portfolio, adjusted for inflows and outflows. My IRA, which had no inflows or outflows, returned over 36%. My best performers were FRFHF - 15% of portfolio, 55% YTD GOOG - 6% of portfolio, 59% YTD TSLA - 5% of portfolio, 102% YTD INTC - 5% of portfolio, 93% YTD It also helped that I significantly increased my allocation to US banks after the regional bank meltdown in March and April. My worst performers were DVN - 3% of portfolio, -22% YTD BABA - 3% of portfolio, -12% YTD

TCEHY. Increased my position by 35%. I have managed to avoid adding to my BABA position that is well underwater, but couldn't resist the recent drop in Tencent.

One of my best was buying Robert Shiller's book Irrational Exuberance right after it came out in March 2000. I don't recall who or what turned me on to the book; it might have been a post by benkea or dealraker or someone like that on the old Yahoo Berkshire board. Anyway, I was working at Qualcomm at the time, surrounded by folks who were "conservatively" counting on their stock options doubling in value in the next year. After reading the book, I sold my vested options and also most of the high flying tech stocks that I owned. I did not catch the high, but avoided most of the pain of the next couple of years (I kept my Lucent stock, which turned out to be less than brilliant). I had started nibbling on Berkshire B shares in Feb 2000, and selling my tech positions enabled me to increase my position in Berkshire considerably. So the ROI on the $19.56 I spent on the book was spectacular.

Trimmed BAC, GS and JPM. US banks are still about 30% of my portfolio.

Fairfax acquires another 2.5 million shares of Orla Mining. https://www.fairfax.ca/press-releases/fairfax-announces-acquisition-of-additional-orla-shares-2023-12-11/

I think this is roughly correct, although you are ignoring non-controlling interests. Non-controlling interests run around 10% of pre-tax income, I believe. But this is just for the first year, right? If Fairfax continues to trade at book, they can theoretically use all $3B in earnings to buy back shares and continue to generate a 15% ROE. But if Fairfax trades at a premium to book, it becomes more difficult to generate 15% year after year. For example, let's say Fairfax retains all $3B in net income so that equity is now $23B. With the same rate of return on investments and the same combined ratio, investments and float have to go up a lot - by around 15% each - to still generate a 15% ROE. How long can this be sustained if Fairfax trades consistently at a significant premium to book? Not very long, I suspect.

Viking, thanks for a great recap of the TRS investment. Given that FFH looks undervalued still, the TRS should provide value for a while. Do you know the mechanics of how the TRS works exactly? Is it settled in cash quarterly? I was wondering if it is possible that FFH may have to come up with a bunch of cash if the stock price goes down a lot for some reason. I'm sure management has considered any such possibility, so this is more curiosity than anything else. I have a vague recollection that this may have been discussed already, but a quick search of the site did not yield anything.

Berkshire is almost 25% of my portfolio and I have concluded that my foray into BABA was a mistake, so I am not fixated on screaming bargains. Just pointing out that Berkshire doesn't look particularly cheap. I won't be buying any at the current price, but I have no plans to sell any either.

After tax operating earnings are at a $40 billion annual run rate roughly. Add to that about $14 billion in normalized after-tax capital gains from the equity portfolio (6% pre-tax gains on $310 billion and a 25% tax rate). That's $54 billion of total earnings on a normalized basis. At a current market cap of $760 billion, Berkshire is trading at a P/E of 14 or so. Seems fairly cheap and a better value than the S&P 500, but the stock is no screaming bargain. I'm not adding any value for the optionality of holding a lot of cash, as cash is earning 5% right now.

@Viking, @UK and @Vinod1, thanks for your comments. They add some very useful context to how I was thinking about Evan Greenberg's comments. It makes sense that most insurers wouldn't benefit nearly as much from higher rates as Fairfax would.

I don't understand this comment by Evan Greenberg. If investment yields have gone up a lot (say by 3 or 4 percentage points), then it should be possible to raise the combined ratio by a lot more than 1 point and achieve the same risk-adjusted return, no? I realize that this depends on the size of the investment portfolio relative to earned premiums, but the math for Fairfax indicates that the CR can go up a lot and they can still earn a good risk-adjusted return. Is it different for most other insurance companies?

Morningstar's data for Fairfax does not look correct here, probably because there was no FRFHF ticker back in 1999. Here's the same chart for FFH.TO - in USD and with dividends reinvested - for the same period. The total return is quite a bit lower.

I bought my first shares over 23 years ago (Feb 2000). I remember that Warren's longevity was a concern even back then, but he has easily outperformed actuarial expectations since!

Fair enough. Thrifty3000 mentioned $10 to $50 in underwriting profits. I took the midpoint and added $30 to his base investment case to get about $170 in investment returns + underwriting profits. I think this will get whittled down to $100 after all expenses and taxes. But it may be that the investment base case and/or the underwriting profit estimate are on the conservative side.

Nice analysis. Thanks. To calculate the final return to common shareholders, however, shouldn't you deduct interest expenses, corporate overhead, income taxes and non-controlling interests? After all that, your base case looks more like $100 EPS attributable to common.

It's true that the comparison is not apples to apples, but GEICO by itself does not explain the difference. 2022 was the only bad year for GEICO with an underwriting loss of -$1.9 billion. In the four years prior, GEICO's underwriting profit totaled over $8.6 billion, or almost $2.2 billion per year.

Nice work! I checked the BRK data for the past ten years and your chart looks correct. Even accounting for differences in the lines of business, I am surprised that Fairfax's underwriting has been noticeably better than Berkshire's in recent years. I mean, Buffett is very proud of the quality of Berkshire's insurance business, but Fairfax has had better underwriting results for the last six years or so. Very impressive.

Data from FRED does not match up with this chart. Any thoughts on why there is a discrepancy? https://fred.stlouisfed.org/series/CPALTT01USQ659N

Does anyone know when Fairfax is scheduled to release Q2 results? I thought today might be the day, but there doesn't seem to be any notification regarding this. So maybe the earnings release is scheduled for Thursday of next week?

I'm curious about this sale as I have some USB in my portfolio and consider it quite undervalued still. Were you just getting your exposure down to a reasonable level or were there other reasons? My main concern with USB is that they may have to increase capital levels quite a bit over the next couple of years, but they showed with their Q2 results that they can build capital rapidly if needed.

Yes, the stock price has historically been very volatile. Perhaps it is better to look at changes in book value per share (plus dividends) to get a better idea of how the business has been doing over time.

Not sure what's going on with the yahoo charts, but they don't match up with yahoo's own historical price data. FFH.TO closed at 200.50 CAD on July 3, 2003. Thus the price return over the past 20 years is about +395% in CAD. The USD-CAD exchange rate was almost exactly the same 20 years ago as it is today, so that doesn't make a difference either. Maybe the chart has a starting date of March 2003; FFH.TO traded at below 80 CAD then according to yahoo's historical data.

What is the source for this chart? It doesn't look right to me. BRK.A closed at $56,100 on 12/31/1999 and at $519,460 today. That's a return of +826%. FFH.TO closed at $245.50 CAD on 12/31/1999 and at $992.29 CAD today. Ignoring dividends, that's a return of +304% in CAD. The return in USD is close to +350%. I don't think Fairfax has paid enough dividends to bring the total return in USD anywhere close to +826%, let alone exceed it.

The 13F-HR for Q1 is out. https://www.sec.gov/Archives/edgar/data/1067983/000095012323005270/0000950123-23-005270-index.htm Here are some changes that I noticed - added to OXY; reduced ATVI, CVX and GM; sold out of USB and BK but retained position in Citi.