ander

agreed Berkshire stock could go down (which probably not as relevant to Ajit), but intrinsic value likely goes up much more given the position they are in.

Is Ajit selling really a concern given that he's had a long history of selling / gifting? It is of course not a positive signal, and I understand it is a large proportion of what is remaining, but I do not believe it is necessarily a suggestion of impending doom at Berkshire (remember if there is impending doom in the broader market, that is where Berkshire often does the best so one would not want to be a seller of shares right into it).

Fairfax 6-K "“As previously announced in 2020, I purchased in the market an additional 482,600 subordinate voting shares of Fairfax at a price of US$308 per share, or approximately US$150 million in total. At the time, I believed, and I said publicly, that the trading price for Fairfax shares was ridiculously cheap and very significantly below intrinsic value, and I was acquiring these shares as an investment. Even though I believe our shares continue to trade well below intrinsic value, I decided to sell a portion of the shares I acquired in 2020, representing only a small portion of my total holdings of Fairfax, for estate planning reasons. As a controlling shareholder, my salary has been fixed at C$600,000, and I have never had a cash bonus nor received any shares as compensation for decades. I continue to control the 1,548,000 outstanding multiple voting shares and 519,828 subordinate voting shares of Fairfax, representing greater than 90% of my net worth, and I am not contemplating further sales. As I have said many times, Fairfax is not for sale, and I am confident that our future is very bright. As always, the best is yet to come,” said Prem Watsa, Chairman and Chief Executive Officer of Fairfax."

And further out, I'm guessing closer to $4,000+ USD in 7 years. Likely should be $1500 plus today and compound 17% per year gets you there.

Definitely conservatism re: the $125 / share versus what should be $150+ normalized earnings. I would not want him to overcommit and disappoint.

@MMM20 I agree with Gregmal they're idiots if they do not have a margin of safety for stock price movement that forces their hand. I have an oversized position and added to it - am only annoyed it's not down further! But @MMM20 what do you think the price threshold would be that would actually force their hand??

Doubt MW is playing it long after covering but who knows. But wouldn't be surprised if they're wary of index inclusion with the timing of this report -- cover before Fairfax added to index maybe.

Read the presentation. Nothing stands out as material. He's not saying there is fraud but rather the accounting practices are aggressive in some cases. 1) In the interview on CNBC, he did mention x-head of PWC (the auditor) being on the board. R. William McFarland. Carson suggested this board member might be keeping the auditor less independent than otherwise would be. His bio is at the bottom. Seems like he's involved as a director at a number of their businesses. I do not necessarily like the connection if he was the former auditor for Fairfax but nothing sinister in itself. He may know the businesses better than others and can possibly add more value and is appropriate to be on the board. Anyone have a view on Bill? 2) In the interview on CNBC, Becky asked where he would cover. Carson did not answer. Said if book value should be 20% lower and should trade lower than book value at 0.8x or so instead of premium because they are manipulating book value. Overall, I find the short case to be extremely weak!! Guess it is an opportunity for investors / Fairfax to buy additional shares lower. Mr. McFarland is the Chairman of the Board of Directors of AGT Food and Ingredients Inc. and a director of our publicly traded subsidiaries, Dexterra Group Inc., Farmers Edge Inc. and Fairfax India Holdings Corporation. Mr. McFarland previously served as Chair of the Board of Directors of The Conference Board of Canada. Mr. McFarland was the Chief Executive Officer and Senior Partner of PricewaterhouseCoopers LLP (Canada) from 2011 to 2018. Prior to that, Mr. McFarland was a member of the executive team at PricewaterhouseCoopers LLP (Canada) from 2005 to 2011, having been admitted to the partnership in 1992 and having led the Greater Toronto Area audit practice from 2002 to 2005. Mr. McFarland is a Chartered Professional Accountant and a fellow of the Chartered Professional Accountants of Ontario.

I think this is an incredibly important point for all of us long-term shareholders. I do believe they are well positioned to execute and agree that "Multiple expansion HAS NOT HAPPENED." and "Multiple expansion is rocket fuel to a share price." I also agree it will happen.

"I could see Fairfax exiting the TRS position when they feel shares are close to fair value (by close i mean within 10%)." @Viking Appreciate your analyses. Any guesses what Fairfax (i.e., Prem) may view as fair value today? or what do you think is fair value today?

There is some debate re: earnings post 4 years from now and of course hard to say what the world looks like the further out we go. I have BRKb put away for the next 20+ years and will take a look then unless if anything substantial changes. I see the clear path to why FRFHF has substantial upside within the coming years, but curious if anyone has a framework for thinking about long term value accretion 10+ years down the road. I know Prem targets 15%. Is that realistic?

I think that was a smart sale - I did something similar. I think he's just getting approval so no issue with caps and gives flexibility. I'm guessing the stock drifts back down as the "meme" traders / computers are done. I do think it's worth a lot more, but this reaction seems silly. What is more important to me are the Form 4 filings.

$100 per year in income. What do you think downside risk is to that number on average?

Filed that he bought another 1.9 mil shares. Did not buy as aggressively as he did in previous days. At 181.6 million shares.

"Fairfax’s equity portfolio looks reasonably well positioned (so far) - but this could change in a hurry" --any stand out to you as potentially vulnerable?

Any thoughts on Fairfax exposure to tech (e.g., Digit, etc.) -- especially as lofty valuation multiples compress.

Re: comments on how Fairfax is allocating to bonds and thinking of duration risk, I pulled the excerpts below from the 2021 Annual Report. They have about $13 B in investments (Associates, Common and Preferred) and have $36 B between cash and bonds ($14 B in bonds). The way I interpret is that Fairfax 1) thinks of the $13 B as their "excess" capital bucket that they can invest and 2) is likely to keep the $36 B in cash / bonds and will likely keep duration on the shorter side since they don't know how high rates may go (e.g., if rates at 8% on long end) -- and if there was an increase in the duration they would probably be thinking of that as part of the $13 B "excess" capital bucket they have. As float grows so does the $36 B bucket which eventually leads to more excess capital to the $13 B bucket. That's how I think about it. 2021 Annual Report: "Inflation and higher interest rates are the big risks the markets face today. The CPI index was up 7.5% in January 2022, the highest in 40 years and the ninth consecutive monthly reading above 5%. The Fed is behind the curve as it was in the 1970s and we fear interest rates will increase significantly over time. We should benefit as our total fixed income portfolio, inclusive of cash and short term treasuries, has a duration of only 1.2 years (an average term of 2.2), but significantly higher long rates will have an impact on the economy. This may still be a few years away and, as I said earlier, we have companies with great management that should be able to navigate these “rocks” profitably! Higher interest rates will destroy the speculation we have seen in high tech and other growth stocks with high valuations, SPACS, crypto currencies, etc. Another risk we continue to see is China and its real estate bubble – which is being tested." "Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Typically, as interest rates rise, the fair value of fixed income investments decline and, conversely, as interest rates decline, the fair value of fixed income investments rise. In each case, the longer the maturity of the financial instrument, the greater the consequence of a change in interest rates. The company’s interest rate risk management strategy is to position its fixed income portfolio based on its view of future interest rates and the yield curve, balanced with liquidity requirements."

I'm not familiar with Allegheny. Does the transaction add new lines of business that Berkshire isn't involved with or is it just more with substantial overlap?

The Brit deal done was originally done in 2015? When was it bought back in? I wonder if in this environment maybe the rate would be more like 5 or 6%?

Learning Machine...Nice summary...I was in the process of posting something similar. I have never invested in gold. Now am looking at as one of many ways to bet on persistent inflation. Possibly a hedge. Figuring out best way to express bet. I was thinking about 100 bps.

my understanding is the reason for the process behind these authorizations (versus Berkshire) has to do with it being a Canadian listing and the rules there.

Thanks. That's exactly what I'm trying to understand re: consolidation. Are they buying a nominal amount, or accounting change or large $ amount? I'm just wary of them adding at possibly inflated multiples (could be a great deal, but things are frothy in this environment). And if so, if true value turns out to be lower in the future that would be unfortunate.

On Digit, are they contributing any cash or proceeds to increase ownership to 74% in Q3/Q4? and presumably, if so it will be down at today's valuation? or do they own rights to purchase at lower valuation? or is it not an actual increase in ownership but since would be allowed to increase ownership, it triggers a change in accounting only? From the Q2 report below. "During June 2021, the company's 49.0% equity accounted associate Go Digit Infoworks Services Private Limited ("Digit") entered into agreements with certain third party investors whereby its general insurance subsidiary Go Digit Insurance Limited ("Digit Insurance") will raise approximately $200 (14.9 billion Indian rupees) of new equity shares, valuing Digit Insurance at approximately $3.5 billion (259.5 billion Indian rupees), which resulted in the company recording a net unrealized gain of $425.0 on its investment in Digit compulsory convertible preferred shares as described in note 5 (Cash and Investments) and note 6 (Investment in Associates) to the interim consolidated financial statements for the three and six months ended June 30, 2021. The transactions are subject to customary closing conditions and regulatory approval, and are expected to close in the third quarter of 2021. Upon closing of the Digit Insurance equity issuance in the third quarter, and upon final approval by the Indian government of its previously announced intention to increase foreign ownership limits in the insurance sector from 49.0% to 74.0% and the company obtaining regulatory approval specific to its holdings in Digit, the company anticipates it will consolidate Digit and record an additional gain of approximately $1.4 billion."

Great results! On the Digit portion I read the Digit thread as well, but wondering if anyone had a sense of fair value. I understand the benefit of the mark-to-market, but in this environment (some companies being value at ridiculous price levels), anyone do work on what they think would be a reasonable valuation on Digit.

For anyone looking for a replay of the interview: