Uccmal

I had just got started in my own stocks in late ''97. One very clear recollection is watching a quick piece on ROB Tv, the precursor to BNN. The moderator showed two stock counters side by side. MSFTs, and the entire TSE. MSFT in and of itself was trading in greater numbers than all of the major stocks in Canada. I have nothing to say about value investing except I hadn't really figured it out very well. I dont seem to recall the Russian default at all for some reason, although I recall Greenspans Irrational Exuberance Speech, and BRe-x very clearly, and both were around 96'. Bre-x was my first valuation. I estimated the value of all the gold that supposedly existed, multiplied it by the gold price then and couldn't get anywhere near the market cap Bre-x had attained. In essence before even accounting for mining costs, there was no way that mine would ever pay the shareholders back. I had learned enough value investing by 1999 that I bypassed the Nasdaq runup and crash.

They have made these announcements the exact same week every year, and bought almost no stock during that time. Rest assured, if Fairfax gets pummelled some day and has the cash they may actually execute on this. The two situations of excess cash, and cheap stock have not coincided since the early 90s.

I was giving this some more thought. Second Cup has some really good captive locations. There are two in a Queens Park office (Ontario gov't bldg). The government doesn't buy its workers coffee so these outlets are insanely busy. There were two at Sunnybrook Hospital when I was last there, also insanely busy. These leaseholds are probably very long with protection from competition. These outlets will also provide coffee for meetings etc. The street locations, are not so good, as compared to your average Sbux.

I echo the prior two sentiments on Second Cup. This one crops up on my radar every few years, in its various incarnations. Not only are they behind Sbux, And TH, there is also Timothy's in the Greater Toronto Area. They got into the hospitals, and such via the Cara connection. All three of the above companies keep opening outlets at a rapid clip. Second Cup completely lost mindshare over the last ten years, and isn't going to get it back in this operating climate. Now there is Macdonalds to contend with as well. Just to show at they are up against in Canada: Tim Hortons sells some 50 % within the fast food category in Canada, and above 70% in the coffee/baked goods category. The left overs are carved up amongst the rest. Lost cause IMHO.

Well, I have unconditional love for Prem and everyone at Fairfax, but I won't hold something to hold it. Otherwise you just create more risk in the portfolio if the margin of safety isn't adequate, and you give up opportunities that may be even better elsewhere. That being said, the average investor would be far better off holding Fairfax than any index over the long-term, and I would suspect will do better than if they even owned Berkshire Hathaway, simply because of size. As well, it's been three years of subpar performance because of their conservative stance, while markets have roared ahead. And now, you have the additional impact of significant acquisitions and deals that have gone sideways...Sandridge, Torstar, Blackberry...while insurance pricing has had a tepid recovery. So the amount of pessimism around Fairfax is pretty damn big when considering that the company is no where near the financial distress it has faced in the past, and is very well positioned to take advantage of others when the shit hits the fan. I don't know...sentiment on here may be a good contrary indicator. Cheers! Maybe so, but quite frankly, At this point my cash is better waiting in my hands than in the hands of FFH right now. As much as I admire the FFh teams abilities they need to transition away from turn arounds and mediocre buyouts toward high quality wholly owned businesses or partnerships. I have suggested three in Canada. I could easily come up with a dozen or two more. I would much rather see them pay 500 million toward a great investment that immediately put 75 million a year on the balance sheet than turn arounds. BBRY, Torstar, Sandridge, Resolute are all weak businesses with no moats, and in a couple of cases very dubious management. They have billions tied up in these kind of mediocre operations. 2 billion invested in a Mullen or Russell would provide cash flow immediately to their balance sheet. When the shit hits the fan they could deploy that cash flow, as Buffett does. It is now time for Fairfax to use their size and power to advantage. I fully understand that holding FFh over the long term will yield decent results, probably well in excess of the S&P 500. So it is an okay investment from that standpoint, but not as good as some oard members are able to do. Part of what drives my thinking on this is the reverse engineering I have done on my acquisitions from March 2009. At the time I bought Leaps and common for Sbux, HD, Axp, GE, and WFC. I would have done at least as well over the past 4.5 years leaving those alone, and rolling them over rather than selling them and going into BAC. And my intention going forward is to keep a portion of my BAC, AIG, JPM, and WFC, at least until a financial crisis starts to brew again. I bought SSW around christmas 2008 and the common has tripled, paying dividends for the last 3 years as well. It all goes back to time being the friend of the truly great business. FFh is not taking advantage of this!

The recent events at Fairfax are not doing alot to convince me of their ability to invest privately. Cara operations is no where near a market dominant type of player. And now RIM. Thats a big set of chains to be dragging around for the "long term". There are so many mid size companies in the manufacturing/energy arena that Fairfax could monetize so much faster. I have listed 3 that they have held, have board members on, or hold now, that are all better than either RIM or Cara. Mullen group, H&R Reit, and Russell Metals to start. All would feed instant cash flow to FFH. At one time I held up to 1000 shares in FFH. I am now at 100, and probably will go to none shortly.

Thanks Gary, I too took a ride in the Rim... down. One of the worst all time investments for me. I am not one to give advice preferring to share experience. You have 25% cash, and what sounds like a decent job. Why not institute the most successful Buffett skill and try patience. There will be a significant correction at some point, probably sooner rather than later. Like me, you sound like you have no trouble pulling the trigger, when the time comes. My long term returns will be just fine If I can keep myself from making mistakes by confusing value for creative destruction via the Rims, Resolute FP, and Fibreks of the world. Right now I am net cash, 5%, for the first time in 16 years of investing. Its not that anything is obscenely over valued, its just that there is nothing really compelling. I tend to stick to businesses where I see a longer term, somewhat predicable future and avoid Graham/Schloss/Watsa situations these days. The G/S/W style doesn't work well for me.

http://www.theglobeandmail.com/globe-investor/investment-ideas/strategy-lab/value-investing/a-rocket-scientists-formula-for-beating-the-market/article14173745/ Article about Long time board member JEast by board member N. Rothery in Globe.

Amazing what can be done with data. For the next project. Go back to the inception of the board and determine how many pages discuss macro economics relative to investment ideas, how many were right, and whether there is any point to it all...... Like Sanj., and Eric, I haven't had an original idea in years. On the old board I posted dozens, and it wasn't pretty.

Very accurate assessment Kraven. It was a very scary time. And it happened twice - Oct/Nov. 2008 and March 2009. I was fully invested gong into round 2, and subsequently took the elevator down. And then I took the ride back up with a better portfolio. Giofrqnchi, you are overly optimistic in your assessment. FFh was down $100 going into March 2009. They had fully cashed in the CDS, their own stock portfolios had been destroyed. If the government had mismanaged the situation by tightening rather than loosening Ffh would have been wiped out along with virtually every other financial. The survivors would have been few. I bought Leaps in AXP, GE, Sbux, HD, at the time. I even bought some FFh. At that point though it was a pure gamble that governments would do the right thing, and the markets had over reacted. Interestingly, my tax free accounts (RRSPs) were only down slightly relative to the markets at the time - no leverage.

Hee, heee.... Jeast, James, You certainly have a perverse streak in your personality... ;) Thomson Reuters has under performed the market for 20 or so years. Thats one out of 25. Of course, once you put it in a portfolio it will start to perform.

Uccmal, Would love to hear your thoughts on Extendicare. Just came on my radar. BLSH See this: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/exetf-extendicare/msg126483/#msg126483

Al, Though our portfolios are different my results seems to match yours though mine is very short period of time as i only started in 2008.More my portfolio size grows and increases in mulitples of my salary its seems more harder to concentrate everything on just 1 or 2 ideas, Loss Aversion kicks in as i always think how long will it take for me to earn everything back with my normal salary. I wonder how Eric concentrate such large amounts in 1 or 2 stocks, thats one thing i need to learn. For that matter how Fairhomes concentrates Billions in just 5stocks is really amazing.Probably time will teach you how to handle more money when great idea shows up or may be i also think extreme concetration happes during the worst times and we are not their currently thats my feeling! Good points. Although spring 2009 presented a great opportunity to buy a diversified basket of the very best companies on earth. My other oversight was not just holding them or converting the options to stock at the time. I bought sbux below 10, axp below 20, ge below 10, and hd around 20. Would I have done better keeping those than with BAc in the last year and a half. Might have been a wash. Lesson learned. My plan is to keep BAC, WFC, JPM, AIG, and SSW until they are clearly over valued this time. However, we know that God laughs at plans...

One common theme here seems to that each person has developed their own investment philosophy and accompanying process. Just reading balance sheets is not enough. A philosophy and process become ingrained to the extent that you start to feel it. This is where George Soros' sore back comes in. I was down 70% in March 2009. I liquidated what I could and piled into Leaps on a few of the very best US companies. To be honest I actually had nothing left to lose at that point. I bought SBux, AXP, GE, HD, and a couple of others. I ended up 2009 ahead of the end of 2007, and 2008. My first down year was 2011 due to my own stupidity.

As per the other thread on intelligence. I dont think that has anything to do with it beyond a certain point. One thing for sure is that I have disciplined myself to buy when things are cheap, and sell when things are expensive, and I follow through. There is also, the 'problem' of being too early, which has made me a fortune. I originally bought BAC warrants in mid 2010 ( check start of BAC warrants thread). I kept buying all the way down, moving to Leaps along the way, and then all the way up. The point here is that I got to know the company over time. The only way you could buy BAC at $5.00 was to be fairly confident this was a disconnect. To know that it wasn't right you had to have been around for awhile. Same with Seaspan. I bought SSW, the first time in December 2008, and have bought it all the way up. I am still buying on dips. This would be the concentration aspect of a few good ideas. You get to really focus on a company as it turns around or exploits its innate advantages. On the flip side, every year I get a couple of "good ideas?". I buy the stock, and realize, usually within a few weeks that things aren't as good as they seem, and bail, usually at a small loss. Then I redeploy the funds back to my better ideas, that I am more familiar with. Therefore only 7 or 8 stocks in my portfolio. I think there is an experience aspect to this vocation. Once you have been stung with companies in secular decline you add that to your mental check list (my examples: yellow pages, sfk/fbk, Rimm). Once you have been stung by resource stocks revaluing their reserves once or twice, you get gun shy ( caribou Resources no longer exists - the CEO was buying stock right to the day before they filed for BK). In the end, this leaves a handful of companies in a handful of industries that aren't going to go down. Again, concentration. Finally, If its seems to good to be true then it probably is. I have fallen for the high yield trap many times. As much as I gripe about dividends I would rather see AIG or BAC incrementally, and conservatively raise their dividends, then run themselves out of cash trying to pump the stock. Nuff said.

Quite the results Packer. Mine are roughly, 9 years at 25% annualized. I will note that the result is after tax. I oay the taxes each year out of my brokerage accounts, so that does not equate to posted mutual fund results. I have always been concentrated, in 2005/06 I was essentially 90% in FFh. Right now, I am about 75% in US financials. Seaspan and the RBS prefs make up most of the rest. Since my last post here I decided to reduce my aggregate borrowings to zero and am about there. I get disconnects between US and CDN accounts. i.e. I have 100 G borrowed in the US account offset by 100 cash in the CDN. I am now very willing to accept lower returns in exchange for lower risk. Too many times I have lost, and had to earn back the losses. I would rather bypass that circus going forward.

That was my recollection. I dont think he was ever banned.

The guys got cajones... I'll give him that. I wonder if his returns have improved above break even, since he left the board. Who said "those who cant do, teach"

A little anecdote. A late Friend of mine ran a couple of car dealerships in the 1970s-1990s. He was a very bright and perceptive individual. He was asked by the Ontario government to sit on a committee on vehicle safety, and safe driving. He was on the committee with a few elected members of provincial parliament (MPPs). Now these are powerful people overseeing budgets and processes in the billions. My friend's description of the process and ensuing commentary was that most of these MPPs were stupid. But they were elected, had power, and had awesome social skills. They seem to be idiot savants, great at smoozing, saying what people wanted to hear, and getting re-elected. My dad has had similar experiences with our federal government elected officials. Are they smart?

Stephen Baxter is one of my favourite writers. I really liked Manifold Space, Manifold Time. Also, Exultant, Coalescent, and Transcendent. The guy has to be the most generally knowledgeable Sci-fi writer I have ever read, a list that includes all the biggies. He took on Evolution which was a bit tough going, and another series that follows British Roman history that is a little tough going as well. Some hits, some misses.

Packer, At my peak in the FFH Early leap days(2006) I was running obscene levels of leverage, >50%, but then my portfolio was only 1.5x my annual pay. These days I stay below 10% margin. I am sure its the same for you, but we cant borrow against options, and curiously the only warrants that count for margin are the BAC. AIG, WFC, and JPM cant be borrowed against. As mentioned my BAC leap position is 100 % hedged. Ideally, I am aiming to have net cash, but its taking time for my positions to mature (AIG, and BAC). As the markets rise, and a correction becomes inevitable, sooner, I'll want more and more cash available to redeploy into cheaper stocks. Hey, thats my style man. Packer, how about you?

I don't know about that. I'm as competitive as the next guy, but what does it matter? I'm not out to beat anyone. I simply need to achieve satisfactory, absolute results. Relative results don't support the family. We can all do well, everything being equal. It's not a zero sum game in that respect. If your concentrated portfolio does great, well I can still do just fine too and vice versa. At the end of the day, Mike Burry said it best. Know thyself. If you are the intellectual heir to Buffett and Munger, then by all means follow that road. Hell, if I could, I would. If I could tell which companies would be doing great in 10-20 years that's what I would be doing too. I can't. To me all of "those" companies always seem expensive. Sure, if I could buy AAPL, IBM, DVA, etc at BV, I would toss other things and do so. Absent that, I do what I do. The biggest mistake I think investors make is trying to be someone they aren't. If you are uncertain about things and believe we don't know what we don't know, then perhaps having 5 20% positions isn't the wisest course of action. If on the other hand, you are able to do so, then that's the path you should follow. Good post. Know thyself. I have tried the schloss approach a couple of times and just end up selling stuff at a loss. I do better the way I do it. It took years to evolve a style that works. That being said, I am open to the basket approach in times of extreme markets such as early 2009.

Around 90% in my top 6 - 8 ideas. I am learning the value of sticking to my best ideas and saying away from lesser ideas. Roughly in order: BAC - my leap position is 100 % hedged again at current levels. Also have warrants and common Aig - warrants, common, and leaps SSW - largest common position Smaller In no particular order: RBS preferreds WFC - common & warrants JPM - common & warrants Extendicare FFH & other - very small. I have built part of my holdings to generate dividends to finance a couple of years away from work. Returns similar to Rodriguez experiment, after tax, over 9 years with leverage. The leverage roughly cancels out his non payment of taxes in his IRA experiment.

One down and out bank was enough at the time. BAC was it. I spent my time focussing on it, and how the Leaps behave, probabilities of recovery. As I have said before, my best returns have always been when I have gotten to know something over time reasonably well. I didn't look at C initially so I have let it go ever since. BBAc management has learned and grown in the 3 plus years I have held the stock. I have also held smaller positions of JPM and WFC since around early 2011, and tripled down on JPM in the aftermath of the Whale incident. Thats enough for one private investor to keep track of.

I think you need to separate traditional short sellers from short sellers who deliberately catalyze a position such as Muddy Waters, or Jim Chanos, or Ackman. My understanding is that traditional short sellers try to grab a falling knife on the way down, not on the way up. Linkedin, while obviously overvalued, has earnings, capital, a brand, and upside earnings potential. You need a company that has nothing there to hold its stock up. Linkedin has 1 billion in cash as of 6 weeks ago, and essentially no debt. So, how do you set your target to buy the shares you sold short: $50, $100, 150? What's fair value for LinkedIn? I have a hard enough time setting upside sell targets on value stocks. Should I sell my shares of BAC at 16, $20, $24? And I have already made 100% profit to date on the aggregate position. Seems like torture to me unless you can identify and publicize a catalyst. LinkedIn is overvalued doesn't seem like a sufficient catalyst to me. The difference between Facebook, Google, LinkedIn, and Netfilx, versus .coms of 13 years ago is they they have viable businesses with real revenue and cash flow.