SafetyinNumbers

Fairfax also used expensive stock in the late 1990s to do a series of insurance acquisitions in part to pick up cheap float. A smart move by both BRK and FFH, IMO.

I think they are telling us their sweet spot is quality at a fair price and they are waiting for fat pitch. That should send the multiple higher but the market might wait until they actually pull the trigger. Does anyone have an estimate of how much they could deploy into equities from fixed income if an opportunity presented itself?

My guess is that if estimates go up post quarter that eventually the stock will resume moving higher but thankfully I don’t have to bet on it.

2.5x+ BV starting to seem expensive or is something else going on?

Thanks!

Thanks for sharing. Do they have the FIH.U transcript as well?

Thanks for sharing. This moment at the AGM forced me to add even though it’s a full position. If I can paraphrase Prem here: We’re sitting with the bat on our shoulders waiting for fat pitches and virtually every one we have swung on lately has been knocked out of the park. We should have a rating system based on dollars. If a trade makes $1b it’s a home run like the TRS, duration decisions which allowed for the premium growth and saved billions, the SIB etc.. Right now, I think they are stating plainly that quality compounders on sale is their sweet spot. The beauty of the giant float is that just stacking cash gets them over a 15% ROE. I can see how buying a crash could increase returns and increase the multiple i.e. decrease negative Social Value. Lots of investors won’t buy Fairfax because they only buy quality and Fairfax does not own quality i.e. Fairfax owns stocks they would never buy. Part of Markel’s premium is because they are associated with quality as it’s certainly not because of recent returns. I had a PM friend say FFH’s reputation is as a junk collector but that could change quickly if price changes quickly. They also seem to have a lot of excess capital. Float is $33b but they have $45b of fixed income. If there is a market dislocation like the pandemic etc… Fairfax might be in the position to deploy 20% or more of its market cap in high quality stocks or the index at a fair price. VOO on the 13F maybe isn’t much of a head scratcher anymore but a capital allocation decision consistent with a new mentality. Of course, we’ll have to see what they actually do but each fat pitch they swing at could super charge ROE and BV if they get a hit and it seems to me like an environment rich in potential fat pitches including a market dislocation.

I use 10% as my hurdle rate since that’s an estimate of long term equity returns. I’m not sure what they use.

I think Fairfax is an absolute return investor and not a relative return investor. They aren’t trying to beat the S&P/500.

My guess is it should increase the deferred tax liability all else being equal by the increase in the inclusion rate. Anyone have a better idea? If my estimate is right it would increase the deferred tax liability by ~$412m or ~$18/share.

I asked the question about using a structure where FIH was the GP. I thought the answer suggested it was the likely possibility but others in the room didn’t have the same takeaway.

@hardcorevalue presented BAT so he can probably help.

There was no explicit mention of IDBI but it was alluded to that the decision would be post India election (early June). Generally I got the sense that activity will pick up across the board in India once the election is over. Also, I was the “someone else” who had the opportunity to sit on the panel with Viking at the dinner. I hope I made sense even if I wasn’t memorable!

Thanks! I’m still confused about what @John Hjorthis upset about.

You think they are lying in these two slides?

I think this is what he’s referring to. https://www.fairfax.ca/wp-content/uploads/2023-Fairfax-Financial-Holdings-Limited-ESG-Performance-Report.pdf

Those were the old estimates unless they are unchanged.

That doesn’t make sense. They shares held for employees haven’t vested yet. He probably doesn’t understand the accounting. Also it’s weird because the computer sets the target price so he’s working backwards.

I’m proud of my CFA but it doesn’t make someone care about the quality of their work. I care about what I share on Social Media and I’m not getting paid by anyone.

He says his target is 1x 2023 YE BV but C$1180 is US$862 and 2023 YE BV was ~US$940. How does this stuff get published?

Can you see how much he changed his earnings estimates?

That’s terrific. It really does seem like things in India are going to accelerate once the election is over in June.

Hi everyone, if you attended FFH week or listened to the AGMs, please share what you learned that was new?

FFH is long the swaps, Canadian banks are short the swaps and long FFH. I think that’s the whole picture. It could be if someone wanted to go short FFH via swaps, the banks would take the other side and sell some shares to offset their net position but that’s likely marginal at best.

I hope Viking doesn’t mind me responding but I’m almost certain the Canadian banks that are acting as counterparties are fully hedged (i.e. they own the shares directly). The play here is the income they earn on financing the TRS for FFH. They are not betting against FFH, they are simply providing credit.