SafetyinNumbers

I’m hearing from a shareholder who has a large position in Fairfax India that it’s rallying because Indians in America think that India will benefit from the close relationship that Trump and Modi appear to have. It’s been basing for a while so might just be a coincidence. The IPO of Anchorage is also expected over the next 10 months but it’s not guaranteed.

Thanks! I think that’s part of why it did well on Nov 1

They kept the language about best efforts for the Anchorage IPO by September 2025. I don’t think it would be that surprising if someone in India had an informational edge.

Thanks @mananainvesting and @Viking! Viking I’m looking forward to what you come up with. I find your analysis extremely helpful! @Haryana I think that makes sense on the performance fees but it’s hard to believe the discount closes entirely except if investors really want to own BIAL post IPO.

Thanks for listening! On FIH, the fees aren’t waived until the most recent book value ~$21.5, just that they are already paid up to the end of 2023 and any additional since then to end of Q324 already accrued above the 5% hurdle rate.

I hope you enjoy it. Anthony, the host, has great energy!

Thanks @nwoodman! I appreciate the kind words and absolutely agree. The right tails are so exciting.

I went on a podcast and spoke mostly about Fairfax. https://t.co/x7v5g2OvGf

Float cap matters more than market cap. The 60 add will make them dig deep. I’m also sure IFC will be issuing more equity soon to increase its weighting.

I agree with you that most investors don’t spend the time to understand how the value is being built but that has nothing to do with if FFH will ever fully reflect its intrinsic value. Multiple expansion takes aggressive buyers and reluctant sellers. The buying is coming from the 60 index add and all of the Canadian active funds that are underweight which is value insensitive . Meanwhile, share buybacks and the TRS have cleaned up 7m shares since 2019 from the weakest (read value investor) hands. For those remaining, 2024 will be the fourth year with ROE north of 15%. I think anyone who has a rudimentary understanding of the business model can predict the next 4 years will also be north of 15% on average. If I’m right, the shareholders left will be reluctant sellers by the end of 8 years and the multiple could challenge something like Intact Financial at 3x BV despite recent poor returns. That’s why my plan to sell is based on forward returns and not valuation. Call me a reluctant seller.

Just lucky I guess. I think his major issue is he doesn’t speak to any clients so there is no feedback. As you described Viking he’s analyzing insurance like it’s a widget factory where margins mean revert instead of a money making machine levered to interest rates and asset allocation.

The power of compounding at work!

No one outside of India, investing in India has better connections than Ben.

No withholding for Canadians

15% for equity investments.

Ironically, by keeping a reasonable hurdle rate of 10%, one leaves themselves open for a home run because the margin of safety is very high and the right tails are wide open on ROE and multiple expansion. If one book ends ROE range for the next 5 years at ~15-20% and the terminal multiple between ~1.2-2.5x, the stock CAGRs between ~15-40%. That’s a return between 2-5x in 5 years. Unfortunately, I think many value investors will miss out because they are up a lot and they are afraid of drawdowns.

Post Q324 there is nothing to stop index arbs from running up FFH shares into the likely 60 add in December. Book value is growing 3-5% per quarter which makes it easy to own. The wild card is where investors let go of their shares. Based on the discussions on this board maybe we won’t see much multiple expansion but there is only one way to find out. I’ll be holding on to my shares regardless of multiple as long as BV keeps growing 10%+/yr.

Consensus FTM EPS went up first and then retraced a bit. I wonder if that’s all it’s referring to. I think the stock will rally after earnings as the index arbs will be more aggressive after that risk is out of the way.

I think now more than ever, the consensus earnings estimates reflect what Mr. Market thinks about forward earnings as most market participants treat money management as a big data exercise. A unique quirk for FFH is that it doesn’t report adjusted EPS so Mr. Market thinks it trades at ~10x FTM with very low earnings predictably. The adjusted earnings is a composite of Morningstar and RBC’s core earnings estimates which exclude equity earnings from what I can decipher. Of course, Morningstar also expects earnings collapse in 2027 and 2028. I find it difficult to model earnings that low with the contributions from Eurobank, Poseidon and the TRS. Even in the IFRS/GAAP EPS it seems like analysts are assuming nothing else from the equity portfolio contributes any earnings for the FTM estimate of ~$155. We should get the rest of the street coming out with 2026 estimates over the next quarter or two which might help give Mr. Market more comfort on earnings power.

I think we can make some pretty good guesses on underwriting income, investment income and profit from some of the big holdings like Eurobank, Poseidon and the TRS for the next three years assuming no multiple expansion. Multiple expansion will only help the TRS. It also helps the company is buying back stock at these levels providing a floor for the multiple and that the 60 add is in front of us. If the multiple does expand, the excess capital will go from buying back stock to buying back the minority interests in the insurance subsidiaries. That could add another ~$25/sh in earnings. If there is a market correction or a widening of credit spreads that would also returns as capital could be allocated from treasuries to higher returning investments. Digit could also be sold down and reallocated to higher yielding investments (not necessarily higher returning). There is a lot of right tail optionality in the portfolio although we don’t know which levers they will pull and when.

Luckily they usually come hand in hand!

Pretty sure this is how multiple expansion happens.

FFH reports Eurobank and Poseidon on a lag so we know these numbers already for Q3.

I was thinking going from 1-2 points of reserve releases to 3-4 points.

That really depends if their assumptions were the same as yours when they wrote that business 4 years ago. We’ll know soon enough.