SafetyinNumbers

This is pretty cool

I still think it makes sense to buy ELF.TO instead of VOO. Give up some liquidity for margin of safety.

Yes, AI got it wrong. This disclosure is in the 2024 AR:

I think he made the purchase on margin too which likely influenced the decision.

The short answers are 1) The stock doesn’t pass their checklists (heuristics) and if it does 2) the portfolio doesn’t pass their checklists and if they get to 3) they use very conservative instead of realistic estimates and have such high hurdles that they still can’t get there. Mostly though the hurdle is finding room for a new investment as avoiding taxes on something already in the portfolio is paramount.

I was trying to determine if it was a concentration issue or a hurdle rate issue. Turns out it was the latter. I recently presented to a bunch of investors on the top 3 reasons why they didn’t own Fairfax and hurdle rate was #3. My own analysis suggests high teens+ ROE is more likely for the next 5 years so I’m happy to buy at this price. Fairfax has a hurdle rate of 15% themselves and they are buyers a hundred plus dollars higher which is nice confirmation.

Nice. Hoping it continues for the next 25!

That’s a pretty high hurdle. How have you done so far?

There is only 1 analyst with estimates in 2028-29 and that’s Morningstar. He forecasts unusually high cat losses in the out years. Generally, quants don’t like P&C insurance because it’s lumpy and the float looks like debt but this guy is also not a good analyst.

Substack post on why this time of year is usually a good time to add to Fairfax. https://open.substack.com/pub/berczyparkcapital/p/fairfax-financial-seasonality-opportunity?r=ecc87&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false

I appreciate you think it’s too expensive to add to your already large position but to be clear hypothetically if you didn’t own any, you would not start a new position unless it traded below book value. Is that correct?

I think in the last year at some point you said you wouldn’t start a new position in FFH if you didn’t own one already. Is that still the case?

MKL reacted pretty well to its beat.

So pessimistic! I think closer to 90 vs 95 but I am an optimist.

I think that’s just called analysis. The BMO analyst on the other hand expects higher cat losses than last year and a combined ratio of 97.9.

The first book on Buffett/BRK came out in 1992. At the end of 1991, BRK traded around 1.4x BV and the multiple proceeded to double over the next 5 years. It makes sense as book readers might be the type to buy (demand) and hold (reduce future supply). It took until BRK issued stock (increased supply) for the Gen Re deal for the multiple to come down.

I don’t think of it as trying to time the market but taking an expected value approach to fixed income investing much as they do with equity investing. I’m not expecting them to trade every move correctly, that would be impossible. If you ever do the study, please share.

I think this chart shows how reserve releases are cyclical. It makes sense as high reserves are booked in a hard market and if there are no unfavourable developments have to be released in line with average claim duration (4 years). Premiums were growing fast 4 years ago and with slower premium growth since 2024, the reserve releases should have growing impact.

Very much disagree with the conclusion that underwriting income is going to be reduced. Premium and float growth will be reduced as we will write less business. I expect combined ratios to actually go lower over the next 4 years as reserves are released from the hard market over the past 4 years.

Seemingly through hurricane season. Next 3 quarters reported through May include the shareholder letter, AGM and is seasonally very strong. We also found out about the Eurolife gain and more about buyback activity which suggests a floor on valuation (or at least more buybacks if we dip lower).

A friend confirmed it was Scotia so it’s probably a good guess that it’s the buyback. We should see it by November 10 if that’s the case.

Have you done a study on what their positioning was from 2016-2025 and what the benefit/cost was? If so can you please share? I like the optionality of being shorter duration. If long rates do go up then it might create a hard market which they can take advantage of. If not, the lower interest income potential doesn’t stop them from still reaching a 15% ROE given all of the embedded gains in the equity portfolio.

Did you see the broker?

There doesn’t seem to be a post money valuation available. I think Ki should IPO at a very healthy multiple of premiums. 5x seems reasonable given the growth, profitability and potential for a 20% ROE.

Stand has $1b of insured value not $1b of premiums as far as I can tell.