SafetyinNumbers

They have bought some shares back but they are in the business of assessing investment opportunities and making investments. If they don’t have the capital to execute then they hurt the value of the network they have built. Having worked in a fund, when the capital is turned off, analyst morale collapses. The discount between the share price and book value is well understood given the market structure. The growing discount between book value and intrinsic value is less understood but it shouldn’t be surprising given Fairfax’s conservative approach to asset valuation. It’s happening at FFH too. Comparing the fees to intrinsic value might help with framing.

Management fees aren’t high compared to most PE funds. In fact, the fees are lower than would be paid on most PE funds when the conservative valuation of the portfolio is included. Further, the cheap leverage at the holdco also is a net benefit to owners so should be included in the analysis.

I’m asking because most analysis is done statically looking at what BIAL intrinsic value is now or where it might trade on a listing as opposed to what it might be worth in 10 years. Probably less relevant for those trading $16-20 price range.

What do people think BIAL will be worth in 10 years?

The market structure changed. The market became less efficient. They prefer making investments over buying back stock but the only capital they have access to are dividends from existing holdings unless they make sales. They could mark up the portfolio to full value like their private equity peers would do. The stock price would probably be higher, the discount bigger and the fees much bigger. I assume you will be at the AGM to air your grievances?

It takes time to fill an airport?

My understanding is that Anchorage is used to bid for more airport concessions not BIAL directly as this article speculates. https://centreforaviation.com/analysis/reports/indian-airport-concessions-set-to-restart-bangalore-airport-to-join-the-fray-as-a-bidder-741327

So relatively short holding periods. More of a swing trader vs long term investor?

We know intrinsic value went higher. Just a timing difference.

I’m not sure what consensus is on buybacks. I think they have $2.4b to spend this year. They paid $384m to March 6, buying 226k shares. That would leave $2b. I assume they are more aggressive at lower prices so >1m shares seems likely.

I’m curious if investors here have Fairfax Financial FFH on their list to buy on a further drawdown that don’t own it already. I don’t want to hijack the thread but the audience here seems ideal. I had an interesting discussion in the The MacroTourist substack chat yesterday with someone who has this plan and it made me curious if this is a common view. I own a bunch but have added 9% to my position this year. Despite that it’s gone to 56% of my net worth from 59%. As you can see, I don’t have the discipline that you do if you are in this camp!

I bought both of these too! Luckily got the CSU on the open for $2290.

The triangles did change a lot post IFRS 17 from persistently showing favourable development to showing adverse development. Runoff wouldn’t explain that would it?

I have spoken to thousands of investors over the past 20 years so just sharing what I have observed. Clearly you are exceptional @petec. To that end, why do you think Fairfax and Fairfax India are cheap?

That doesn’t make much sense. Increasing supply has the opposite effect. The more shares that trade at lower prices will reduce the reserve price faster though.

I don’t think that’s the correct framing for Morningstar. They are quants herding investors towards “quality”. They depend on the analyst for the moat analysis and the financial forecast. Their model comes up with the target price based on that. Fairfax just doesn’t screen well. Earnings are highly unpredictable. Revenues are cyclical.

I appreciate that most value investors don’t care why their stocks are cheap but I do because it helps with conviction and to avoid mistakes.

Bloomstran used to mention Fairfax in his annual review of Berkshire and essentially dismissed it because of the leverage which is the best reason to own it, in my opinion.

The analysts are mainly a reflection of their clients. My comment was more referring to the quality/value investor that owns Berkshire or Markel so presumably understands the business model but won’t look at Fairfax because they don’t like the expected value investing style. Most people can’t think probabilistically so they rely on historical correlations to create heuristics to protect themselves from bad outcomes. This is not a critique, deterministic investing has worked well since the GFC and may continue to work well, it’s just not what Fairfax does.

Consensus from quality investors that Fairfax are bad investors.

When investing based on probabilities luck definitely plays a role in both directions.

You might but that doesn’t change consensus. On this point, a lot of these gains haven’t hit book value which helps with confidence on forward returns.

That’s good. I just see a lot of they got lucky on interest rates and steel and oil and gold and Digit etc… The consensus is they are bad investors which is pretty clear as analysts tend to ignore the equity portfolio to the point they don’t include any value until gains are realized. BMO wrote on FFH last week post the Poseidon sale and cut the earnings given it is equity accounted for but didn’t include anything for the gain to be realized in Q2.

In my experience that’s not the case. The better ones tend to get bigger weights and help the performance that much more. When those are mistakes, it hurts more. I have had my share.

When I read this, it seems dismissive of the common sense probabilistic bets they made and continue to make, which may not be how you intended it. Most capital can’t make the same bet because the institutions are investing other people’s money. There aren’t many expected value / probabilistic investors around and most investors don’t respect us because we don’t invest like they do but it is a valid strategy. Worked for Buffett especially in the partnership days and Templeton etc… I have great respect for quality investors. I cosplay as one with small parts of my portfolio with mixed success (KNSL going badly right now but it’s a great business). The multiple expansion in quality compounders forced me to think long term and I think that’s really helped my returns since then. I never would have predicted would have such a concentrated position in anything ever even 5 years ago when I started buying FFH but the risk/reward seems that good. As an expected value investor I know I could be wrong but the odds that I’m wrong in a way where I don’t meet my 10% hurdle seem very low over the next 5 years. If I’m even remotely right though, I should handily beat my hurdle. I might beat it spectacularly. That’s a possibility when buying Fairfax but probably not when buying Costco. Quality investors follow Buffett’s rule #1, never lose money. Expected value investors expect to be wrong a third of the time. They also expect to underperform the market for long periods of time but if it’s a successful strategy they will also beat the market for long periods of time. Expected value investing is an absolute returns game. Quality investing has been hijacked by the relative returns crowd. Most self-described value investors are quality investors with a value filter on the buy decision. The ones that are out of business are the ones who used the value factor to inform, the sell decision. Never sell has all of the assets. It’s worked because growth and predictability factors have high correlation with stock prices. The value factor hasn’t had high correlation with stock prices for a long time. Most institutional capital is trying to beat the market in the short term. That’s how they keep the capital. That means keeping up with the quants. That’s why they are selling Fairfax despite the incredibly low valuation. They don’t even bother predicting expected return. Gross premiums are slowing. In every other sector this means the stock price is going down, so they sell. What’s surprising to me is how much they own. To keep the stock flat despite earnings beats every quarter means they owned a lot and might still. The big multiple expansion we saw from 2020-July 29, 2025 was due much more to institutions chasing the revenue growth than anything else. I think value investors were selling on the way up because the multiple was expanding from 0.6x to almost 1.7x BV. A lot of investors on this board contributed! Since June 2024, between index demand and buybacks over 2.1m shares have been spoken for. I was also buying on pullbacks. My position is up 68% since then and I used leverage to fund it. Channeling Buffett Partnership days. I think it’s a similar kind of market from what I have read. Now we are getting the big multiple contraction as momentum investors continue to unwind their positions. The beauty is the multiple can contract 20% and the stock might be flat. The share count will also be much smaller. We might have $2.4b to spend on buybacks between proceeds for Poseidon ($400m held at holdco) and dividends from the insurance subsidiaries. We are allowed to pay out $4b and the last few years they have been doing half and using it for buybacks.