Viking

This is the thread each year where I give thanks to Sanjeev and the many great posters from years past. I moved to Toronto for business reasons about 12 years ago and discovered this board and Fairfax as an investment. Good advice from many others on this board, good decisions, dumb luck and time all combined over many years to put me in a good enough position financially that I was able to quit my day job and spend quality time with my young family (7 years now and counting). I have since moved back to Vancouver and in hindsight one of the greatest gifts of taking the job in Toronto was that I discovered this board and Fairfax; an example of unintended positive consequences. Thank you to Sanjeev, bsilly, cardboard and ericopoly to name just a very few; many more have helped me. I will always be very thankful. Thank you and have a great holiday and a prosperous new year!

I am amazed at how fast smartphone companies have blown up: Palm, Mororola, Nokia, RIMM... soon HTC? They have not been able to stay popular with consumers. RIM was not able to make the transition from enterprise to consumer. I am sure the decisions made in the boardroom were backed up with great analysis and made perfect sense at the time. Who in their right mind would have been able to predict how fast the company has lost sales. Apple has been able to stay very popular with consumers. Samsung has as well; what's interesting is Samsung made their business by basically copying Apple's phone (very smart). Perhaps RIM's fatal decision, made years ago, was to dismiss Apple's iphone as a strong competitor and not offer a similar product. Samsung's 'dog with fleas' launch of Galaxy Gear shows how few companies are able to launch great consumer products in new categories. Microsoft's Surface is another good example of how challenging it is. Perhaps Apple is grossly underappreciated for how well it develops and manufactures products for the consumer market. Perhaps Apple has the culture and talent to keep innovating; and perhaps their competitors simply do not. Time will tell.

Imagine if you purchased a Kindle and got as part of the purchase from Amazon a free on-line subscription to the Washington Post. I realize that this was not an Amazon purchase. I wonder if we will reach a point where the major tablet/smartphone ecosystems (Amazon, Apple and Google/Android) decide to get into the content business in a major way. However today it currently looks to be a catch 22 (for the hardware manufacturers) as they may get the benefit of the content they purchase but run the risk of having other content providers (competitors) cutting them off.

I would like to say thanks to Sanjeev and the individuals who chose to post on this board. In the past 10 years my financial position has improved dramatically; as a result, my quality of life had improved dramatically. Without this board I would be in a much different place today. And I look forward to the next 10 years with great anticipation. :)

About 20 hours per week: sports (NFL, NHL; movies (recorded on DVR); news. Definitely more in winter months and less in summer months.

So BV = about $75; BRK now says they will buy back stock below 120% = $90 (where it is trading today). BRK has the cash to buy back lots of shares; they also now appear more willing to actually buy back shares in a meaningful way (buyback today is a good start). BRK's businesses are heavily weighted to insurance and US housing... both of which look very promising moving forward - insurance entering a hard market and housing is improving. BRK should be able to grow BV the next few years by 10% per year quite easily. Putting it all together... BRK stock today looks to me to be a great substitute to holding bonds... limited downside and solid upside of 8% to 12% over the next few years.

Gio, I like your question as it is logical and straight forward. I have been investing in FFH on and off for the past 10 years... I must admit I have not been a buy and hold investor. In the good old days the stock could be purchased for under 0.80 x BV (sometimes much below) and sold a short time later for much higher (50 to 100% gains were not uncommon). Not only would the stock sell below book at the same time FFH would sometimes be sitting on large gains in its investment portfolio that were not yet priced into BV (like the credit default swaps back in 08 and 09); this made the purchase even more compelling. It was kind of like shooting fish in a barrel. Needless to say, back in the good old days, a trader mentality produced far better returns than buy and hold. And then FFH delisted from the NYSE and the crazy volatility vanished. Since then FFH's stock price movement has become a different animal. BV has gone sideways for two years and the stock is trading today where it was last trading during the financial crises in 2009. I was not a buyer at $370. I have been an aggressive buyer at $350 for three reasons: 1.) BV = $360. I am buying below BV. Not 0.80xBV but still below. 2.) Insurance market looks to be hardening with each passing month. FFH should be able to grow its insurance business very well. 3.) Investing: recently, FFH investments have made some nice moves (Cunningham & Brick sales, RIM getting some positive coverage and stock up almost 100% from lows) which may help Q4 BV. Dividend: expect announcement shortly; expect another $10. Helps stock have strong finish to end of year. Not a reason to buy but something I will be paying attention to. Should the stock continue to go lower I will be happy to purchase more. I am not sure yet if this is a short term or long term holding. If the company pops back to $380 by year end I may simply lock in a nice 7% gain. I need to spend more time understanding how much insurance pricing is improving... if the hard market is gaining more traction I would be foolish to sell at anything under 1.2xBV.

Kind of reminds me of the good old days when these sorts of articles would result in FFH falling 20% or 30% or 40% or more. I do miss the volatility as it was an easy way to make money. I am happy to take advantage of another dip under BV.

Book Value = $360. Stock trading at $348. P/BV = 0.97 ST Negative: expect ugly Q4 results due to US hurricane; FFH tends to get hit pretty hard with these sorts of things. Medium Term Catalyst: insurance markets are clearly hardening; FFH will benefit, perhaps in a big way. US hurricane will help - short term, hurricane is a negative but medium term it should prove to be a benefit as prices increase. Their investment portfolio will go sideways until their is a big sell off at which time FFH will have the cash to make out like bandits. In the good old days in a sell off you could always count on FFH P/BV dropping to about 0.80. Since they delisted from the NYSE the stock has not traded below BV very often. I am happy to re-establish a position today below book and ride the improvement in insurance; what they do moving forward on the investing side is a bonus - based on past history, my thinking is they are due for some nice upside surprises over the next year or two. Nice to be back in the saddle again...

If we got a 10% correction, I would focus on sectors that have been crushed recently - I would look to buy more DELL as it would likely trade in the mid to low $8.00 range. FFH is back on my radar; would be great to re-establish a position below BV as insurance pricing hardens. LUK also looks interesting below $22 given its stock price and all the cash it has on hand. I would love to get back into lots of other names (i.e. US banks etc) but it will take more than a 10% decline to get me excited.

For those who like to think about these sorts of things... not that there is anything wrong with it! ;) http://finance.yahoo.com/blogs/breakout/great-disconnect-awful-earnings-vs-hot-stock-market-113011268.html

"Well, almost all. Here's a mega-post of video excerpts from Fortune's annual technology conference" http://tech.fortune.cnn.com/2012/07/24/all-of-brainstorm-tech-in-one-place/?iid=SF_T_Lead

Just moved to 100% cash. Been a solid year. I am happy to wait for some great bargains to show up (like they always do).

DELL has been on my watch list for a while. FFH, Southeastern own it and Markel recently bought a little. On the flip side, here is what David Einhorn recently had to say "Dell (DELL) proved to be a disappointment. We had thought that the growth in the non-PC business would be enough to offset the deterioration in the PC business. The non-PC growth was smaller than we'd hoped and the PC deterioration was worse than we'd anticipated. While DELL has a good balance sheet, it appears likely that management will try to use much of the cash to try to buy its way into better businesses. At a minimum, this will erode some of the value cushion that the cash balance creates. We exited with a loss."

Obviously, if you are able to find a great company trading at a great value (as defined by the buyer) you should buy it regardless of what is going on in the economy or stock market in general. What I find interesting is how Mr Market's definition of value changes over time. From 1984 to 2000 the multiple got bid higher and higher.... in 1984 you likely bought value at a PE=8 and thought you were making out like a bandit selling a few years later at PE=12 (likely doubling your money). By 2000 PE's in the 20's were not considered excessive as stocks had run pretty much straight up for 20 years. And we were in a 20 year bull market. Since 2000 the opposite has happened... the PE that is considered 'value' has been steadily coming down. My guess is the bear market is not over yet even though it has been mauling investors for 12 years. Watsa, I think, would agree (given how hedged FFH is). In a bear market, I will be happy to buy low and sell high (and repeat) and protect my capital. At some point in the next 5 years my guess is the stock market will hit bottom and we will enter the next great bull market. That is the time to buy the best and hold tight for the long run. History teaches us that 'we are there' (the bottom) when stocks are hated by all. Clearly we are not there today.

I am back to 80% cash and 20% invested. I have been happy to cash out and lock in returns. Stocks are trading near a 4 year high. Why? 1.) Europe is entering a bad recession 2.) China is slowing 3.) The US is slowing; corporate profits are decelerating In short, the economic backdrop stinks. Europe debt problems remain; nothing has been solved and likely will not be in the near term. Yes, US housing looks to have bottomed and the fact things are not getting worse is positive. The only reason stocks averages are rallying these days is the 'smart' money is anticipating QE3. The worse the economic and profit news gets, the more the market averages go up. Bizzarre. Of course if you find great companies trading crazy cheap you should buy them. The summer months is a tough time to invest as the volume is light. As we enter Sept and volume increases I think life will get interesting. It has been a great year already and I am happy to move back to cash and wait for the nexr round of bargains to be served up.

You can add HPQ (-50%), BBY (-40%), FTR (-50%), RRD (-39%)... I do find these opportunities interesting (especially the basket approach). The challenge is valuing the business, management and future earnings. My big challenge is I give management the benefit of the doubt too much... I have had the most success staying away from turnarounds and sticking with well managed companies with improving earnings (and what management says will happen usually does happen). The one exception would be buying US banks; I have bought and sold them a couple of times over the past year (taking advantage of the volatility).

US 10 year bond yields are back at historic lows at 1.48% US GDP is clearly slowing: http://www.bloomberg.com/news/2012-07-17/gross-says-u-s-nearing-recession-as-goldman-sachs-cuts-forecast.html The odd man out is the US stock market. What is a little bizzarre to me is it seems to rally when the economic news actually gets worse... with the expectation that Bernanke and the Chinese will announce QE3 etc. http://www.bloomberg.com/news/2012-07-17/asian-stocks-fall-on-imf-cut-to-gdp-outlook-u-s-data.html

Here is a recent video from ECRI; my guess is their view is still in the minority. With the passage of time, my guess is they will be proven to have been correct (give or take a few months). If true, we will have an interesting Aug & Sept ahead of us. I will also be closely watching earnings guidance from the US large cap space. Interesting times! http://www.businesscycle.com/#

Buffett folded the partnership in the late 60's because stocks were grossly overpriced. The ratio today is higher than when Buffett wound down the partnership... so I do not follow the logic. Stocks obviously are much cheaper today than in 2000. We will find out in the coming years if they get even cheaper (or not). My guess is the secular bear market is not done and we will all come to understand and appreciate FFH's portfolio positioning (once again)!

I think MSFT understands that smartphones, tablets, notebooks, desktops and soon, TV, cars, at home or at work etc are all converging. Apple soon will have the ability to have all platforms work seemlessly together via 'the cloud'. As Apple grows their ability to tie everything together becomes even more powerful. I am not a teckie and definitely not an early adopter. I am a happy Microsoft consumer (have been for years). I am now wondering if I should begin migrating to Apple products - phone then perhaps tablet. The reason being is even I can see how all the Apple devices can work together; and this is only going to get better in the future. Go big or go home.

Made me wonder if they will be looking to purchase Nokia to get a manufacturing platform in the Smartphone segment (RIM could also be had cheaply). HPQ also is cheap. With a few purchases MSFT certainly could change the way the game is played in a hurry. My guess is they see Apple's hardware/closed system getting bigger and bigger and close to the point of actually challenging their monopoly in desktop operating systems. Once that genie is out of the bottle then MSFT suffer. The game is changing and MSFT just might get it...

Many stocks are at 52 week lows. Resource stocks have been killed. Financials are down alot. During last years sell off I noticed that some sectors and stocks got cheap in Aug and others got cheap in Nov; the market kind on cycled through sectors as it found its way to bottom. So I missed buying some great companies early in the sell off (like USB). So during this sell off (if thats what transpires in the coming months) I will be more aggressive buying companies as they get cheap and not wait. After today, I am 35% stocks and 65% cash. As a general rule for every 5% drop in the S&P I will invest about 10%-15% of my net worth. I.E. if the S&P falls from 1270 to 1200 I will look to move to 45% stocks and 55% cash. How much I spend will obviously depend on where the stocks I like trade. What stocks have you been buying or are you close to pulling the trigger on? Over the last month I purchased JPM, DNB, KR & DWA. Today I purchased BAC, RY.TO, WAG & POT On my watch list are GLW, KSS & BMO (and lots more...) I would also like to begin accumulating a few resource stocks (best in class with lots of cash). As the stocks I own fall 10% from my purchase price I will also look to double my position (to max 10 or 15% position) I am looking for: 1.) #1 or #2 player in their market segment 2.) strong balance sheet (low to moderate debt) 3.) strong management (successfully managed through 2008/09 melt down) 4.) strong history of returning capital to shareholders (dividend and/or share repurchases) 5.) stock trading at or near 52 week low

Interesting thread. At the end of the day I think we are all trying to find an approach to investing that fits with our emotional makeup and understanding of the markets. To be a 'value investor' does this mean one must buy and hold for ever and usually be 100% invested? Of course not. We all can be value investors and at the same time do very different things. We are all very different animals with different backgounds, different objectives and different risk tollerances. We also will have very different measures of value. The key is finding a strategy that delivers acceptable returns and lets you sleep at night. Personally, I like to hold high cash balances and sit in the weeds and wait for market dislocations like we are seeing right now. Kroger (KR) is an interesting case study and representative of much that has been happening to stocks the past decade. Kroger's business is stronger today than perhaps at any time in their history. And the stock is trading today where it was trading in 1998 (14 years ago). Earnings are muchg higher. The market PE has been contracting. Are we done? No idea. Buy and hold has been a very difficult strategy since the 2000 market top (I am talking in aggregate). Everyone has been given many opportunities to buy low and sell high and this will continue. Buy and hold (long term) will again be a great money-making strategy in the future; just not sure when.

Micheal Pettis recently wrote a somewhat detailed article explaining the challenges currenty faced by Spain: http://www.financialsense.com/contributors/michael-pettis/europes-depressing-prospects-spain-euro