Viking
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Sold a bunch of the stuff i bought last week. Happy to lock in some nice small gains. Up about 3% on average (FFH, RJF, SF, BCE, T.TO, SLF, CWB, BNS, CM etc). Everything was held in tax free accounts. I also lightened up on my oil holdings (CNQ and SU) - no gain here… just decided is was getting too overweight. Moving proceeds back in to money market type funds that pay 4% (risk free). Back to 50% cash. Fairfax continues to be my largest weighting (by far). Oil is #2 and big US banks is #3.
What did we learn over the past 2 weeks? Higher interest rates are starting to break things in the economy. Banking crisis with regional banks is likely to tighten credit moving forward. Commercial real estate (and highly levered parts of the economy) is now getting onto investors radar. I think we continue to be in a bear market.
My focus right now is capital preservation. My total portfolio is back up a little over 10% YTD. No need to try and be a hero given the current risk/reward set up.
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At the 24 minute mark the hosts provide a good summary of the differences in accounting for banks between the US and Europe. Bottom line, Europe stress tests the bank for interest rate risk (across their entire business) and the US does not. They say JPM is one of the few US banks that runs/published its total interest rate risk.
They also feel the real issue at many regional banks in US is credit risk. They account for 80% of all commercial loans; these loans tend to be concentrated (so when issues arise, these banks tend to blow up).
i appreciate getting a European perspective on the current financial crisis.
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4 hours ago, vinod1 said:
Insurance is really different from banking. The insured cannot claim hurricane damage for the year and ask for the money to be paid. The liabilities are pretty predictable. That is why ALM is a big deal at P&C's.
i agree that insurance is different from banking. Here is the piece i do not understand… when interest rates were falling the past 5 years to essentially zero in 2020/2021 did all these P&C insurers not book massive ($billions) in gains on their fixed income holdings? It looks to me that when interest rates were falling the gains from most of the fixed income portfolio flowed through the income statement and book value. I would have expected that in Dec 31, 2001 there should have been billions of gains sitting in the ‘held-to-maturity’ portfolio at all these insurers.
But now that interest rates have spiked higher massive losses are suddenly showing up… and have conveniently been tucked into the ‘held-to-maturity’ bucket so losses do not flow through the income statement. Is my understanding correct?
Essentially, the gain (from cratering interest rates) is allowed to flow though the income statement but the loss (from spiking interest rates) is not allowed to flow through the income statement?
There is a logic here i do not understand. If anyone has an answer i am all ears.
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Happy to add to my already oversized position in FFH today. Price traded at $635 for much of the day. Stock is down 9% off its recent highs. BV is $658. My guess is they will earn $130/share in 2023. My guess is Q1 earnings will come in around $35/share. They paid a $10 dividend in January. So my guess is March 31, 2023 BV will be about $685 ($658 + $35 - $10 = $685).
But what about its $38 billion fixed income portfolio. Rising interest rates over the past year must have resulted in billions in held-to-maturity losses… right? Wrong. As crazy as it sounds, Fairfax fixed income portfolio was positioned perfectly on Dec 31, 2022. It is a big, big WINNER from rising interest rates. It is better positioned than any large financial institution i know (bank, insurance etc).
Most insurance companies are sitting on billions of held-to-maturity losses right now. These losses did not flow through the income statement. These losses did hit book value (so most now prefer to report ‘adjusted book value’). Yes, the held to maturity losses don’t matter. Silicon Valley Bank thought the exact same thing 10 days ago… and it didn’t matter. Until something happened THAT NO ONE THOUGHT WOULD HAPPEN. Well, now all those held-to-maturity losses do matter. so much so that Silicon Valley Bank is out of business and its shareholders have been wiped out.
An accounting gimmick resulted in poor decision making at financial institutions (they did not manage their interest rate risk properly). That is now resulting in a loss in confidence in the financial viability of many financial institutions. An interest rate risk has quickly and unexpectedly morphed into a solvency issue.
It will be interesting to see how investors discount held-to-maturity losses on insurance companies books moving forward. Insurance is different? Really? That is what banks thought 10 days ago too. And it was right. Until is wasn’t.
I would imagine insurance regulators are probably better understanding which insurance companies a have large held-to-maturity losses sitting on their books. Does this force more conservatism at insurance companies moving forward (i.e. slower growth)? Does this extend the hard market? Bottom line, financial system panics are never a good thing.
So at a share price of $635, Fairfax shares are trading at a P/BV of 0.93. Cheap. For a company that is poised to grow earnings by $130 in 2023. This is an effective earnings yield of 20%; or a P/E = 4.9. That is very cheap. And a company that is a big winner of rising interest rates…
I hope the stock keeps going lower in the current financial panic. Fairfax stock has become the gift that keeps on giving (rising stock price with big swings happening 2 or 3 times a year).
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Added to FFH. Added RJF and SF to my US bank/financials basket. Added TD to my Canadian dividend basket. Cash is down to 30% position.
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Is First Republic dead man walking? Credit downgrade to junk can’t be a good thing. Followed by ‘rumour’ it is up for sale? Not something a consumer/business customer wants to hear. It will be interesting to see if any banks actually get sold and to whom.
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First Republic Bank, which was downgraded to junk by S&P and Fitch, is looking at a possible sale: Bloomberg
https://ca.finance.yahoo.com/news/first-republic-bank-downgraded-junk-020341444.html
Ratings agencies S&P Global and Fitch cut First Republic's credit rating to junk status.
The bank is now considering various options, including a sale and boosting liquidity Bloomberg reported.
It could attract interest from larger lenders if it goes on sale.
First Republic Bank is considering various options, including a sale, Bloomberg reported Wednesday, citing people with knowledge of the matter.
The bank is expected to attract interest from larger lenders if it goes on sale, per Bloomberg. The San Francisco-based lender is also looking at options to boost liquidity, per the news outlet.
Ratings agencies S&P Global and Fitch had cut First Republic's credit rating to junk status earlier on Wednesday due to concerns that depositors could pull funds from the lender.
First Republic has been assuring customers of its liquidity since the implosion of Silicon Valley Bank — which in turn triggered concerns about the financial health of regional banks.
On Sunday, First Republic said it was getting $70 billion of additional funding from the Federal Reserve and JPMorgan Chase after its share price slumped sharply amid Silicon Valley Bank's implosion.
"We believe the risk of deposit outflows is elevated at First Republic Bank despite the actions of federal banking regulators and the bank actively increasing its borrowing availability to mitigate risk associated with the bank failures over the last week," wrote S&P Global Ratings analysts Nicholas Wetzel and Rian Pressman.
First Republic's share price closed 21.4% lower at $ 31.16 apiece on Wednesday. They are down 74% so far this year.
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36 minutes ago, Dinar said:
@Viking, why do you think BAC benefits? Sure, it will probably get more deposits, but I believe that the bank lost an incredible amount of money on long term treasuries, mortgage backed securities and regular mortgages. It's tangible equity on a mark to market basis divided by total assets is very low. I think that its net income margin will probably come under pressure due to consumers wising up to higher rates, and going after CDs & money markets. I also think that the commercial loan book is about to come under pressure as the economy weakens, and have you looked at their exposure to office loans?
Same questions can be applied to Citibank and Wells Fargo.
GS & MS are completely different animals, but have you looked at their balance sheet, particularly liabilities? What happens if credit spreads on their paper widen out 200 basis points, which is probably reasonable given CS?
@Dinar those are all good questions and i am not an accountant or an expert on banking. So the short answer is i am not really sure how exactly it all plays out. That is why i am suggesting a basket approach. And as we learn more, tweaks can be made. Today i sold some BAC and initiated a position in JPM (even though i think JPM is more expensive). So i will manage my weighting based on who i like the best. But i also understand there is much i don’t know. So i also don’t want to go all in on one or two names. My plan is to also go wide with exposure; so include all 4 big banks, MS and GS and probably also AMEX. I just think these are exceptionally strong, well run franchises.
This is not a super high conviction trade for me. I like the current risk/reward set up. But it is a very fluid situation. I will be flexible as more information becomes available.
In terms of deposits at the big banks, i think they will continue to be quite sticky. Especially if the big banks are perceived to be safe havens (which appears to be happening). In a banking crisis people are not thinking about the interest rate on their checking account. They are thinking about if the safety of the money in their checking account.
In terms of interest rates, we may well have seen peak rates for this cycle. Interest rates across the curve are much lower today. So led-to-maturity losses are already much lower for all banks. We will learn much more on this front when banks report Q1 results in another month or so.
In terms of commercial loans i think BAC is pretty well positioned compared to peers (i might be wrong).
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Is buying a basket of the too big to fail US financials not a no-brainer trade today? I am thinking equal weight positions in JPM, BAC, WFC, C, MS and GS. They look like they will be big winners from the current panic. We know deposits are fleeing from the regional banks to these institutions. Credit Suisse is close to being put out of its misery. The winners? Yup, the big boys.
Will it be a rocky couple of months (maybe even a year)? Yup. But as we emerge on the other side of this bank panic they will be even more dominant. There are more shoes to fall. Commercial real estate looks like the next shoe to drop. The panic hitting regional banks will just get worse as more ‘surprises’ on their books get revealed.
- Interest rate risk (rising rates) + market risk (current bank run) + credit risk (shit like commercial real estate) = category 5 hurricane for regional banks
The big banks were at the epicentre of the banking crisis in 2008. They were the cause of it. It took the big banks 7 years to emerge from the last crisis. This time around, the banking crisis is different. The big banks are in much, much better shape this time. So they will emerge from this crisis faster, stronger and larger. Just depends on how bad things get.
There likely will be some short term pain… perhaps a year or so of lower earnings. But looking out a couple of years, there is a lot to like.
What are the risks?
1.) new regulations reducing profits (or forced capital raises diluting existing shareholders)2.) government deciding big banks are the new oil: evil incarnate
How to play the opportunity as an investor?
1.) start with a core position (basket - equal $ weights for each company you like)- big enough total position you are happy if stocks run away from you higher
- small enough you can add to your position on weakness
2.) perhaps add 20%- 30% to position on declines (perhaps for every 5% decline - on average - of the stocks in your basket).
Another way would be to buy a large cap ETF but you would not have any control over the weightings. -
Michael Kofman has been one of my go-to’s when wanting to get an update. He just returned from a trip to Ukraine to get first hand information. He expects a Ukraine offensive in the coming months (after Ukraine is re-armed by the West). He expects something decisive to happen. He is normally pretty guarded so that surprised me.
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On 3/10/2023 at 8:08 AM, Mephistopheles said:3 hours ago, Sweet said:
I don’t agree that the oil fundamentals are compelling right now. We have come off quite a large build in the past few months. There also appears to be a decent chunk of supply coming on the market this year - the IEA (which is terrible I know) is predicting over 2 million extra supply this year. You also have OPEC sitting on a couple of million barrels or great of spare capacity.
The price action recently appears to be something related to the wider market, it’s risk off out there. Not sure I see much further downward pressure in price but I don’t see oil heading above 100 anytime soon.
Many oil companies themselves are not doing enough to repair their image. They presided over a lot of value destruction and the sector is avoided like the plague. Oil companies are viewed as planet destroyers. I don’t expect these companies to re-rate at higher multiples, so they need to find discipline and figure out how to return as much value as possible to shareholders.
When looking at fundamentals i think the key is your timeframe. If your timeframe is the next couple of months then, yes, the fundamentals for oil are weak. That is because for the first 5 or so months of the year, supply usually outstrips demand. Oil inventories build. And then as we hit June/July then demand starts to outstrip supply (driving/flying spikes). And oil inventories shrink. This dynamic was known a week ago.
When i look out 12-24 months i continue to like the fundamentals for oil. Why?
- demand from China will increase in 2023 from 2022. How much? My guess is 1 million barrels per day
- global demand (ex China) will continue to increase; likely 500,000 or so barrels per day (primarily India and the rest of the developing world).
- SPR drawdown has almost ended; 800,000 barrels per day of supply is being removed from the market (and i think the plan is to replenish supplies when oil trades below $70 which would add to demand).
- we will see some new supply from US shale of about 500,000 barrels per day. Interestingly it appears growth from shale is slowing and might plateau in the next couple of years.
- Russia, is of course, a big wild card. It makes sense to me Russia production will not remain at 2022 levels (given sanctions and exit of oil services companies) and will likely be lower. reduction in supply of 500,000 barrels per day makes sense.
OPEC? US shale is no longer in control of the oil market. OPEC is back in control of the oil market. This is perhaps the most important factor in todays oil market. People are anchored to the ‘shale is in control’ narrative. They are playing checkers (as usual). That is because investors expect the recent past to play out again in the future. Instead, investors need to read up on their 1970’s history… the last time OPEC was firmly in control. How did that go for oil prices and US consumers? Not pretty.
But i know, the 1970’s price spike was all about geopolitics. So what is going on today on the geopolitical front? it is just as bad as back in the 1970’s. The West is at war with the ‘authoritarian block’ led by China and Russia and it is getting worse. Where do the gulf countries sit? Increasingly, it appears they are siding with the ‘authoritarian block’. Why? The middle eastern countries are sick and tired of being lectured to by the West. Trudeau/Canada called out Saudi Arabia for (pick a reason) and Saudi Arabia severed all ties (including pulling all international students out of the country). Biden gets elected and personally attacks the Saudi leader over the Kashoggi murder. Seriously? Do people think Saudi Arabia wants anything to do with the US or Canada right now? What Saudi Arabia does know is the ‘authoritarian block’ will STAY OUT OF ITS DOMESTIC POLITICS. Qatar is likely still seething over the extremely negative coverage it got in the West before and during the recently held world cup.
Biden’s trip to Saudi Arabia right before the US election with cap in hand was instructive. The fact the Saudi’s/OPEC cut production weeks later (the ultimate f-you) is even more instructive.Its not a fluke that China just brokered a deal between Iran and Saudi Arabia. Having a common enemy (increasingly the West) can create strange bed fellows. And that is how geopolitics works (not naive notions like ‘right’ and ‘wrong’).
So what does this have to do with the price of oil? OPEC+ (including Russia) is firmly in control of the oil price. Oil will be priced where they want it to be. My guess is they want oil priced between $80-100. High enough they can provide a good life for their citizens. But not so high it will spur the West to action.
The wild card is Ukraine (that geopolitical thing). Sounds like we will likely see a Ukraine offensive in the coming months. It it is successful then Russia will respond. How? No idea. But they are a very important oil producer…
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1 hour ago, LC said:
I do not think the FRB will be easing much from here. My guess is a few (1-3?) more hikes (to really fvck with us), then they hold steady for a while.
I'd say we're going to have to make money based on earnings, not multiple expansion.
(doesn't Jpow know I can't do that???
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If history is any example, the stock market might try and help convince the Fed to end rate hikes. And then try and convince the Fed to actually start easing. So my base case is to expect some pretty wicked volatility. So the market averages continue to swing in big directions both down and then up… but with a flat to downward bias in the coming months.What is an investor to do? Active management will likely outperform simply buy and hold in the coming months. As we get to the bear market bottom, likely later this year, then buy and hold will likely outperform from that point forward. Obviously, just a guess. But it is useful to have a plan.
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Investing for the past 10 years has been all about following the Fed. When they are easing it is risk on for assets (stocks, bonds and real estate). When they tighten it is risk off for assets. Now it's pretty useless to debate whether this is good or not - that does not put food on the table.
The simple question is what do they do moving forward. And how can investors profit? Do they continue with their tight monetary policy? Is inflation still public enemy #1? Or do financial stability concerns cause a pivot to a more accommodative policy? Super interesting times! And probably a good idea to fasten the seatbelt... the ride from here could get even more rocky.
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The sell off in oil is a gift for investors that can handle the volatility. The fundamentals have not changed much. In fact the fundamentals are getting better as companies will be reigning in spending on increasing production. The sell off in oil is being driven primarily by sentiment. The sell off is great for oil companies. Yes, even at $68 oil they are still making buckets of money. Over the last 2 years they have completely deleveraged their balance sheets. Most oil companies are now returning 50-75% of free cash flow to investors. The problem with buybacks is they are usually done at high prices. Significant buybacks in the coming months (at very low prices) will be very accretive for shareholders. Today both SU and CNQ have dividend yields of 5.5%. Very good in a low interest rate world. Oil stocks (and the oil market) continue to be very mis-understood by investors.
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Built out a portfolio of Canadian high dividend payers. 5% of my portfolio. Average dividend yield is 5.8%. With interest rates cratering, my guess is dividend paying stocks are positioned very well. Will build this out on stock market declines.
- Communication: T.TO, BCE
- Banks: RY, BNS, CM, CWB
- Utilities: ENB, TRP
- Life insurer: SLF
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Added to SU. Starter positions CNQ, JPM, MS, WRB.
- not much has changed with oil from a fundamental perspective. Sentiment stinks. Love one day 10% declines in stocks when it is being driven by sentiment.
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BAC, WFC, C, SU
All down more than 5%. It looks to me like the big banks will be the big winners. The business at all the small banks that are going under will need to squish somewhere.
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46 minutes ago, TwoCitiesCapital said:
I'm confused. Other than their involvement in the crypto space, what does crypto have to do with any of this?
It's not like these banks went under because of bad loans. These banks went under due to liquidity mismatches and depleting capital from forced treasury sales. It's not like they were investing in Bitcoin - they were investing in treasuries.
Blame the Fed, regulatory requirements, accounting standards, and fear for these failures. Not crypto.
What did Signature Bank in was its involvement with crypto. Banking is all about confidence. Crypto is blowing up everywhere. So lack of confidence in Signature (caused by its past involvement with crypto) put it out of business. Would any of this have happened if it never got involved with crypto? No. It would still be in business. -
Good update on Canadian real estate. Lots of issues. A frozen market. No one wants to list right now (inventory is super low). Affordability is at historic highs. Investors buying today are cash flow negative. In short, bubble mentality largely continues.
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The challenge might be knock on effects. The stuff that is likely out there but needs a match to set it off. Or its like a pressure cooker… pressure just keeps building until it blows. Can’t see it looking forward. Makes sense looking back.
My guess is high interest rates have created lots of problems. We just don’t see it clearly yet. The next couple of weeks will be interesting. My guess is more weak links will be exposed. The short crowd are like a pool of piranha. -
So stockholders get wiped out. Bondholders likely get wiped out. Both Silicon Valley and SignatureBank.
The new news is uninsured depositors get bailed out. Does this mean deposit insurance in US just got extended to everybody and is now unlimited?
Looking ahead, what is the next band-aid that gets ripped off for banks? Do the commercial real estate vultures start circling? How would that layer onto the current issues?
What happens if we get a recession later this year? If banks balance sheets are messed up right now, what happens when a recession hits? And things actually get bad? interesting times…
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16 minutes ago, aws said:
Fed is safeguarding depositors and Signature Bank has been closed by regulators:
“No losses will be borne by taxpayers.” Does this not make a sale more difficult? Messy unwinding over months can hardly be a good thing for regulators.
1.) Silicon Valley Bank.
2.) Signature Bank - i remember following years ago when Edi E had it on his buy list (it has been off for years). What a spectacular fall. Crypto… the gift that keeps on giving…3.) next?
—————“We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.”
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1 hour ago, This2ShallPass said:
Shares outstanding increased from 106M to 147M from 2015 to 2017. Did they issue additional shares to buy BIAL or something else?
How much of the increase in shares are due to the performance fee paid to Fairfax, wondering if it'll still be a good investment if Fairfax continues to get shares (especially at such a big discount to BV)?
Fairfax India BV at Dec 31, 2022 =$19.11/share. Stock closed on Friday at $12.60. Is Fairfax India a good investment? Well it certainly looks cheap with a price to BV = 0.66.
How cheap? This depends on what you think about book value. Does it fairly reflect the value of the companies owned by Fairfax India? The disclosure provided by Fairfax India on each of the companies it owns is very good.
The largest asset owned by Fairfax India is BIAL (40% of BV?) …. Probably a good place to start.
Another question that has been debated on this board for years is: What will cause the significant discount to BV to close? The following question might be a better starting point: Why does the discount exist today? It didn’t always exist.
—————If Fairfax India is as cheap as it looks (let’s assume it is worth $19.11/share), does the fee structure matter? Is it material to making a purchase decision today?
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“Success is when opportunity meets planning.” Success in investing is also all about getting the big rocks right. We are learning in real time the genius of the management team of Fairfax. At least the last few years. Genius is a big word. But i think it applies in this case.
What are the big rocks at Fairfax?
1.) insurance
2.) investments: fixed income
3.) investments: equities
The positioning of Fairfax’s massive $38 billion fixed income portfolio on Dec 31, 2021 was absolute genius:
- significant sales as interest rates bottomed locking in large realized gains: “During 2021, we sold $5.2 billion in corporate bonds, mainly acquired in March/April of 2020, at a yield of approximately 1%, for a gain of $253 million.”
- duration of the portfolio was shortened and composition of portfolio was shifted to higher credit quality holdings, mostly treasuries: “At the end of 2021, our fixed income portfolio, inclusive of cash and short term treasuries, which effectively comprised 72% of our investment portfolio, had a very short duration of approximately 1.2 years and an average rating of AA-.”
- part of the fixed income portfolio was hedged: “To economically hedge its exposure to interest rate risk (primarily exposure to certain long dated U.S. corporate bonds and U.S. state and municipal bonds held in its fixed income portfolio), the company held forward contracts to sell long dated U.S. treasury bonds with a notional amount at December 31, 2021 of $1,691.3 (December 31, 2020 – $330.8).
In 2021 Fairfax realized significant gains, improved the credit quality, reduced the duration and hedged their fixed income portfolio. They did all this right before hell was unleashed by the Fed. That… was… genius.
What’s the big deal? With the Fed spiking interest rates higher in 2022, Fairfax has benefitted as follows:
1.) low duration (part 1): Fairfax has already been able to reinvest a large portion of its fixed income portfolio into securities with much higher yields and this is resulting in an immediate and significant increase in interest income:
- 2019 = $826 million
- 2020 = $717
- 2021 = $568
- 2022 = $874
- 2023E = $1.5 billion
2.) low duration (part 2): Fairfax has experienced only modest mark-to-market loss on its fixed income portfolio in 2022. This loss was absorbed by the business and Fairfax actually saw an increase in book value in 2022. Most P&C insurers saw book value fall 10-20% in 2022. And as we have just learned with Silicon Valley Bank, large unrealized losses sitting on your balance sheet usually don’t matter… but sometimes they do.
3.) credit quality: there is a good chance the US could enter recession later in 2023. Should this happen, credit spreads will likely blow out and holders of lower quality (corporate) bonds will see the value of their bonds fall leading to more unrealized losses. This in turn will lower the book value of some insurers even more. My guess is Fairfax is well positioned here compared to other insurers (given Prem has warned about this risk).
Bottom line: Fairfax is exceptionally well positioned in the current rising/high interest rate and increasingly stressed economic environment. Especially compared to other P&C insurers. As Peter Lynch would say “the story” for Fairfax continues to get better.
It could be argued that Fairfax today is actually a safer investment than most other P&C insurers. It also has one of the best earnings growth profiles looking out the next couple of years (probably THE best). Lower risk AND much better profit growth.
So given how well it is positioned today, Fairfax must trade at a premium multiple compared to other P&C insurers. Right? No. Not even close. Fairfax currently trades under 1 x book value. Most of its P&C peers trade at 1.5 to 2 x book value.
Fairfax’s stock significantly outperformed the market averages in 2021. And again in 2022. My guess is Fairfax’s stock is going to make it a three-peat in 2023.
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Prem’s Letter 2021: Our interest and dividend income continued to drop from $880 million in 2019 to $769 million in 2020 to $641 million in 2021, reflecting declining interest rates and the fact that we have 50% of our investment portfolio in cash and short term investments. During 2021, we sold $5.2 billion in corporate bonds, mainly acquired in March/April of 2020, at a yield of approximately 1%, for a gain of $253 million. At the end of 2021, our fixed income portfolio, inclusive of cash and short term treasuries, which effectively comprised 72% of our investment portfolio, had a very short duration of approximately 1.2 years and an average rating of AA-. Rising rates in 2021 resulted in a small unrealized bond loss of $261 million. During the last two years, we were able to invest $1.6 billion in first mortgages with Kennedy Wilson at an average rate of 4.5%, with an average term of three years.
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2021AR: To economically hedge its exposure to interest rate risk (primarily exposure to certain long dated U.S. corporate bonds and U.S. state and municipal bonds held in its fixed income portfolio), the company held forward contracts to sell long dated U.S. treasury bonds with a notional amount at December 31, 2021 of $1,691.3 (December 31, 2020 – $330.8). These contracts have an average term to maturity of less than six months, and may be renewed at market rates. During 2021 the company recorded net gains of $25.7 (2020 – net losses of $102.0) on its U.S. treasury bond forward contracts.
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1 hour ago, Munger_Disciple said:
On pages 20 & 21, why is Watsa comparing intrinsic value (book) growth in USD to stock price appreciation in CDN? Doesn't make any sense to me. Both should be in the same currency, preferably USD.
i agree it makes little sense. (Most shareholders are perhaps Canadians and anchored to the stock price in Can$?) I view it as a historical quirk.Fairfax India is listed on the TSX but only trades in US$.
Weird. But whatever. Small potatoes. As long as they keep delivering stellar results i don’t really care.
what are you selling today?
in General Discussion
Posted · Edited by Viking
Lucky. My view is in a bear market one goal for investors should be to not lose money (at least that is one of mine). That capital preservation thing Buffett talks about: ‘Keep what you got.’
My gut told me this weekend (after doing a bunch of reading/thinking/processing) i was getting out over skis with the equity weighting in my portfolio (it was up to 70%). Stocks popping higher the past 2 days gave me my opportunity to do some rebalancing in my portfolio (sell on strength).
I bought my dividend portfolio last week primarily to get a dividend yield of 5.7% over the next year (that is what the yield on the basket of stocks i purchased worked out to). Well Mr Market offered up a 3% gain in less than a week. And the proceeds are now in cash earning 4% so i lock in a higher 7% return risk free (with zero volatility). Plus by sitting in cash i can reload should stocks sell off again (my guess is they will).
I continually trade in and out of Fairfax. I have a very big core position that i am happy to hold. But i also buy chunks of shares on big dips (like we saw last week when it dropped under US$635). Today it is trading at $665. Of course, i do not hit the absolute low (on the buy) and high (on the sell). But if i can make a quick 2 or 3% on a trade on a stock that is undervalued (on 100 or 200 shares at a time) i am happy to do it. And if the stock keeps going lower i am happy to simply hold a larger position.
I sold down my oil position simply because it was getting too large (that gut thing). At the end of the day, no one knows where the price of oil is going over the next year (with a high degree of certainty). I love the set up for oil. But i also understand what i do not know. That sleep well at night thing.