Viking

Glider, great charts. Yes, the stock is wicked cheap at US$400 The set-up for Fairfax is the best I have ever seen (other than when they were sitting on the big CDS gains back in 2007-08). The difference is Fairfax is positioned exceptionally well right now (lots of tailwinds to both insurance and investing sides of the business) and this should continue to drive solid top line and earnings growth for the next couple of years. The key will be patience.

Who has been spending money to increase oil and gas production the past 2 years? No one. With oil spiking are we seeing the usual spike in spending at the big players to significantly increase production? No. Capital discipline like we have never seen. Especially the frack group. The big European producers are exiting oil and gas as fast as they can - they are focussed solely on alternatives today and moving forward. Norway? Their big oil fund is exiting all oil investments (just a little ironic?). Who wants to LEND to oil and gas producers. No one. ‘ESG’ risk is driving big changes at investment banks and pension funds etc Who wants to LEND to oil and gas producers today? No one. ‘ESG’ risk is driving big changes at investment banks, pension funds etc. They are running from current oil and gas investments let alone spending more. And we are just getting started. Oil and gas IS the new tobacco. What are the companies doing with their free cash flow? Paying down debt (good luck rolling that over in a few more years). And with shares at crazy cheap valuation stock buybacks make way more sense than growing production. Choosing production growth over buybacks in the current environment will get a senior management team fired. I agree Covid has created all sorts of distortions. And i am not suggesting oil will top $100 and stay there for years. But the hate driving the investment/ESG climate suggests to me that oil and gas prices will likely stay higher for longer.

@nwoodman, yes, Eurobank is poised to do very well moving forward. NPL are down considerably to 7.5% (from +30% a few years ago); the balance sheet is largely finally fixed. Property prices in Greece have been increasing for years with no let down during covid; and Eurobank has a significant and very profitable real estate business (formerly know as Grivalia and before that Eurobank Properties). Greek GDP is expected to grow 6% in 2022. The government is very pro business driving through many needed reforms. Bottom line, it reminds me of the situation with big US banks in 2016. Everyone hated the banks. Shitty past returns. Run by crooks. Turnaround was taking too long… 6 years and counting! Dogs with fleas. And then earnings popped. Then the market multiple increased. And the stocks rocked. The caterpillars had turned into butterflies. And now everyone loves Jamie D. and Brian M. - such great CEO’s smooch In 2022 it looks like we are at the ‘earnings pop’ stage with Eurobank. After Atlas, my guess is Eurobank will deliver the largest increase in value to Fairfax shareholders in 2022.

+1. Investor sentiment has been falling since April. And now most investors are currently bearish (by a sizeable margin).Can we go lower? Of course. My guess is have a couple more week of turbulence and as we get to the other side of the Delta wave we will see the reopening trade act 2. And my guess is it will be a fast and furious move to the upside. The news flow on the virus has been very good of late. Kids 5+ will soon be getting vaccinated. Therapeutics will soon be available. Governments/organizations finally have enough public support to mandate vaccinations and vaccine passports (at least in most parts of Canada). Opening up of international travel should be a big catalyst for markets (although perhaps another quarter or two away). - https://ycharts.com/indicators/us_investor_sentiment_bull_bear_spread

Well lumber prices, after bottoming out at US$500 in August, are moving higher once again and have just topped $700. Lumber is proving to be the posted child for ‘cyclical’. The interesting thing for investors is in the last bull market in lumber (2018) prices PEAKED at $600. At todays pricing of $700 lumber companies are once again making lots of money. And the recent run up in prices looks like it might continue for a while. The supply / demand picture for lumber is VERY constructive. New home construction is very strong and looks poised to stay strong for the next couple of years. BC, the historic swing producer in NA, is reducing capacity (lack of logs) and will be for years to come. Bottom line, lumber prices are likely to remain much higher (on average) than their historic levels for the next couple of years. What does this have to do with Fairfax? Well, they own a big chunk of one of the largest lumber producers in North America: Resolute Forest Products. ———————- Fairfax owns 30.5 million shares of RFP. With shares at US$13, market value = US$400 million With 79 million outstanding, ownership = 39% Market cap = US$1 billion TTM Adj. EBITDA = $935 (yes, that number is right Total Debt = reduced to $303 million (rate of 4.95%) Net debt = $125 million (June 30) Cash Lumber Duties on deposit = $332 million Duty increasing from 20 to 30% on US sales (timing?) Pension Deficit = $445 (down $184 last 6 months) Significant US tax attributes of $2.5 billion pre tax ———————— And Resolute just named a new person to their board. Who? Some guy named Duncan Davies. “Mr. Davies will succeed Bradley P. Martin as the company's non-executive chairman. Mr. Martin of Fairfax Financial Holdings Limited will continue to serve as vice chairman of Resolute's now eight-member board.” - https://resolutefp.mediaroom.com/2021-09-13-Duncan-K-Davies-Named-Chairman-of-the-Board-of-Resolute Who is Duncan Davies? He was President and CEO of Interfor for 20 years (until 2019) growing it into one of the largest pure play lumber companies in NA. Before joining Interfor he was an investment banker. He lead the strategic pivot at Interfor into the US South and Pacific Northwest which in hindsight was brilliant. - https://financialpost.com/commodities/agriculture/id-work-forever-but-thats-not-fair-interfor-announces-leadership-change-amid-headwinds What does this mean for Resolute? This just confirms the company recognizes that lumber is the present and future of the company. BC is home to three of the top 4 lumber producers in North America (West Fraser, Canfor and Interfor). It is very smart of Resolute to tap into that knowledge base as they are still early days in their pivot to lumber. It also looks like Resolute might be looking to grow in lumber via M&A. In their most recent company presentation there is a slide ‘Capital Allocation: Top Priorities’. Listed at the top of the list is ‘Acquisition opportunities – lumber and pulp at the right price’ https://www.resolutefp.com/uploadedFiles/Investors/Presentations_and_Webcasts/Presentation_Items/RFP-TD-Securities-Paper-Forest-Products-Conference- 2021-08-29.pdf I think i will get out the popcorn and start watching what is going on with lumber futures again ——————————— Where will M&A opportunities come from? Perhaps further consolidation of wood markets (log baskets, lumber and pulp mills) in Ontario/Quebec. Another poster introduced a new player - GreenFirst - their deal with Rayonier just closed (old assets of Tembec). Their Chairman of the Board is some guy named Paul Rivett - https://www.newswire.ca/news-releases/greenfirst-completes-acquisition-of-rayonier-forest-and-paper-product-assets-834363239.html Rayonier purchase of Tembec in 2017 - https://www.northernontariobusiness.com/industry-news/forestry/tembec-acquired-by-florida-cellulose-maker-624608

Greg, yes, Fairfax was my largest position back in early 2020. I also held a chunk of Fairfax India. And due to the pandemic i went 100% cash back in Feb/March 2020. And that was one of the best investment decisions i have ever made. (The day i sold a bunch of my shares I was skiing with my son and i had to cut it short and go into the lodge with my iPad to do some selling before markets closed (1 PM on the West Coast); we still talk about the conversation we had on the drive home later that day when i explained to him what i had done and why.) I think my many posts on the pandemic back in Feb/March was spot on (in terms of what was coming for equity markets) and hopefully a few board members found them helpful. Now you are probably wondering why i sold Fairfax back then. Well Fairfax has two businesses: insurance and investments. You want to own Fairfax when both are businesses are performing well and prospects are looking up (which i believed they were as we started 2020). Guess what a pandemic does for insurance? Back then we had no idea (if pandemic was covered by insurance). Not good. And potentially catastrophic. Guess what a pandemic does to investments (especially equities like Fairfax holds)? How do stocks do in a recession? Or a severe recession? They get slaughtered. The pandemic was new news. It was a terrible event for a company like Fairfax. So i exited 100% of my position. When the facts change i change my mind. What exactly is the problem you have with this? Now did i post that i had moved to 100% cash? Yes. Did i tout Fairfax after i exited my position? No. WTF? So how was i being ‘dishonest’? Please lets try and not hit below the belt with our comments… And, yes, i was largely out of Fairfax until Oct/Nov of last year. Despite the fact others had started to point out how cheap the stock had gotten. So guess when i bought most of my shares in Fairfax last fall? It was immediately after Pfizer announced the news of the vaccine. 90% efficacy. New news again! So back to my lesson on when to own Fairfax. How was the insurance side of the business doing? Well by Nov we had clarity that the pandemic would not be covered by most policies in the US. So the insurance hit from covid was largely know and moderate. At the same time we also got confirmation that insurance was indeed in a hard market. So insurance was flashing green. How about investments? Well the vaccine news was a game changer for stronger economic growth. And that is good for equities, especially the kind of equities that Fairfax owns. So the investment bucket was also flashing green. So with both insurance and investments poised to do well i decided it was time to buy Fairfax again. And given the stock was trading at its cheapest valuation ever i backed up the truck. Yahoo! Can we please get back to debating Fairfax?

Greg, is there a reason you do not debate what people actually say? When they say it? You ask questions. People give you thoughtful detailed answers. Often with facts. You chose not to debate the facts. Instead you paraphrase what ‘they’ say. And that of course makes it impossible to identify who you are talking about. Or what they actually said. And so of course it is impossible to actually intelligently engage in debate. i read you post above and i have no idea what you are talking about.

Ok Greg, let’s see what we can learn about Fairfax today 1.) Greg: ‘do you not believe something needs to change for FFH to get appreciated by the market?’ - Yes. And i want to see action from Fairfax (talk is cheap). So what has Fairfax been DOING that demonstrates that ‘change’ thing we all want to see is actually happening? Read on… The most important change we need to see is the business results need to get better. The stock is in the toilet because the business results over the past 7-8 years has been terrible. As i posted before growing $6 billion in shareholder value (+$200/share) over the past 9 months is a good start. Of course this needs to continue now for a couple of years. Not at that pace of course. But it would be nice to see them get close to that 15% growth in BV aspirational goal over the next couple of years. 2.) Greg: ‘corporate action?’ Yes. And this has happened and is happening. They have communicated two major strategic changes that address the two biggest factors dragging down shareholder returns in the past. The next generation of equity managers have been given significantly more $ to manage. Former President Paul Rivette is no longer with the company. a.) investing: no more shorting. Prem confirmed this has been incorporated into their investing policy book. This cost them perhaps as much as $4 billion in losses over 6 or 7 years. b.) no more new/large insurance acquisitions. In the past large acquisitions were funded largely by issuing new shares. My guess is poor performance from newly acquired insurance businesses has cost Fairfax north of $1 billion in the first couple of years after acquisition. c.) Fairfax has also announced that their younger investment managers (Wade Burton, Lawrence Chin) will also manage $3 billion of the equity portfolio (up from $1.5); a reward for their strong performance. d.) Paul Rivette leaving also might be significant (in terms of the types of investments Fairfax buys moving forward). It was Paul’s idea to start Fairfax Africa (he wanted to duplicate the success the Fairfax India team was having). And his job to manage it. I think his fingerprints were all over the many lives of RFP. Torstar is another. I wonder if his leaving was not tied to disagreements about strategy and future direction. He certainly did not leave Fairfax to retire and spend time with his family. This is just speculation on my part. i think Fairfax has also made other important changes over the past couple of years that i would classify as ‘corporate actions’. Fairfax has come to understand that they are not a turn around shop. The current equity holdings need to be profitable and fund their own growth. An enormous amount of work has been put into fixing past mistakes and they are now at a point where most of their equity holdings are good to very good holdings run by strong management teams. Are there laggards? Yes. But the number of fixes they have made the past 3 years is impressive. And if i am right, as we get to the other side of the pandemic, and businesses normalize we should see the benefits start to manifest in the financials via higher profitability. And the past couple of years Fairfax has largely stopped putting big money into deep value shitty company. And has pivoted to partnering with strong management teams. Atlas/Sokol. Stelco/Kestenbaum. Helios. Kennedy Wilson/mortgages. All very good moves. So when i add all the above up it looks to me like Fairfax is pivoting nicely. 3.) Greg: ‘would the following help’ a.) ‘NYSE listing’: i like this idea. Who don’t they? No idea. Good question for management on the quarterly call. b.) ‘A real buyback’: yes, i would love to see a large buyback! Prem has actually been pretty consistent in his answer to this question. How does Fairfax prioritize use of free cash flow: i.) take advantage of hard market: support growth of insurance subs ii.) reduce debt iii.) buy back stock The good news is with earnings and the jump in value of equity holdings the insurance subs likely need little money from the parent. And with the recent closing of the sale of Riverstone and 15% of Brit Fairfax had the cash to pay off their credit facility and get debt levels to a more acceptable level. So with i.) and ii.) done i expect buy back stock to become the focus at Fairfax. Now Q3 is the catastrophe quarter so it makes sense for Fairfax to be prudent. My guess is we will see the pace of buybacks pick up after they release Q3 results. And the pace of buybacks will depend on… (see next point) c.) ‘Monetizing big pieces of the equity portfolio’. And, yes, i would love to see this as well. Now you do realize they just sold that shitty runoff business they owned for a cool $1.26 billion ($700 million last month and $560 last year). Analysts hate runoff business. Good insurers don’t have them. So Fairfax simplified their business. Sold an asset. And realized a price that no one would have imagined. A+ grade for Fairfax management in this deal. Now what have they done with their equity holdings? They did sell APR to Atlas (for more Atlas shares at $11). Good sale? Hell yes! Get rid of a problem. Get more Atlas shares for cheap. A grade for Fairfax management. Have they made any big equity sales? No. Why not? No idea. Perhaps because they see more upside in the holdings? We are still in the middle of this pandemic. We are still early days in the recovery. It appears it is going to take another year or two to get to a more normalized economy. In the meantime we could see cyclical/value stock continue to chug higher (and perhaps much higher) with lots of volatility. My guess is we WILL see some large asset sales in the next 12 months. Especially if we get another leg up in the reopening trade like we had last Nov to March. But regardless, the equity holdings that Fairfax owns will be worth more money (collectively) in another 12 months as the economy expands and they execute on their business plans. And this is a good thing for shareholders. Now i think you want equity sales so they can take out a bunch of stock on the cheap. Yes? You do remember they did purchase TRS on 1.95 million FFH shares? So not technically a buyback but… Even you have to admit this was a pretty opportunistic/savvy thing for Fairfax management to do at the time (in the teeth of a pandemic).

‘FFH has a tendency to chew off more than they can handle. I am not sure they learned much in this regard. Just recently, they invested 100CAD in a mining venture. Do they really have expertise here? Maybe they do, I have no idea. Other than stopping shorting, ( which is significant) I am not convinced they have learned really anything.’ For sure this is a watch out. But because they sunk $100 million into a mining venture you are convinced they have not learned anything? But if you want to look at recent decisions would it not make more sense to start with Atlas? Recent purchase. And massive in size. This is now close to a $2 billion decision. Or what about Stelco? A $400 million decision? Or Carillion/Dexterra? Now a $200 million decision. Or the APR fix (sell to Atlas for $200 million). There are many more decisions made the past couple of years that should be good for shareholders in the coming years. Are they not putting together a pretty good string of mostly good to great decisions over a few years now? My read is if you look at Fairfax and break the company history into 4 year blocks. And list and analyze the top 15 management decisions each year. And compared the 4 year periods it would be VERY obvious that the 60 top decisions made the past 4 years are showing a clear break with the past. And they are working out much better for shareholders. Lots of shitty companies were purchased in the year 5-8 block. Most have been fixed over the past 4 years. And most of the new companies purchased the past 4 years are not shitty - like Atlas and Stelco - so they do not need to be fixed. Now Fairfax is not going to hit on every purchase. So i fully expect that some current holdings are going to underperform (hello Farmers Edge - but it was purchased in the year 5-8 block). But hey, i might be totally off base. So if we learn that Atlas is a big ponzi scheme. Or that the Stelco CEO is an idiot (like he decides to buy another steel company at peak valuations). Or that Eurobank is cooking the books (it is a black box bank after all). Or that the Indian investments are a sham (it is India after all…). Or that the insurance companies start reporting CR at 100 or more (it is Fairfax after all). Well if these sorts of things happen i will have to update my assessment of management at Fairfax.

‘One of the reasons that FFH's share price is in the shit-hole might be that market participants have lost confidence in Prem's decision making’ I totally agree! i think i have consistently said this is a big watch-out for me with Fairfax. Some really bad past decisions. Bad communication. If the stock was overvalued this would be enough to keep me out. If the stock was fairly valued this might be enough of a reason to keep me out. But with the stock dirt cheap - and my read that they have been making better decisions for a couple of years now - i am happy to own the shares. Has the decision making the past few years really gotten better (my reading of the tea leaves today)? Time will tell. I will keep an open mind. And if Fairfax starts to fall back into their old ways i will respond accordingly (likely exit). It just cracks me up that no one is giving them credit for the insurance businesses they have today. Or that we are in a hard market. Or Atlas. Or Stelco. Or India. All the fixes made to the many, many problems over the past 3-4 years. Does no one else see this? Regarding RFP: if the US has a housing boom (very likely with interest rates so low) then lumber pricing is going to remain well above long term averages. If lumber prices stay high RFP will print money given the pivot they made to lumber the last couple of years. Bottom line, i understand why Fairfax still owns RFP. Look at the decisions management has made at RFP the past few years. They have done exceptionally well. Commodity super cycle? There are very good reasons to want to be patient with RFP right now. But to call management negligent because they did not sell at $18 just makes no sense to me. (And let’s not get started on how you exit a position and realize only top $ when you own better than 10%.) We could have almost the exact discussion on Stelco. Man, why did they not sell out at CAN$50? Absolute dummies. And on Blackberry i have posted numerous times on why i though they should have unloaded Blackberry. When i read the Q1 release that was one of the big things i was looking for. But they still own it. Prem’s communication regarding Blackberry has been poor (i have read it all). So shareholders really are left to speculate. Not ideal. But i have reconciled myself to the fact they still own the company. And that they will monetize Blackberry at some future date. Hopefully we get some good news on Blackberry with the patent sale. In the meantime, what they do with Blackberry is not central to my thesis of why i think the company is cheap. So i do not let it become a distraction when i value Fairfax as a company. We are 11 months into the cyclical/value bull market (that group did not get going until Nov of 2020). With a large swath of companies peaking out in valuation in March/April. PERHAPS the bull market in these stocks has another leg higher. Maybe we actually get a multiyear run in cyclical/value? Fairfax’s equity holdings have performed pretty well the past 9 months… perhaps there is more upside to come Fairfax is getting roasted for bad buy decisions and now for not selling. The fact they have added $6 billion in value for shareholders in the last 9 months? Over $200/share? Doesn’t matter? Because they still own BB and RFP?

1.) ‘the past matters’. Yes it does. But ‘come on’ the Blackberry purchase was 8 or 9 years ago. Seriously? i have laid out in great detail all the many things Fairfax has done over the past 3 or 4 years to fix past mistakes. And where they have been putting new money to work. Yes, the past matters. But the decisions made the past 3 or 4 years matter way more than something they did almost a decade ago. So let’s start with the very recent past. I purchased my big slug of shares in Q4 of last year. So what have earnings been at Fairfax over the past 3 quarters (since purchase)? Net earnings. Change in Assoc (not in net earnings) Q4 $909 million. $32/share. $250 million Q1. $806 million. $29/share. $700 million Q2. $1.2 billion. $43/share. $800 million Total. $2.9 billion = $104/share. $1.75 billion = $67/share We also know a gain on Digit of $1.4 billion gain ($47/share) is coming. So add it all up: $6 billion ($218/share) in value creation for shareholders in just the last 3 quarters. So, yes, i love how this company IS PERFORMING. Just a friendly reminder… the stock is trading today at about $410. But the story gets even better. If you are looking forward. And you are interested in understanding what earnings will be in the future. Fairfax is actually an insurance company. (Not sure if you knew this with all the posting from you about the big Blackberry purchase 10 years or so ago). A big one. And we are in a hard market. And have been for a little over 2 years. We can expect that the current hard market will benefit Fairfax in a big way in future years - top and bottom line. Insurance hard markets are a BIG deal; they happen very infrequently (maybe every 15 years or so). But it takes time for the benefit to show up in the financial results (i know, i know, that future results thing that i keep bringing up that you find so annoying). And despite the huge run up the past 3 quarters the equity portfolio (as a whole) is still cheap (using June 30 marks). Atlas, about 20% of the equity holdings was $14.25. Cheap! Eurobank was EUR 0.85/share. Now i can hear you whining about Eurobank. I have a question… have you actually done the deep dive on Eurobank? Looked at financials, followed the multi year restructuring, listened to management team on a couple of calls, tried to figure out what GDP growth in Greece might be etc etc? And then put it all together to try and figure out what they will actually earn in 2022, 2023 and 2024? (Remember, i don’t give a shit what Eurobank earned in 2019, 2018, 2017, 2016, 2015…) My guess is your analysis of Eurobank probably involved ordering Calamari and a beer at your favourite pub. (That comment made me hungry and thirsty Bottom line, their investment portfolio is well positioned. And VERY well positioned should we see another leg up in the reopening trade (as the world gets to the other side of the Delta virus). Now do i give a shit what earnings were at Fairfax in 2019, 2018, 2017, 2016, 2015, 2014, 2013? NO! Because, as i said, i bought my core position in Q4 of last year. What i REALLY care about is what earnings are going to come in at for 2021, 2022, 2023, 2024. Future earnings are what matters. Now i realize i have only responded to the first of your 4 points; but i think this post is already too long so i am going to stop here (for now).

glider, my one big wish for Fairfax is that Prem stops talking in public (other than saying a few words and kissing some babies). I find when he talks too much on any topic he inevitably says something that leads to misunderstandings. Its like what he says, what he thinks he says and what people think they hear are three different things. And he has been doing it for as long as i have followed Fairfax (close to 20 years). He has lots of strengths… look at the company he has built and the people he has assembled. Impressive. But ‘less is more’ when it comes to Q and A with analysts/public

I view Fairfax as a turnaround. They have been cleaning up past errors for at least the past three or four years. As i have done my deep dive into the various equity holdings this is a recurring theme. Most of the equity holdings are now positioned pretty well. Eurobank. Fixed (merged with Grivalia, dramatically reduced non-performing loan portfolio etc). APR. Fixed (sold to Atlas). Fairfax Africa. Fixed (I think); merged with Helios. EXCO. Fixed (restructured). Boat Rocker. IPO (can now execute growth strategy). Farmers Edge. IPO (can now execute growth strategy). Carillion/Dexterra. Reverse takeover of Horizon North (executing growth strategy). Toys R Us retail operations. Fixed (sold); now just own real estate. RFP. Fixed (aggressive pivot to lumber). BB. Pivot to software (cars and cybersecurity) and restructure debentures ($6 strike). Other equity holdings have continued to chug away. Their various Indian holdings (direct and through Fairfax India) are on fire. And new purchases (the past couple of years) have been good to very good. Atlas has already been a grand slam home run and it is just getting started; and it is now almost 20% of the whole equity portfolio. Stelco is looking like a home run. I think the Carillion purchase is going to be a good one. Buying 30% of Eurolife from OMERS is a good decision. Will all the equity holdings perform well from here? No, of course not. Farmers Edge looks shaky to me. But taken as a whole, the Fairfax equity portfolio looks better positioned than any time in the last 7 or 8 years (perhaps longer). At the same time the insurance side of the business is performing very well. Digit? Absolutely smoking. And all some people want to talk about is Blackberry? Its become a fetish of sort for some people (especially when the name ‘Prem’ is inserted into the same sentence). Was it a bad purchase 7 or 8 years ago? Yes. Is it going out of business? No. Is it a good or bad holding today at US $9 or $10? No idea. It is in a bunch of technology sweet spots. Is it in the early innings of a turn around? Yes. Will it work out? No idea. Will Fairfax sell it? No idea, but probably at some point (just like all the other equity positions Fairfax owns). My point is Blackberry no longer matters all that much to the overall Fairfax thesis. Yes, it is a large holding. But it steadily falling as a percentage of the overall investment portfolio. A lot of good things have been going on at Fairfax for a couple of years now. On balance, the company is very well positioned to deliver solid returns for investors.

The problem Fairfax India (and Fairfax) have right now is both management teams are delivering significant earnings. BV is jumping. And both companies are positioned to continue to post strong results moving forward. They have been executing well for years and we are just now starting to see the results (improving profitability and jump in BV). And the big ‘problem’ for investors is Mr Market is not paying attention. So the stock prices of both companies are trading at an ever decreasing multiple to BV. It is getting comical. The good news is Mr Market will eventually come to understand how crazy cheap the shares are. The move higher will be fast and furious. Greed will replace fear. The narrative will reverse. Prem will add a new chapter to his book (like an overage boxer who stages a comeback and wins another title - ‘surprising’ everyone in the process). This is just how the stock market works PS: and to be honest, i am really enjoying the whole ‘they are making money hand over fist and it is not being priced into the stock yet’ problem. That is called a first class problem.

Bearprowler, i fully agree that Fairfax needs to find a replacement for Prem for the conference calls. That is simply not one of his strengths. i love the idea of an investor day. Fairfax is complex and this would help greatly. Andy can talk insurance (with managers from operating subs). Someone other than Prem can talk investing: stocks and fixed income. Prem of course would get the first 15 minutes And they can walk everyone through the ‘new Fairfax’.

Xerxes, i think the core problem with Fairfax has been the extremely poor performance over the past 7-8 years. That then puts the spotlight on management. And rightly so. And all the warts get magnified. Brookfield owned a significant % of Norbord (OSB) shares since 2004. That holding period is a lot of lumber cycles. Yes, the West Fraser acquisition of Norbord this year gave them the opportunity/liquidity to unload their whole position. But how many previous ‘peaks’ in OSB pricing to unload their shares did they miss over the past 15 years? Was Brookfield Property Partners not a brutal investment for investors for many years? With Brookfield buying them back recently on very favourable terms for the parent? Is Brookfield not a wickedly complex organization? Are its financials not considered to be a black box. Is it not very promotional with its presentations? Yes, the shares of BAM are doing very well. And the narrative today surrounding Brookfield is also very positive. When your share price is rocking and you are not doing dumb things investors give you the benefit of the doubt. Does Fairfax need to improve its communication with investors? Yes. But they also need to get earnings, BV and the stock price growing again. PS: i like BAM

The 1% position in NSE cost Fairfax India US$27 million. If we see an IPO for NSE this could increase the value of their position to +$200 million. Pretty crazy return on this investment. It is on the books today (fair value estimate) for $99 million. It is looking like many of the investments the Fairfax India team made over the past 5-6-7 years are really starting to deliver which is resulting in another jump in BV in 2021. Privi was monetized for a significant gain. Fairchem stock has skyrocketed this year (up 3X). Chemplast is now up 35% in 2 months post IPO. Pretty much every publicly traded holding of Fairfax India is up well over 50% so far in 2021 (with some up more than 100%). And more is coming. Seven Islands IPO is in process. An Anchorage IPO is coming (i think). Hopefully the run in Indian stocks continues. Fairfax India has been a big winner.

The IPO market in India looks pretty frothy. If Digit decides to go the IPO route at a very high valuation i think Fairfax should cash out a chunk; not all, but a large chunk. And use the proceeds to buy back stock in a company trading at 0.65xBV (Fairfax). A decent example might be Quess. Fairfax got in on the ground floor. The Indian stock market went bonkers in 2018. At one point Quess traded over 1,000 INR. I think Fairfax marked the carrying value of their significant position near the high. Fairfax likely had an opportunity to sell a chunk at very high prices but did not. And when the Indian stock market hit the wall in 2019 Quess came down hard bottoming out at 200 INR in April 2020. And in 2020 Fairfax was forced to significantly drop its carrying value for Quess. The stock is now trading over 900 INR. But i am not sure buy and hold (great company, great prospects) was the right decision. i also wonder if the Quess experience is not one of the reasons Mr Market is largely ignoring the Digit news.

Xerxes, thanks for posting. The second video (21 min) was excellent. The person doing the interview asked great questions. So people watching the video get a solid overview of the company. Bottom line, Digit certainly looks like the real deal. The financial impact for Fairfax could rival the CDS gains back in 2008-09. And just like the CDS position it is being completely missed by most investors. Today. Mr Market eventually ‘got’ the CDS investment and my guess is they will also eventually ‘get’ Digit. And Fairfax shares will respond accordingly. Just another of the many tailwinds / catalysts that should play out over the next 12-24 months.

Spek, shame on you… you sound like a short term trader (not a real investor) with a comment like that But you have likely already sold the Fairfax shares you purchased last Friday. Realizing they will likely only give you a 25 or 30% return over the next year… and replaced them with the shitload of other stocks that are going to give you a 50-60% return. I bet you are happy you dodged that bullet!

Stubble, i think you know i often try and make points with extreme examples (and a little humour ). Kind of as a counter balance to the other extreme perspectives. A way to keep me balanced and smiling There is a lot more to Prem and Fairfax than what investors have seen play out the past 7 or 8 years. So i do think looking a little further back can sometimes help provide a more accurate picture of what we are likely to see in the coming years. And i appreciated your insight into ownership % and multiple voting shares. Something to file away..

Buybacks is one of a few potential catalyst to get the share price higher. However, for the past couple of years there have been other higher priorities at Fairfax: 1.) support insurance subs growth in hard market 2.) reduce debt 3.) stock buybacks Prem has been very on message on this topic for a couple of years now. 1.) the hard market in insurance pricing looks like it is in the later innings (end 2H 2022?). Given earnings and jump in their investment portfolios the insurance subs should not need much in the way of new money from Fairfax (in aggregate). 2.) $500 million in proceeds from the Riverstone sale used to repay line of credit has likely brought Fairfax’s debt levels down to acceptable levels so i think we can check this box as being done for now. 3.) that now leaves share buybacks as the only ‘unfinished’ bucket outstanding. Regarding timing for large buybacks, as has been pointed out by others, Q3 is not usually the quarter Fairfax does big buybacks. Peak hurricane season. And i think Q3 is also the quarter Fairfax completes its reserve review (not that i am expecting any issues). If we see an uptick in buybacks my guess is it will start to happen after they release Q3 results at the end of October. Fairfax should have a couple hundred million available to get the buyback train going. A buyback in size will really depend on when they are able to monetize holdings. The good news is their equity holdings are up $3 or $4 billion over the past 3 quarters. So at least the valuations of some businesses are getting high enough that the potential is there (to sell at a reasonable valuation). And of course it is pretty much impossible to know what holdings will be sold and when. If we get another leg in the reflation trade later in Q4 Fairfax may get its opportunity. Two dates on the calendar might also come into play. Dec 31. And the date of the AGM. Page 2 of the annual report has the line “closing share price Dec 31’; this is the date from which performance is measured each year. And, as any CEO knows, it is always better to have a higher share price when you hold your annual meeting. People assume Fairfax is a serial issuer of its own stock. And they have been for many years. Why? To fund their growth in insurance. To build their empire. Now Prem has said very clearly those days are over. No more big insurance acquisitions. Ok. So let give Prem the benefit of the doubt. Let’s assume we have seen a peak in total shares outstanding (and let’s ignore growth in shares driven by stock awards as pretty much all companies do this to some degree). Now i have a question for those of you who are still reading. Has Prem ever reduce Fairfax’s share count in a year? I think everyone knows the answer to this question… and it is yes! Good for you if you got it right This next question is a little more difficult. Fairfax has been in operation for 36 years. In how many of those years has the total share count fallen? Answer: 12. Since inception Fairfax has reduced share count 33% of the time. I know, I know, this can’t be true… so just ignore if it messes with your current thinking. Bonus question. This one is going to be multiple choice. What is the largest amount (in percentage terms) Fairfax has reduced its share count in a year? a.) 5%. b.) 8%. c.) 16%. d.) 25% I am going to let someone else post the answer. But remember, we all know beyond a doubt that Prem ONLY knows how to issue more and more shares every year In his 2018 Letter to Shareholders Prem made the following comment: ”I mentioned to you last year that we are focused on buying back our shares over the next ten years as and when we get the opportunity to do so at attractive prices. Henry Singleton from Teledyne was our hero as he reduced shares outstanding from approximately 88 million to 12 million over about 15 years. We began that process by buying back 1.1 million shares since we began in the fourth quarter of 2017 up until early 2019 – about half for cancellation and half for various long term incentive plans we have across our company.” Success is when preparation meets opportunity. I think we are getting closer to Fairfax starting to deliver on the aspiration laid out in the quote above….

Fairfax has recently made two significant strategic changes. 1.) no more shorting 2.) no more big insurance acquisitions (empire building) The shorting losses totalled around $4 billion over 7-8 years. The biggest single cause (by far) of Fairfax’s significant underperformance has been fixed. The Allied World, Brit and International acquisitions also experienced big losses post acquisition. Allied World was year 1. Brits losses have been spread over a couple of years. But Fairfax has a demonstrated track record of being able to successfully integrate insurance businesses but it does take 4 or 5 years (which is about where we are now at with recent acquisition). Allied looks good. Brit needs to get through covid. The international operations are collectively moving in the right direction. The important takeaway for investors today is Fairfax will not be making any new large insurance acquisitions. No share dilution at US$400. And as the recent acquisitions are integrated we can expect improved performance (higher level of profitability) from the group as a whole. In addition to the two changes i highlighted above, there have also been big changes in how it manages its equity holdings. I have posted on that before so i won’t bother doing so again. Fairfax can be viewed as a turn-around. But like all turn arounds we won’t really know for another year or two. Should be worth a beer at the next AGM in April? Any takers

Hobbit, thanks for posting. I saw the 10% move in Chemplast Sanmar shares overnight and was wondering what was up. The stock is now up more than 25% since its recent IPO. After BIAL this is Fairfax India’s largest holding so the move in the stock price is material. chug, chug, chug…

Glider, I established my core position in Fairfax last November. As I have done my deep dive on the company and we have seen Q4, Q1 and Q2 results my view is 'the story' for Fairfax has gotten much better. So I have continued to hold a core position (which I have flexed down and back up a couple of times since March as the share price has jumped around). So this could very well become a position I hold for a couple of years. That is a 'trade' type time horizon for me. When I make a big purchase I normally do so understanding it may take 1-2 years for Mr. Market to figure things out and push the share price higher.