Xerxes

I had increased my FFH holding by 30% (share quantity wise) late in March. Only to see the whole meltdown … again. Further increased this morning by another 30% (share quantity wise). In my case, it takes me years to build up a position, so I have the latitude to average up or average down. Sadly, it has been average down for FFH case. If it goes down another 20% in the coming weeks, you know who is getting irritated :)

Thanks SJ / BearP6 for the feedback. For me, the 100% dry powder position on FFH was striking compared to 35%, but the reality is probably much lower. Need that 13F !! Bryggen, I will give one qualitative feedback. This is purely my own opinion. I have not counted the actual number of times in the two AGM transcripts of FFH and BRK, but the overall impression that I had was that at Berkshire's AGM, I heard a lot of "I don't know …." from Warrant Buffet, while at the Fairfax AGM, I heard a lot of "it will come back …." sort of language from Prem Watsa. That was just my overall impression. I believe the relative size of their usable dry powder to be positively correlated with their time horizon and the wideness of the range of possibilities that they are seeing. I think what that means in turn is that if there is a second leg down in major way (i.e. 1929 style), it is very likely that FFH may not survive in its current form given that Prem Watsa base-line view doesn't see that, but Berkshire would be well positioned to be the Rock of Gibraltar. It was telling me for to hear Charlie Munger on WSJ saying that we are just trying to survive through this. If there is no major leg down, I think FFH will probably do better for new investor given the big discount that the market is giving.

I am going to group the perceived issues into 4 categories. - (1) Holding Co. liquidity - (2) Historical portfolio return - (3) Future portfolio return - (4) cash injection into portfolio companies Most folks here agree that current liquidity at the holding company is enough. If (1) is truly not an issue than then the deep discount is not justified and is an opportunity. Most folks here agree that portfolio past return (recent history) has been a great disappointment. This is already reflected in the book value through mark to market and/or impairment(s). However, should (2) start or perceive to weigh more on the BV and trigger some covenants at holding company level, that will likely have a secondary effect on (1), thereby justifying a huge discount even if current liquidity is perceived to be enough at the moment. Most folks here agree that portfolio return in the future will be much better (or so we hope). If (3) WILL be true than the deep discount is not justified and is an opportunity. ----- total dry powder available ---- can someone explain what is wrong with the logic below> BRK's cash pile is $130B (aprox.). vs. market value of $444B. So 30% of the market cap. FFH's cash pile (hold co. + portfolio cash) is about $11B vs. $10B market cap. So 100% what am I not understanding ?

Folks, I am trying to understand this explanation. he says CAPEX > depreciation … just means depressed earnings. How is that related to the net cash produced in the covid context remaining unchanged ? if anyone got that, a quick explanation would be appreciated. thx "Warren Buffett: (01:27:41) It affects others much less. Our three major businesses of insurance and the BNSF railroad, railroad and our energy business, those are our three largest by some margin. They’re in a reasonably decent position. They will spend more than their depreciation. So some of the earnings will go, along with depreciation, will go toward increasing fixed assets. Warren Buffett: (01:28:13) But basically these businesses will produce cash even though their earnings decline somewhat. And if we’ll go to part two, at Berkshire, we keep ourselves in an extraordinary strong position. We’ll always do that—that’s just fundamental. We insure people. We’re a specialist to some extent and a leader. It’s not our main business, but we sell structured settlements. That means somebody gets in a terrible accident, usually an auto accident, and they’re going to require care for 10, 30, 50 years."

Wide bodies will be greatly impacted. Narrow bodies will be also impacted but will recover first. But yeah gloomy.

You realize (do you?) that your statement, as phrased, could be a source of mental anguish. Perhaps helpful to use the Brooklyn Investor's lens (no this is not a post about market timing, or is it?): http://brooklyninvestor.blogspot.com/2017/11/is-buffett-bearish.html Using similar methodology and incorporating the latest released data, the coverage stands at 117-8%. Maybe helpful to remember that 1997 and 1998 were special years, as GenRe was acquired and BRK picked up 19B of bonds as part of 15B of float (unaudited, from handwritten notes). So 1999 may be a better year for comparison (pro-forma if you like), especially keeping in mind some of the comments made then. i think Mr. Buffett was made aware of this coverage data and apparently said that it happened to be a fortuitous correlation.Perhaps fortuitous but interesting nonetheless.. When he purchased GenRe, he had mentioned that he was "creating Fort Knox here". Perhaps 2020 is a time when we are collectively running out of Fort Knoxes. For me 2020, it is all about Purells and BRK :) Cheers

Very true, i would echo your comment by this quote. “There are two kinds of forecasters: those who don't know, and those who don't know they don't know.” I believe most folks, including myself, fall in the second bucket.

Haven't gone through the details, i would just say that i am glad that Buffet and Munger continue to manage the company with an eye for the next 50 years as they see fit (yes i am aware that they are old), as oppose to satisfying either Wall Street or us or anybody else with their quarterly results expectation and how much they bought back or didn't. I don't own Berkshire as one of my largest position, because i wanted them to do the things that i would want to do myself. (i.e. buying the dip). The reality is while we worry about covid-19 and how 2021 looks like and all the obvious things, you would want someone else to worry on your behalf about 2030 and beyond and not do all the things that look obvious.

The BBN analysis is good one. But I would just say that FFH is not a conventional name, so i don't really count on BNN or their analysts to say Strong Buy. I bet if i were to go on BNN archives in the years 2004-2010, you don't get too much Strong Buys from BNN on technology names, with the analyst keep referring to the spectre of the Dot.com bubble. Not saying FFH is the new high-tech in the making. All i am saying is that BNN has a conventional main stream view with a certain framework and FFH is outside the norm.

2CC, you stated this on the other thread: "With $835/share in float, $420/share in equity, and $337/share in debt - it's hard for me to come up with a case where returns aren't going exceptional @ $260/share. That is $1500+/share earning you a return. 15% compounded from these depths only requires an annualized return of 2.5% on the float/debt/equity to get 15% ROIC for your dollars. Such a low bar! Particularly in an environment that is being disrupted where investment grade corporate debt and high-grade equities/preferred yield quite a bit more than that." To me, Prem's promise of 15% return over the long term is a return on BK not market value. The fact that the stock is at deep discount, although good from a new investor point of view, is (1) less good for existing shareholders that don't plan to take advantage of the discount, given other market opportunities (2) also less good for existing shareholders, if Prem doesn't take advantage of the downturn and (3) completely unrelated to the 15% return over the long term BV. For sure, the stock will at one point bounce back like an elastic from a discount of 0.6 to a discount 0.9 (as an example). But just like the downdraft was not Prem's fault and was market's doing, the bounce back is not a Prem's win ... unless he takes advantage of it in a major way. But i agree that it is doubly good for new investors with a new entry point. Basically market is treating Prem Watsa as a risk thus paying new investors a discount for taking shares at this point. Unrelated, i was thinking about Petec comment about lumpy return from a different thread. Taking that point of view on the FANGs names, i would characterize Alphabet and Apple as the ones with reliable return whilst Amazon is the one that has lumpy return, which i am happy to stomach, every time spigots get turned on or off. FFH's lumpy return however hasn't been there on the upside. And any excess return I get here as an existing FFH shareholder by buying the dip, is a market return as oppose to fruits of FFH investments from the past.

Listened to the call. My comments: - Main focus seem to be to make it clear that the hold co liquidity is there. - Looks the feeling is that the window of getting that widening spread on fixed-income is largely a March event. (if i understood correctly) - No question on position sizing of Exxon, Google etc. At this point i am guessing minor until 13F comes out. - Looks like they bought (i think) bonds issues from Berkshire Hathway Energy and Walt Disney (although DIS was mentioned in the AGM) - Half of the question seem to be from individual investors - COVID seem to be minimal impact for now (naturally covid related question mostly seem to come from analyst who know better) - Poor Prem, he has to keep telling people that buybacks are not priority. Probably his fault as he made big deal in talking about Teledyne some years back. - Pretty funny when he asked if anyone on the phone has investment ideas they should let FFH know Good call, but i think it is for each to figure out if 60% discount to BV equals 60% discount to intrinsic value. Or there has been major impairment like Recipe and such, which was on a secular decline to begin with.

Hi SJ, I don't have answers for all of your questions, but I do have a response for #6: I'm comfortable with them piling into Atlas. I think Atlas will be a wholly-owned Fairfax Company one day like Mid-American became under Berkshire. With Paul Rivett showing signs of moving into semi-retirement and spending more time with family, Prem and the old guard aging, Andy Barnard not being much younger than Prem, I like the idea of Bing Chen and Wade Burton sharing future duties at Fairfax in terms of a succession plan. One handles operations and one handles investments. That may change depending on what happens, what acquisitions are brought in, what leaders emerge, but I think shareholders could be comfortable in that pairing. Cheers! Parsad Hypothetically speaking, why would the Washington family would want to let go of Atlas, if it is a great bet? FFH would be better off in having a controlling position but probably no more as that type of business in not in their circle of competence. Going to mid-American comparison, if a potential intent is the get the whole of Atlas, and if that bet is a function of David Sokol ability to stay and continue the good work, shouldn't Sokol have a Atlas-only stake, like Greg Abdel does with BRK Energy. For the record, I personally believe in Sokol and his work and Atlas.

My guess (hope that is not true) is that they shorted Netflix and Amazon, as listed in the annual letter, based on their higher old-school valuation ratio of P/E ** SIGH ** But let's give them the benefit of the doubt. Or lets not >:( Where did you get $390 for BV ? it says => Book value per basic share at March 31, 2020 was $422.03 it says $122.3 (unrealized short) that means it wasnt close as of March 31, when the market bounced back.

Xerxes, you seem to have it all well thought out :-) i do own BRK. In all honesty, probably mostly just because i like Buffett. And the fact they have so much cash (ideal in the current environment). It is likely just a short term hold... i will be happy to sell for a quick 3-4% gain. Done it a couple of time already :-) Fairfax India looks interesting. I do like some of the assets (but not CSB). But until i get some clarity regarding the path of virus i am going to get very selective (which means FIH will just stay on my watch list :-) there is not much thinking on my side on my logic. It is just that my view is that "it is never as good as it looks when things are good … and it is never as bad they look when things are bad". We (be it investors, forecasters, industry participants) tend to take a snap shot of a great thing and project into the future, and when the bottom falls out, we tend to take a snapshot and also project it to the future, and call it structural change. Always overshooting and undershooting

You are absolutely right on lumpy results. While I always took note of that, somehow I failed to register that BRK had never said. Though they (BRK) have been sayings … we don't care about reported earning but we care about long term economic growth per share. Speaking of which, is it safe to assume that the last time that lumpy side was to the upside was the 2008-09 short … and perhaps Odessy (don't know the full story there, but folks were talking about in this thread). And also as the new generation takes over, I think that would mean less lumpiness … and more steady growth.

Pedro/KFS I am not familiar of the team working their equities side. Do you know how much dollar value or percentage he is managing. high double digit is pretty impressive. Who knows maybe he was shorting Resolute Forest on leverage ? for me the key is going to be the Q1 13F; i don't expect FFH loading up the truck during the drawdown. But I very much care about their position sizing of the two names that they chose to 'market' during the AGM: i.e. Exxon and Google. For me that would be key and indicative of new direction. Based on a board member recommendation on a different thread, I listened to two Google Talk videos with Thomas Russo. Very interesting with his concepts of capacity to suffer. In some ways, that capacity to suffer applies to us FFH shareholders, I never expected major growth (have other growth engines in my portfolio); rather wanted a modest/steady but continuous growth. Let's hope there is light at the end of tunnel.

Looks like Greg Abdel and Buffet would be answering the Q&A … no Munger Nothing to add !

Viking, my non-scientific but philosophical view is that the pendulum always swings back … It may be rough for FFH, but I think both BRK and FFH had about the same peak-to-trough drop. FFH a bit more. Just like FFH got a few large businesses impacted, BRK has a whole host of entities impacted as well (Coka Cola, Airlines, etc.). They are both not investing heavily in equities in the dip it seems (from what we know); FFH b/c it cannot (perhaps), BRK because it doesn't want to. I think as long as both names remain diversified within your own personal portfolio, that ought to do it. I personally greatly admire the collection of old economy assets Fairfax India has. EM will always be a challenge, … until it isn't a challenge anymore. Then people will flock back to India, they would call it "like investing in China in 2001" and that theme will go on, until pendulum swings back and it is no longer "like investing in China in 2001" etc. it is like investing in Chili in 2019. Unfortunately the pendulum swing happens over many years and it doesn't swing back in a way we can forecast. I work in the aerospace industry for more than a decade; we have been doing well... our industry has been growing by this much X CAGR, i.e. Airbus pumping out +50 A.320 per month (I don't work for Airbus, but just an example), and that was baseline of all forecast … all was well, life was good …. well until suddenly it isn't (i.e. Covid).

I will give my opinion. The current downdraft on the share price is probably due to some and of points below. - anticipating a mark-to-market decline on BV due to the positions that are marked-to-market (i.e. BB etc.) - liquidity concern with holding company - the trading liquidity becomes apparent during market downturn - FX rate USD:CAD; share price today in $CAD is the same as in 2013, but with a very different FX rate. - systematic concern with larger holdings that are equity accounted (Recipe, Seanspan, Eurobank) all of which are getting a covid broadside hit of the above, (1) and (5) are general market condition, so will reverse in time. And then it becomes function of good those individual picks were as oppose to correlation racing to 1. (4) and (3) you cannot do anything about it. (2) is probably is no concern based on previous posters

I recall listening to Buffet interview back in March and I felt an unease with his uneasiness about Covid’s impact. Anyways, I hold BRK because they are different. And if they are not doing anything, as we are still in the early innings how the wheels would come off, I am ok with that. If I wanted a mediocre conglomerate that buys and sells at the wrong time, the GE of old would be of a great option.

There is a discount between market and IV. The discount needs to be attributed to something. I chose to think that the discount attributed to the misc. list of small businesses that BRK carries. (All of which do have positive value on their own as stand-alones, but not collectively between the four walls of BRK) Someone else might take the market value, deduct cash ($130B), deduct best estimate of the of the misc. list small businesses, deduct the market value of the larger portfolio companies ($200B) and arrive to the conclusion that the two major groves (i.e. railroad + MidAmerican) are undervalued. Therefore, i.e. $8.3B @ 10X P/E. instead of 16 multiple. The discount is due to something, and I chose to believe is the due to the drag of misc. list of entities that are on "permanent display" on Buffet's canvas as a proof for future 'larger' opportunities that we are not a hedge-fund and that once in the family your are in the family. Therefore, that semi-permanent discount to me is akin to a "marketing expense". BRK has traded at a premium against BV most of the time in the past 20 years (except at times of great market dislocation, I think). Can we also say that BRK has traded at a premium against intrinsic value most of the time in the past 20 years. By the way, I don't know the answer to that question, but I suspect the answer is either (1) no or (2) mostly no as we don't have a reliable data on intrinsic value as it is a range. If the discount is sufficiently very large, BRK will buy back its own shares. If there is a strong belief that discount will close. Why there aren't major trading houses doing a long-short on BRK. Going long BRK and shorting the some of sub-assemblies, thus isolating the bet on the discount closure. Instead most folks tend to just go long BRK (like myself) thus seeing the discount (a big portion of which i believe is permanent) as a margin of safety then doing an isolated bet on narrowing the discount. That is how I see it and I do realise what I written above could be seen as a stretch.

The list of the stuff one gets for free is like the negative pricing on the barrel of oil. Better left in the ground. The value of those small businesses (cost against market value) to BRK I think is more akin to “marketing expense” for the greater BRK conglomerate. Marketing expense so that BRK can continue to advertise itself as the home of last resort to whoever wants to sell and that BRK will keep you whole. (I.e not a hedge fund) So if the calculated number represents true intrinsic value, than the market discount is justified and represents the “marketing cost”. I probably don’t make sense but that is how I see it.

I think making Amazon a pillar in the portfolio like Apple would be the right hedge against headwinds in all of its various consumer businesses.

I checked on the net, Q4 was on Feb 14th Using the same lead time, it ought to be around May 14th for Q1. Or around there. I think for BRK the F13 also is mid-May after the 03rd May AGM.

Are you thinking that Mason Hawkins might be throwing some capital into FFH? He had been lightening up on FFH over the past year, but he certainly has taken high conviction positions in the past. Yeah others like Southeastern. I think SE was already in FFH based on their podcast few years. I wasn’t aware that he was unloading. If so he is probably back. He (or his associates) were also big on Fedex. There was a whole podcast on it with the CEO. I wonder what they did with it as it was a long term position for them.