Xerxes
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Posts posted by Xerxes
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I did listened to the podcast on the AcquirerMultiple. Sounded very interesting.
Can someone who read the book can confirm if the book offer some historical anecdote about specific P/E companies and/or specific deal (i enjoy reading history), or is it just one those broad strokes at looking at long term return and showcasing that S&P500 did better etc. etc.
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On 9/19/2021 at 10:15 PM, Xerxes said:
The Fall list is heavy. Lots of work is needed to get through this:
10 Rings (Marvel movie) -- done
Sopranos prequel
007
Dune
Foundation Trilogy
Eternal (Marvel movie)
Spiderman multiverse (Marvel movie)
Dexter
Narcos Mexico Season 3
Mandalorian (no clue on release date)
Billions (part 2 of the last season ?)
Succession (new season ?)
Might be missing
10 Rings (Marvel movie) -- done
Sopranos prequel -- done
007
Dune
Foundation Trilogy -- on-going
Eternal (Marvel movie)
Spiderman multiverse (Marvel movie)
Dexter
Narcos Mexico Season 3
Mandalorian (no clue on release date)
Billions (part 2 of the last season ?)
Succession (new season ?)
Expanse Season 6
Yellowstone Season 4
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I finished watching Expanse Season 5.
The best scene in the season, where the Martian Admiral talks about .... guess who ? Xerxes.
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Recorded only 1 week ago, with half of it on a children book.
The other half, the analyst backward circa 2016-17-18 opinion on FFH. Talking about the usual market timing and comparing the Buffett of the north with Buffett.
The only right statement is that FFH is a blackbox and that you never know.
This guy needs to do some homework.
John O'Connell discusses Fairfax Financial - Video - BNN (bnnbloomberg.ca)
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thank you.
The real hero of this Greek tragedy is the collapsing bond yield from 37% to 1%. Whoever locked-in those distressed bonds at +30% and rode them all the way to 1-3% must be laughing all the way to the Eurobank.
The aggregate sum of these Greek investments seem to be as big as (or bigger) than Fairfax India's market capitalization. In another time and place, this Hellenistic basket of investments would have been formally called "Fairfax Greece", if their deeper involvement was in fact pre-planned as oppose to a initial desire to repeat the Bank of Ireland trade, which then grinded them and morphed into a deeper involvement.
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Glass half-full:
You folks are being overly pessimistic, maybe, just maybe, the Blackberry executive-gentleman thinks Blackberry has good potential, but also maybe he has been watching YouTube Motely Fool videos on the diversification. So, to kind of hedge his bet, he decided to sell his Blackberry shares and re-direct those funds into buying an undervalued Fairfax itself at a good price, thereby holding Blackberry indirectly.
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On 10/7/2021 at 2:32 AM, Viking said:
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?
I was not even aware of BAM's legacy investment in the lumber until earlier this year. But it didn't matter, as it was layered under a growing and a very successful asset management business. Agreed that the Resolute is irrelevant in a grand scheme of things. But irritates the hell out of me.
On 10/7/2021 at 2:32 AM, Viking said: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?
The point i was trying to convey is that, if you are an institutional investment manager who is recommending BAM or its subs as investment to your boss or some sort of committee, you have a framework to work with. Something to latch on or chew on. You can try to sell that internally. It may or may not pass, but you can try.
With FFH or BRK*, you have no such framework, because everything is based on Tesla-like leap of faith. How can you sell that to your boss. Unless its market value drops by a huge margin of safety below BV, than that becomes a story to sell to your boss as a reversion to the mean trade. But that is it. It ends there.
Of course, for retail investors that opaqueness is the opportunity. But one that needs to be hedged by a fair amount of Amazon and Google (in my case).
* i am adding BRK so that i am being fair; when you buy BRK as a professional investment manager, basically what you are saying is that, i have outsourced to Omaha
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55 minutes ago, MMM20 said:
The Indian investments including Digit represent well over half of the current market value now. Even if 0.8-0.9x P/B is fair, that's a +50% from today on the marked-to-market book value. And do we have a potential Naspers/Tencent redux on our hands with Digit? I'm not sure how to handicap that, but it seems like a real possibility. From a starting point of an all-time low (post-9/11) valuation, the risk/reward seems skewed to the upside with that sort of optionality built in.
Welcome MMM20
The highlight of your post
Joey Levin from IAC on different conference calls had described IAC as a portfolio of call options. Perhaps there is a bit of that here as well.
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While i disagree on some/many Gregmal posts on FFH and Prem, and without commenting specifically on BB itself (which i dont know more than an anybody else), ... i would say that in Gregmal's defense, his comments on the situation are probably no different folks talking about Charlie Munger and Alibaba in the other thread.
I dont think anyone in the Daily Journal or Alibaba thread has anything but respect for Charlie Munger.
But they are looking at it from a life cycle point of view, and great investors like everything else or everyone else have a life cycle, when they think about other things at different stage of their career/life etc. Gregmal is just more vocal about it.
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Putting my SJ's hat on: great news for Fairfax India's majority owner: Fairfax Financial.
I am learning.
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But then they held on the other old-economy names ...
I think that is one of the reason why institutional investors stay away from FFH, unless there is a huge margin of safety (i.e. mean reversion).
Not because they don't believe Prem Watsa's ability but just that they cannot wrap their heads around what framework Prem Watsa is using to decide when to sell or buy. Think of endless discussion in this very forum about BB and resolute.
Institutional investors dont have that problem with say Brookfield. The BAM folks are showing themselves savvy investors using clear framework and speaking clear language that the investor base understand. That framework allows institutional investors to feel comfortable with BAM or BX and the like. Even if it is all optics or smoke and mirror. The investor base feel comfortable that at least they know where they stand (even if they are not in the stock).
With Berkshire and Fairfax, the investor would be literally outsourcing all that to the founder-CEO-operator and taking a leap of faith.
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4 hours ago, Viking said:
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.
Cheers
Perhaps we will see each other in Toronto for the AGM.
Whether the discount narrows or not, I'll buy you a drink for all the work you have done.
The only difference I would say between CDS and Digit is that the former was cold hard cash that got realized. Digit will likely be unrealized gain for a long time even after its IPO. If Prem sells a portion of Digit, I would really question why Digit (a fast growing tech) deserves a trim and not Resolute (a lumbering sawmill) .
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I bought the book from a bookstore when i was in BC.
Next step: to read it.
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16 hours ago, StubbleJumper said:
I would agree with you that many founders cannot morph from empire building to shrinking the capital base, but we should keep in mind that Prem might have more motivation than most.
SJ
Thanks.
That was very informative !!
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in case, they were not posted before.
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11 hours ago, Spekulatius said:
It is great that we found some ancient scrolls telling Prem’s tales of buybacks in his gleeful years:
Thanks for the good laugh on a otherwise grey Tuesday morning where i live
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Short-med term trading aside (which pros and cons have been well documented here in the thread), for those in it in the long term, it will come down to one thing only:
The founder-operator-CEO ability to morph himself/herself from empire-building into being laser focus on growing value per share by shrinking the capital base. Some founder-operator-CEO cannot, some founder-operator-CEO do not want to.
Who can blame them. Even the mighty Buffett for better of last decade, had more fun playing the waiting game to snatch a prize than doing the boring-boring obvious thing of buying its own shares. That is why the case study of Teledyne is so interesting, where the CEO just flipped a switch purely based on what made sense going forward.
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Prem bought 482,600 shares ($149 million) in 2020 at an average of $308 USD per share.
Those are now worth $191 million (barely 28% for 1 year or so). He said his timeframe is 3-5 years on conference call.
When he made bet in June 2020, it was a macro bet and it was not a bet on himself (going forward it will be on himself). Same as those buying today who are Seeking Alpha.
My sense is that he has some focus on the growing value per share if he made the trade of that size.
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On Resolute and BB, i hope he knows something we don't about these two names, otherwise the optics of not-unloading aint pretty.
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6 hours ago, dartmonkey said:
I'm not following this logic. If I wanted to invest in FIH's holdings, wouldn't I be better off getting them through FIH at 60c on the dollar? A 40% discount pays for a lot of years of Fairfax management fees, and the discount is not likely to get even larger.
I meant a large institutional buyer buying FIH through a private placement from FFH, at a price that is largely above the $10 carry and perhaps also the market value, given that the large buyer would need liquidity and spot price wont do it. That new "mark" will help lift the rest of FFH holding as its BV re-adjust. FFH owners will benefit with some of that intrinsic now in the books. FIH holder will benefit as the ownership will broaden out, albeit not a FIH BV.
That means no new equity issued for FIH below book value. Just shares exchanging hands directly between FFH and that buyer. The same way Softbank sold a big portion of Alibaba to 3-party buyer (Singapore sovereign fund if i recall) without disrupting the float as a significant owner of the equity.
Of course if FIH traded at a premium, there would be direct issuance of shares, and broadening will happen like that.
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bottom line:
(1) persistent FIH BV means more FIH buyback; more performance fee to FFH; net results: more % FFH ownership (this was SJ's initial point)
(2) broadening the FIH investor base, thus less % FFH ownership:
(i) issue new FIH shares for new investors. Net result: more cash coming into FIH for investment. [out of the question given the deep discount]
(ii) direct placement to an interested third-party. Net result: Cash going to FFH but no cash going to FIH. The BV of FFH adjusted upward from its current carry of $10 (circa 2016). <=this is my point
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2 hours ago, StubbleJumper said:
You've delved right down to the bottom line, I'd say. The prevailing market price really only matters if you intend to sell (a portion) your holding or if you need to use it as collateral. But, if you don't intend to sell or borrow against it any time soon, why do you care if the market price lags (this applies to both Fairfax India and FFH shares)? Pete has provided the best potential explanation for that, which is that a capital raise might be desirable at some point, but short of that, if the shares trade at a discount for a decade, why would a long-term holder (like FFH) care?
SJ
Reputational risk.
Going back to my comment that there must be a part of this scheme, where Prem is thinking "i want FIH to be must-own asset when investors want exposure to India like BEP is a must own asset in the renewable world, and therefore i want to have the broadest set of investor and not keep increasing FFH% own stake"
This means lower %FFH ownership of FIH overtime (not more) and more broad institutional investment, but then again as pointed by others direct listing of the subs (and competing platform i.e. Brookfield) would take that uniqueness away from FIH for large institutional investors.
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14 hours ago, StubbleJumper said:
I always recommend that people reflect on Prem's personal interests. So, in this case, Prem owns a considerable slug of FFH but I don't believe that he personally owns a meaningful position in Fairfax India (but please correct me if my understanding is poor). Prem gets a benefit from the increase in Fairfax India's BV because that ultimately flows to FFH. Through his shares in FFH, Prem also gets a benefit from the annual investment fees and the tri-annual performance fee triggered by growing Fairfax India's BV by more than 5%. When there is a large performance fee, it can be settled by issuing Fairfax India shares to FFH at the prevailing market price.
So, from where I sit, Prem (and all of the rest of us FFH-only shareholders) benefits when Fairfax India's accounting BV grows quickly triggering a performance fee and that benefit is even more pronounced when Fairfax India trades at a discount to book.
The discount to book matters to Prem because it provides an opportunity for a discounted share buyback which pushes book up and helps trigger the performance fee, and once every three years a discount to book would be the lollapalooza factor when FFH actually receives shares for its performance.
Prem's a pretty smart dude. I recommend that people always follow the money.
Prem has been more wrong then right in the past 10 years, perhaps, he would be wrong here as well (if he truly wishes to have a large discount) and the FIH discount does not persist, to the benefit of FIH direct holder and to the detriment of FFH's performance fee.
but joking aside, is it logical to think only through the KPI of FFH% ownership ?
Isn't there a part of this scheme, where Prem is thinking "i want FIH to be must own asset when investor want exposure to India like BEP is a must own asset in the renewable word, and therefore i want to have the broadest set of investor and not keep increasing FFH% own stake"
Also earlier above it was pointed how FIH is carried on the FFH's book for $10 with market being at $13 and FIH BV being at $20.
Is it more advantageous for FFH and Prem to:
(1) have a large discount, to have an incentive to have FIH buybacks such that BV moves up, and FFH gets more % ownership as a result
or
(2) perhaps monetize a bit of its FIH holding to a third-party, and get a new "mark" closer to BV of $15-20, thereby lifting its carry from $10 to a higher number, thereby helping pushing FFH's BV close to intrinsic value. Why would a third party want to buy a piece of FIH from Prem when they can buy it cheaper on the market. Liquidity perhaps ...
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4 hours ago, ValueMaven said:
Agreed. Well said @Xerxes
Thank you VM
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^^ I think you can enjoy both the show and the book at the sametime. The show seem to be going slow, so you have plenty of time to at least finish the Trilogy. I would just avoid looking on the internet for articles that makes comparison between show and the book ...
PS: There was a typo in my note above, i meant non-chronological (order they were written) and not chronological (in order they happened)
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3 hours ago, John Hjorth said:
R.I.P.
@Xerxes, your question qualifies without being considered disrespectful by me, personally. We will see.
Cheers !
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I recommend going non-chronologically in the order he wrote it.
I would start with Foundation Trilogy ...
The Foundation Trilogy itself was a series of shorts stories cobbled together. And more or less written at the same time as the Caves of Steel and the Naked Sun (the two books of the Robots series). 1950s, 1960s whenever that was.
In the 80s though, Asimov was contracted again to write more books and there he started to merge the two universes together: Robots & Empire, and the subsequent works. I think reading the books non-chronologically you get a glimpse of the back story of what Asimov was thinking as he evolved and his ideas evolved. I think that is super fascinating and how he meshed one universe (Robots) series set in the near future (it has earth in it) and depicts the spacers and robots etc. with another universe entirely (Foundation) set in a veryyyyy distant future where there are no robots (i cannot say more than that :-) ).
The his last two books written in the 90s are Prelude to Foundation and Forward to Foundation, which are his less popular books. And if i recall one of them is like a prequal to the trilogy. That said, even with those books, you would have needed to have read most of the previously written books.
I admit, it is very tough to translate this into a TV Series & happy they are tackling it. i am a pretty liberal fan but i got to say at a few point i lost patience in Episode 1 and 2, when Hollywoodism took over.
The one thing to know is that almost (or most) all of the Asimov books had a twist in them that I didn't see coming when I read it for the first time. There was one book, where i kind of figure out the plot twist close to the end (because Asimov wanted me to, I guess), but then there was a twist within a twist that sent me packing.
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On a different note, looking forward to see Dune on big screen, i think the first book is very translatable into a movie (or 2 movies as they are doing there), but then even the mighty Dune by the time you get to Book 4, it becomes untranslatable into movie/TVshow. I have read all of six Frank Herbert original work (the first one many times), and i got to say i understood nothing when i read Book 4.
Dune is going to be awesome.
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EDIT: minor typo; i meant non-chronological order
Movies and TV shows (general recommendation thread)
in General Discussion
Posted
For me, Lewis best performance will always be Lt. Winters in Band of Brothers.
PS: I am about to finish off Billions season 5. Funny how suddenly mid-season they were wearing masks or the lead actor shaved off his beard. I guess different production period before and after Covid.