Xerxes

My question wasn't so much to determine weather it is cheap or not. But the trigger for re-rating. BAM is valued via its asset management business (multiple on FRE) + its carry + maybe also its invested capital. While, BAM and FFH are completely different businesses, I would think that Fairfax also has an operating earning portion (we can argue what the can be) + potential monetization + etc. The market does not care about the second bucket "i.e. potential monetization", because much like BAM's carry, these are lumpy. If and when it comes, the market (and the accounting, i might add) will both recognize it then ... but wont bother with till. So it is the earning of the big associate (in absence of a re-rate on the bond portfolio, which is perhaps further in the future) that really need to get a lift. From Q3 earning: "Consolidated share of profit of associates of $227.3 million principally reflects share of profit of $82.0 million from Resolute, $43.3 million from Eurobank and $20.3 million from Atlas Corp." Compare the scale of the dollar value of the earning coming from Resolute vs. what is coming combined from Eurobank and Atlas. I think, it is pretty well understood that the latter two' earnings are on an inflection point (I get that), but TODAY, they are collectively lower than the earnings from Resolute ! So why should the market care TODAY about Atlas and Eurobank, and give it credit in Fairfax market value ? if the stock market is severely undervaluing Atlas itself, does it really surprise anyone that it is also discounting through FFH's own share price, Atlas's picture just gets muddier when seen through Fairfax. Bottom line, we need to see a good uptick of earning from Eurobank and Atlas (not their stock price going up, ... earnings) before seeing anything in term of "credit" given by the market on Fairfax valuation.

Thanks for posting. I really like the work that they are doing and the impact that they are having. Compare that some guy sitting in NYC flipping options and stocks like burgers. That said, this is not only long term, it is very long term, before any major investor gets excited about the stock. Market value is at about 60% of its BV. The difference between this entity and FIH is that, for this one the current Helios operator have an incentive to close gap. (or rather more incentive than say FIH, not to say that FIH does not have an incentive) At September 30, 2021 common shareholders' equity was $593.6 million, or book value per share of $5.44 with 109,107,606 shares outstanding, compared to $599.7 million, or book value per share of $5.50 with 109,118,253 shares outstanding, at December 31, 2020, a decrease of 1.1%.

The pace has been different in Japan for sure. Social employment for all trumps maximizing shareholder value in Japan. And I imagine same is for Korea. Incidentally, great piece on Samsung, not related to break-up, but what it looks to be next chapter. Samsung Electronics wants to dominate cutting-edge chipmaking | The Economist I would argue that Alphabet, Amazon and the rest of them are also conglomerate. But that is because that combination adds value (at least for now). And that is not only exclusive to Big Tech, David Sokol is building an old-school conglomerate. What are going away are the legacy conglomerates where clearly they were past their time and relics of the past. (cough Berkshire ? cough Fairfax ? cough)

Viking, How should Berkshire (the industrial conglomerate that it is today) be valuated in your opinion ? based on sum of parts ... or a multiple off its operating earning. At which point in its history did it make sense to shift from SOTP to multiple or vice versa for Berkshire. I know folks use both ways now. Now, what about FFH ? I am asking because the FFH-portion of the earnings from Atlas and Resolute looks about the same range, which was surprising to me given the disparity between the two in terms of management quality and size of the business. FFH owns about the same % of each of them. Perhaps RPF has its earning at its cyclical high while Atlas has it a cyclical low so seem to coincide at this moment in time. Which would mean there has to be a serious growth in Atlas's earning (as envisioned by Prem) and that would lift the base-line of that multiple valuation. I say that because market clearly does not care about SOTP when it comes FFH. So value added by FFH's heavy-hitter Associates come in play only (1) if the management at some point monetize a sliver of the holding or (2) accounting rules are changed such that Associates get that mark-to-market. Since the latter is impossible and the former would only come into play when FFH is ready to monetize, than clearly it is that uptick in earning that needs to be there to lift the valuation by multiples. To be clear, i am talking about accounting earnings and not the "dividend & interest" line item, which is real cash.

Fascinating discussion

Admittingly, i got a bias toward aerospace. That aside, my limited understanding of GE Healthcare's history tell me that the actual 'crown jewel' of the GE Healthcare was sold to Danaher (Larry Culp's old outfit) for a cool $20 billion cash that went to pay down the debt at the group level. Prior to Larry's taking over as CEO, John Flannery who was the CEO for a limited time tried to spin of Healthcare with that crown jewel in it. That was deemed the wrong strategy by the powers be, since at the time, a melting GE was not going to capture any of the windfall of that spin off, only GE' shareholder would have. To be more accurate it was not a full spin off, it was akin to raising equity with an IPO and spining off the rest. So some equity would have remained with GE. Long story short, when the Larry Culp regime took over, they stopped that, and decided to in fact to get hard cash for that business by selling to Danaher. So the spin off today does not have that business in it.

thanks, was fully unaware that only B shares were being donated

I still think Buffett should have used Elon Musk playbook and done a Twitter poll asking if he should do buybacks. What better way to disclose

Is it possible that in some way he is buying his own personal shares, indirectly. i.e. Bill Gates is offloading an annual % of A-shares, and the buybacks are sucking that extra float

For what is worth from Bloomberg. An interesting yardstick. "Berkshire spent nearly $20 billion more repurchasing its own stock since the middle of 2018 than it deployed accumulating its Apple stake through the end of last year. In total, Buffett poured about $51 billion into buybacks since a change to its policy more than three years ago, and appears to have continued snapping up at least $1.7 billion of stock since the end of September. " Billionaire Warren Buffett’s Berkshire Buy Backs Exceed Cash Spent on Apple - Bloomberg

The crown jewel is GE Aviation, but Buffett is probably by now all against anything remotely close to aerospace. The healthcare division will be a stand alone as a tax-free spin off, which means GE probably looked at potential buyer paying cash and had to weigh in the offer value vs. the tax it had to paid. And chose a tax-free spin off. About 7-8 years ago, UTC went through the same exercise but did find a willing buyer for its Sikorsky division. The offer was high enough to offset the tax bill. The GE power/renewable needs to be hammered into a division before its spin-off. They need to put some lipstick on that pig before floating it to Wall Street, so really who wants that. All in all, they have not shared much about the capital structure of the new companies either. It is my firm belief that GE Aviation would need to scale-up once it freed itself of these two spin-offs. EDIT: in fact, who knows maybe Larry Culp will be buying Precision Castparts from Uncle Warren for his new GE Aviation

Clear, thanks, it was bugging me the whole weekend, when i was reviewing the discussion between the merit of the two few pages ago, as seen from the investor p.o.v. in a tax-free world.

my experience has been that most Direct Investing branch of the Canadian big banks do not offer foreign investing outside North America

Dividend vs. buyback Scenario: - market cap: $100,000 - 5 shareholders with equal % - company plans to return $20,000 to shareholders Return of capital through dividend $20,000 returned as cash dividends and split equally so each partner gets $4,000 One of the partners pulls out her Robinhood App and uses the $4,000 cash to buy some fractional shares So in aggregate she has now $24,000 worth of stock and another partner who sold and kept the dividend in cash has less (i.e. $16,000) So now she has 24% of the company. Other partners have 20%, 20%, 20% and 16%. Return of capital through share buyback $20,000 returned as share buyback with 1 of the partners being bought out completely by the company. There are now 4 partners each with 25% share of the company. What's wrong with this math ... Is this correct ? if so, it appears you get more with share buyback

maybe due to the 8% drop on FFH share from July 1st to close of quarter. re: the derivative that they put on themselves, Though that is a lot for an 8% movement. Blackberry also dropped 20% in the quarter. so ...

wow ...I just remembered this. Time flies. That was 5 years ago now. Swiss Chalet owners Cara buying St-Hubert for $537M | CBC News Back then i had zero investment in FFH. Was just a curiosity to read about now and then. I am optimist by nature, I could not square investing with someone so bearish back then.

The body language says it all

I watched Dune last night, great stuff but now agree about the 'acquired taste' comment. Watching it i could really feel the vastness of the Dune universe. The scene when they land on Dune was breathtaking. The sadistic Baron ! the prison planet etc. Was hoping to see Count Fenring, but he was nowhere to be seen !!! and am not too sure i agree as to when Dune part 1 ended. They could have gone a bit further. I downgraded "Foundation" to watch only when i am doing my laundry, and replace it with Deadwood on HBD, which is more fun to watch.

Sorry, but i got to push back on this view as well. Had they retired half of their share, and the market had plunged, collectively we would have complained why could they not have bought back their share at a distress price and how they wasted so much dry powder on buybacks pre-market crash. Going all in hedging (+90% of your positions), or going all in buying back one's stock, means that you assuming there is an extremely narrow set of different outcome in the future. I think with the things we have seen in 2020 and 2021 (i.e. Tesla, pandemic, negative oil WTI price, etc.), it has been more rewarding for a capital allocator to be humble and assume that anything is possible. There is a recent interview with the previous CEO of Goldman Sachs on Bloomberg Front Row. I highly recommend for folks to watch it. He says it best: He spends 98% of his time worrying about things with 2% probability ... most of the planning is about contingency planning, not what will happen, but what could happen ,,,, and given enough time, not only everything can happen but everything will happen

Anybody has suggestion how to get Barron's in print in Montreal. Before we had some newsstands the magazines but some of those went away with Covid. And Dow Jones doesn't do print delivery to Canada for retail. Period.

i dont think anyone here has any problem with the CEO doing what they thought was right. After all they (investors) are free to not own the stock. It is not doing what they committed as a CEO of a publicly traded company .. that is concerning. Another sport analogy: can Maradona scoring the win for Argentina in early 1980s be considered like scoring the bet against the housing in 2008-09. It was an asymmetric play-gamble that paid off in both cases.

i recently bought this book (link below), which have not read yet, i think Fairfax deserve a chapter in that book, both the positive aspect of it and the negative aspect of it. Global Derivative Debacles: From Theory To Malpractice (Second Edition): From Theory to Malpractice (2nd Edition) eBook : Laurent L Jacque: Amazon.ca: Kindle Store But FFH is not alone. I recall Harold Hamm's Continental Resources had hedged oil price risk via put option prior to the 2014 collapse in oil price, and comically remove the hedges (exactly at the wrong time) when oil plunged, leaving a lot on the table. (if i recall the story correctly). Peter Munk, when he was alive and leading Barrick, he sold its future production and pretty much cap the upside for the investor. Lastly, there was the infamous case of Delta Air Line buying a refinery 10 or so years ago to hedge its exposure. Made a lot of noise about forward thinking ... what happened after that. Was that really worth it. My memory is 5 years out of date on that story. Of the few examples i gave the first three, (FFH, Continental Resources and Barrick), the founder was the CEO and the operator. So one can deduct that there was a case of wanting to protect's one baby. BUT, if what is the value for the investor if the upside is fully hedged. Folks here often complain who FFH sold J&J and the other quality names too soon. But if you look closely you will see that those 4 high quality name were sold exactly in the same year that FFH booked a major loss on its shorts position. Therefore, the high quality names were sold as an offset to close the shorts at a loss.

To own gold, one must be very long term, if and when it goes parabolic you will feel it. In the short term though, higher interest rate will be a headwind to all commodities. The Goldman commodity chief had a nice saying when asked about super cycle phase in oil : "name me the currency, i will tell you when was the super-cycle" Implying that the boom and bust in the commodities happen at different time when viewed through the lens of different currencies, but we tend to view everything through the USD lens. Gold may be flat in USD terms, but how it is when viewed in local Asian currencies ... are they getting their needed so-called hedge. Oil was peaking in the summer for 2008, when viewed in USD terms, but I bet emerging economies like India really had their super cycle in late 2018-19, when US dollar reigned supreme, making barrel expensive for them in their local currencies.

^^^ agree There is a clear point where hedging becomes a directional play on the market. Viking, A comment on your post: FFH first committed in 2017 (not 2021) (post Trump presidency + rate moving higher + animal spirits being unleashed) to not do any more shorting. And that is when I started buying small positions. But I agree that the no-short mandate is now more serious. Can you guys imagine if they were truly short Tesla in 2020. In this very forum earlier in 2021 and late 2020, people were hoping that FFH was shorting Tesla which was grossly overvalued at the time (which itself was probably $400 billion ago in Tesla's market cap)

I dont know much about these 3 European companies, but recommend reading the article. It is interesting. Basically making the case of how the dash toward de-carbonization would mean a more a secular shift toward a joining the national electricity markets across seas (i imagine it is already connected across land in developed economies). The booming business of knitting together the world’s electricity grids | The Economist