Dynamic

Fantastic results. Well done. I am at an eerily similar concentration of FFH that I want to let ride as it remains undervalued and has good prospects (though I was late to that party compared to you, I'm sure), but also have a decent chunk of uninvested cash. Trying to avoid selling too soon with the best compounders, though who knows when an even better high conviction opportunity might come up and lead me to sell down at least some.

26.7% USD-denominated gain in 2024 starting with 54.7% cash (not for especially strategic reasons) and ending with 17.4% cash. $BRK.B contributed to gains, but added to $FFH.TO in a very big way as I solidified my understanding and confidence, making it my largest position in a very concentrated portfolio gradually through the year and it did exceptionally well and I believe remains undervalued, so I did fine despite the cash drag. We've been early-retired since the end of 2021 and have grown the portfolio significantly since then despite withdrawing cash and widened the lead over the SP500TR index. Avoiding losses in 2022 was a big help. My Lowball value figure is an estimate of trough pricing of my holdings if they get beaten down, such as 120% of BVPS for Berkshire, and say 5x EPS or 90% of BVPS for Fairfax. In the long term it tends to track with growth in Intrinsic Value. Cash is valued at par, so the decline in my Lowball valuation in 2024 reflects going from a large cash position valued dollar for dollar to a large $FFH.TO position whose Lowball value was probably more than 50% below Intrinsic Value and maybe 20% below Market Price at time of purchase. In the long run I've used the Lowball value to gauge progress towards reaching retirement in a more market-neutral and conservative way than say the 4% rule applied to current market valuation. Over the years I tracked our progress towards retirement by working out a comfortable income for our modest spending some years ago and increasing it by the inflation index in the UK, then capitalising it at a suitably conservative rate for CAGR net of inflation, post-retirement (e.g. 3.5% to 4.5% real returns). Cal Year USD gain outperf vs SP500 TR pre tax GBP gain Lowball value USD gain 2016 24.2% 12.2% 54.2% 19.1% 2017 24.8% 3.0% 14.1% 12.7% 2018 25.3% 29.7% 33.0% 44.8% 2019 18.0% -13.5% 13.6% 5.4% 2020 -3.4% -21.8% -6.0% 32.4% 2021 79.6% 50.9% 81.4% 34.2% 2022 24.1% 42.2% 39.8% 38.3% 2023 9.8% -16.5% 3.9% 22.0% 2024 26.7% 1.7% 28.6% -8.7% cagr 23.9% 9.4% 26.8% 21.1%

I'm in the 1-3 years category. I made my first investment in September 2023 at about 1140 CAD and have since rapidly become confident enough to nearly quintuple my holding to become my largest concentrated position, adding FRFHF and FFH.TO during the Muddy Waters short decline (910 USD and 1365 CAD) and at later points in 2024 (1535 CAD, 1570 CAD, and 1455 CAD). My current expectation is that it will compound at a baseline 15%+ CAGR (albeit lumpy) in the long term with some quite possible kickers to boost that return especially in the near term. My intention right now is to let it run even if becomes very outsized in my portfolio. Anything that replaces all or part of my Fairfax position would probably need a superior long term outlook. Huge thanks to all the people who post here for helping me quickly gain that confidence, in particular Viking and SafetyInNumbers. Viking's posts (and the PDF book/compilation) read like a really rational and well constructed crash course on Fairfax and its hidden value drivers and really do have a hugely worthwhile impact. I do understand how the writing process can help you clarify your own thoughts and to check facts but I wanted to acknowledge how much they had clarified mine too and how much in accord with my investing style theirs is that I had very little to fill in from my own research to become very confident in making it my largest position. It could have been too easy for me as someone casually interested in Fairfax a couple of years ago to dismiss the run up in the last few years as "I missed the boat already" and to retain the impression I had carried that Fairfax's investing was a bit too macro oriented (hedges, now abandoned had seemed to be chasing a replication of their last enormous success of profiting from the GFC) or prone to falling into value traps (Blackberry), when's the truth is the portfolio as a whole had for years been doing just fine with many exceptional investments more than making up for those that haven't been great. The discipline and patience to keep bond duration short while rates were so low then lock them in for longer duration as they went higher is good risk management and capital allocation that inspired confidence. Combine that with disciplined underwriting and a Hard Market that may persist for longer than historically normal due to the whole industry that 1. fears falling interest rates and bond returns, and 2. has perhaps been conditioned by a decade of low interest and bond returns to avoid chasing market share and float instead of underwriting profit 3. is conscious of recent extreme weather events, including many where the losses weren't as bad as they might have been, pandemics and other geopolitical risks. So not only did I feel early last year that at least four years earning $125+ annually (and probably closer to $160+) was pretty much locked in thanks largely to the bond duration, but also that there's still a fair chance that this hard market won't swing to a soft market very quickly, given how recent history has affected the other actors in the insurance market, hopefully extending Fairfax's appetite to write a lot of well priced business and maintain good float leverage on mostly pretty safe investment assets that far exceed the market cap of Fairfax, thus amplifying a solid and sometimes boring single digit return on that portfolio to a mid teens+ return on equity. Thanks to everyone here for sharing their thoughts on Fairfax.

I wonder if Dollar General fits into the Win-Lose category rather than Win-Win as per Charlie Munger's filter described so well in Mohnish Pabrai's excellent University of Nebraska talk recently posted on this YouTube channel. I don't remember the source but I saw a video detailing numerous issues with single staffed stores and lack of corporate support for staff about a year ago. I really appreciate Bloomstran's comprehensive knowledge of Berkshire and his interpretation of the GenRe rationale. I think he has acknowledged that since he was persuaded to release the letters publicly, the Berkshire content has enhanced the name recognition of his fund. Berkshire is an major part with many constituent parts, so it does deserve more coverage than most positions, but I no longer read the whole letter slowly in detail as I did in earlier years.

This Watsa interview from 2011's first edition of the Fairfax Newsletter was interesting, posted here on Twitter/X by FindingComputers. I'm afraid it's only in text as image format so you may need to zoom in and/or rotate a phone if reading it there.

I'm pretty sure nobody knows. If they complete their activity in the confidential treatment they may have the full filing published at any time, possibly via a revised 13F-HR filing for each period or at least the most recent. The other trigger might be reaching a reporting threshold such as 5% ownership or 10% ownership though I'm not certain if they can request that the Form 4 and 13D or 13G filings they submit to the SEC also remain confidential to them and aren't published until later. I expect @gfp would be our expert on this. I've only read some of the rules about confidential treatment. Eventually, either they cease to apply for confidential treatment or it is denied, presumably because the public interest in disclosure is deemed to outweigh the commercial interest in confidentiality.. The 13F-HR must be filed within 45 days of a calendar quarter ending and Berkshire uses the full 45 days, so the 31st March filing will be out on 15th May. Every other quarter comes out on the 14th of a month, being August, November or February, so if it remains confidential we'll find out on May 15th

Yes, and I would want to plan for an even bigger drop to be survivable if I took out a margin loan against it. A 25% loan against a $400 stock would become a 50% loan against the same stock when cut in half to $200, so that's clearly too risky. It could easily fall 60% or 70% in extremis compared to it's current fairly lofty levels, albeit still below IV. Imagine extreme insurance loss events (Pandemic, event like 9/11, or a major war) coupled with rising interest rates and a big recession hitting big names like Apple really hard, perhaps two or three of those at the same time. The worst drop Berkshire has seen is probably not the worst it will ever see. Anything now than about 12.5% loan to value would make me nervous.

Margin debt can be very risky especially if your dealer offers you more margin that Regulation T. In times of major decline they then tend to increase the margin requirements which is more likely to lead to forced sales at the worst time. However, I could imagine that right now with Berkshire B shares over $400 and A shares over $600,000, you could withdraw on margin about 5% of the market value with very little risk, so $20 against each B Share or $30,000 against each A share. If it fell 75% it would still only be a 20% loan to market value and I don't think it's ever fallen to a quarter of a previous high. If Berkshire compounds at say 8% or better in the long run your percentage loan would reduce over time making it even safer so long as the margin interest isn't too expensive. So there are ways it could be done pretty safely so long as you're strict about keeping your limits a very long way from a margin sale in the worst case scenario.

31.4% between FFH.TO and FRFHF. Happy to let it run to at least 60% if it looks like it will continue lumpy but fairly consistent 15%+ ROE, if nothing far superior comes along.

Welcome, @charlieruane, what a good post. I agree with much of what has been written in this thread and also appreciate the likes of @gfp and @Viking to name but two for their valuable and insightful contributions over many years. I now actually track my portfolio against the index and tech and periodically record how many shares of BRK.B my total portfolio value is equivalent to, as a way of confirming if trades other than my default options of Berkshire or the S&P500 Index are adding value. If not I ought to wait for fatter pitches or give up trying to beat them. I consider Berkshire to be my default investment for up to 100% of my portfolio, internally diversified with trustworthy management, likely to perform at least about as well as the SP500TR without frictional costs (which for me include withholding tax on dividends), likely to outperform in bear markets and something where I understand Intrinsic Value and can buy with margin of safety, unlike the index. My original core holding from July 2003 when I switched accounts to be able to buy US stocks has grown each dollar to $8.23 with no costs, compared to $7.61 for the SP500TR before costs, a 0.42% beat in terms of CAGR and a huge beat compared to my local FTSE100-TRI benchmark. I've added over the years at higher prices, but with much greater margin of safety than my original purchase and very few substantial dips below my most recent buy price. Having to look better than Berkshire has been a tough hurdle for other investments and has helped me reduce underperforming mistakes to an insignificant level, outweighed by outperformers. As for Fairfax I finally made myself comfortable with it last year and bought an initial position. Now with the Muddy Waters opportunity I've gone to a full concentrated position, and even though I consider it cheap, with margin of safety and great prospects for at least 3 to 5 years, I have to limit the initial position size to perhaps 20-30% of my portfolio (again as someone willing to run a highly concentrated portfolio). I'm trying to plan ahead to prepare to hold on to Fairfax and let it compound for me over at least a decade, preferably longer, where I anticipate a lumpy 15% rate of compounding or maybe even a little better. I'm trying to envisage different scenarios and how to think about them in advance. For example my most likely expectation is for it to double in 4 to 5 years, maybe 3 years with luck and a rerating, which might even make it exceed 50% of my portfolio within 5 years and feel a little tempting to reduce (which I intend to resist), but still with better compounding prospects than Berkshire and the index. It's also possible that bad catastrophe losses at any time could impair it's book value dramatically especially due to the inherent float leverage, though I would expect such circumstances to lead to a hard market allowing it to write a lot more well priced business afterwards. I expect Fairfax might suffer a substantial price decline but if it's after say 2026, it's likely to still be well above my buy price this year. I'm trying to prepare myself to react rationally to whatever the future holds and only sell if I'm convinced that Fairfax is permanently impaired or I have a considerably better prospect elsewhere.

So far we're looking like at minimum 229 million USD or at least 0.89% of the market cap and could well be above 1% in reality if those who responded are generally truthful. (EDIT: March 6th update, about 340 million USD minimum, so over 1%) That's based on the first 102 responses weighted by the lower bound of each option. There could be some rounding up but this is probably outweighed by the couple of votes for the unlimited top category, 50m+ which could in reality be considerably higher than the 100m USD I credited it as.

The $125 estimate of normalized earnings would improve imply 12.2% normalized earnings yield at today's close of 1022 USD, which seems attractive, and with 4 years of approx $2 bn in interest and dividends pretty much assured, it seems likely to me that without big cat losses or a disastrously softening insurance market that we could well substantially beat the normalized figure over the next few years and perhaps can build the normalized run rate to something even higher. So 12% ish, is probably a fairly conservative lower bound expectation and there's a good prospect of something in the high teens to maybe lie 20s at least for the next 4 years or so. I've only had a position in FFH (and now FRFHF too) for about half a year since becoming convicted I needed a starter position but I'm glad to have taken the chance to add to my position at about $910 USD last week and make this a high conviction part of my concentrated portfolio.

Cal Year USD gain outperf vs SP500 TR pre tax GBP gain Lowball value USD gain 2016 24.2% 12.2% 54.2% 19.1% 2017 24.8% 3.0% 14.1% 12.7% 2018 25.3% 29.7% 33.0% 49.4% 2019 18.0% -13.5% 13.6% 2.3% 2020 -3.4% -21.8% -6.0% 32.4% 2021 79.6% 50.9% 81.4% 34.2% 2022 24.1% 42.2% 39.8% 38.3% 2023 9.8% -16.5% 3.9% 22.0% cagr 23.5% 10.3% 26.6% 25.5% Regarding calculations, each year I calculate two quite simple returns and take the average of them: Return1 = (YearEndValue / (PreviousYearEndValue + CashAdded)) - 1 Return2 = (YearEndValue - CashAdded)/PreviousYearEndValue) - 1 Average Return = (Return1 + Return2)/2 I report the average of those two in the table above as I've tracked it that way for years. In the last 3 years or so, I've been withdrawing funds to pay living expenses and taxes, so CashAdded is negative, but it still works. More recently I've also started using a unitised approach as outlined here, to account for money in or out https://monevator.com/how-to-unitize-your-portfolio/ which for 2023 calendar year gave a USD return of 9.9% and a GBP return of 4.4%, pretty close to the other method.

I suspect they wanted to take the opportunity of him commenting on Berkshire to tag both companies and attract more clicks, so it could be a human. I see the same with Selling Alpha where somebody quotes Buffett and mentions Berkshire as an aside when writing about a different company so the link shows up on my daily email.

Yes, I've used boilermaker's approach a number of times to enter long term positions and also to juice returns on one merger arbitrage so far. In that case I was assigned then sold short duration calls to get further premium and potentially another bite. In most cases something over 18% annualized, or more typically well over 20% is where I start to get interested, so long as I'm a willing buyer at the effective entry price (strike minus premium plus commission). I usually go for one to four weeks duration, must often 1 to 2. Boilermaker seems to really like weeks with fewer trading days than normal. Occasionally I've rolled my puts to different strikes or expiration dates or both but mostly I let them run to expiry.