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Glad I was able to speak what some others seem to be thinking as well. I just think it's a big mistake to get rid of a great company that has a long way to run because you feel you're not being creative or you think you can do a great margin better investing in obscure companies. This reminds me of Peter Lynch's discussion about how pharmaceutical executives feel the compulsion to invest in oil stocks and oil executives in pharmaceutical stocks. Don't mistake me: if you see a no-brainer opportunity in a small company, by all means go for it...just be aware that much of the time, you're getting low valuation but accepting other, just as relevant, risks. Ben Graham used to own a whole host of stocks to hedge against these risks. Seth Klarman is similar. It also helps if you gently remind yourself that you're probably not Warren Buffett and that 15 or 20% annual returns will make anyone with a reasonable pile of capital very wealthy over time. I've observed this board for awhile and it seems a few guys here made a tremendous amount of money with just one boring investment! Fairfax. Are we prepared to tell them that it's a "real shame" they held so much Fairfax? Whether they are less intelligent or creative than someone who does it buying an obscure zamboni manufacturer, I don't really know or care...the end result is the same. To the original poster I quoted, I don't mean to pick on you, and I bet you have a reasoned view for your argument. I just want to present the other side.

I'm surprised you all let this go. I'd like to comment on two things, both of which I consider nonsense. 1. It is "very easy" to find securities that will outperform the market. 2. Holding Fairfax is inferior to running around finding these "very easy" securities. I think investors vastly underestimate how good Warren Buffett was at his job back in the 1950's and 1960's when he was buying these niche securities. He's even better now, but obviously runs so much capital that his returns are lower. There seems to be this "Buffett envy" going on in value investing circles whereby investors feel the need to look for little cigar butts similar to what Warren used to - largely influenced by his talks to students and his biography. And yet, I have seen precious few investors who have successfully done it. Beyond the platitude that smaller areas of the market are "inefficient," there are considerable risks. You are usually investing in second rate businesses that destroy value, or at least are not really building any. Often these businesses are run by inexperienced managers and have little advantage over their competitors. Thus, the business risks you assume are big ones, although most investors think a cheap valuation makes up for it. Sometimes, but not always. Take for an example Dempster Mill Mftg - a well known Buffett investment way back when. If you think through the situation, there was a good probability that the investment was not a wise one. It took heroic efforts by a new manager to keep Dempster from going under, and even then, it was not an absolute home run. Yet, most Buffetteers admire these types of investments Warren used to make. But what was Warren's largest partnership investment? American Express, a well known company then and now, not a micro-cap dishwasher manufacturer. He also had a successful investment in Disney, and one in GEICO, again two companies that were well known. What was probably his best stock investment at Berkshire? The Washington Post, not exactly "unknown." Yet we're told that he made all of his great returns back then because he could look small. Well, as with everything in life, the answer is yes and no. I think there is a great myth that you need to look where no-one else is looking and be creative in the investment process. That you should get points for creativity or something. But the very same people propagating this myth are students of Charlie Munger, who once wrote to Wesco shareholders that "We try to profit more from always remembering the obvious then grasping the esoteric." Let's talk about a few more of Warren's home runs. Petrochina, one of the largest companies on the planet. Freddie Mac, one of the largest companies on the planet. Coca-Cola, the most well-known brand on the planet. BYD, one of China's most well-known and well-respected companies. These are investments where, for the first 5-10 years, he made 25%+ compound annual returns. Who are these people not getting rich by consistently generating 25% compound returns? Where is this stock market where 25% annual returns don't generate "alpha"? Why do small investors need to run around looking at micro-caps? *** Let's also look at some other legendary investors. What sort of returns did they achieve and what were they buying? Lou Simpson - 20%+ type returns buying very well known companies. Rick Guerin - 25% type returns investing in a pretty broad range of securities small and large. Ruane, Cunniff - 15% over 40 years investing in large stocks. Eddie Lampert at ESL - you would probably know of almost every company he ever invested in - 30% CAGR for a 15-20 year period. Glenn Greenberg at Chieftain - did 25% for about 20 years, again you'd probably recognize almost every stock he owned. These guys are legends, they're all rich, and they invested in a huge range of securities. Who do we know of that was investing in small securities that no one has heard of? Here's two: Schloss and Graham. Did either of them do 50% compounded? Hell no. They're hall-of-famers with 15-20% returns. Do I need to bring up Charlie's returns? What has he bought over time? So I dispute this notion that investors are somehow doing themselves a disservice by sticking with companies they know well and that others know well. Well-known companies are often just as mispriced as small ones. "To a man with a hammer, everything looks like a nail," says Munger. Yet the Buffetteers seem to only admire one tool for finding cheap stocks (size constraints), when myopia, ignorance, and a host of other biases are just as powerful in creating misvalued securities. To wrap this up a little, I'm not saying there aren't lots of small mispriced stocks. Buffett did very well with them, and there are probably others doing great, too. But recognize two things: 1. Huge CAGR's are really, really hard. 2. You can do extremely well investing in larger companies, great companies, and well-known companies, without a lot of the risks of investing in broken-down nags. This is well proven. So if you rationally evaluate Fairfax and come to the conclusion that you're going to get 15-20%+ CAGR (eminently reasonable given the fact that they are a relatively small player in a gigantic global insurance market and are run by one of the smarter investment teams on the planet), don't worry about how much "alpha" you're not generating by looking elsewhere. Was it a mistake to invest in Berkshire when it had a billion dollar market cap and was well known? I repeat, there are no points for creativity. Don't forget it takes a unique cast of mind to just sit on some great companies and compound at high rates with no taxes, professional investor or not. I'm probably not going to convert anyone who believes strongly that they have to be looking in the dirty alleys for cheap stocks, but if you're on the fence, hopefully this is food for thought.