ourkid8

Gio, thanks for posting. Those margins are superb! Why doesn't Fairfax take Thomas Cook private? I am assuming restrictions in India prevent it. Maybe this is a business we should look at taking a large stake on... Hmmm... Tks, S

Out of curiosity, why did Prem recently issue shares? Tks, S Well, I would also add that he is actually holding a lot of cash (30% of portfolio!). So, he has opted both to retain some exposure to his alpha and to get some of the stability cash provides. At least, this is how I see it. :) Gio

I take offence to this since it is not "HIS" business, it's a public company and it is owned by shareholders. Yes, he is a large shareholder but it's not HIS business. Tks, S

Lets say the decline Prem is waiting for does not transpire as that is entirely possible. Is Fairfax still undervalued based on your analysis considering they will need to book huge losses on their hedges or is it overvalued in that scenario? As a business owner, we have to look at both sides. I fully understand your position if there is a market decline. Tks, S If Mr. Watsa is right, as I believe, BV today is extremely compressed! It simply is not a metric you could rely on, to arrive at a valuation for its stock. In 2007, 2008, and 2009 BV increased 35% annual. And go look at the numbers: FFH in those years booked much larger gains from its equity hedges than from CDS. Simply because its equity investments will fall dramatically less than the Russell2000, the index they are using to hedge. Then, with all that cash at their disposal they will take advantage of very compressed and undervalued stock prices, and position themselves like almost nobody else for the subsequent bull market. They are following the pendulum, and positioning themselves accordingly. They are extremely contrarian and therefore very hard to follow… but, sooner or later I still believe they will be proven right. Remember that business is always about decisions, better: strategic decisions. This is true for practically every kind of business, but most of all if it is a financial business. I am happy for your investment in BAC. And I will never invest in BAC. Simply because I have no idea of the process that goes on inside such a gigantic organization. And because I don’t really know who is in charge. What he has achieved in the past. Why he should achieve good results in the future. Because he hasn’t deserved my trust. And I invest only with people who have won my trust. Rest assured: it is not such a simple thing to do. This is how I do business, and it is also how I invest. Gio

Again, you are not explaining HOW it is currently undervalued as the stock is at 1.2x book and book value continues to fall. Please help me understand how it is currently undervalued. . #1, you are looking for a broad decline of the index. You have to remember, Prem does hold equity positions and those will also fall by an equivalent amount. This is NOT like the CDS bet. #2, that does not show it is undervalued in fact it will explain how we are overvalued as he will realize the mistake and start from there. How can the stock trade at a premium to book? Read the BAC thread, Eric clearly demonstrated to us how BAC was dirt cheap and due to his analysis I was able to take a HUGE position which has paid off exceedingly well. (Thanks Eric) S Simply enough, here we have 3 possibilities: 1) Mr. Watsa is right: today’s BVPS makes absolutely no sense… FFH will create great value. 2) Mr. Watsa is wrong, and will recognize the evidence of his mistake, when that evidence comes: he will take losses on FFH’s hedges and use a stupendous amount of cash to restart from there… FFH will create good enough value. 3) Mr. Watsa is wrong, and he will never recognize the evidence of his mistake… FFH will cease creating value. Practically anybody on the board believes either in 2) or in 3)… I still believe in 1)… ;D ;D ;D Gio

Gio, would you please help me understand how mr. Watsa will continue to create value with the 100% equity hedge besides a broad decline in the indexes? So far, he has not been able to beat the delta of the hedges in place. I agree. Mr. Watsa did not go stupid all of a sudden but I cannot see how this is deeply undervalued at 1.2x book with 100% equity hedged. S Guys, it is very easy an plain to see: if you believe Mr. Watsa & Co. will go on creating value, FFH today is deeply undervalued; instead, if you believe Mr. Watsa & Co. will cease to create value, FFH is not undervalued. Period. For my part, I repeat what I have said in another thread: under $380 I will buy more. :) Gio

Their peers do not have 100% hedged portfolios which is destroying shareholder value nor are they taking large positions in potential turnarounds such as Blackberry. At this point, Fairfax has very few peers you can compare them against. Tks, S

Unfortunately... :-(

It's currently selling for 21% over book value so 1.2x book. ($334.51) Due to the hedges, this should sell around book so we could see continued decline in the stock. The recent equity issuance was rather timely at 1.3x book and lets hope they are able to repurchase the majority of the stock issued at lower prices in the near future. This is a rather large position in my portfolio and I am still kicking myself for not selling it at $475 earlier this year. The hedges are absolutely killing us and I hope in the future they use cash as a hedge instead. I also hope there is no dividend announced either and they retain earnings for future non-insurance acquisitions. (I forgot to add, high quality non-insurance acquisitions such as their 51% stake in The Keg) Tks, S

BAC - Warrants / Common / Options AIG - Warrants / Options PM FFH BRK.B CNR.to SD IBM - Options Chou Associates fund Cash

They are finally moving up to higher quality businesses! Let's hope the trend continues and BB was the reason. Tks, S

http://finance.yahoo.com/news/fairfax-agrees-acquire-majority-stake-150321025.html (Reuters) - Fairfax Financial Holdings Ltd has agreed to acquire a majority interest in privately held Keg Restaurants Ltd (KRL), which owns over 100 steak house restaurants in Canada and parts of the United States. The terms of the deal, which is expected to close early next year, were not disclosed. Canadian restaurateur David Aisenstat will retain a minority 49 percent stake in the Keg and will remain head of operations, as president and chief executive. KRL, in a statement on Monday, said the transaction will benefit The Keg Royalties Income Fund, which owns certain trademarks and other related intellectual property used by KRL. In exchange for use of those trademarks, KRL pays the fund a royalty of 4 percent of gross sales of Keg restaurants, KRL said. "Fairfax is a well-known and proven investor in the Canadian market. With the addition of Fairfax to the Keg team, The Keg is well positioned and has a solid foundation for continued growth, which will benefit the fund and its unitholders," Kip Woodward, chairman of the fund, said in a statement. Toronto-based Fairfax, headed by Canadian value investment guru Prem Watsa, is the largest shareholder of BlackBerry Ltd. The firm has been in the spotlight this year as, in September, it made a tentative bid to take the struggling smartphone maker private. However that deal was aborted earlier this month, and Fairfax opted to lead a $1 billion debt financing deal to help BlackBerry turn around its fortunes.

+1, it's a large position in my portfolio and I highly recommend Chou Associates!

In all fairness, I do not think Buffett has ever renegged on his word.

Gio, care to provide your feedback on Italian banks? We would appreciate it... Tks, S

I am extremely disapointed and rather frustrated by Fairfax right now and let my emotions cloud my judgement when the stock was at $475. First the 100%+ equity hedges and now blackberry. I cannot understand why Prem and team does not follow Buffett's lead and use this capital to buy a high quality business. ARGH!!!!!! Tks, S

I just received a package for a class action lawsuit against J&J. Did anyone else receive the package? Is anyone actually filling it out or just dumping it into the recycle bin? Let me know... Tks, S

http://www.valuewalk.com/2013/09/fairfax-financial-eyeing-cara/ "According to Foodservice and Hospitality’s annual top 100 ranking, Cara had combined sales of about $2.3 billion in 2012, while Prime’s biggest banners had combined sales of $335.1 million." I was previously asking what would Fairfax stake be in the combined company? Well, unless Fairfax raised their stake we should be looking at around 15% of the combined entity. I really like the move as the combined entity has a much stronger competitive advantage. Thanks, S

It's up 4% today and a solid YTD return.

It seems too small for Berkshire but definitely something Fairfax can look at! :) I would love to start seeing Prem look at quality businesses outside insurance which can move the needle. Tks, S

Anyone looking at the BAC/AIG 2016 options which began trading today? TKs, S

I recently sold 50% of my position in SHLD for $64.50. My justification is in the SHLD thread...

Is anyone adding to their portfolio? BAC and AIG options are looking mighty tempting... :) Tks, S

Mine is ATPG and FTR for the similar reasons you listed below. I learned to stay away from companies with high leverage. Tks, S

I am pretty sure Fairfax does not depend heavily on Prem but there is a comittee for full sized equity positions and acquisitions. He makes the ultimate decision but there is a comittee in place which will help with succession planning. Tks, S