ourkid8

Hi Moore_capital - You do not find BAC selling for 20% below TBV and AIG around 55% TBV amazing value?

It would make sense to implement what Francis did across his funds. There is a 2% redemption fee for individuals who redeem their units in less than 2 years. None of that amount goes to the fund manager but to the long term shareholders in the fund. Thanks, S

I am asking Parsad when Fairfax would purchase Chou associates so he can officially be on Fairfax's payroll. (Please add a bug in Prem's ear) To advert conflict of interest, Francis does not own Fairfax part of his fund. Thanks, S http://en.wikipedia.org/wiki/Fairfax_Financial Chou Associates Fund In late 2002, Fairfax invested $50 million in Chou Associates Fund and another $50 million in the first half of 2003 (Fairfax apparently owns more than 26% of Chou Associates Fund).

Now the million dollar question you asked in the past, when will Fairfax officially bring Chou back in the fold by purchasing Chou Associates!!! :) Tks, S Just remember, if for some reason Fairfax needed Francis, I don't think it would take even an arm twist from Prem to get him there. And even though technically Francis does not work at Fairfax, I would not be surprised if he has a significant amount of input into Fairfax's investments simply as an advisor, shareholder, friend of the company and loyal sounding board. Cheers!

I would definitely invest in Chou Funds as I have in my personal account. (I own a large stake in Chou Associates) Francis is one of the most ethical individuals who actually refunded his management fees due to poor results in his Chou Europe fund. In the investment world, that is unheard of. Now on a returns perspective, since inception of Chou Associates,(Nov 28, 1986) he has returned 10.8%. S

Last time they paid a dividend and then issued shares to purchase I believe it was Zenith. That stung as they could have paid the minimum $2 dividend and used the money saved for the acquisition. What I learned is that this dividend is a priority for Fairfax and we have to learn to live with it. S

I totally agree with you as I also feel very comfortable with a concentrated portfolio. I have 3 positions which account for 47.64% of my portfolio (Philip Morris International, Fairfax and Bank of America) and my top 6 positions are 78.93%. With a concentrated position, you need to be extremely certain of it's prospects otherwise it can hurt!!! :) S

I am currently at 1.8:1 warrant:common ratio. (In dollar value) You guys have not taken into account the following: 1) The adjustment of the strike price 2) The adjustment to the number of shares you can purchase for each warrant you hold

Don't forget there could be a significant amount of stock repurchased as it did drop below book. FFH is cash rich and looking for opportunities...

Just a quick follow-up on this thread as Fairfax is doing exceedingly well on it's small investment. (It's still trading at a large discount to book) -initial private placement 5,699,309 shares at a price of .56/share (73% off it's initial investment in Dec 2011) -16,334,000 warrants with an exercise price of .65/share (49% off it's initial investment in Dec 2011 with the exercise of the warrants) -2,500,000 and 1,698,200 - The last two purchases Fairfax made was at $.85/share and it is currently trading at $.95/share (14% off it's investment on Nov 1 2012 and Sept 20, 2012) I hope this is not a long-term investment because of the low quality of the franchises BUT Fairfax did acquire shares at an amazing price while being the largest investor at 45%!!! (after exercising the warrants)

I would also like to thank the board and a special thanks to Sanjeev!!! Let's all make tons of money and have fun doing it! :)

Is that our friend Francis Chou? :) As you mentioned, it would be a wonderful idea to bring him back in the fold by purchasing Chou Funds!!!! Modification: changed the company name to Chou Funds from Chou Associates AND clarified which Francis it was. :-)

Sure, let me dig up my notes from 09' and I will post my updated thesis. I was lucky to be able to purchase this stock at $42 during the crisis and enjoying the ride.

I have 10% of my portfolio in CN Rail and I love the strong conviction Cascade Investment has behind CN Rail! I plan on holding on to this investment for the long term... S

Yup and our pecentage ownership in the company just increased by .5%! I love it... :)

There was an error in your post as Mohnish currently has 6 US positions (BAC, C, CHK, GM, GS and ZINC) which he has to report but we do not know what other International holdings he may have. (ie. Canadian and International) In regards to my portfolio, 74.77% of my portfolio are in 6 positions and the following are in the order of weight - Philip Morris International, Fairfax Financial, Chou Associates, Bank of America, TD Bank and CN Rail. (33.01% is in PM and FFH alone) I am debating what to do with my smaller positions in their portfolio. I have numerous positions the following size - 0.42%, 0.83%, 1.93%, 2.37%. Does everyone keep smaller positions or consolidate them for the next fat pitch? S

As a large holder in CN Rail, I enjoyed the incompetence of former management as it allowed me to tremendously benefit off it!!! It's a shame HH is running CP and will whip that company into shape. Tks, S

In my situation I do plan on holding Fairfax for life along with my other core positions. (Philip Morris International, CN Rail, TD Bank, Berkshire Hathaway and Fairfax Financial) My hurdle rate is under book value for FFH because every once in a while it drops below my rate and I get the opportunity to continue to add to my position. As of right now, FFH is about 17% of my portfolio and I would continue to add the lower it goes below book. I understand the difference is very nominal but it has to reach my price otherwise I would not buy. Tks, S I suspect that the reason is that not everybody wishes to hold FFH for a decade like you and me. Some people are more active investors and want to pick up a 50-cent dollar and then turn around and sell it for 80-cents in a year or two. People who are able to do that reliably can have a better return than just holding FFH or BRK for lengthy periods. I suspect that people are now looking at FFH as an opportunity to buy very cheap and sell a little bit less cheap sometime during 2013 for a quick 20%. As an observation, back when ORH was still publicly traded, many of us made good money by flipping back and forth between FFH and ORH depending on which looked more attractive. For whatever reason, the relative valuation of the parent and subsidiary would swing perhaps 30% back and forth a couple of times per year so you could play the relative valuation while retaining a long-term exposure to the basic P&C business and to the investing prowess of Prem et al. Too bad we can't do that anymore! SJ

I totally agree with you as the merits of the business have not changed besides the fact you are buying into this business under book value thus magnifying your returns further. (I also added substantially to my stake) I can pull the quote from the book i am reading (Tap Dancing to Work) comparing buying business at book, 150% book and 80% book... Tks, S

I sold out of JNJ to increase my position by 66%! I am really hoping Prem is repurchasing stock at the current price!!!! (I will continue to add when this is a discount to book) Let's hope the dividend this year is $2/share (His minimum payout) and the remainder of the return of capital is in share repurchases. Tks, S

I would definitely say JNJ USED to have the best customer service and customer experience. The recalls were absolutely shameful and hopefully the new CEO can turn around the tarnished image it currently has. I am a really frustrated shareholder! I definitely disagree with you on numerous companies you mentioned who have the best moats. Where are the rails? Cigarette companies? Etc... Thanks, S

Instructions on how to calculate your cost basis after the tax free spin-off of the N.A. grocery business (KRFT) http://www.mondelezinternational.com/SiteCollectionDocuments/pdf/Mondelez_Kraft_Spinoff_TaxBasisInformation.pdf KRFT and MDLZ are two companies I plan to hold for a long long time and I will try to provide a write-up shortly. My cost basis is: KRFT = $27.92 and MDLZ = $17.13. S

Very well said and I am looking very closely at FFH to substantially add to my position!!! It seems many individuals on this board have a 1-3 year lense instead of looking out 10+ years. Yeah but, if you buy above book value, you will not get the benefit of investment returns....say BV is going to compound at 10% annually, but you buy at 1.1xBV, what's your return? For example, look at Loews, they're trading at a 20% discount to BV....and have similar growth record as FFH. Anyways this is outside my circle of competence...I'll stick to GOOG and PH. Palantir, I don’t think I understand your point… Mr. Watsa stated goal is to compound book value at 15% annualized. In the past he achieved a 23,5% annualized return since inception… If past results are indicative, maybe he will do better than 15% in the future! Anyway, if you by at 1,4 x book value in year 1, and the stock trades at 1,4 x book value in year 10, your annual return will be exactly 15% (or higher, if Mr. Watsa outperforms). Instead, if you buy at book value in year 1, and the stock trades at 1,4 book value in year 10, your annual return will be higher than 15%. What I meant is that a company like FFH, which grew at an annualized rate of 23,5% for more than 25 years, deserves to trade at 1,4 x book value. It’s “fair value” should be around 1,4 x book value. So, right now you are getting a substantial discount, and your margin of safety is meaningful. giofranchi

In addition to SD, my second undervalued equity I would have to say is our beloved Fairfax. At book value, its an absolute steal!!! Where else are you able to buy a company who are arguably the best capital allocators around? ( debt and equities). I see tons of individuals really analyzing LUK and hell, I did the same but I could not pass the quality test. Why look at buying a second tier company when you can buy Fairfax at book? We all have to remember, insurance operations will drastically improve in the mid to long term and we will be writing profitable business. My only concern is Prem's purchases of non insurance businesses. (Thomas cook, sporting life etc...) let's hope he can move up the quality scale as Buffet. S

I love it when it falls below book value as Mr. watsa is able to repurchase stock below book AND I am able to increase my position!!! Yay!!!! S