Partner24

I'm not timing things when I can focus on individual stocks. But my wife's employer has forced their employees to choose between different products of a financial institution. So I can't buy individual stocks and the stock funds are not very interesting...so I'm forced to go macro with her account. The macro things are not my speciality, but since I'm forced to focus on these things for her account, since 6 months or so, her funds are 100% in very short term government bonds and cash.

Terrific. It's on days like this that value investors can put into pratice what WEB have teached us. :)

You should not focus on what the price of FFH will be before taking your decision. What matters most is the gain in intrinsic value. The scoreboard will sooner or later take into account what happens on the field. If it is later than sooner, you'll get the chance to buy FFH at a cheaper price along the way. Cheers!

+1 Me too!

Ross, great to see that I'm not the only one who likes Bidvest Group here. I'm always surprised that this company is not the subject of more discussions here since it has a business model that fit well with Berkshire and has a terrific track record. Wine for me. I prefer the Château Le Puy, wich sell at a reasonable price and can last for decades...even in the poor vintages! The 2009 vintage wich is available is a great vintage that will last more than 40 years IMO. A great quality for a good price. For the value guys who want to pay cheap, Bordeaux Sirius 2011 is a good choice too and for sparkling wines, Segura Viudas from Spain is a good value. Cheers!

Good news. FFH shareholders are not drinking the Kool-Aid! Regarding the freeze of his 600 000$ compensation offer, there is nothing new. Just offering to keep walking the talk?: So from 2000 onwards, my compensation will be a fixed salary of $600,000 with no bonuses. This compensation will not increase annually...Going forward, the only difference between me and you, our shareholders, will be my salary of $600,000 Prem Watsa, March 1 2001

If you are forced to have that share structure to maintain the so-called "culture", then there is a bigger problem. It would mean that you have the intention to dilute the shareholders ownership significantly over time and you don't have a shareholder base that share your long term view. Markel didn't need to that, neither Leucadia, Berkshire, Bidvest, etc.

Well, guys, I have the habit of increasing the number of shares in order to satisty my apetite for acquisitions, but I'm not happy about one of the normal consequences associated to it. So I have issued a press release at Friday and the special meeting of shareholders to be held on July 21. You can understand that by these little details, I want all the shareholders to be informed about that change and I create some very favorable conditions to get the maximum number of shareholders possible at that special meeting... Get your popcorn. Here's a terrific episode of Fairfax corporate governance.

The trend is very clear. Thank you Liberty for that graph! If it helps the environment (global warming) and the families and cut the financial resources of some very ethicaly questionable countries, I'm in for a continued financial support, especially if it helps decrease the production price of solar energy.

I would never use the MBTI other than just for personal fun. If you want to take more useful tests, you should take good ones related with Holland typology, some good personality tests that are more related with job satisfaction and job performance or general cognitive aptitudes tests...but not the MBTI.

Does somebody have notes from these meetings or from the FFH AGM? Thank you!

Liberty, I've known them since 12 years now. My very good opinion about them have not changed over the years because they keep their discipline, determination, their investing style in good and bad years, their candor and desire to keep getting better by learning from past mistakes. Those are great qualities for investors and these can easily be put to test especially in the money management business. They are in an industry filled with "sharks", big egos and volatile clientele that sometimes reach for the savor of the day. So it would be easy to lose the focus and they do not. Their long term investing results have not been achieved because of chance. To me, they are the testimony of who they are. Cheers!

I know then and I can tell you all that they are very classy, disciplined and talented investors. They have that ability to keep their investing style intact in both good and bad times and their strategy work. They are one of the very very few investors that would I trust to manage my family funds if I were to stop picking individual stocks myself. Cheers!

As always, an excellent letter.

This is a really interesting thread to read. It could be a case study for why companies should remain private. If you think that private company shareholders don't voice their opinions and get into disagreement sometimes, just take a look at your local yellow pages and see if there is some corporate lawyers out there that live not so bad.

Therefore if you don’t pay a dividend, you reduce the demand for those stocks by that number of investors. If you reduce the demand you tend to reduce the price. It has nothing to do with Markel, Birkshire or anyone else, it is simply the law of supply and demand. That supply/demand thing might work in the short term, but not in the long term. That's Benjamin Graham and value investing 101 principles. The voting machine work in the short term, but in the long term Mr. Market is a weighing machine that will find the intrinsic value of the business. You don't want managers who fall into that voting machine trap and make irrational decisions to please people who think like that, because if they do, they'll get the shareholders that they deserve.

The main point is that is not a good thing to issue a dividend and then issue stock below intrinsic value. It's simple math. Let's that that we are 10 persons that own a bank account worth 1000$. 1 share each. Each owner share is worth 100$. At the beginning of the year, I pay every owner 5$. They receive the 5$, but their share is now worth 95$ and the bank account now have 950$. Still, 100$ in their hands in total (let's not take taxes into account here). 5$ cash and 95$ of shares value. Now, I need to fill the bank account and issue 1 share at 50$. The new investor is happy because he paid 50$ for a share that was worth 95$ before the transaction. Now the bank account is still worth 1000$, but we are now 11 holders having a share worth 91$ each. That little "50$ out, 50$ in" transaction let every"before transaction" holder 4$ poorer. This doesn't make any sense at all and if every holder keep thinking that it is a good way to make money and to found their personal expenses, these capital allocation decisions, if they are done frequently, will make them significantly poorer over time. The only persons that win in these financial transactions are the new holders.

Good discussion guys! I'm part of another group of patient FFH long term shareholders (i.e. retirees) with no new money to invest. So we would be disadvantaged by the options route and we've come to count on the dividend. But I can see the advantages to some shareholders of the opposing views! You're right. Like I said, the thing that they should do IMO is to stop paying a dividend AND stop raising capital with the common shares priced below intrinsic value, especialy if what they get in return with the cash is bought at a fair price. For the retired shareholders, they could sell some of their stocks from time to time in replacement of the dividend. As long as each dollar of retained earnings translate in a dollar of market value over time, it is even more favorable to that (i.e. taxes) instead of receiving a dividend. Cheers!

Already 13 years! Time pass so fast. Thank you so much Sanjeev for what you have done with this board. That's the greatest investing forum that I can think of. Great job that you can be very much proud of. Sincerely, Partner

Also, would it be preferable to cut the dividend and have Prem pay himself a la Frank Stronach? I'm sorry, but when you tell about Ben Graham, Warren Buffett, John Templeton and the likes, you're not in the "Frank Stronach" league. If he wants shareholders who only care about the next quarter financial community targets, he can change his langage, but long term shareholders think about capital allocation soundness. You never see these kind of things with Berkshire Hathaway. That's the bar that we inspire ourselves from, not Frank Stronach.

Well, I've been a shareholder uninteruptly for 12 years now and I don't see why I would sell my share any time soon, but I would sign that. Prem, you're a great manager and I like you very much, but that side of managing the business doesn't make sense at all. You're hungry of growth and that's terrific but it should never come at the cost of a poor balance sheet (1999-2006) or diluting your shareholders in order to keep your expenses need. That does not make sense to pay a dividend (1$ of value for 1$ of value-income taxes) and then issue shares at a discount to intrinsic value (1$ of value for 60 cents or so).

I would agree - but I believe the annual dividend it really a way to pay Prem the salary he deserves on an equal footing to all shareholders. Remember the man's salary hasn't gone up in years. ...and Warren doesn't need do to that. Prem can sell some shares from time to time instead. If this was made in a hurry to calm down rating agencies, it shows that rating agencies don't agree with Prem view that Fairfax is very soundly financed and he need to consider them because we get diluted because of that. It doesn't make sense to issue dividends and then dilute all of us with a equity offering below intrinsic value.

I find it odd that Prem said that the stock was inexpensive and the equity offering was in the bottom of the options list, and few days after, you get that press release. It sound like: Don't listen to what I say, listen to what I do....

Yes, and I still remember not so long ago, the day that FFH crashed to about the $50-60 range. That's when the shorts were all over the company and the false reports were being published. Remember those days? Oh yes Hawks, I remember them very well! :-) So much things have changed with FFH since then. I'm happy that they still keep a more conservative balance sheet and have more sound underwriting business now than in those years.

Yes I think that this board started in January/February 2009. Cheers!