Crip1
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Posts posted by Crip1
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7 hours ago, dr.malone said:
After the meeting, I caught up with Brian Bradstreet and talked with him briefly:
Somewhat bullish on bonds here. Have not done much since last October. Likely to stay under 5 years duration. Sticking with high-quality government paper as of now unless corporate spreads blow out from here. Thinks rates will stay higher and for longer than most people think. Recalled bond investing during the early 80s and the Volcker years.
First and foremost, thanks for the update...definitely appreciated.
Treasury rates peaked in October, and they've not "done much since"...nicely done. After hitting the valley around the start of 2024, have been slowly rising since and then rocketed higher over the past week. It would really be interesting to know if they are going to use this decline in pricing to push out duration.
-Crip
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The question of whether or not we we fully understood Fairfax is complicated to say the least. Below are a few aspects of Fairfax along with some commentary:
· Did we foresee the interest rate environment? I don't think so.
· Did we foresee the hard market continuing as long as it has? Again, I don't believe so.
· Did we think Fairfax was executing well and was well positioned? For the most part, yes, we did. We may have under estimated how well they were executing, but we did see that the company was in a much better place.
Many things have gone well for the company over the past four years, some of those things were within their control and some of other things were outside of their control. To the question of whether or not we understood what Fairfax was four years ago, we likely didn't. Part of the reason was the exogenous factors that, as investors, we never want to assume that everything's going to be wonderful because that doesn't always work out. To your point about underestimating the company, we likely did, but healthy pessimism was part of the reason.
While typing this, something else popped into my head. Viking, you've been commended many times over for your analysis of Fairfax, and said commendations were definitely deserved. One other aspect of your posting that was really impactful is talking me out of being "grounded" to a stock price from months past. Many times in my investing life I've sold part of a position with the theory that a recent run-up was temporary and that I could re-buy at a price 10% of so lower than the current price. I was tempted to do that with Fairfax, but you reasoned me out of it. I really appreciate that.
-Crip
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11 minutes ago, Gregmal said:
Nah, its actually a very low risk scam-like operation. I'd be shocked if he is still materially short Fairfax. He closes substantial portions of his "shorts" within days of first going public as thats when you get maximum movement. Why wait for fundamentals to prove you right or (likely) wrong?
Not 100% sure of that. The video of "Help me dig up dirt" suggests more than a short-term short and distort deal, but it may be a matter of "Hey, we orchestrated a 10% drop last time, let's try it again"...the "cost" was a 2 minute video which, clearly, isn't much.
-Crip
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Yeah, clearly an element of Skip Bayless for you sports fans out there or Jim Cramer at play in that accuracy is of secondary or tertiary importance compared to showing bravado and being bombastic/memorable. Saying something stupid is OK as long as people remember who said it. I mean, seriously, fake Canadian accents, cartoons and TicTock video clips? Only compelling enough to drive out the weakest hands with volume no higher than normal.
On the other hand, part of me wishes it was more successful. Their initial report allowed me to buy and sell in a period of less than a week which reduced my net cost per share by $18.50…I’d not mind doing that again.
-Crip.
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50 minutes ago, Viking said:
One step closer to being able to (finally) close the book on this perpetual money-losing holding. It would be interesting to know what the benefits are to Fairfax of taking it private.Part of the benefit would presumably be not having to talk about the share price any more. It's now "out of sight, out of mind" so if it does go fully belly up, it's a non issue. If, by the grace of God, somehow it starts making money, it could be sold eventually not unlike the Pet Insurance business. Improbable, but not impossible.
-Crip
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On 3/11/2024 at 4:10 AM, nwoodman said:
Agree it was kind of a strange way to conclude. Micron, Ki and even Digit would suggest that it is in their wheelhouse.
This did not look as strange to me as it did to you I thought it was intended more tongue in cheek than anything else.
Years ago Prem was criticized, and I thought the criticism was valid, or not owning up to mistakes. That's one thing that Buffett does consistently, and he's done it for years. If one goes back 10 to 15 years when the future did not look quite as positive as it does now, being humble to that level may not have been a good idea to attract new shareholders. Buffett, on the other hand, has had insane levels of success so humbleness is not scare off potential shareholders.
This paragraph and the overall tone of the letter seems almost like a maturation of the company. There seems to be less selling going on and more simply reading the news.
All of the above in my humble opinion.
-Crip
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Fairfax - 26.5%.
Fairfax India - 8%
-Crip
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7 hours ago, backtothebeach said:
My guess is around $1B = 4-5%.Well, I have a half billion so do the rest of you have the other half billion?
-Crip
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32 minutes ago, TwoCitiesCapital said:
Going to be honest - the share price reaction to an a amazing earnings report is a bit disappointing
Makes me wonder if 1) the market had it "right" and the earnings rally was what we saw in January or 2) if we're back to the days of the getting the earnings look for free and the stock responds 2-3 days later
Either way - I am somewhat shocked we didn't get a pop of 5-10% from market participants who haven't been following this as closely as we have.
I think two things are muting the reaction today.
First, though I don't have data to support this, historically the reaction to positive earnings news has taken 2-3 trading days to materialize. No idea why this is, but it's happened on more than a few occasions.
Second, the earnings report came in reasonably close to expectations with positive surprises (4 year run rate) offset by negative surprises (slowing premium growth), so much of this was already baked into the price.
All above in my humble opinion.
-Crip
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7 hours ago, Daphne said:
If they show up on the call, expect lots of questions along the line of “when did you stop beating your wife?”
Likely right
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2 hours ago, Viking said:
@dartmonkey I think management has commented on the TRS in the past. I think they have said they hold it as an investment. Not complicated.
How do you evaluate an investment? By calculating intrinsic value. My guess is Fairfax can do this… for itself.
I don’t understand all the hand-wringing / urgency to ‘do something’ with the TRS position. Especially given the likelihood of mid to high teens ROE the next couple of years.
Not sure if it is technically "hand-wringing" but I do like the idea of using some proceeds from the TRSs to buy back stock. The difference I see between investing in TRSs and buying back one's own stock is that the TRS is technically temporary where the buyback is more permanent. Example, we get some black swan even that harms the company and, accordingly, brings the price of the stock down, we're hit with a double-whammy as not only is there harm done to the company, but the TRS investment becomes less valuable, driving down the price even more. It's leverage against the shareholders. Keynes famously said "the markets can remain irrational longer than you can remain solvent". Buying back stock is more permanent.
So, while I am not in favor of getting out of the TRS position, I'd be happy trimming the position and using proceeds to juice the buyback. Also, not pounding the table on this...just seeing the attractiveness of doing so.
-Crip
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12 minutes ago, Daphne said:INVESTIGATION ALERT: Berger Montague is Investigating Securities Fraud Claims on Behalf of Fairfax Financial Holdings Limited (OTC: FRFHF, FFHPF) InvestorsDow Jones - Updated 43 minutes ago
INVESTIGATION ALERT: Berger Montague is Investigating Securities Fraud Claims on Behalf of Fairfax Financial Holdings Limited (OTC: FRFHF, FFHPF) Investors
PHILADELPHIA, Feb. 14, 2024 (GLOBE NEWSWIRE) -- Berger Montague is currently investigating potential violations of the federal securities laws on behalf of shareholders of Fairfax Financial Holdings Limited ("Fairfax Financial") (OTC: FRFHF, FFHPF).
CLICK HERE TO LEARN MORE ABOUT THE INVESTIGATION
Fairfax Financial, headquartered in Toronto, provides property and casualty insurance and reinsurance, as well as investment management services in the United States and internationally.
On February 8, 2024, short-seller Muddy Waters Research published a report titled "Fairfax Financial Holdings Ltd.: The GE of Canada."
Following this news, Fairfax Financial's share price fell by more than 11.6%, from a closing price of $1,041.43 on February 7, 2024 to a close of $920.37 on February 8, 2024 -- a decline of $121.06 per share.
If you are a Fairfax Financial investor and would like to learn more about our investigation, please contact Berger Montague: James Maro at jmaro@bm.net or (267) 637-3176, or Andrew Abramowitz at aabramowitz@bm.net or (215) 875-3015 or CLICK HERE.
Whistleblowers: Anyone with non-public information regarding Fairfax Financial is encouraged to confidentially assist Berger Montague's investigation or take advantage of the SEC Whistleblower program. Under this program, whistleblowers who provide original information may receive rewards totaling up to thirty percent (30%) of recoveries obtained by the SEC. For more information, contact us.
Berger Montague, with offices in Philadelphia, Minneapolis, Washington, D.C., Delaware, San Diego, San Francisco and Chicago, has been a pioneer in securities class action litigation since its founding in 1970. Berger Montague has represented individual and institutional investors for over five decades and serves as lead counsel in courts throughout the United States.Not going to exonerate Muddy Waters, but this looks to be ambulance chasing.
-Crip
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3 hours ago, cwericb said:
Putting things in perspective, isn't share price presently back to where FFH was about three weeks ago?
Yeah, pretty much. And the company has not changed much in the past month, either.
-Crip
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3 hours ago, RedLion said:
I’ve done well over the years buying after some of block’s reports. Buford was the best. I’m fully invested right now, already have a big chunk of ffh, and watching to see if I get a great chance to backup the truck. Looks like probably not.Well, I backed up the car and added a few into the trunk this morning.
-Crip
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4 minutes ago, Viking said:
@Crip1 BSilly is on my investing wall of fame for his posts on Fairfax, especially 2003 to 2005. So rational, educational and even keeled.Concur 100%
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This short report can be one of three things, as I see it:
1) Smash and grab - This is clearly possible with a stock that has risen rapidly, is complicated, and is in the blackout period ahead of what should be a pretty solid earnings report. If this is the case, one has to think that a 12% decline today should have resulted in some quick money and this may go away.
2) Honest analysis - There are contrarians out there, and I can sometimes fall into that camp. They do analysis and state their opinions with no nefarious intentions besides making money. One has to acknowledge that this is a possibility. If this is the case, then one would think this will go away pretty quickly but if the report and subsequent success in driving the price down continues, others may jump on board. If so, this will last a little while.
3) Something nefarious - Like the early 2000's, this may be bigger than Carson Block or the Muddy Waters firm. Not making accusations, just acknowledging that this is a possibility. And, if true, than this could get pretty ugly. Likely not as ugly as it did 20 years ago because Fairfax is in a significantly better position now than they were then, but ugly still.
-Crip
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8 hours ago, Viking said:
Is anyone else experiencing deja vu?
If Peter Eavis made an appearance, that would feel like deja vu. Although, as a long-time shareholder, it would be great to see BSilly or Cardboard back commenting.
-Crip
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On 1/24/2024 at 4:47 PM, Thrifty3000 said:
So, for this simple look through earnings spreadsheet the most important fields I track are:
- Ticker
- # of Shares I Own
- Per Share Cost Basis
- Normalized Earnings Estimate Per Share
- Normalized Dividend Per Share
- Total Cost Basis (Cost Basis Per Share X # of Shares Owned)
- Total Normalized Earnings (Normalized EPS X # of Shares Owned
- Total Normalized Dividend
- Current Share Price
- Current Value of Investment (Current Share Price X # Shares Owned)
- Normalized Earnings Yield
- Normalized Dividend Yield
- Price to Normalized Earnings Multiple
- 10 Yr Estimated Growth Rate
- Year 10 Normalized Earnings Forecast (Based on current normalized earnings and my estimated growth rate)
- % of Portfolio Allocation
- Unrealized Gains
- % Unrealized Gains
Normalized earnings is the field I focus most on getting right. I don't have a one size fits all approach for this one, though. I'm mostly focused on understanding what free cash flow will look like through a full economic cycle. I also try to understand and adjust for key risks - like super cats. For some investments I have to adjust for things like big, temporary, expenses - like major litigation costs/settlements that will take a few years to burn through (think post-GFC Bank of America). With some investments that have highly reputable managements I've learned that management forecasts are plenty reliable. So, if I'm really comfortable with a manager, I'll start with their forecast, try to poke holes in it, and adjust accordingly if I come up with anything.
As far as making adjustments, I review my estimates annually at a minimum. However, anytime I learn about a material change, or think of a material risk, whether from company updates, CoBF, or otherwise, I immediately update my estimate. I probably make a handful of small adjustments to the model every quarter. I rarely have to make major adjustments at this point. I may make 1 or 2 major adjustments to the model each year. Usually, I get to just bump up the earnings estimate for the next year, which is fun.
Since I started maintaining this spreadsheet in 2019 I've been able to increase my total normalized look through earnings by six figures every year just by replacing lower yielding investments with higher yielding ones whenever clear opportunities arise.
Thanks again for the time/effort to respond on this. It is something that I thought I should do but now really realize that I NEEDED to do this to better frame investment decisions. One other question...do you have any ETFs or mutual funds and, if so, how do you incorporate those into the analysis? About 70% of financial net worth is invested in individual stocks, but some money is in ETFs (for access to industries where I want to be but would prefer others with more knowledge pick out winners/losers) or Mutual Funds (401k accounts my wife and I pay into that do not offer self-directed stocks as investment options).
-Crip
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1 hour ago, ICUMD said:
Thanks for writing this detailed explanation.
Your rationale and explanation make sense.
However, we can't be certain that is how they are actually calculating the fee, as there are slight discrepancies.
I wonder if it would be reasonable to submit your assumption to Fairfax India investor relations for confirmation or clarification. Really, they should offer an appendix showing their calculation to the annual report, at the end of each 3 yr period.
Concur in full that showing actual calculation would be the right thing to do.
Reminds me of when I took on a supplier management position at my former employer. One of the contracts with a supplier called for a bonus if volume exceeded a certain threshold. The problem was that the way it was written, it could have been interpreted 3 different ways, each of which resulted in vastly different dollar amounts. Fortunately my predecessor who negotiated the contract was still with our company, and the supplier contact who negotiated on their behalf was also still with his company. The kicker...neither one remembered the intent of the bonus language. This is where I learned that whenever there is a mathematical reference in a contract, to ALWAYS give examples to illustrate the verbiage.
I never saw that in any report of FFH or FFHI...
-Crip
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FFH - 26%
Fairfax India - 9%
MKL - 9%
BRK - 5%
JNJ - 5%
JPM - 5%
BABA - 5%
CATY - 3%BYD - 3%
Other Stocks - 5%
AI ETFs - 7% (There is money to be made in AI, but no way I can pick winners any better than a dart-throwing monkey, so I'll give some experts the chance.
Other Mutual Funds - 7%Cash - 13%
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13 hours ago, Thrifty3000 said:
I almost never buy or sell. I have a handful of core investments that I’ve owned and followed for years. I have about 3% of my portfolio in some tracking positions that I’ve held for over 2 years while getting to know them better. I have a watchlist of companies I’m either trying to learn more about or waiting for the right price to buy. I find it very hard to find companies that I like better than my core holdings. Though it does happen. I’ve exited 7 or 8 positions in the last 5 years. Half were core holdings and half were trackers.
Looking at equity earnings like a salary makes me think much more like a business owner when I’m buying parts of the businesses that are paying my “salary.”
Also, once you give yourself enough “raises” - via more and better investments - you’ll be able to replace your actual salary with your equity “salary.”
So, a few questions (and I truly appreciate your intellectual generosity):
- Is the file as simple as Company A earned x per share so my portion of the earnings is x times the share amount owned? (Column A is Company, Column B is EPS, Column C is Shares owned, Column D is Column B times Column C) If it's more complicated, what else to do capture?
- I assume that you do not look at dividends except to add them to share count if you reinvest...is that right?
- Do you adjust for one-time charges?
- Do you attempt to convert this to Cash-Flow by adding Depreciation/Amortization and deducting Cap Ex?
- Do you update this quarterly or annually?
-Crip
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2 hours ago, Thrifty3000 said:
A trick that has been incredibly helpful for me… I created a spreadsheet where I track MY portion of the look through earnings from my equity investments. So, for example, If I have 100 shares of Fairfax and I estimate the normal earnings to be $150 per share then in my spreadsheet I would show MY total Fairfax earnings as $15,000. If I have 1,000 shares of BRK and assume $25 per share of look through earnings then I would add $25,000 to my spreadsheet. With Fairfax and BRK combined I would have $40,000 of earnings. (I look at those earnings almost like my salary. I want my “salary” to be big, steady and growing over time.) Notice I haven’t mentioned stock price, because my number one priority is the quality and growth potential of MY earnings. With that mentality, if I can at anytime sell all my Fairfax and BRK shares to buy assets producing significantly more than that $40,000 of look through earnings then I am happy to do it. I treat that like getting a pay raise - which is fun and motivating. This approach helps ensure that the only way I can confidently sell one asset for another is if I’m confident in my analysis and able to transact at attractive prices.
In the past I have thought about doing that, but never took the time to do so. To what extent do you feel this exercise impacts your buying and selling?
-Crip
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OK, so there has been some conversation on this board about how great the next three years ahead look and how great of a job management did to position the company as it is, and so on. All of that is valid and correct. There have been concerns around what happens after these 3 years (not sure whether the “3 years” is because Viking has been projecting that time period, or because of the stated run rate by the company). Specifically, concern over what happens when this “gravy train” ends and interest rates come back down to 1% or thereabouts. The more I ponder this, I’m increasingly less concerned about three years down the road for the following reasons:
- After peaking in October rates have come down, but they are still notably higher compared to Covid-times.
- Every day that the market moves sideways, and we’re a month plus into the sideways movement, that three years gets extended into 2026. (and I’m willing to bet that we don’t see 6 rate cuts by the fed in 2024, nor do I see that happening in 2024 and 2025 combined FWIW).
- The assumption (fear) that rates go back down to 1% is, in my opinion, overblown. Yes, if we do go into a recession, rates will drop, but we seem to be anchored into recent memory when rates were at historical lows and expect that to happen again. That fear is overblown.
- Assuming treasury yields do move lower, at some point the spread between treasuries and high-grade corporates is going to widen such that the risk-reward equation moves squarely in favor of moving some monies into corporates. It’s not always wrong to take prudent steps to “reach for yield” and with the size of the investment portfolio FFH is better able to benefit from this compared to the competition.
Of course, black swan events do occur, and there is no guarantee that Fairfax will avoid doing unwise things as has happened in the past, but risk-reward is squarely in “reward” at this juncture, and I think will be 2-3 years from now.
-Crip
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16 hours ago, Partner24 said:
Hi Crip, I remember that 15 years or so ago, we had a very similar investing mindset and had similar core holdings. Are you still invested in FFH and MKL? I would be interested to get an update from you.
Cheers!Wow, yeah, it has been a while. i trust that all is well with you.
Yes, still holding Markel but trimmed my holdings substantially. Top 5 are: Fairfax, Fairfax India, Markel, BRK and JNJ. With the exception of Fairfax India, the other 4 were in all likelihood in my top 5 back then as well. The major change is that Fairfax is far and away my tp holding where, back then, I think it was Markel.
-Crip
Analyzing Brett Horn
in Fairfax Financial
Posted
Guessing it's a combination of Inconsistency-Avoidance Tendency (#5 of Charlie Munger's Psychology of Human Misjudgment) and the fact that any indication akin to "I was wrong", no matter how refreshing it is in real life, is a resume-killer in the profession of Equity Analysis.
-Crip