Crip1
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Posts posted by Crip1
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On 6/19/2023 at 6:44 AM, Luca said:
I only see @Saluki and @Viking buying Fairfax India in the past years. What does the rest here not like about FIH? Is it the fees?
To me their assets seem pretty solid, as @nwoodman pointed out, the airport will likely make a nice return, the stock exchange should be a homerun, rest of the assets should benefit of the india GDP tailwinds too. New restructuring should increase exposure to the other assets.
I had FFHI as a moderate holding until spring of 2022 when I went overweight. Since then I’ve bought and sold a portion of holdings a few times to lower the average cost. The ping-ponging from below US$12 to around US$14 has allowed for this.
I am still overweight as this is my #2 holding as a little over 10% of total assets. As it gets closer to NAV, I’ll pare back the position to get it to normal weight (5%).
-Crip
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34 minutes ago, Viking said:
The problem is Fairfax does not run the business to attract a long-term shareholder base. The decisions/results/communication they delivered 2010-2020 are all the proof that is needed on that front. It was terrible (on balance). My guess is many long-term shareholders capitulated and sold in the bloodbath in 2020. Trust in management was lost and at an all time low.
Fairfax is a blank canvas today. They are starting over and building a new relationship with shareholders. If they want long term shareholders they need to play their part. They need to re-establish trust. Communication needs to be stellar.
Look at Buffett today. He is running Berkshire like a trust. Capital preservation is paramount; not return. And you see it in Berkshires results... they are not close to what they were. (I am not saying this is how Fairfax should be run.)
Will I hold Fairfax long-term? I don't know is the honest answer. We are still too early into the turnaround. I love the set-up for the company right now. Management has delivered for the past 5 years.
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At the AGM I asked Prem what lessons Fairfax had learned from the lost decade for shareholders (2010-2020). And had any processes changed within Fairfax to make sure the same TYPES of mistakes are not made again. I got a non-answer. Which of course WAS an answer.
Another question at the AGM was if Fairfax carried too much debt (operated with too much leverage). Prem's answer was they could sell Odyssey and be debt free.
I found the answers to both questions to be lacking. But I remain open minded.
Dude, you are speaking my language.
Considering FFH is my largest holding, by far, I clearly like the company and the story. But, there is one aspect of Fairfax that is highly problematic, IMHO, and that’s Prem’s reluctance to candidly admit errors. Buffett has always been extraordinarily good at this and I think it’s healthy for any individual, especially one in a leadership position.
It is almost impossible to change unless there is valid reason, and the valid reason needs to be admitting errors or, at minimum, admitting that things could have been done better. Prem is reluctant to do this. He was looked at very favorably during the financial crisis based on how well he navigated Fairfax through that. The ensuing 8-10 years were substantially less successful. Will we see a repeat now? I don’t think so, but I am not as sure with Prem because of the lack of candidly admitting errors.
-Crip
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7 hours ago, racemize said:
I guess getting back to the multiple of book value trading question. In all honesty, if you are a permanent holder, you don't want it to trade at 2x book value. In fact, you want it to trade as low as possible for as long as possible, so they can buy back shares. Trading higher does nothing good for you, unless you 1) want to sell; or 2) want them to issue shares to buy other companies I guess.
Viking has done more in-depth research on Fairfax than many investors do on all their holdings, so there’s little reason to expound on that. What has become clear is that after years of working to keep the company afloat for the next 12 months, FFH has morphed into a company that makes decisions with longer-term timeframes.
So, on one side we have FFH selling at a discount to BV. On the other side FFH sells at 1.5x to 2x BV. The beauty of it is that FFH wins either way. Nothing wrong with taking out a few hundred thousand shares as a way to benefit long-term shareholders. Should we magically sell at 1.75x BV in a few months, FFH then has currency to make (strategic) acquisitions. Heads we win, tails we don’t lose.
Interest rates: Rates move lower and we’re locked in to attractive returns for the next 3 years. Rates move higher and we can roll our fixed income into high-yield corporate. Heads we win, tails we don’t lose.
-Crip
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1 hour ago, ICUMD said:
Another block trade today of 335k shares, total trade of about 370k shares.
At least someone seems to be think this is undervalued. Maybe FIH trying to close the gap to BV to strengthen its position?
Well, if someone is selling 335K shares, they think it's fairly valued (the yin and yang of investing).
In all seriousness...I'm more than happy to have either FIH or FFH take out more shares at this much of a discount.
-Crip
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2 hours ago, dartmonkey said:
It's interesting to see how many Berkshire picks end up in Watsa's portfolio. There was already some Occidental and Chevron, and now more Occidental, just like in Berkshire, and no additional Chevron, while Berkshire is selling Chevron. In banks, both companies used to own Wells Fargo, and now, both have big positions in Bank of America (although Fairfax also owns a bit of Citigroup and Bank of Nova Scotia). Just one car builder in both portfolios, and it's GM. Both had Taiwan Semiconductor, although Berkshire has sold its stake recently. Activision arbitrage - yes, in both cases, but both have been reduced this quarter.
Great minds think alike? But it seems like a bit too much overlap for it to be coincidence.
Investing returns is a simple numbers game, there are no style points for leveraging the knowledge/acumen of others.
-Crip
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8 minutes ago, Santayana said:
Looks like Mr. Market is back to it's old ways of not reacting to earnings the next day. I expect there will be a nice little pop next week. I'm tempted to add even though I'm already quite overweight.
Was thinking the same way...it's happened numerous times over the years and it would not surprise if it happened again this time.
-Crip
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52 minutes ago, glider3834 said:
So, if 10% of BIAL is worth $225M, then the whole enchilada is worth $2.5B with FFHI's now 64% ownership valued at $1.6B. IF that is the case, then everything else is valued at $173M.
What am I missing?
-Crip -
2 hours ago, Spekulatius said:
Markel is vastly overrated for the results they have been generating. WRB is a much better business, imo. I think even BRK is likely to get better returns going forward than MKL despite their size.
I think MKL gets the premium to BV based on consistency. True may not have done much outstanding over the past decade but they’ve not done much stupid either…that’s a big reason that they’re priced at higher metric than FFH. The MKL investor is concerned more than the average investor with return OF my capital rather than return ON my capital.
The thing I can’t get my head around on MKL is Markel Ventures, specifically, what it is worth. Berkshire morphed from primarily an insurance company to an operating company. Markel is still mainly insurance, but operations are starting to be a bigger piece of the pie and, generally, operating companies are going to be valued at higher multiples to BV than Insurance Companies.
-Crip
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15 hours ago, glider3834 said:
Two separate and disparate thoughts on this:
• As a long-time shareholder who has seen BB negatively impact my net worth, I don’t have any psychological need to get rid of it. The losses on this are in the past, and nothing can change it.
• BB has always been in my “too hard” pile so I have no idea if the true value of this company is the current share price or somewhere north or south of current share price.
So, bottom line, if this can “unlock” some of the value, so be it. If it can be sold with the capital being redeployed into buying back shares, buying out minority interests or better investments, so be it. I’d rather not sell just because it’s adversely impacted the company.-Crip
P. S. That said, like most all of us, I really wanted them to sell when it was a meme stock back in 2021.
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1 hour ago, Candyman1 said:
Anyone worried for FFH about the risk of large floods out west due to coming melt off. I live near the mountains and man is there a lot of snow currently. Not sure if FFH has a lot of exposure. I remember a smaller snow year, but it stayed colder than normal for longer, like this year, and suddenly the temps shot up into the 70s and just those few days took out a number of bridges. Similar thing might happen now on much larger scale.
Same for the upper midwest as the snowpack is higher than average. Can't recall the year but a few decades ago we had a similar situation. Once spring arrived, heavy rains were exacerbated by snow-melt runoff which caused a boatload of river flooding.
That said, I've no idea the level of FFH's exposure to this.
-Crip
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11 minutes ago, maplevalue said:
Importantly, this would also encourage firms to re-invest in their workers and businesses.
I'm not sure I see why this is the case...anyone?
-Crip
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1 hour ago, MMM20 said:
Analysts starting to get it...maybe just less career risk now that the stock has been up
Analysts starting to get it...the final paragraph looks like all they did was read Viking's posts.
-Crip
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41 minutes ago, StevieV said:
I thought they'd keep extending the duration.
Likewise. The one surprise that popped out at me is the average duration of the bond portfolio being unchanged from the end of Q3 as I would have guessed something closer to 2%. It compels me to think that they (Bradstreet) still sees inflationary pressures and, accordingly, did not see the benefit of locking in longer-term yields in Q4 of 2022. That did not look to be the right move in January but so far in February the story has changed.
-Crip -
59 minutes ago, Saluki said:
New Prem Interview. A few interesting tidbits about his first meeting Buffett and Francis Chu.
Prem's statements about relationships were quite interesting as they really apply in multiple areas, business-related and otherwise. The one point that he missed that is vital, however, is that of trust. Maintaining relationships is all fine and dandy, but if the people with whom we look to establish, maintain and build relationships do not have a level of trust in us, those relationships will be borderline meaningless. For Prem, my guess is the trust/integrity factor in dealing with people is almost like breathing so he does not mention it here as it's second nature to him. (Now, I do wish he spoke with more candor in his letters to shareholders as opposed to being the eternal optimist but that's an entirely separate discussion).
-Crip
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From the Q4 Markel press release:
Development on prior years loss reserves within our general liability and professional liability product lines in 2022 was impacted by broader market conditions, including the effects of economic and social inflation, and was most pronounced on the 2016 to 2019 accident years, which was before we began achieving significant rate increases for these product lines.
There's a yin and yang to this. First, one has to think that as time goes on this (economic inflation) is going to be seen throughout the industry. This has to have a negative impact on loss ratios for everyone which will negatively impact earnings for the foreseeable future. At the same time, this will either delay the end of the current hard market or mitigate the "softness" of the market. It is going to impact the whole industry and, like other macro trends, some companies will navigate it better than others.
-Crip
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53 minutes ago, cwericb said:
Analysts really are a bit of a joke. In theory they look into their crystal balls and make predictions of the future when all too often the reality is that they simply react to what has already happened.
When it comes to Fairfax, really, is there an analyst out there who can match Vikings knowledge of the subject? I very much doubt it - and Viking (and others here) provide their knowledge and insights of Fairfax to board members without charge. Thank you.
That's damn right.
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3 minutes ago, SafetyinNumbers said:
BMO upgrades to outperform C$1050 price target.
So, yeah, we had to figure this was coming. And while I agree with upgrading FFH as it is my largest holding, this is really another example of Wall Street advisors using the rear view mirror approach. The main difference between FFH now and FFH 3 months ago is the 30% increase in share price. It's the same damned company that was rated neutral at US$490 but is now rated outperform at US$638. It's back-asswards,
-Crip
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42 minutes ago, StubbleJumper said:
So, who has a quarter-billion dollars just laying around for a block trade like that?
SJ
Was thinking the exact same thing...
-Crip
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Is anyone seeing a reason for this? Volume does not look to be extraordinarily high.
-Crip
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Just finished this book yesterday. I would highly recommend this to most folks. The abject narcissists out there would not benefit from it, however. The author did not speak much to what compels individuals to not use a checklist, but I feel that's a pretty important part of the equation.
In my opinion, it's really an ego thing, and all of us suffer from that to one extent or another. We all have a tendency to overestimate our intellect, our memory or our aptitude. Accordingly, we don't feel the need for checklists. In reality, even the most brilliant and disciplined among us would benefit from using checklists for multitude of applications. The reason we don't is because we feel we don't need it. Bottom line, we all need it.
This applies completely to investing, and I'm really looking to develop a checklist (though I'm not against leveraging off of a previously developed one).
-Crip
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@MMM20The oil company comparison is not a perfect one, granted, but the concept of selling the product in the future for less than it is selling for now is similar between the industries. It is not a question of if the hard market in P&C Insurance is going to end, but when and how severely it will end. As the economics are presently, the industry is sure to attract new capital and any new entrants into the space have one big way to differentiate themselves and that’s with price. The market will soften, so profits are going to decline. And, in the past, the market softening has resulted in the industry as a whole eating capital which is going to drive down earnings (even taking into account the investment portfolio throwing off significantly more cash than we’ve ever seen at FFH) resulting in the P/E moving higher, even assuming the same share price. History does not repeat itself, but it rhymes.
@Viking Before responding, I do want to echo the sentiments of many others regarding the insights you’ve shown on this message board. You’ve done a great job making a complex analysis easier for many of us to understand and, for that, you have my sincerest appreciation. Your point about the BV now being notably different (higher quality) than the BV from 10-15 years ago is not in dispute and does, admittedly, show the limitations of using it as a valuation tool. P/E valuation has its limitations as well due to the lumpiness of FFH’s earnings and the inevitable Cat losses as well as the inevitable softening of the market.
-Crip
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5 hours ago, MMM20 said:
Amazing that FFH's NTM p/e is right around ~10 years lows given the performance of the past couple years. Maybe it's just confirmation bias as this imperfect metric squares with my view that the stock has gotten much cheaper relative to the growth in sustainable earnings power even as the stock price has nearly ~2.5x'd from pandemic lows. What a ballast for portfolios since the pandemic. It looks like they're set up better than ever to go from strength to strength... here's to a fairer low-teens multiple / $1,000+ stock in '23. Knock hard on wood.
Two separate thoughts:
Seeing a declining P/E in a hard insurance market is similar to when oil companies see the same when oil prices are rising. Insurance companies SHOULD see outsized growth in earnings when the market is the tide rising all boats.
This decline will bottom out and, eventually, move higher. The question is whether it will be due to increasing market value or decreasing earnings, or both.
Though others disagree with this, I still see the price/BV metric being the best way to value FFH. Buffet said years ago that intrinsic value of BRK roughly follows book value over time and it seems to fit with FFH as well. The good news is that intrinsic value has been growing in a few areas which are not reflected in Book Value, the pet insurance business and Digit being prime examples. The P/E graph suggests that FFH would be worth 2-3x what it is currently selling for assuming a reversion to a P/E of 20, and I don’t think that’s accurate. I do think that it’s worth a 25% premium to BV, which is about 20% higher than it is right now, more or less. Furthermore, as has been pointed out multiple times on this board, there are several catalysts for further improvement in BV so, yeah, I’m holding it.
-Crip
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40 years ago I was 19. If someone would have told me back then that 40 years from now I'd be digging on Mongolian heavy metal, I'd never have believed it. But, oddly enough, here we are.
Saw this band live with my son and a buddy of his and had an absolute blast. Does not matter that it's not English...
-Crip
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On 11/24/2022 at 11:23 PM, UK said:
It really is a magnificent song.
-Crip
Fairfax 2023
in Fairfax Financial
Posted
+1 (actually, I'd plus more than one if it was possible)
-Crip