Crip1

I'm not buying the "cost savings" aspect. Reason is simple...everyone is going to do this and everyone is going to reduce costs and competitive pressures will see to it that everyone cuts rates so that the cost savings will largely disappear. It's less about increasing profitability and more about maintaining profitability. -Crip

Thanks for posting, though, neither of these are working for me (I'm an Android guy). Either way, for those of us who can't access and don't want to pony up for the subscription to the G&M, can you give a brief synopsis?

Perm vs. Trading: I’ve had the vast majority of my position for a while now but have done a fair amount of trading in and out to bring my average cost to around $11. The return has been unsatisfactory considering I bought roughly half of my core position in 2018 and the rest in 2022. Position size: It’s #3…in line with MKL and BRK but well behind Fairfax, so it’s not a small position. The problem is that I am struggling to figure out fair value. Similar to Fairfax in that I can’t give a rock-solid “This is what it’s worth” figure, but I’m more than reasonably sure that both are worth substantially above where it’s currently trading. Dissimilar from Fairfax is that I’d have done way better by simply investing in an S&P Index fund over the past 3-7 years, so opportunity cost is significant. Ultimately, the plan is to keep the core position and will trade in and out where it make sense. I’ve endured suboptimal price action such that it would be foolish to sell out before receiving the reward for my patience. -Crip P. S. It's kinda self-centered to talk about me in that post compared to the company. I do so wondering if others are in of a similar predicament.

Figured it made sense to start a separate thread on the book which dropped yesterday. I've downloaded it, but am still finishing a book before I start on this one. https://www.amazon.com/Fairfax-Way-Inside-Lasting-Success-ebook/dp/B0FB2FDTT1/ref=sr_1_2?crid=TO3PEP8KT7R7&dib=eyJ2IjoiMSJ9.x-taRfzvsx_HLmxEApUU_As51Y5eZMZ5wAKxPV-bP-p_AFT1Pw5w8pmE8Xaj5ONDOMEvwtWlE8T9D7xeAIIH9d4KAEzlRpgMuIcUjjrv9HzYclft2Zu1fLMV0SCNPcv1JJct51556hpM1aMMWrjJU4cm7gXCzevgU4hGq9598wwmS_Jgte3hFI-yExqheMOB6-O5NTz5QjxMLHcfdLkDePezdDQVgyFirpJVWFwd4yE.32IwVcsmPDoJPfBU-dYBtdL8txnHPudrk_HX8K2Fyzo&dib_tag=se&keywords=fairfax&qid=1763492524&sprefix=fairfax%2Caps%2C340&sr=8-2 -Crip

I'd offer a couple of thoughts: All large companies are complex, and I'd suggest that Fairfax is more complex than others. With multiple moving parts, getting things right is hugely difficult. Value investors have a tendency to work in a margin of safety in their analyses. Combine these two to the inherent difficulty in estimating earnings for ANY company and, yeah, accuracy will be fleeting. And, honestly, it makes a difference if FFH earns $50 or $55/share to the company, but if Q3 earnings would have only been $47 instead of $52, the value proposition would be pretty similiar. -Crip

I concur with “interesting”, maybe even “fascinating”, but definitely not “concerned/worried”. Again, similar to you, considering the objectively very good earnings report, the price action over the past two days does not make sense. Adding to the mystery is that that MKL (which I’ve also owned for over 25 years) is up more than 6% over the past week while FFH is down 1.5% despite the very good earnings report. It does not add up. Fully acknowledged, the effective argument can be made that, even if I could figure this out, it is debatable on whether or not one would benefit from figuring it out. But it does not make sense, and it would be good to understand why…especially seeing MKL hitting new highs. Final interesting aspect is that, both today and Friday, the morning price is notably lower than the afternoon price. -Crip

Maybe others will remember but, years ago, it was common for a solid earnings report to be followed up by a 2-3 day delay in the market recognizing it. it was odd, but happened multiple times. Whether it happens this time remains to be seen...and is of minimal importance. The COMPANY is performing better than the STOCK has in the past couple of months. Fine...it was my biggest holding and is now 12% bigger. It's akin to the houses that leave open buckets of candy out asking trick-or-treaters to take only one...the current stock price is jus too tempting. Only buying more is far more ethical/moral than grabbing fist fulls of candy. -Crip

OK, added to my position at $1,615 last week which caused the immediate 3-4% decline. Fully disclosure, just added again at $1,543. Y'all may be able to get in at $1,500 if previous trends continues. A little surprised at the price action this morning but, oh well, when the pitch is fat...swing. -Crip

My apologies to everyone for not disclosing that I bought yesterday morning at US$1,615. True to my anti-Midas touch, it's down 3.5% in the 24 hours since I bought in. I should have mentioned this so that anyone who was looking to buy would have waited a day or two for "anti-Midas" to click in. -Crip

Premium growth as well as lower combined. BV is up a little over 10% YTD. Certainly not a guarantee, but it does bode well for next week's FFH report. -Crip

I do not agree. Charlie was running the investment portfolio at the Daily Journal and, to the best of my knowledge, did not pick up MSFT or GOOG. He did take a big position with BABA and that most certainly was not a good move. Not being critical on that BABA position, nor of Charlie. I am a huge admirer of Charlie as he was absolutely brilliant, but nobody is infallible, something to which Charlie would wholeheartedly agree. -Crip

I mean, we knew this was coming, and it's not a "one and done" type of thing...this looks to be the beginning of a multi-year development. So, what's that mean for Fairfax? * One leg of profitability, Underwriting Income, is going to be reduced, potentially to close to zero. Combined ratios may still be in the 95-98 range, but owners need to be prepared for 100, plus or minus a point or two. And premium growth will diminish, or potentially reverse. * The other two legs, Investment Portfolio and Associates/Owned Businesses, will not be impacted by the turn of the insurance cycle. They will be impacted by the overall economy, interest rates and the individual business's performance. This is an area where the investment leverage becomes a substantial strength. * "When the tide goes out, you see who's been swimming naked". There is zero doubt that there will be companies swimming butt-naked out there. The extent of this is undeterminable at this point. But to the extent that Fairfax's "other two legs" perform at least acceptably, Fairfax will be poised to pounce on the market once it turns grabbing market share from naked swimmers...but we're talking years down the road. All in all, this is going to be short-term pain (a few years) to recognize long-term gain (a decade or so). The amplitude of the pain/gain is under management's control. I'm not remotely tempted to sell a single share. Patience. -Crip

Others have to be thinking this, so I'll say it. With the recent drop in price, it's getting time to buy more. If it goes much lower between now and the earnings release, despite that Fairfax is still well over 25% of our net worth, we may add to our position. -Crip

Symbiotic relationship. FFH gets access to capital that allows them to make deals that otherwise they couldn't, or that would put them in a more precarious financial situation than is prudent. OMERS gets a healthy return, relatively low-risk, from a trusted partner. -Crip

I agree with the sentiment that staying on the shorter end is not a macro bet. It’s not quite this simple, but this is the gist of it. Extending to 7-10 years would offer the upside of an extra 0.5% to 0.6% in annualized yield, would lock in that yield for a much longer time and enables potential price appreciation should interest rates decline appreciably. Keeping in the 2-year duration allows protection against inflation-generated capital loss and allows for redeployment sooner with limited, if any, capital loss. Bottom line, is it worth risking the loss to gain an additional 0.5% - 0.6% in yield? The risk/reward analysis says it is not, IMHO. Going with longer duration would be more of a macro bet that inflation will remain at bay or will decline. It would be riskier than staying short. But, others will disagree, and that’s what makes a market. -Crip

You beat me to it...was going to add that. -Crip

Since the beginning of 2021, these 4 gentlemen have made a helluva lot more money (measured by earnings) than than the company has. Being transparent, I've not attempted to try to figure out what the company has done in terms of economic gains not measured by Net Income, but that's a long time period, 4.5 years, of senior management out earning the company. I know that Prem and co know what they're doing, so there's got to be something that I don't see. -Crip

Simple and brilliant.

I am less concerned with the 10-20 bag potential and more concerned with unlocking/monetizing the value. Several of us have been patient for quite a while but that patience, unless one had extraordinary timing, has not been rewarded in terms of market value. One could have invested in an index fund and done as well. The thesis as of now is BIAL. -Crip

Currently FFH is over 30% of the total, and when FFHI (7+%) and Eurobank (just under 4%) my Fairfax-total is close to 42%. Not looking to sell any of this, but I think I have enough for now (until something drops for no good reason). -Crip

To be clear, my comment was tongue-in-cheek!

My arm shot up so fast that that I tore my rotator cuff. -Crip

Agree with this all the way around. If Fairfax ever becomes “popular” we can see the Price/Book rise to 2x or more, and that would at least compel me to think about selling a portion. Sitting at 1.5x, I don’t give selling any thought. If we do sit at 1.5x for a company that can compound at 15% for a decade or two, life will be good. -Crip

Yeah, we're going to disagree on this. "Invert, always invert" - objectively challenging one's own beliefs is really hard, which is why not many folks do it. I agree that one "should" be able to do one's own analysis, but one also needs to embrace that other viewpoints may be valid. That helps us to learn. Buffet concurs as he migrated from strict Ben Graham methodology as years went on. We grow more by understanding we may be wrong than believing we're definitely right. Objectively, BH is wrong. That was the gist of my original post. It was not defending the reasons I have a ton of my net worth in FFH. It was looking to understand his perspective and then determining the validity of his perspective. Invert, always invert. -Crip

“Useful” is in the eye of the beholder. When we read opinions which disagree with our own assumptions, it can and often does force us to pressure test our hypothesis, and that can result in reconsideration of the hypothesis or it can strengthen one’s convictions. So, to that end, he’s been useful. In this instance, he’s not really raised much to compel reconsideration. And, worse yet, when he asserts investing results being “increasingly hit or miss over the years” with zero tangible examples, it damages his credibility. His usefulness is limited, but not nil. -Crip