Crip1

"SOP" - Pretty sure that's "Sum of Parts". -Crip

Bucking the trend of outperformance, 2017 saw me up 16% and change for the year, inclusive of cash position. My weighted return for the most recent 1, 3 and 5 year time periods have lagged the S&P slightly on an annualized basis but, in aggregate, that lag over a 5 year period is not inconsequential. This is not wholly surprising as, historically, I’ve returned even to slightly worse than the S&P in up markets but much better in down markets. A long-term bull market has hurt my returns relative to the S&P. Long term (10-20 years), I’ve outperformed the S&P, but that outperformance is shrinking with every passing year. There is a temptation to move everything into an S&P Index Fund and walk away, but I’m highly reluctant to do this as time has shown to be my friend (and, one of these years, mean reversion in and of itself will do the trick). There are two “mistakes” I’ve made which made 2017 less than desirable for me: Lack of focus. I’ve not spent to the time researching and learning as much as I should have. That will change in 2018. B of A Warrants. I sold out within a week of the Trump election in November of 2016 opining that the temporary euphoria would wear down and I’d be able to buy back more a few weeks down the road. WRONG! That decision ended up costing me big-time. My position on the warrants was sufficiently big that if I’d have held on to half of my position, my overall would have exceeded 20%. Can’t do anything about the past, so am looking towards 2018. All the best, everyone. -Crip P. S. Cryptocurrencies are in the “Too Hard” pile.

I’m quite comfortable with FHH holding on to the cash for now as opposed to succumbing to the urge to deploy out of need to “do something”. Use the dry powder for the right opportunity. -Crip

Joe Kernan just needs to not be part of a Buffet interview. -Crip

Wondering what other FFH assets have open-market values far in excess of carrying value... I'm not advocating selling one or more, just acknowledging that the value of FFH's assets may be far in excess of current share price. -Crip

I don't disagree about the valuation of Costco, but we're getting closer to a 52 week low which: A) Has only happened a few times in the past several years and, B) Has been a really good buying opportunity when it has happened. I can't state where it becomes a "buy", but it's got to be close. Secondarily, I love the experience at Costco. It's the Amazon of brick and mortar in that it's my first choice for much of what I purchase. Further, when I check pricing for items there, even against Amazon, it's rare that they're beaten. I'd not mind owning it and will look closer the more it declines. -Crip

Perhaps, but the Suncorp shareholders have now seen a 77% pop from the February price. not bad for 4+ months. -Crip

Suggests that this is a good time to be a contrarian... -Crip

Crip, you have been around here forever. Your comment, "This is definitely a falling knife". You haven't held enough losers if you are calling this a falling knife plus the falling knife term is generally reserved for company's that have a realistic expectation to end at $0 (like Home Capital, for example). I get it that it is falling everyday (a little) but it is more like death by a thousand paper cuts then a falling knife. Falling knives are down a lot more and also have a lot more ugliness then FFH, imo. If it rebounds, it will possibly rebound 3-4 x's faster than it has declined. Based on the Investopedia definition (http://www.investopedia.com/terms/f/fallingknife.asp), you are right...I stand corrected. That said, though not perfectly accurate, the concept is roughly right. One of the many flaws I have is that I hate buying something for more than I could by it for. Examples include making damned sure I get the asparagus at grocery store 2 for $1.99/lb as opposed to grocery store 1 directly across the street from store 2 at $2.29/lb. And that's NOTHING compared to my buying a car. I've lost opportunities to buy shares in the past because of this. Case in point, I put in a buy order yesterday at US$415 when the quote was US$414.70...now it's at $422. In reality, did it make sense to spend the additional $.70 to buy at a multi-year low? Likely it did. -Crip

For the past half decade, FFH has been quite profitable excluding the loss on the hedges (earnings before bad stuff). Underwriting profitability is consistently solid and, while the investment side has not been stellar, the results there will be really lumpy as shown recently when the "lumps" have been on the good side (again, excluding the loss on the hedges). Now, the term "excluding the hedges" is problematic in that the hedges DID happen and they DID cost the company plenty. But, they're gone now and the drain we saw on financials performance is gone as well. Countering that to a certain extent is the lack of bond exposure which was a substantial tailwind so it's not all peaches and cream, but, when looking at the company in its present form and current price, IMHO, it's attractive. My two issues are: FFH is my second largest holding. It was my largest but the price action has seen that change over the past several months. Catching a falling knife is dangerous, and this is definitely a falling knife (down more than 12% YTD compared to an 8% increase in the S&P). That's a 20% under-performance compared to the S&P which increases to 30% when considering the past 12 months. Clearly we're closer to a floor on the price now than 6 months ago, but I can't state for sure that this IS the floor or how close we are thereto. I'm of the opinion that the Q2 financials will look pretty good which should cause a bump in price so I'm strongly considering adding more right now. Hopefully for you all, my purchase will have something akin to the cwericb impact allowing all of you to get in at a lower price. -Crip

There's nothing in here that is revolutionary, particularly to those who follow Charlie Munger. But virtually every time I read/listen to Munger, I learn something. This 15 minutes is no exception. https://www.yahoo.com/finance/news/charlie-munger-says-single-payer-healthcare-solution-225404021.html The interviewer, clearly, does not know much about Munger as he was surprised on a couple of occasions by Munger's "frank-ness". -Crip

FFH was heavily criticized for closing out the hedges based on an election. The shift in philosophy was mind-boggling to say the least and compelled many on this board to call into question the decision-making. No disagreement with that. And, I too really wanted to hear Prem say “Yup, we thought this way and thinking that way cost the company money” or some such thing. Based on what I know about Prem, I did expect that. But, while Prem is verbally beaten up on the hedges being a disaster in retrospect, it should be noted that they would have been more of a disaster had they held the positions rather than succumbing to the “Trump-sale”. The losses over the ensuing 4 months would have been huge…major salt in the wounds. So, criticize the decision to buy, but give credit for selling when he did and not hanging on stubbornly longer. And, while we’re at it, let’s talk Fixed-Income. The sale of the LT Fixed-income trove in early November has proven to be quite positive as well as they could, at current rates, buy back the entire position for a heckuva lot less than they sold said position for. They made a boatload on the LT bonds over the years so while they did not sell at the bottom of the valley, history will show that they sold at a good or very-good time. That’s all history…where do we stand now? This is now a company whose underwriting abilities look to be good, if not very good, if not excellent. The financial position is not a Berkshire-esque fortress, but they’re going to be able to pay claims. And, they’ve got a lot of dry powder. The $64K question is investing…have they learned anything? I am not looking for FFH to shoot the lights out going forward, IF they can execute an investment strategy akin to hitting singles and doubles on the fresh powder and underwriting profits then this is a winner. Toss in the occasional acquisition (Zenith has been OK J) and this story gets even better. Like anything, it’s a Risk-Reward analysis. IMHO, the scales tip to the “reward” side moreso than “risk”. -Crip

This is a more instructive thread than the annual one…both are interesting, I guess, but this is moreso. It’s rather embarrassing to say that I’ve lost to the S&P 500 over each of the past 7 years, but am 1.5% ahead, annualized, over the past 10 years. Clearly the first three were pretty good. Looking at the past 15 years, I’m close to 4% ahead, annualized, of the S&P 500. 8 respondents returned 30+% over the past 10 years? That’s freaking crazy. -Crip

Technology, markets, and people are awesome. Politics, radical religion, and people suck. As much as I can't argue with that, it's likely worthy of it's own thread. -Crip

I could not agree more, Cardboard. For years the underwriting at FFW was suspect so capital was a risk, more so than for the “average” insurer. Now, underwriting looks to be fixed...still risky as is insurance inherently, but far more stable than 10-15 years ago. Looking at it now, a great way to mitigate the existing risk inherent in the organization is to buy good businesses at fair prices as opposed to fair businesses at good prices. That’s not to say that macro bets are off the table, but I’d rather have the needle moved, plus or minus, but a more conservative approach than by macro factors. Over time, I feel that this approach would ultimately reward the shareholder. FWIW, I increased my holdings by 15% last week, effectively sticking my toe in the water. Less than 1.1x BV has shown to be attractive. -Crip

Pure speculation: Volume is high which suggests to me that some large shareholders are getting out. Why? If their thesis for owning FFH was that doing so was an effective hedge for their overall portfolio, that these is no longer valid once the equity hedges are liquidated to the extent that they were. Some posters on this board seem to fit that profile. What's left is a good sized insurance company which has been underwriting effectively (bordering on very effectively) for the past several quarters, has been making opportunistic (but not stupid) acquisitions at a steady pace and, the past few years not withstanding, has shown to have a better-than-average investing acumen. Is that worth less than 1.1x BV? To each his or her own. -Crip

Well, now the question is...did Fairfax buy back in to all or part of their US Bond position at a cost 1-2% lower than they sold? My guess is that they may be selectively buying back in but for the most part, they did not. Which brings up the next question...what does a company do with $10B in cash? -Crip

Agreed... -Crip

Racemize - Referring to MKL's Terra Nova acquisition? -Crip

No

"Lethargy, bordering on sloth should remain the cornerstone of an investment style." Made sense to lead off my response with that Buffetism. FFH tends to be 15-20% of my portfolio, depending on market fluctuation. Intellectually, if it got to 2X BV I'd be looking to lighten up the position a bit but if it does get there, I am not 100% sure I would as the news would need to be really good for it to get there and I would be tempted to believe the hype. Similarly, using your example, of .75 BV, I would likely add more if I had something else over-valued or some dry powder. The theory is simple...I think that FFH can earn money from their ops and invest the float better than I can invest my relatively small nest egg (Same for MKL, and BRK which, combined, constitute over 50% of my portfolio. -Crip

I like beer. I like whisky (and whiskey). A nice margarita is tough to beat on a warm night here in Dallas. -Crip

"Investors must hand over their cash for a decade. If they exit early, Meyer keeps half the principal." Perhaps a better title for this thread is "Things that make you run like hell..." -Crip

A man walks into a Psychiatrist's office, wrapped head to toe in only clear Saran Wrap. The Psychiatrist looks at him and says "I can clearly see your nuts". -Crip

A horse walks into a bar. The bartender says to him "Hey, buddy, why the long face?" -Crip