This2ShallPass

Thanks for the running commentary @Parsad! Much appreciated. Great to see Prem commenting on buying at a fair price, that's the only practical way to invest all the money coming in next few years.

I was only commenting to the question on what are characteristics of a high quality company and hence didn't mention about price / value. Hopefully value investors and quality are not mutually exclusive. With ~$4B coming in next few years, I would be ok with them paying a fair price for better companies (even if it means 10% return vs. their 15% target). "Since 2009, we have invested $978 million, have received $979 million in distributions and still have investments with a year-end market value of $683 million." - Sure IRR could be higher. But, practically I don't see how given these numbers.. Maybe we're splitting hairs here, the word fantastic is what I was referring to and 15% in 5 years is not that (for me). I just assumed they're a investment company and the terms were nothing fancy. If they were able to get downside protections, then 15% is fantastic. Do you think it's realistic for Fairfax to have got special terms from BDT and Shawkwei?

Yes Viking, I just did a cumulative return but we don't have enough details to calculate time weighted CAGR. It's possible they invested small w BDT at the start. Still 15 years is a long time to get 70%. Unless, they just did a token investment in 2009 and 80-90% of the $978M was invested 5 years ago. In this case, commentary while factually correct is misleading, they shouldn't say we're investing with them for 15 years. Also, in that best case scenario, BDT would have only got Fairfax 15% cagr over the last 5 years. I cannot square with Prem's comments about fantastic long term returns - 15% is good not fantastic, 5 years is not long term and 70% total return is so-so. Maybe it's ok to give both BDT and Shawkwei few more years to run, we need places to invest the boatloads of cash coming in next few years. I would prefer if Prem becomes Singleton 2.0 and plows every extra dollar not needed by insurance subs into buybacks. Lowest risk and surefire way to get the stock to double in the next 3 years..

@Viking appreciate the deep dive, it really helped to see each top holding analyzed separately and we can all come to our own conclusions. To me personally, the above is not the definition of quality as even a bad pf could generate >15% in a couple of years if they hit some macro tailwind. If you change the definition to 15% over 10 years, then I agree the only way to achieve that is if underlying investments are higher quality. On the holdings, agree with your analysis on most of them. Recipe - It scares me a bit they're actually expanding to US and India. Even US is similar to Canadian market, but I'm pretty sure Indian restaurant market is very different and they have no advantage entering there (the answer to anything India related cannot be "because Prem"). Haven't proven success in home country, poor industry and expanding is not a good combo. BDT, 70% return in 15 years starting from one of the historically low entry points for markets in 2009. I would say definitely unacceptable performance and no reason to stick w them. That only adds up to 35% cumulative return in 16 years, so not sure how they could have compounded at 12%. Maybe the 2010 fund was a very small inv and the 12% doesn't really matter for overall returns. Same as above unacceptably low returns. BDT and Shawkwei looks more like old Fairfax to me, stubborn and not willing to admit mistakes or move on. The combined inv is $1.2B which is worrisome. With all the tailwinds and how well Fairfax is positioned for the next 4 years, the slam dunk move seems to be take the $1.2B and buyback shares. Will have much better returns. Very well put @giulio. It's ok if Fairfax feels this is their edge, but some here want to ignore good high quality companies because they screen well (implying price is not cheap), which is a mistake imo. At the huge sums Fairfax will have to invest, getting a predictable 10% will surely get the stock to higher prices than a lumpy 15%..

Due to some work commitments, I'm not able to make it this year. I was really looking forward to seeing members from this forum, but will plan ahead for next year. Enjoy the AGM and pls post notes.

"Because of the significant underachievement of passenger traffic in the last year of the second control period and the intended completion of capital projects during the third control period (from April 2021 to March 2026), UDFs were expected to increase significantly in the third control period.With the higher UDFs and the ultimate return of passenger volumes to pre-pandemic growth levels, aero revenue was expected to return to normal levels at some point during the fiscal year ending March 2024. Based on current traffic volumes, this looks likely to happen." From annual letter. We are 3 years into the third control period, when they say UDFs are expected to increase, do they not know yet or am I reading too much into it? I wouldn't be surprised given India's lumbering bureaucracy..

@Viking good question. I can think of some characteristics that make a high quality company. Would love to hear from others also on their definition. Have a defensible moat. Something they do that's different than others (most commodity companies fail this test) Ability to consistently make money through good times and bad (not feast or famine like cyclical industries) Lower capex - no need to pour all the profits back into the business Consistent top and bottom line growth Solid balance sheet Price setters and not takers (again commodity companies fail this one) Metrics could be growth rates, capital intensity (capex as a % of revenue), consistent FCF generation, debt coverage ratios, return on assets, equity, TBV etc..

Yes, that's the question I was trying to ask Viking - is Fairfax equity holdings high quality? They have knocked it out of the park in the last 6 years and it's been amazing. But, looking at the equity portfolio list, are the current holdings that different from this list from 2017 (without the benefit of hindsight of course).. Atlas - most metrics have worsened. Not a good industry Recipe - what has fundamentally changed to make it a better business? Grivalia - yet to be proven, seems like a jockey bet on the CEO Kennedy Wilson - down 50% last year and 35% ytd, temporary blip or fundamental issues? Mining - cyclical industry, why is this different than buying Resolute 10 years back? John Keels / CIB - is Sri Lanka and Egypt the best places for money. What specific advantage Fairfax has investing in these countries? BDT/Shaw Kwei - what are their historical returns and why are they different from Mosaic capital Dexterra - what has changed I'm not suggesting these are poor businesses, but the portfolio is starting to slightly worry me. One of the concerns many here had back in the day was Fairfax always buys very cheap and low quality businesses, how can we be sure they're not going back to old habits.

@Dinar did you find more details on this? The one requirement US has is on FBAR. US citizens have to file every year (during tax time) if they have foreign financial assets above $10k. No implication on taxes unless your end of year balance is >$100k (and >$150k any time of the year). But I don't think this applies to securities held in US brokers.

Thanks @Viking for another great post. Appreciate your deep dives into various aspects of Fairfax. BDT and ShawKwei partners, combined investment is $1.2B. Has anyone followed them, are these good inv managers? They have done great on their big investments, but when looking at this portfolio, first thought that comes to me is why is this high quality? Most investments seem to be in cyclical industries, economically / politically unstable countries (Sri Lank, Egypt) etc. Even Atlas doesn't look to be doing that great from @nwoodman post. Pretty much all the metrics seemed to have worsened. I haven't followed Atlas, is this really a homerun investment? They are in a not so great industry though.

Definitely hope not Good to see Fairfax has stated 1 yr op earnings as their upper limit of loss tolerance. The chart shows they have done pretty well over the years, only year they came pretty close was during Katrina..

You're saying Fairfax negotiated with OMERS and Markel as counterparties and it's up to OMERS, Markel and other large minority investors to take care of the discount and also represent the minority overall in the negotiation. Am I correct? To me, those other people don't matter as much as very few investors would have bought FIH because of them.

We just have to agree to disagree on this @SafetyinNumbers. If they just kept this as a deal with OMERS and Markel then that would be fine. But they opened it up to the public and knew very well retail investors would buy because it has the Fairfax name.

100%, lesson learned. I'll say this one last time and then hold my peace (this topic riles me up every time). Big huge Fairfax used money from small retail investors, 100% risk was yours and made more money in FEES than you were able to make in PROFITS!! Their promise is you'll eventually make the money at some future time, but couldn't wait for such future time to collect their fees. Think about that. In my humble opinion, that is not how you should conduct yourself in any situation. Neither fair nor friendly.. This is not why I invested either but it's fair to bring it up when the discussion is around fees. I reduced my stake but am still in it because of BIAL, it's a true crown jewel. And honestly there's lot of FOMO for me w FIH or I would have completely exited (stuck w them for the last 8 years and couldn't exit when BIAL is starting to hit it's stride). Just curious, why did you sell?

No, I just meant it's true what you're saying (OMERS and Markel didn't step up). But most retail invested in FIH because of Fairfax and not these other parties, so I feel Fairfax has the responsibility to setup the agreement that was fair in the first place and not rely on others to help close the discount.

I don't mind if we're at a premium. The only reason a closed end fund sells at a premium is because of the reputation of the manager. If I can make 20% more because of Fairfax's reputation then giving them extra in fees is fine. In my opinion, it's completely not ok to charge fees at a price that no one else in the world is willing to pay for. Ignore Fairfax for a minute, would you be ok with any inv manager making more money from you than you can realize in profits? Yes looks like it. But most of us are buying Fairfax India because of how much we trusted Fairfax.

I'm definitely curious on how they managed to get such an unfair agreement in the first place. Say I come to you with a proposition to make you a lot of money and you pay me a hefty fee in return. I then convince you my fees are calculated on a metric that I can control. 3 years pass and I tell you I have made $100,000 for you and my fees are $20k. You pay me the $20k and turn around to sell your shares to get the $80k in profit. To your shock, you find out no one is willing to buy for the price I told you and your profit is only $30k. But, here's the rub, you have already paid me $20k! Your net is $10k. I used your money, 100% of risk is yours and ended up with more money than you did. This is the reality of FIH shareholders like me (it just so happens I have way more Fairfax but that doesn't make it right). I'm happy they chose to get cash, but there's nothing fair and friendly about this structure. It fleeces the minority shareholders and is just another case of Fairfax not treating minority shareholders right.

For worst case scenario, I looked at damages from Katrina which is the largest ever ($195B) and adjusted for inflation. So a Hurricane like that would cause $300B in damages today. Someone here mentioned Fairfax typically has 1% cat loss exposure and Berkshire 4%. That would cost Fairfax $3B. Then say we're really unlucky and got hit with another hurricane half the size, so 2 bad hurricanes in a 2-3 year period. That would be a loss of ~$4.5B. Bad but manageable, they lose little more than 1 year of operating earnings..

Things work out! Doing an IPO in 2022 would have been terrible.

I'll take you up on that offer, appreciate it:) Will message you once I have planned my trip.

I was also surprised at the big difference in performance, CAD is down >25% from start of 2011 (-1.8%/yr). Anyone know what caused this big weakening? In 2011 CAD was par to USD.

Thanks @SafetyinNumbers. I'm currently planning to get in on the 9th afternoon and leave 11th, still haven't booked.

Apologies for creating another thread, couldn't have a poll as a reply in the other one. I would like to attend the AGM. I'll be coming by myself and have never met anyone before, so not sure what to expect. Anyone willing to share their experience with previous AGMs is appreciated.

If you look at the US OTC FRFHF, return from 2011 start to now is only 180% (including divi but not reinvested). That's ~8% CAGR.