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I've liked Francis Chou's thought process for 2 decades. Just finished reading the 2023 annual letter. I don't understand how bright money managers can keep making justifications for pursuing their philosophy whilst underperforming vs S&P over long period of times: An individual invested in this fund (& many others) for 10yrs, 15yrs, or 20 yrs has significantly underperformed the S&P 500. Yet the same letter states how the Chou Fund is rated as having one of the best returns over long period of times. If the reason to invest is the desire to outperform the index - chase alpha - how do managers justify their performance? Do money managers believer the index is too risky because of tech stocks and while active money managers may underperform, they are less risky than the index??? After pursuing an active management value investing style for two decades, I realize that compounding in index would have yielded better financial returns. However, by participating in the community, I have learned a lot.

@Parsad well said. After pursuing an active investment management strategy for the past 2 decades, sobering to see that not a single value manager I know of - even the zero fee funds ones - have outperformed the S&P 500 for the past decade. Anything can happen going forward, but I'm curious to hear arguments as to realistic risks for long term investors of investing in US index vs. active managers like the ones you mentioned. Even though S&P 500 is heavily weighted to MAG 7, should Tesla, Nvidia etc. collapse, there will be new ones creeping up in the index.

Have held the stock for close to 2 decades - despite frustrations of 2010-2020 era. IMO, annual letters always read like the author is exuding positivity, not necessarily humility. Good to see the mea culpa this year on Blackberry. I do find it surprising that Watsa didn't discuss the MW short. I understand taking the high road approach in order to focus on the company's earnings. On the other hand, an annual letter is meant to convey the highlights and lowlights since the last letter. Treating the MW's short as a "non-event" doesn't seem appropriate given the news it attracted - especially for a company that has been hit hard by a previous shorting attempt. If I recall correctly, the other interesting omission in this year's letter was no discussion of stock buybacks. In previous letters he has discussed Singleton's approach to reducing share count, hinting at future stock buybacks.

If anyone on this board is going to PIF AGM next weekend in Austin and wants to meet up, pls message me.

Thanks @Spekulatius. That makes sense. The Cannibals portfolio is mostly algorithm driven. MP is still holding MU in his fund. I believe he has had MU for >5yrs without much to show. He obviously has conviction that the next 5 years will be different. Let's see how it plays out.

On recent Conference call did Watsa shed any light on what FFH is doing with profits from sale of pet insurance business in 2022?

@Spekulatius have seen you mention several times MP selling Micron shares. Can I ask you when did he sell MU and what % of his MU position did he exit? Everything I've seen, indicates MU is a core position of >15% in MP holdings for 5+ yrs and one of his few US positions along with Brookfield. As of Fall 2022, he remained bullish on MU.

@RetroRanger thanks for posting the Pabrai video. Interesting perspective on 100 baggers.

Seems like an option to buy shares during a Capital raise. Does that mean pre-existing shareholders can buy in at 1 lira whereas new investors have to come in at today's price of 3 lira? Company was trading at 8 Lira a few months ago.

Can't find anything online to explain the drastic fall

My takeaways from 2020 AGM: Prem admitted some mistakes (which is a change), but remains as bullish on FFH as ever. Everything is great. Companies are great, people are all awesome. Got to hand it to Prem for consistency in Optimism Bought corp bonds at 4% yield and sold half of them at 1% yield Didn't sell BB - conv. explanation of securities regulation. Not clear whether they would have sold if spike event had occurred outside of the 6 month prohibition on trading window Stock positions increased 18% in Q1 Insurance underwriting business performing v. all and flow compounding at a consistently healthy rate

Xerxes, would love to see this thread of where FFH is in 2030 and have it updated yearly :) Parsad, While this may seem like a great trade in the next 2-3 years. I think the narrowing the discount will only come on the back of a rising book value, so you would get a double-lift in absolute and relative terms. But then what ... Do you see it as having a real "growth" engine once the discount narrows ... past these relatively speaking low hanging fruits. Maybe we should make it a thread. Where do folks see FFH ten years from now !!!! - size of the float - outstanding shares (hopefully 40% bought back) - the size and growth of FIH - the size and growth of Atlas - book value - share price - hopefully Resolute and Stelco long gone. I like BB converts. Can Prem pull a Microsoft out of his hat

Going through the posts on this thread, my summary is that consensus is that 1) basic underlying principle of identifying a business that will return your money and more to you in future is just good investing & 2) perhaps there has been some evolution in "value investing" to not only focus on P/E, P/B, assets and debt but also place emphasis on potential to grow earnings. Does that make sense?

excellent points above by LC, Cherecza and Writser questioning why Amazon could not be a "value company". I like the comment also about value investing being "nerdy" and gravitating to "mathy" situations and missing out on the potential growth prospect. Maybe what should be dead is the topic of "value" vs. "growth". Maybe the markets have come to a new way of "investing well" which blends assessing BOTH intrinsic valuation of assets and multiple of yesterday's earnings but also giving important consideration to earnings growth.

There was a thread or two in the past. I am interested in talking about Angel investment opportunities. However, there are issues: - For a lot of Angel investment opportunities, information is not openly available. It's possible to share info between friends, but it's harder to post information on public forum. There can be multiple parties upset about it. - As you may have seen on CoBF it's difficult to talk about companies managed by people who read/post on CoBF. This is an issue talking about Angel investment opportunities. From my experience even in non-recorded public meetings people usually tip-toe around the negatives of startup companies - nobody wants to offend and nobody wants to be kicked out of future contacts, allocations, board seats, etc. This is again magnified by posting on public forum. Jeff Bezos does not care what we say about Amazon on CoBF. Joe StartupCEO might care a lot. - Unlike public companies, the opportunities to invest into a startup are only open to qualified investors and only for certain amount of time. So there might not be much interest in companies that are not raising money currently. And for companies raising money currently, see my points above. - Edit: Point above is exacerbated for foreign investors. Not sure if you're in US or Canada, but cross-border angel investing AFAIK is even harder to discuss and accomplish. Anyway, I'm willing to try somehow, feel free to start thread(s), feel free to PM me if you want to talk in private. BTW, there's an Angel investing event on Wednesday that netnet posted about: https://www.cornerofberkshireandfairfax.ca/forum/events/life-science-investor-meeting-sept-2-and-sept-9/ You can ask netnet if it's OK to talk about the companies that present afterwards. (I may have to miss part of the event :( ) Jurgis, thanks for bringing up good points around posting publicly about Angel investments as one does want to remain cordial. I've generally tried to stick with categories of "Strengths" and "Areas of Concern/to work on" when giving opinions on startups. I've signed on the link you kindly shared for a healthsciences event next week. Will take you up on offer to connect via PM. Thanks. Best,

To double click on the idea of "adjust to the world around you" and metric of value, I've been thinking of this idea that in tech with proven earnings a P/E of 30 might be the equivalent of P/E of 10 in traditional industries. Reason: In proven tech companies with earnings, the total addressable market (TAM) is unknown because they open new markets. This does not happen with traditional commodities & industries - ie a pulp producer is unlike to evolve to clothing apparel retailer. With tech, a computer company (like Aapl) can become a music company and then a services company and then may become a health company. So if Aapl, Goog, FB are ever trading at a PE of <30, could be the equivalent of traditionally buying at PE of 10. Does that make some sense??

Agree. What I'm learning is that perhaps driver for value inflection point should be clear at time of purchase. Concept of "value will out over time" is not good enough.

In my years of reading this Board, this is the first time that I've come across an Angel Investment thread. I've always thought this was a space for exchanging ideas on the public markets. I now wonder if there would be interest in starting an Angel Investment/Private investments title under General Category? I know Sanjeev is planning on some website changes. Would there be interest in discussing private investments on the new website?? If so, I'd love to contribute. Best,

Learning Machine: I'll add my 2cents as an Angel Investor and echo sentiments posted causing you to think carefully about the investment: 1) Pharmacy can compete on Speed, Price, Service, drug quality/safety - NowRx seems to be focused only on speed 2) https://www.goodrx.com competes on price 3) As an Angel investor, I presume you have a portfolio of companies ? The investment should be one company out of at least 10-20 companies in your startup portfolio 4) Investing at Series B level is usually for larger VCs that can help the company on path to IPO. Upside is not huge, but there is substantial de-risking. Individual Angel Investors likely want to buy in earlier. 5) I'm not familiar with Seed Investor, but it seems to take >7% of your investment in fees plus takes equity from the company. 6) Mike Maples from Floodgate talks about whether founders are "living in the future" or merely addressing an existing problem. As an Angel Investor you may want to seek out the former. 7) Their stated strategy of use of data to make an impact in future seems weak and purely theoretical at this time. They have not elucidated a thought through data strategy. Best,

In general, if you do poorly for 15 years then it means simply one thing, you are making mistakes in figuring out how much cash business will produce for owners. Agree. However, plethora of value investors have not done as well as expected for past 10-15 years including Prem Watsa and FFH whom this board is v. familiar with. Thus, there have been a group of v. intelligent, astute and respected deep value managers that have not performed as well as expected over a relatively long time frame of 10-15 years. Changing understanding of future cash flow generation likely required to change outcomes going forward.

Yes but WHY can you not convert this to cash. The thesis for all the value guys in sears wasn’t based on the operating business. It was based on the assets Deadspace, you may have struck a chord when you say that traditional value investing focused on assets but not possibility of generating cash from the assets. Some of the error was in expecting that assets to be re-valued but not understanding the inflection point that will cause the re-valuation. Some have simply believed that over time "value will out".

rranjan, Yes makes sense. How then do you explain Chou Associates 15 yr compound return of 1.6%? Are you saying that value investing community is not able to fairly assess how much cash the business will generate in future.

Much discussion as to why results from Value Investing have been poor for > a decade. Covid and 2020 has further highlighted the gap between value & growth investing (mostly tech). In Francis Chou's 2020 semi-annual letter, he argues that value investing works but he his valuations have been wrong - gave too much emphasis to assets and not enough to operating side of business for companies in trouble - mistakes of commission. On the other hand, mistakes of omission were undervaluing profitable companies and potential for growth. Not sure how he would change the valuation for growing companies - accept a different P/E? The following is Francis' write up on Does Value Investing Work? : "With the lackluster returns by value funds in recent years compared to growth and index funds, there is some doubt as to whether value investing can still work in the current market. We hold the view that value investing certainly works, but only when executed properly. Sometimes it is easier to blame the market environment than to admit our own faults. Although factors such as low interest rates, the popularity of passive investing and elevated market valuations played a role in blunting returns for value investors, we also accentuated the problem. The key to value investing is appraisal. If that is not precise enough, everything falls apart. We tend to fish in troubled waters, and what caused the biggest problem in recent years was that our appraisal of troubled companies was off the mark. When we thought a company was worth 100 cents, it was actually worth closer to 60 cents. We tended to give much higher weight to asset values and not enough weight to the value of the operating company. We used the asset value as a huge security blanket and became blind to the deterioration of the worth of the operating company. That was a mistake of commission. We also made a bundle of mistakes of omission. Over the last 30 years, roughly half our portfolio was in troubled companies and the other half was in good companies. So, we are well acquainted with investing in both types of companies. But what happened over the last few years was that we spent most of the time undervaluing the good companies. When our assessment showed that the investments were worth 100 cents, they were more accurately close to 150 cents, thus causing us to miss most of those opportunities. These “omissions”, though they are unseen mistakes, are nevertheless as real as mistakes of commission. In summary, although the markets have been less kind to value investing, we exacerbated the problem as practitioners." The full letter is publicly available at http://choufunds.com/pdf/SEMI-AR%202020%20%28English%29.pdf

Re 35x forward earning being v. expensive. Makes sense for traditional valuation metrics. However, recently have been wondering if big tech is "different" because one doesn't know the TAM. Unlike brick and mortar companies where there is a known market with a growing pie, big tech tends to evolve and add new pies. So Aapl is expensive today if their TAM is computers, iPhones, AirPods, iWatch & services. However, if they add "health" or "?" then their valuation today may not be expensive. In the past 25 years Aapl has gone from being a computer company to something new every few years. Each time they add a product it creates network effects that strengthen the other components. In some ways Amazon is similar. One could value it 25 years ago if one looked at the online books sales market. However, one couldn't envision retail sale and 3rd party sales and web services.