investmd

KFS, I admire your conviction and comfort in holding FFH long term with no plans to sell. Two questions: 1) I understand buying cheap when it is well below book value. However, how do you square your statment of holding it long term with no plans to sell with with fact that folks who said the same thing 10-15 years ago, have not had returns and paid the price in opportunity cost. 2) Whilst cheap today, are there catalysts you see to get back to fair value? or is it a question of "value will out" with time? I'll go on the record here and say that in the past few weeks I've made FFH into my largest investment ever at an average price that just happens to be pretty close to Prem's recent 150M purchase. A couple years ago, I called FFH "statistically cheap" when it was selling at slightly below 1.0 x book and made an initial investment. I would have considered a fair, reasonable value to be around 1.3 or 1.4 x book. Today, at 0.7 x book, this has easily entered the "stupid-cheap" category. I look forward to revisiting this post in 5-10 years and reflecting on Mr Market's extreme depressive outlook on FFH during this time. I view this as a long-term investment and have no plans to sell.

François Rochon is still in charge there. He introduced David Poppe as a new partner at the last annuel meeting. With Valeant he just managed the portfolio prudently, selling shares to not let it become a too big part of the portfolio contrarly to Sequoia. The more debt they took the more he reduced it. The thing with Giverny is that they have compounded consistently at close to 15%. From 2010 to 2019 they outperformed the S&P500 by approx 4%/yr. From 2000 to 2009 they outperformed by close to 4%/yr. From inception to today, they have outperformed S&P500 by close to 4%/yr. That is a crazy good record. I wish I had discovered them earlier.

I would echo comment above about stubbornness: Watsa has been steadfast in saying that his LONG TERM shareholders have done very well. However 10 year return is flat- zero. Both 15 year return and 20 year returns are under < 5%/year before dividends. His defn of Longterm seems to be only since inception. I wish he would give credit to shareholders who have stayed with him for 10-15 years, bought regularly and underperformed the market. They too are long term shareholders and the company has underperformed in the long term. If he accepted the mistakes, acknowledged, learned and moved forward situation would be more palatable. Any return from here is a win for short term investors. Those who have held long term have lost compounding power.

The subscription fee is only for those that want the upgraded services above and beyond the message board. Otherwise, they would have full access and use of the message board as they do now. So nothing would change for the majority of users or new users. Cheers! Good that subscription is actually a "freemium" model and doesn't deter more voices from being on the board. Sanjeev, you've done a great job with this Board and I've often wondered about the "why" behind all the effort spent. If one can align incentives for participants and for organizers, there will be a path forward. Monetizing it means it will be sustainable. Otherwise, volunteer efforts whither away and quality decreases.

Parsad, I support the move to monetize the site. Otherwise it is not sustainable. However, charging for a subscription probably doesn't get you that many $s . Risk is that it dramatically decreases engagement amongst current users and proves to be a barrier for entry to future users. It's not even the $ amount - just the fact that it's not readily available. CEO of Shopify recently said that good businesses take things that are already possible and make it 10x easier - ie reduce friction. Don't have an answer right now as to how to monetize but will think about it.

Agree, not easy when one isn't conforming to how the rest do it. Basic principle is the truth will always be easier - just stick to it. If you want to add some humour and shock people, it's still ok to stick to the truth: "I made a lot of money in the markets, and retired at 37" - that will impress some and force them to move on. However, it sounds like you are in transition. Apparently, transition is about getting from you are to where you want to be. So make the jump. Figure out where you want to be in 10 years and start incorporating that in your language today.

Recorded conversation with Francis Chou and Mohnish Pabrai at a Harvard business class :http://chaiwithpabrai.libsyn.com/mohnish-pabrai-lecture-at-harvard-university-april-7-2020 ‪Neat to see evolution of thinking in Value Investing as Chou moves from philosophy of picking cheap stocks to picking companies that are actually growing. Prediction is returns for investors in his fund will be better over next decade than past decade. ‬...long podcast - 2 hrs....Chou has bought Appl & Google...They both speak about a transition in philosophy of buying companies with growing earnings rather than looking for companies that are only trading at a discount to intrinsic value.

Any explanation why FFH.TO close up >9% on a day when the TSX was up just over 3% ? Can't be the AGM as the stock was down yesterday...time for people to digest the news from AGM that they bought corp bonds at 4%, insurance is doing well and they dipped into XOM & GOOG? Buybacks?

For those not on the call, here is a summary of what I took away from the call: • Prem remains very optimistic • Fair and Friendly culture are the deep value pillars of FFH that will see it through bumps • Lots of focus on results over 34 years of company existence and being part of the 1% to increase share price by >15%/yr • Value investing has not done well over past 10 years but over 50+ years it has and will come back in vogue • Admitted disappointed at what Covid19 crisis has done to FFH share price • Nil to acknowledge 10 & 20 year results below index ( I think Watsa considers these shareholders to be shorter term holders) • Insurance business is doing well and has tailwinds • Equity portfolio will perform better going forward than when Watsa managed it • Due to large spread, have sold treasuries to buy high quality corp bonds yielding on average 4% with duration of 4 years • Buy backs: FFH is undervalued and buy backs are good but to me it appeared that Watsa suggested they were a 3rd level priority after ensuring the financial position was solid and taking advantage of opportunities in insurance markets. He did say they do buybacks and will continue to do so but are not going to telegraph when. • Insurance is the crown jewel in the holding company • During Covid19 downturn, FFH bought some XOM at a dividend yield of 10% and bought Alphabet

Does anyone know timing of FFH AGM this year? Was originally scheduled for April 16th. Their website says it will be webcast but no further details as how to sign up or time of event. Would like to block the time off on my calendar. thanks,

I'm advocating for people to be strict about social distancing and help "Bend the Curve". If your work is vital to stopping the pandemic, thank you for what you do - whether it's front-line healthcare or keeping grocery stores open for us to eat. If your work is not VITAL to helping stop the pandemic, please be strict in social distancing and help Bend the Curve so that hospital system is not overrun. If hospitals can just run at full capacity and not be overwhelmed, healthcare can take care of people. If overrun, so many people don't get access to care.

Yes, distribution of Covid is very heterogeneous currently in the US. I also know that Salt Lake City for example has very few cases admitted. However, the fact that Jacksonville or Salt Lake City doesn't have a big problem right now, doesn't diminish the problem in NYC and the threat. As of last night, the US now has the largest number of reported Covid cases in the world! at over 81,000. By the end of the day today, it will be likely over 100,000. The whole world is thinking of only Covid. I'd advocate that we as individuals think of what we can do to help with the crisis. There are frontline healthcare workers taking best care of humans, others are working to keep grocery stores open for us to eat, bus drivers are taking emergency workers to frontlines....I would not want to diminish the good of anyone's career. However, If the work you do is not VITAL to fighting the epidemic, what we as individuals can do to help contribute to society is SOCIAL DISTANCING to help BEND THE CURVE.

Cherceza - You are correct that thousands die annually from the flu. We know that resulting pneumonia is one of the largest Cause of Death for the elderly. The point you are missing here is how contagious COVID 19 is and the effect on the healthcare system. The worrisome aspect is healthcare systems being overrun. When that happens, normal lifesaving treatments for heart attacks, strokes, cancer etc... are compromised. In order to create capacity for Covid patients, hospitals across N. America have cancelled non emergency surgery - so if you are waiting to have heart bypass surgery - you will wait rather than having treatment. The only way currently to stop the system from being overwhelmed is to social distance.

I was on a conf call today with a surgeon from Brooklyn who said their one hospital has 180 Covid patients admitted with 90 of them on a ventilator in the ICU - their previous capacity for ventilated patients was 60 prior to emergency expansion. Means that other sick people just won't get care. There's 2 things people can do: provide emergency services (healthcare, fire, police, stock grocery stores so that people can eat) or do your part to help society by "bending the curve" and be strict in social distancing. If one can change the doubling time from 5 days to 7 days or 10 days or longer, it will prevent the entire healthcare system from being overrun. Currently most hospitals in N. America are not doing elective surgeries - keeping the beds open for the oncoming onslaught - which has arrived in NYC already.

The problem isn't the mortality rate, it's the virulence - how many people get infected and how fast. If current doubling time in your part of the world is 4-5 days (number of cases double every 4 to 5 days), in approx 6 weeks there will be roughly 1024x more cases (10 doubling times) . So if your region has 500 cases now, in 6 weeks it will be 500,000. Some people will die. Some young people will die too. However, the point is that the hospital system will be overrun. That means people who need usual life saving type treatments (heart attacks, strokes, cancer therapy....) won't be able to be accommodated. Article on the math of pandemic - by using simple math and data available in the news the author concluded on March 12 that social distancing was mandatory to flatten the curve: https://medium.com/@Jason_Scott_Warner/the-sober-math-everyone-must-understand-about-the-pandemic-2b0145881993

I'm aware of previous work by Ioannidis and it is high quality. While he hits the mark in saying we are making decisions without data, this article is off side in that he offers no proposed solution. We can see a tsunami coming off shore. The only tool we have to possibly prevent a disaster is social distancing. This article https://www.statnews.com/2020/03/18/we-know-enough-now-to-act-decisively-against-covid-19/ offers a friendly response to Ioannidis' and conclude with "no choice but to buy time with social distancing"

Investmd....I understand your frustrations totally. I have studied Fairfax in-depth for well over 20 years and invested in the shares almost as long. I concluded a few years ago that something was very very wrong. Despite all of my considerable efforts I could not get to the bottom of the problem. in the end I concluded it was not one or two problems but a myriad of problems that could not be corrected/overcome. As a result I started to sell off a portion of the shares I owned until I reduced the overall share position to a much smaller portion of my overall portfolio. I can assure you that I never looked back. My only regret....not selling all of the shares that I owned. I enjoyed going to the annual meeting and related activities which included meeting up with old friends that I had met along the way but let's get serious these reasons are not enough to keep me invested in the stock. So for what its worth....start selling off your Fairfax holdings. It will hurt to do so but in the end you will not regret it. Others will disagree with this recommendation but a growing number will agree. Good luck! Bearprowler, thank you very much for sharing your experience and words of support. I've been following and accumulating shares in FFH for 15 years and going to the meetings...and probably drinking the KoolAid. I hadn't thought of selling at these levels. However, your advice resonates. Thanks.

Hmmm...Canada does have an advisory against international travel, does have recommendation for self quarantining for 2 weeks post international travel, doctors have been requested not to travel abroad so that they can be present to help treat, governments have mandated that schools be closed in New Brunswick, Quebec, Ontario & Manitoba, there is no formal entertainment going on - restrictions on gatherings have been placed...@ the grassroots level in Canada I find no one is shaking hands, meetings are being cancelled, there is alcohol based sanitizer everywhere.... Hospital capacity is what it is. However there are plans in place for closing OR's and turning them into ICUs if necessary. Bank of Canada has slashed interest rates, government has issued liquidity. Overall, from what I can see Canada is doing an exemplary job. Re the bolded part: investmd, I don't know where you live. Here in Ottawa, our surgery wait times are already unacceptably long. Turning ORs into ICUs will make them even longer. Hip and knee replacements can wait, I guess. What about cancer? The Ottawa Hospital is struggling to meet Ontario target times for certain types of cancer surgeries. My understanding is that OR availability is the main bottleneck. You seem to think that turning ORs into ICUs is not a big deal. Why is that? Clarifying, yes, turning ORs into ICUs is a big deal. However, in case of pandemic the most urgent have to be taken care of first. Elective surgery may be cancelled for many reasons including the fact that they don't want people coming in for elective surgery to get infected with the coronavirus. So outpatient procedures may continue, but procedures requiring hospital stay may be cancelled. We are not there yet. My point is that Canada is doing an excellent job of trying to be prepared and flattening the curve. So far so good.

Hmmm...Canada does have an advisory against international travel, does have recommendation for self quarantining for 2 weeks post international travel, doctors have been requested not to travel abroad so that they can be present to help treat, governments have mandated that schools be closed in New Brunswick, Quebec, Ontario & Manitoba, there is no formal entertainment going on - restrictions on gatherings have been placed...@ the grassroots level in Canada I find no one is shaking hands, meetings are being cancelled, there is alcohol based sanitizer everywhere.... Hospital capacity is what it is. However there are plans in place for closing OR's and turning them into ICUs if necessary. Bank of Canada has slashed interest rates, government has issued liquidity. Overall, from what I can see Canada is doing an exemplary job.

Points I took away from FFH 2019 Annual Letter: 1. The letter lacks integrity. Starts with 2019 was a great year for FFH and continues mostly with unbridled optimism throughout. Reality is shareholder return for 5 & 10 years have been terrible - he doesn't openly admit it and doesn't admit frustration with it and lay out a plan to change it. If one cares for their shareholders, he would be more contrite about the returns he has delivered. 2. Ends letter with : "Over our 34-year history, we have always operated at Fairfax with a small team which, with great integrity, team spirit and no egos, protects our company from unexpected downside risks and which takes advantage of opportunities when they arise". Well, after reading a decade plus of his annual letters, I've changed my mind - he's not showing integrity/honesty and his writing has consistently exhibited egotistical behaviour and FFH has not been able to take advantage of opportunities like others have. 3. Insurance business is doing very well, has improved significantly and is successfully generating no cost float and is the jewel of FFH 4. I’m glad that he has openly admitted that BB, Exco, and Resolute were mistakes – he is more open about this today than in the past 5. Believes, “India is the best country to invest in long term”. OK, but no explanation as to why. Not genuine. 6. Believes Modi re-election will turn around Indian economy. Again, no explanation as to why especially given that was the thought at time of Modi’s first election and it didn’t come to fruition. Again not genuine in his writing. 7. Over 5 years intrinsic value has compounded by <5%/yr & share price <1%/yr. Over 10 yrs: IV - 3.2%/yr & share price at 5.2%/yr. Prem’s only comment on stock price is : “In last 4 years stock price has not gone up with intrinsic value, but it will happen again” - with no explanation. What about the fact that IV is only up 3.2%/year over 10 years? 8. On investments: “shows that Fairfax’s investment results have been consistently very good since inception, with the exception of the 2011 – 2016 time period, when we treaded water” - how can he say “consistently very good” as investment returns over 33 years have been 8%/yr and over past 10 years have been <5%/yr ? Isn’t the point of his investing prowess to do better than the index? How can he say “very good”? 9. “So when the correction happens (and it may be happening as we speak), we expect value stocks to provide better protection on the downside”. A week after the report comes out, we are in a correction. From what I see, when there is a correction, everything goes down – BRK & FFH are down just as much as tech stocks. 10. Committed to buying back shares over next 10 years Being optimistic is one thing. Not being in touch with reality and getting people to invest in you/your business by shrilling dishonest optimism is getting to be on the Ponzi scheme side of things. As a long term shareholder, I am so disappointed in this man. @Sanjeev: You have been a big supporter and believer in Prem Watsa’s honesty and integrity. This website's name is in homage to FFH. Watsa has shown his belief in you and invested in you. I’d appreciate your thoughts to above comments. Would also love it if there was a way to get FFH to reply.

Noticed this post was started in 2013 and 7 years later it's still on sale! Kind of like Fairfax financial. Ouch. Compared to 2014, WTI is down 50%, whilst a lot of Canadian oil patch equity is down >90%. Companies are still paying dividends. Thesis: IF companies are able to survive at WTI of $50, then equity price will rise substantially when WTI price rises. In the meanwhile, I bought a basket of TOU, PEY, HSE, VET, ARX. They are paying out an average dividend yield of 7-8% at today's prices. World oil consumption is still increasing. Downside risk is that world reaches peak oil consumption & wti doesn't spike. Then oil producing countries may try to monetize their residual assets and open the taps...

Unfortunately 2019 only exacerbated the underperformance - 1.3% return for Chou Associates in a year when markets were up 25-30%. Five year annualized return is negative 1.3%. What boggles my mind is that he is a very bright investor - much more astute than I - and still has returns like that. What bothers me is that he doesn't explain in his letters why his returns are so much below expectations. 10 yr annualized 5.5% & 15 yr annualized of 4.5%. After over a decade in the fund, I did exit. However, I hope for him, his thesis and his investors that he does have a really big bounce back year soon.

Above suggestions of Thinking in Bets & Education of a Value investor are books I have enjoyed. For 2019, my most interesting reads were: Fiction : A gentleman in Moscow - read the whole book with a bemused smile on my face. Favourite line : when protagonist was asked what his profession was he replied "It is not the business of gentlemen to have professions". Non Fiction: Deep Medicine by Eric Topol - role of AI in healthcare of tomorrow and LifeSpan: Why we Age and Why we don't have to by David Sinclair - leading Harvard biologist on why ageing is a disease and how it can be treated.

Thanks. The price history at close for past 5 years that you shared, suggests if one was holding since Dec 2014, annual return has been about 2%/yr (from dividends) in generally a bull market. Wow! Will take a substantial run up in price to justify for those of us who have held.

Dazel: thanks for starting this thread at the beginning of the year and stating your conviction. It's 12 months later and I'm curious as to whether there have been adjustments to your thought process. In another post in January you stated "2019 is all about earnings....good or bad. It is time for Fairfax to perform...if they do not I will accept it and move on. If it sounds like a broken record I appreciate the skepticism from all..." In some ways FFH has performed - insurance side has done well, Seaspan & Eurobank - couple of their largest equity holdings have done well in past 12 months, BUT FFH stock price is essentially flat and I believe selling below book value. So what are your thoughts to close out the year?