Questions to Prem at AGM

[shalab]

I wont be at the dinner or at AGM but hopefully someone can compile a Q/A for AGM and Sanjeev's events.

 

1. Since Prem is now officially a senior(?), what does succession at FFH looks like? Is it Prem's family or something else?

 

2. Is FFH still promising 15% annualized returns or is size a barrier? This one if for you Gio :-).

 

3. Is FFH investing in Dhandho holdings? (since it has invested in Dakshana )

 

4. What is size of HW and how much does each portfolio manager manage? (is it decision by committee? )

 

[giofranchi]

2. Is FFH still promising 15% annualized returns or is size a barrier? This one if for you Gio :-).

 

I will answer this one! ;D

Today FFH’s equity is $7.2 billion. If it compounds at 15% for the next 10 years, its equity will become $28.8 billion. If it compounds at 15% for the next 20 years, its equity will become $115.2 billion. At that point, if it sells for 1.4 x BV, its capitalization will be 1.4 x 115.2 = $161.3 billion. Little more than half what BRK is selling for today. Besides, at that time I guess there will be many trillion dollar companies (markets will be much larger)… Therefore, no, I don’t think size will be a serious obstacle to compound at 15% annual going forward. :)

 

Gio

[moody202]

2. Is FFH still promising 15% annualized returns or is size a barrier? This one if for you Gio :-).

 

I will answer this one! ;D

Today FFH’s equity is $7.2 billion. If it compounds at 15% for the next 10 years, its equity will become $28.8 billion. If it compounds at 15% for the next 20 years, its equity will become $115.2 billion. At that point, if it sells for 1.4 x BV, its capitalization will be 1.4 x 115.2 = $161.3 billion. Little more than half what BRK is selling for today. Besides, at that time I guess there will be many trillion dollar companies (markets will be much larger)… Therefore, no, I don’t think size will be a serious obstacle to compound at 15% annual going forward. :)

 

Gio

 

That tell's us it's feasible from Market Cap standpoint. However, does FFH still have the ability to compound at 15%?

[shalab]

2. Is FFH still promising 15% annualized returns or is size a barrier? This one if for you Gio :-).

 

I will answer this one! ;D

Today FFH’s equity is $7.2 billion. If it compounds at 15% for the next 10 years, its equity will become $28.8 billion. If it compounds at 15% for the next 20 years, its equity will become $115.2 billion. At that point, if it sells for 1.4 x BV, its capitalization will be 1.4 x 115.2 = $161.3 billion. Little more than half what BRK is selling for today. Besides, at that time I guess there will be many trillion dollar companies (markets will be much larger)… Therefore, no, I don’t think size will be a serious obstacle to compound at 15% annual going forward. :)

 

Gio

 

Gio - I would believe you if you were Prem  ;D. The hairy guy with snake skin belt may be you afterall - masquerading as Gio while your real name is Prem  ;D ;D

[giofranchi]

Gio - I would believe you if you were Prem  ;D. The hairy guy with snake skin belt may be you afterall - masquerading as Gio while your real name is Prem  ;D ;D

 

I take this as the best compliment I have received in years!! It is really flattering!! ;D

 

Thank you very much! ;)

 

Gio

 

[ERICOPOLY]

Question for Prem:

 

Are you still writing catastrophe insurance business in the United States?

 

Buffett says that Berkshire is writing almost none due to pricing.

[One World Trader]

2. Is FFH still promising 15% annualized returns or is size a barrier? This one if for you Gio :-).

 

I will answer this one! ;D

Today FFH’s equity is $7.2 billion. If it compounds at 15% for the next 10 years, its equity will become $28.8 billion. If it compounds at 15% for the next 20 years, its equity will become $115.2 billion. At that point, if it sells for 1.4 x BV, its capitalization will be 1.4 x 115.2 = $161.3 billion. Little more than half what BRK is selling for today. Besides, at that time I guess there will be many trillion dollar companies (markets will be much larger)… Therefore, no, I don’t think size will be a serious obstacle to compound at 15% annual going forward. :)

 

Gio

 

That tell's us it's feasible from Market Cap standpoint. However, does FFH still have the ability to compound at 15%?

 

Great Question - Is the goal of Fairfax Financial to continue to grow BV at 15 percent?

[valuesource]

Shalab,

I think the decision to make Paul Rivett president of the holdco was an indication of their confidence in his ability. I've known Paul for over 10 years and he's an outstanding lawyer, executive and investor. I think Fairfax's overall team approach to investment decisions will bode well for them in such a transition.  -vs

[Parsad]

I wont be at the dinner or at AGM but hopefully someone can compile a Q/A for AGM and Sanjeev's events.

 

1. Since Prem is now officially a senior(?), what does succession at FFH looks like? Is it Prem's family or something else?

 

2. Is FFH still promising 15% annualized returns or is size a barrier? This one if for you Gio :-).

 

3. Is FFH investing in Dhandho holdings? (since it has invested in Dakshana )

 

4. What is size of HW and how much does each portfolio manager manage? (is it decision by committee? )

 

 

I can give a pretty good idea for a few of these:

 

1.  Pretty obvious that succession planning started sooner at Fairfax than Berkshire.  While the old guard is still in place, Andy Barnard's position as chief of insurance and Paul Rivett's position of chief of pretty much anything outside of insurance, suggests that this may be a Tony Nicely/Lou Simpson like division of labor, with quality people working under each.  Andy would watch over all insurance subs, and Paul would lead Hamblin-Watsa and non-insurance businesses.  I would not be surprised to see a Watsa installed as a figurehead Chairman, not unlike Howard Buffett, to oversee and make sure the culture at Fairfax remains intact.

 

3.  Fairfax has not invested in Dakshana.  Prem's personal foundation, The Sixty-Three Corporation, invested the proceeds in Dakshana.  Still a good question...did Fairfax invest in the Dhandho raise?

 

4.  Core group is made up of I believe six committee members and Prem, plus one other person (Sam, Roger, Brian, Chandran, Paul, Wade and Prem, plus one that shall remain unnamed).  Francis Burke is also on the committee, but I don't think she looks after any capital directly, and focuses on Fairfax's trading.  They are each allocated several hundred million plus.  Very large investments get the final call by Prem.  Analysts also get a portfolio to manage, but much smaller.  You've got some of the smartest guys in the business working there together.  Going to be hard to replace them...not simply on skill, but their ability to work as a team. 

 

Cheers! 

[shalab]

Thanks Sanjeev - no wonder they say FFH blood flows in your veins  ;D. May be a couple more hard questions to Prem :)

 

5. How does Prem manage his time with FFH, chancellor of University of Montreal and BBRY

6. Where does he see BBRY a year from now, three years from now and 5 years from now?

7. Is tech FFH's circle of competence and will they make more tech investments in the future

8. With India  currency devaluation and persistent high inflation - what is the impact on Thomas Cook

9. Devaluation theory - they are playing both sides of the equation - why?. e.g;, invest in Greece, Ireland etc. at the same time take deflation/CPI hedges in the U.S.

10. While FFH is doing a good job cloning BRK annual meeting format - why is it held in the middle of the week? (typically coinciding with spring break)

 

 

I wont be at the dinner or at AGM but hopefully someone can compile a Q/A for AGM and Sanjeev's events.

 

1. Since Prem is now officially a senior(?), what does succession at FFH looks like? Is it Prem's family or something else?

 

2. Is FFH still promising 15% annualized returns or is size a barrier? This one if for you Gio :-).

 

3. Is FFH investing in Dhandho holdings? (since it has invested in Dakshana )

 

4. What is size of HW and how much does each portfolio manager manage? (is it decision by committee? )

 

 

I can give a pretty good idea for a few of these:

 

1.  Pretty obvious that succession planning started sooner at Fairfax than Berkshire.  While the old guard is still in place, Andy Barnard's position as chief of insurance and Paul Rivett's position of chief of pretty much anything outside of insurance, suggests that this may be a Tony Nicely/Lou Simpson like division of labor, with quality people working under each.  Andy would watch over all insurance subs, and Paul would lead Hamblin-Watsa and non-insurance businesses.  I would not be surprised to see a Watsa installed as a figurehead Chairman, not unlike Howard Buffett, to oversee and make sure the culture at Fairfax remains intact.

 

3.  Fairfax has not invested in Dakshana.  Prem's personal foundation, The Sixty-Three Corporation, invested the proceeds in Dakshana.  Still a good question...did Fairfax invest in the Dhandho raise?

 

4.  Core group is made up of I believe six committee members and Prem, plus one other person (Sam, Roger, Brian, Chandran, Paul, Wade and Prem, plus one that shall remain unnamed).  Francis Burke is also on the committee, but I don't think she looks after any capital directly, and focuses on Fairfax's trading.  They are each allocated several hundred million plus.  Very large investments get the final call by Prem.  Analysts also get a portfolio to manage, but much smaller.  You've got some of the smartest guys in the business working there together.  Going to be hard to replace them...not simply on skill, but their ability to work as a team. 

 

Cheers!

[Guest 50centdollars]

What's their thesis on Torstar?

[steph]

Regarding the 15% target.

Just one observation, I would like to have your opinions.

If you don't take into account FFH first year book value goes from 23% to 19% per year. And if you don't take into account the 3,4 first years, when FFH was very small, you get close to 15% on average.

The first decades were great, but when they started macro investing, even with the incredible gains of 2008&2009, performance has been disappointing.

So 15% seems a though target if they don't stop 'macro investing'.