FFH Results

[Stone19]

http://finance.yahoo.com/news/fairfax-financial-holdings-limited-first-210000073.html

 

Nice quarter Cheers

[naboo]

Corner of berkshire & fairfax becomes corner of Berkshire & Altius.  :)

[Liberty]

Corner of berkshire & fairfax becomes corner of Berkshire & Altius.  :)

 

I'll take that over the Corner of Berkshire & Sears ;)

[Guest Dazel]

 

 

http://www.bloomberg.com/news/2014-05-02/news-corp-to-buy-publisher-harlequin-for-415-million-in-cash.html?cmpid=yhoo

 

Another big win For Fairfax....these guys are good! Fairfax has been good to us this year!

 

Dazel.

[naboo]

First time in 15 years, we might see FFH.to at C$500

[giofranchi]

Q1 2014 Conference Call Transcript

 

 

Gio

fairfax-financial-holdings-Q1-2014-conference-call-transcript.pdf

[beerbaron]

Q1 2014 Conference Call Transcript

 

 

Gio

 

Too bad no questions were asked about their latest investment in Greece.

 

BeerBaron

[bluedevil]

Interesting disclosure that I don't believe has been previously disclosed:

 

On March 31, 2014 the company, through its subsidiaries, acquired a 40.0% interest in AFGRI Limited ("AgriCo") for cash consideration of $78.5. AgriCo is a leading South African agricultural services and foods group.

[Alekbaylee]

Interesting disclosure that I don't believe has been previously disclosed:

 

On March 31, 2014 the company, through its subsidiaries, acquired a 40.0% interest in AFGRI Limited ("AgriCo") for cash consideration of $78.5. AgriCo is a leading South African agricultural services and foods group.

 

Interesting. More on this here...

http://www.afgri.co.za/downloads/2014/AFGRI_goes_private_March_2014.pdf

 

 

[Grenville]

Nice color and good stuff. I like Fairfax building its portfolio across the globe in various niches like this where they can build a platform to invest more in a region.

[gary17]

Hello

Would any FFH shareholders still add to Fairfax at current price, which is about 1.3 book -

How expensive has it been in the past? Thanks

[ERICOPOLY]

Hello

Would any FFH shareholders still add to Fairfax at current price, which is about 1.3 book -

How expensive has it been in the past? Thanks

 

They (the shareholders you are asking) like the price if they choose to hold (unless they do so only for tax savings).  Otherwise, it's all too easy to sell and go to cash.  Just as easy in fact as having cash and buying the shares at the same price.

 

So how is that any differnt?  Buying vs holding?  Other than taxes and psychology, they are the same bullish sentiment.  Having cash and buying is basically the same vote of confidence as holding and not selling to raise cash (other than taxes and psychology).

[gary17]

 

You are the second person whosever explained to me like this. Spot on !  Thanks!

 

The other person was my dad when I asked him if I should sell my rim shares after it ran from 8 to 16 ... He said if you won't buy it at 16 then you should sell.

 

It's a difficult concept to grasp

 

Hello

Would any FFH shareholders still add to Fairfax at current price, which is about 1.3 book -

How expensive has it been in the past? Thanks

 

They (the shareholders you are asking) like the price if they choose to hold (unless they do so only for tax savings).  Otherwise, it's all too easy to sell and go to cash.  Just as easy in fact as having cash and buying the shares at the same price.

 

So how is that any differnt?  Buying vs holding?  Other than taxes and psychology, they are the same bullish sentiment.  Having cash and buying is basically the same vote of confidence as holding and not selling to raise cash (other than taxes and psychology).

[giofranchi]

 

You are the second person whosever explained to me like this. Spot on !  Thanks!

 

The other person was my dad when I asked him if I should sell my rim shares after it ran from 8 to 16 ... He said if you won't buy it at 16 then you should sell.

 

It's a difficult concept to grasp

 

Hello

Would any FFH shareholders still add to Fairfax at current price, which is about 1.3 book -

How expensive has it been in the past? Thanks

 

They (the shareholders you are asking) like the price if they choose to hold (unless they do so only for tax savings).  Otherwise, it's all too easy to sell and go to cash.  Just as easy in fact as having cash and buying the shares at the same price.

 

So how is that any differnt?  Buying vs holding?  Other than taxes and psychology, they are the same bullish sentiment.  Having cash and buying is basically the same vote of confidence as holding and not selling to raise cash (other than taxes and psychology).

 

This imo makes no sense at all… there are a lot of reasons why someone might just hold a business. In fact the great majority of business owners just hold their businesses. But you are traders… Ok! Yet, I still believe the more you trade the more mistakes you will make in the end. So, please go on: jump in and out of FFH! Good luck to you! :)

 

Please, consider this: if the markets are in for a correction, FFH BV will explode (today’s BV multiple basically won’t matter!); if the markets keep getting more and more expensive, FFH will be a mediocre investment.

Therefore, why won’t you keep some funds invested in FFH and some other funds invested elsewhere much more correlated with the stock market?

Are you so sure about what the market is going to do next?! ;)

 

Gio

 

[Valuebo]

 

You are the second person whosever explained to me like this. Spot on !  Thanks!

 

The other person was my dad when I asked him if I should sell my rim shares after it ran from 8 to 16 ... He said if you won't buy it at 16 then you should sell.

 

It's a difficult concept to grasp

 

Hello

Would any FFH shareholders still add to Fairfax at current price, which is about 1.3 book -

How expensive has it been in the past? Thanks

 

They (the shareholders you are asking) like the price if they choose to hold (unless they do so only for tax savings).  Otherwise, it's all too easy to sell and go to cash.  Just as easy in fact as having cash and buying the shares at the same price.

 

So how is that any differnt?  Buying vs holding?  Other than taxes and psychology, they are the same bullish sentiment.  Having cash and buying is basically the same vote of confidence as holding and not selling to raise cash (other than taxes and psychology).

 

This imo makes no sense at all… there are a lot of reasons why someone might just hold a business. In fact the great majority of business owners just hold their businesses. But you are traders… Ok! Yet, I still believe the more you trade the more mistakes you will make in the end. So, please go on: jump in and out of FFH! Good luck to you! :)

 

Please, consider this: if the markets are in for a correction, FFH BV will explode (today’s BV multiple basically won’t matter!); if the markets keep getting more and more expensive, FFH will be a mediocre investment.

Therefore, why won’t you keep some funds invested in FFH and some other funds invested elsewhere much more correlated with the stock market?

Are you so sure about what the market is going to do next?! ;)

 

Gio

 

 

 

Huh? How are you deducting that they are traders because they think that holding a stock equals buying it in terms of sentiment towards said stock? There is only one rational reason to hold a business and that is because you assume it will be a profitable endeavour (by increase in IV or pay out of earnings). If you hold a business at a certain price that indirectly means you believe it's at least worth the price it is trading at. If you do not believe that, you should sell it.

 

 

Re FFH: No one is sure what the markets are going to do, which is exactly why some will argue that you shouldn't hold FFH simply because it could have additional value IF the markets crash. Some deem it more intelligent to buy those businesses that are already trading at a discount to IV and are not dependent on market events. It's an endless discussion.

[giofranchi]

Huh? How are you deducting that they are traders because they think that holding a stock equals buying it in terms of sentiment towards said stock? There is only one rational reason to hold a business and that is because you assume it will be a profitable endeavour (by increase in IV or pay out of earnings). If you hold a business at a certain price that indirectly means you believe it's at least worth the price it is trading at. If you do not believe that, you should sell it.

 

 

Re FFH: No one is sure what the markets are going to do, which is exactly why some will argue that you shouldn't hold FFH simply because it could have additional value IF the markets crash. Some deem it more intelligent to buy those businesses that are already trading at a discount to IV and are not dependent on market events. It's an endless discussion.

 

Tom,

I agree.

Unfortunately, this is only theory.

For instance, I think FFH is worth much more than 1.3 x BV, I don’t even think its BV makes any sense today… You, on the other hand might think about FFH differently… You see? I think FFH is trading well below IV, you might think it is trading above IV! Practice is much more complicated! ;)

 

What I think we might agree on follows: holding or buying FFH today, you partner with a great entrepreneur and his wonderful team of people, and you pay a fair price to do that.

This simple recipe in the long run tends to yield very satisfactory results.

 

Unless, of course, you want to jump in and out… then, good luck to you! ;D ;D ;D

 

Gio

 

[Kraven]

I say high, you say low

You say why and I say I don't know, oh no

You say goodbye and I say hello

[giofranchi]

I say high, you say low

You say why and I say I don't know, oh no

You say goodbye and I say hello

 

Well, I look for great people (at the helm of a predictable business), and then I stay with them.

I act only when the price is VERY low (averaging down), or when the price is VERY high (selling some, most often not my entire position!).

This way I reduce the number of choices I have to make as much as possible! ;)

 

Gio

 

PS

I am sure I know that one… Just cannot remember it right now… ::)

 

[gary17]

Beatles!

[gary17]

 

Thanks Gio

I'm not a trader but I do believe if the price is way too high it is not worth holding then I'd sell.

 

I like what prem is doing. But I don't understand why it took fifteen years to break 500 .. So people who bought the last time it was fifteen have only collected dividend. ... I'd argue fifteen is long term!

 

Huh? How are you deducting that they are traders because they think that holding a stock equals buying it in terms of sentiment towards said stock? There is only one rational reason to hold a business and that is because you assume it will be a profitable endeavour (by increase in IV or pay out of earnings). If you hold a business at a certain price that indirectly means you believe it's at least worth the price it is trading at. If you do not believe that, you should sell it.

 

 

Re FFH: No one is sure what the markets are going to do, which is exactly why some will argue that you shouldn't hold FFH simply because it could have additional value IF the markets crash. Some deem it more intelligent to buy those businesses that are already trading at a discount to IV and are not dependent on market events. It's an endless discussion.

 

Tom,

I agree.

Unfortunately, this is only theory.

For instance, I think FFH is worth much more than 1.3 x BV, I don’t even think its BV makes any sense today… You, on the other hand might think about FFH differently… You see? I think FFH is trading well below IV, you might think it is trading above IV! Practice is much more complicated! ;)

 

What I think we might agree on follows: holding or buying FFH today, you partner with a great entrepreneur and his wonderful team of people, and you pay a fair price to do that.

This simple recipe in the long run tends to yield very satisfactory results.

 

Unless, of course, you want to jump in and out… then, good luck to you! ;D ;D ;D

 

Gio

[Valuebo]

Garychen17: Prem's responsibility is value, not price.

[gary17]

So to the people who bought last time it was 500, did they not see the value get destroyed for at least fifteen years? I'd say the price is more or less an accurate measure of value most of the time...if there's additional value, I'd say it didn't get unlocked, and those people who dependent on that money , perhaps in their later years, didn't benefit from FFH shares !

[Uccmal]

Hi Gary, In 1998 FFh was trading at more than 3 x book - I think it peaked at $600.00.  The better measure is book value.  At one of the AGMs around then Prem stated that he thought the stock was over valued. 

 

Part 2: I am not sure I agree with your Dad's statement.  I might hold a stock at a price where I may not buy for an assortment of other factors - taxes, holding is already large enough, some degree of flexibility on estimates.  In the case of pure speculation such as RIM I agree with his/your assessment. 

 

Part 3: ( to all) I wont buy FFh at this price because I think one day I might get it at much lower prices.  In a major correction for example.  Today FFh is getting some tail winds.  I dont regret selling down hundreds of shares in the $400-420 range either.  The returns on the stock price have been 7-8% per year since then. 

 

I dont get this notion of why FFh has more intrinsic value than Book Value.  It strikes me as a bit of wishful thinking.  I also dont understand why FFh should trade higher than comparable peers: chubb, MKL, or WRB for example. 

 

So to the people who bought last time it was 500, did they not see the value get destroyed for at least fifteen years? I'd say the price is more or less an accurate measure of value most of the time...if there's additional value, I'd say it didn't get unlocked, and those people who dependent on that money , perhaps in their later years, didn't benefit from FFH shares !

 

The price was disconnected from the value.  Ironically, holding FFh shares when they reached nearly 600, only to watch them plunge taught me more about value investing than anything else.  FFh was a strong case against buying and holding without rationale. 

[Valuebo]

They paid more than two times book value on the assumption that the good times would continue forever. Yes, Prem did make some big mistakes back then but anyone who was buying at such a multiple was betting on returns that far exceeded market returns. Prem did relatively ok despite these errors but that just wasn't good enough to justify the '97-99 stock price.

 

Therein might lie a valuable lesson for people like Gio, who focus on management. Prem has always been very willing to show off the superb results of fairfax, which of course hasn't helped in tempering investor expectations.

 

Take this example from the 2000 letter:

 

Before discussing 2000 (easier to discuss the past than the present!), let me reiterate Fairfax's excellent long term track record which has been achieved

during the longest and toughest down-cycle in the history of the property and casualty business. Book value per share has compounded at 37% annually,

while our stock price, even after the recent declines in 1999 and 2000, has compounded at 33% annually. In Canada, there are only two companies, and in

the U.S., eight companies, whose stock price has compounded at a rate faster than ours over the past 15 years. Our company has earned an average 18.2%

on shareholders' equity since we began 15 years ago (below our objective of 20%, because of our low profits in the past two years) versus 9.4% for the 25

leading U.S. property and casualty insurers. There is only one property and casualty company in the U.S. and Canada that has had a higher return on equity

than Fairfax in the past 15 years and none has compounded book value or stock price as fast. You can see why we are so grateful for this long term record.

 

I've heard Gio talking about underpromising and overdelivering management in the VRX thread. Well, this seems to be quite the opposite! If this doesn't shake your beliefs, I don't know what will!

 

If his target was 20% annual return back then and it's 15% now (since some time I might add...), I'm truly wondering whether he'll even get close over the next 10 years. Given this, I would be selling now at 1.25xBV, expecting to do better myself.

 

 

[giofranchi]

 

Thanks Gio

I'm not a trader but I do believe if the price is way too high it is not worth holding then I'd sell.

 

I like what prem is doing. But I don't understand why it took fifteen years to break 500 .. So people who bought the last time it was fifteen have only collected dividend. ... I'd argue fifteen is long term!

 

Gary,

You simply cannot point at the fact in 1998 FFH got wildly overvalued - BV was little above $100, while price reached above $525 (see the chart attached) - and say who bought at that precise time only collected the dividends…

What does that observation have in common with today’s reality?? Imo NOTHING!

Today we are trading at 1.247 x BV, after 3 years BV has gone nowhere, even if IV imo has gone up a lot!

Like I have very often repeated, you must know what you own… Otherwise, selling is the right choice… but not because of the price! ;)

 

Gio

fairfaxchart.pdf