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Luckyone77
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Is it just me or does Fairfax always seem to be squandering the float on buying cigar butts? I too often get the impression they act like it's a craps table in Vegas. Maybe this'll work out and maybe it won't but shouldn't they be buying stuff with enduring quality and value with a more certain outcome instead of all these weird "fingers crossed" deals with hair all over it? It's like they're always swinging for the fences instead of just going for singles and doubles. SD has to be one of the worst investments I've ever seen.

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Lucky,

 

Is it just me or does Fairfax always seem to be squandering the float on buying cigar butts? I too often get the impression they act like it's a craps table in Vegas. Maybe this'll work out and maybe it won't but shouldn't they be buying stuff with enduring quality and value with a more certain outcome instead of all these weird "fingers crossed" deals with hair all over it? It's like they're always swinging for the fences instead of just going for singles and doubles. SD has to be one of the worst investments I've ever seen.

 

You seem to be continually asking the same rhetorical question about Fairfax every few months for the past few years on this board.

 

I'm guessing the answers / opinions of those responding to you, and also your own opinion won't be changed by whatever is said... so I'll refrain other than to ask you to go look back at your own posting history, you will likely find the same answers in responses that you do today.

 

Best,

 

Ben

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And the answer to the question is what then, Ben? And it isn't a rhetorical question.

 

Yes, I STILL don't understand how people so adept at investing could have bought SD and, yes, it sticks in my craw but it still seems the pattern that led them there persists today. Why do they continue to buy long shots instead of a more Buffet like approach of buying great companies at a fair price instead of the other way around? At what point do they stop trying to be so clever and just buy great stocks? Given their size, I would think that there would be opportunities for them that would be too small for Buffet but too big for most others.

 

It just seems to me that they've finally gotten their act together on insurance and are building something significant but are still finding their philosophical way when it comes to investing the float. We all know how Buffett evolved his thinking after the influence by Munger of buying quality assets. Why reinvent the wheel?

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And the answer to the question is what then, Ben? And it isn't a rhetorical question.

 

The answer is that Fairfax has *never* been a buyer of "quality" in the Buffett terms (sure, after 2009 they kind of talked briefly about holding WFC / JNJ, but that's the only stretch I'm aware of, and they stopped that after only a couple of years).  So your question is simply a misunderstanding of the business you supposedly own shares in.  They have been buying beaten up, second tier equity and distressed debt forever.  Shit Fairfax's origins are Prem buying a super struggling insurer...

 

So it's not like their strategy has changed, so your question doesn't make sense.  "It seems like Fairfax is buying low quality speculative, etc etc."  My answer, by your definition, "yes, yes they are."

 

If you do not like, that is fine, many don't like it and they are all very reasonable people.  What isn't reasonable is for you to continue to ask the same question over and over expecting the response to be different.  You can buy, sell or hold, but... your questions aren't furthering your understanding or changing anything.

 

Don't invest in a frog, and hope it turns magically into a princess.  The answer to your question is that FFH isn't a 'princess' and likely won't ever be.

 

Hope that is clear.  My frustration stems from the fact that I can't actually believe you don't get everything I said above, so I am actually curious why you post (only on Fairfax) over the last 3 years, and seem to continually forget that this has already been said before.

 

I just suggest you sell your shares if their strategy is so distressing... a few weeks back $580 was attainable which was a very rich price.

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I've never owned FFH for an extended period of time mainly because I disagree with his macro outlook, and when I've agreed there just seem to be better bets out there. Had nothing to with his investing acumen. Watsa seems to suffer from the same thing a lot of fund managers do, and thats an inability to reverse course when they're clearly on the wrong one. It's what makes somebody like Tepper head and shoulders above everyone else. Guy isn't afraid to do an immediate reversal if his gut tells him thats where the trend is. How somebody like Watsa, Chanos or Faber have been making bearish bets now for over half a decade is at this point just plain stubborn.

 

That said, his current strategy isn't unheard of. Quite a few PMs I know do the same thing when overwhelmingly bearish with their macro outlook. Diversify, hold big portions of cash, and then make smaller bets on real long shots figuring if you're wrong(on a macro basis) they tend to do extremely well in a bull market, if your bearish inclination is correct, the bulk of your portfolio is already adequately positioned.

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And the answer to the question is what then, Ben? And it isn't a rhetorical question.

 

The answer is that Fairfax has *never* been a buyer of "quality" in the Buffett terms (sure, after 2009 they kind of talked briefly about holding WFC / JNJ, but that's the only stretch I'm aware of, and they stopped that after only a couple of years).  So your question is simply a misunderstanding of the business you supposedly own shares in.  They have been buying beaten up, second tier equity and distressed debt forever.  Shit Fairfax's origins are Prem buying a super struggling insurer...

 

So it's not like their strategy has changed, so your question doesn't make sense.  "It seems like Fairfax is buying low quality speculative, etc etc."  My answer, by your definition, "yes, yes they are."

 

If you do not like, that is fine, many don't like it and they are all very reasonable people.  What isn't reasonable is for you to continue to ask the same question over and over expecting the response to be different.  You can buy, sell or hold, but... your questions aren't furthering your understanding or changing anything.

 

Don't invest in a frog, and hope it turns magically into a princess.  The answer to your question is that FFH isn't a 'princess' and likely won't ever be.

 

Hope that is clear.  My frustration stems from the fact that I can't actually believe you don't get everything I said above, so I am actually curious why you post (only on Fairfax) over the last 3 years, and seem to continually forget that this has already been said before.

 

I just suggest you sell your shares if their strategy is so distressing... a few weeks back $580 was attainable which was a very rich price.

 

I get all that. I do. But it still doesn't explain why they persist with buying junk when quality wins the day in the long run. Tortoise vs Hare. Buffett figured it out. Judging by the declining share price, I assume some other people have taken your advice and are going elsewhere. I should have done the same as I've owned it for years. Hopefully, Watsa's instincts prove correct and I get rich while I wipe the egg off my face. It wouldn't be the first time.

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FFH has a different style from the GARP investments that Berkshire makes.  One isn't necessarily better than the other and the expected value for the FFH portfolio might still be higher than the BRK portfolio despite being wrong on more investments.

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lucky, I think you raised valid point.

 

One thing is to buy junk (ripe for bankruptcy) and another thing is to stay fully hedged during one of the greatest bull markets of our lifetime.

 

One isn't necessarily better than the other and the expected value for the FFH portfolio might still be higher than the BRK portfolio despite being wrong on more investments.

 

You got it all wrong!

 

Actually, though the hedging hasn't worked out, I still don't disagree with his thesis there. This whole economy doesn't add up and if you take government spending and money printing out of the equation GDP is probably about zero or a first cousin to it. That's why I kept my money with him...protection. So far it's been a mistake but one I don't regret. It's some of the investments they've made that are the real head scratchers. What's the point of protecting on the downside and then throwing a half billion or so away on a Sandridge or some of the other questionable stocks or investments. Defeats the purpose.

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I don't quite get why people are so negative on Performance Sports. Bauer is a dominant brand in hockey equipment. If you know hockey, you know Bauer. Likewise with Easton and baseball.

 

Sports equipment manufacturing isn't a beautiful business, but it's certainly no cigar butt. From what I've gathered, they went under because of high debt and poor management, not necessarily poor economics.

 

I haven't looked at either company extensively, but I'm not sure why this would be so different than Brooks shoes, which is owned by BRK, for instance.

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I don't quite get why people are so negative on Performance Sports. Bauer is a dominant brand in hockey equipment. If you know hockey, you know Bauer. Likewise with Easton and baseball.

 

Sports equipment manufacturing isn't a beautiful business, but it's certainly no cigar butt. From what I've gathered, they went under because of high debt and poor management, not necessarily poor economics.

 

I haven't looked at either company extensively, but I'm not sure why this would be so different than Brooks shoes, which is owned by BRK, for instance.

 

The problem is that this has been true for a long time and for whatever reason, Bauer has just never worked out for anyone. Hockey is growing, especially in the US. The margins shouldn't be terrible. Yet with Bauer, my outside perspective is that they've made too many poor acquisitions that weren't really necessary and if anything diminished their brand. Nike couldn't even make them work.

 

 

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I don't quite get why people are so negative on Performance Sports. Bauer is a dominant brand in hockey equipment. If you know hockey, you know Bauer. Likewise with Easton and baseball.

 

Sports equipment manufacturing isn't a beautiful business, but it's certainly no cigar butt. From what I've gathered, they went under because of high debt and poor management, not necessarily poor economics.

 

I haven't looked at either company extensively, but I'm not sure why this would be so different than Brooks shoes, which is owned by BRK, for instance.

 

The problem is that this has been true for a long time and for whatever reason, Bauer has just never worked out for anyone. Hockey is growing, especially in the US. The margins shouldn't be terrible. Yet with Bauer, my outside perspective is that they've made too many poor acquisitions that weren't really necessary and if anything diminished their brand. Nike couldn't even make them work.

 

Immigrants don't tend to enrol their kids in hockey.  Boomers are going to stop playing soon.  It's a shitty business.

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Performance Sports have made some decisions that have failed in a big way. They overpaid big time for Easton (and funded it largely with debt). Opening stand alone Bauer stores alienated their long term retail partners; at one of the the largest hockey shops in Vancouver Bauer skates have gone from 80% of the facings to 50% (with CCM being the big winner). They also had a couple of their largest US customers declare bankruptcy. And hockey and baseball markets are stagnant to declining (overall). Mix it all together and you have a perfect storm. Will Bauer and Easton brands survive? Of course. Will they regain market share they had in hockey and baseball a couple of years ago? Not likely.

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I don't quite get why people are so negative on Performance Sports. Bauer is a dominant brand in hockey equipment. If you know hockey, you know Bauer. Likewise with Easton and baseball.

 

Sports equipment manufacturing isn't a beautiful business, but it's certainly no cigar butt. From what I've gathered, they went under because of high debt and poor management, not necessarily poor economics.

 

I haven't looked at either company extensively, but I'm not sure why this would be so different than Brooks shoes, which is owned by BRK, for instance.

 

The problem is that this has been true for a long time and for whatever reason, Bauer has just never worked out for anyone. Hockey is growing, especially in the US. The margins shouldn't be terrible. Yet with Bauer, my outside perspective is that they've made too many poor acquisitions that weren't really necessary and if anything diminished their brand. Nike couldn't even make them work.

 

Immigrants don't tend to enrol their kids in hockey.  Boomers are going to stop playing soon.  It's a shitty business.

 

Rogers was foolish to pay $5.2 billion for the hockey tv rights.

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I don't quite get why people are so negative on Performance Sports. Bauer is a dominant brand in hockey equipment. If you know hockey, you know Bauer. Likewise with Easton and baseball.

 

Sports equipment manufacturing isn't a beautiful business, but it's certainly no cigar butt. From what I've gathered, they went under because of high debt and poor management, not necessarily poor economics.

 

I haven't looked at either company extensively, but I'm not sure why this would be so different than Brooks shoes, which is owned by BRK, for instance.

 

The problem is that this has been true for a long time and for whatever reason, Bauer has just never worked out for anyone. Hockey is growing, especially in the US. The margins shouldn't be terrible. Yet with Bauer, my outside perspective is that they've made too many poor acquisitions that weren't really necessary and if anything diminished their brand. Nike couldn't even make them work.

 

Immigrants don't tend to enrol their kids in hockey.  Boomers are going to stop playing soon.  It's a shitty business.

 

Rogers was foolish to pay $5.2 billion for the hockey tv rights.

 

 

There will be a big TV market for a very long time, but that's entirely separate from how many people actually will be playing the sport over the coming decade (just as there's a huge football audience and NASCAR audience, despite the fact that there are virtually zero recreational football leagues or car racing leagues).  Whether $5.2B was a good price or a terrible price, is impossible to say.

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I don't quite get why people are so negative on Performance Sports. Bauer is a dominant brand in hockey equipment. If you know hockey, you know Bauer.

 

It's almost as if hockey equipment has become commoditized. You walk in to any hockey shop or shop online, how do you differentiate between any of the brands? When Easton first came out with the Synergy it was a game changer, but now you can get a composite stick off ebay not very different than that of the big brands for $50. I had to look up what brand Crosby and Ovie are using.

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I get all that. I do. But it still doesn't explain why they persist with buying junk when quality wins the day in the long run. Tortoise vs Hare. Buffett figured it out.

 

I think Buffett actually compounded at a faster rate when he was doing cigar-butts.  Part (not all) of his conversion to quality was driven by the fact that he couldn't do cigar butts when he got to a certain size.  I am sure that his "guarantee" that he could do 50% CAGR with smaller sums of money isn't based on compounding quality.  Cigar butts is a perfectly sound way of investing, even if it hasn't worked recently (and few value managers have done well recently). 

 

If quality was the only way to go, we'd all do it, and quality would get overvalued.

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I get all that. I do. But it still doesn't explain why they persist with buying junk when quality wins the day in the long run. Tortoise vs Hare. Buffett figured it out.

 

I think Buffett actually compounded at a faster rate when he was doing cigar-butts.  Part (not all) of his conversion to quality was driven by the fact that he couldn't do cigar butts when he got to a certain size.  I am sure that his "guarantee" that he could do 50% CAGR with smaller sums of money isn't based on compounding quality.  Cigar butts is a perfectly sound way of investing, even if it hasn't worked recently (and few value managers have done well recently). 

 

If quality was the only way to go, we'd all do it, and quality would get overvalued.

 

When Buffet closed down his partnerships, he gave a nod to his new strategy that would seek out long-term quality holdings. He said himself that he expected returns to be lower without a commensurate reduction in risk.

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I get all that. I do. But it still doesn't explain why they persist with buying junk when quality wins the day in the long run. Tortoise vs Hare. Buffett figured it out.

 

I think Buffett actually compounded at a faster rate when he was doing cigar-butts.  Part (not all) of his conversion to quality was driven by the fact that he couldn't do cigar butts when he got to a certain size.  I am sure that his "guarantee" that he could do 50% CAGR with smaller sums of money isn't based on compounding quality.  Cigar butts is a perfectly sound way of investing, even if it hasn't worked recently (and few value managers have done well recently). 

 

If quality was the only way to go, we'd all do it, and quality would get overvalued.

 

When Buffet closed down his partnerships, he gave a nod to his new strategy that would seek out long-term quality holdings. He said himself that he expected returns to be lower without a commensurate reduction in risk.

 

Yup.  You buy quality and the cash flow runway is much longer, although the annualized return might be lower than constantly buying cigar butts for a few years worth of puffs. 

 

Also hard to get people who have spent their lives building a business, to sell it to someone who will sell it to someone else or break it apart...thus Buffett buying businesses forever resonates with owners of the types of businesses he wants to buy...they want their legacy to live forever.

 

Cheers!

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  • 2 weeks later...
Shareholders, Watchdog Attack Performance Sports Sale Plan

11:43 AM ET 11/16/16 | Dow Jones

By Peg Brickley

 

 

Performance Sports Group Ltd.'s plan to sell itself quickly in bankruptcy faces major opposition from U.S. bankruptcy watchdogs and blistering questions from shareholders.

 

Performance Sports, a provider of athletic gear, filed for chapter 11 bankruptcy protection Oct. 31 with plans to close on a $575 million buyout deal with its largest shareholder, Sagard Capital Partners, and ally Fairfax Financial Holdings Ltd. or a higher bidder, with a sale to close early next year.

 

The planned sale to Sagard is an insider deal, a transaction of a type that is "rife with the possibility of abuse," U.S. Trustee Andrew Vara wrote in a filing with the U.S. Bankruptcy Court in Wilmington, Del., which he monitors as an officer of the U.S. Justice Department. Mr. Vara faulted Performance Sports for failing to disclose earlier arrangements with Sagard, which was handed the lead bidding slot for the bankruptcy auction.

 

Sagard couldn't immediately be reached Wednesday to respond to the concerns raised by the U.S. trustee or comment on a protest coming from minority shareholders, who say there is a cloud of suspicion over Performance Sports' bankruptcy and its deal with Sagard.

 

Through a spokesman, Performance Sports wasn't immediately able to respond to the concerns, which surfaced Tuesday.

 

Trouble with the U.S. trustee and with shareholders is certain to snarl the smooth path to a sale for Performance Sports. Both objections question financial angles of the proposed deal: Mr. Vara balked at a $23.5 million package of bid protections for Sagard, and shareholders insisted Sagard is pocketing at least $160 million worth of value which rightfully belongs to them.

 

Shareholders are campaigning for an official committee to make sure the sale doesn't include a quiet deal to "buy and bury" potential legal claims against Performance Sports' leaders. They have asked that the sale process be slowed down while they gather information.

 

The maker of hockey, baseball and lacrosse gear was chased into chapter 11 bankruptcy in the U.S. and insolvency protection in Canada in the wake of regulatory probes into the accounting trouble that rendered it unable to file audited reports.

 

"Bad activity in the C-suite" pushed Performance Sports into bankruptcy, according to shareholders. Suspicions won't dissipate until Performance Sports provides audited financial reports or until the results of the probes become public. If damages are a possibility once the outcome of probes is known, shareholders want to be in position to collect to cover their losses, their lawyers said.

 

However, Sagard is buying unspecified legal rights, along with the business, that could include the right to sue or settle with any company officials that might be held to account for Performance Sports' accounting and regulatory stumbles.

 

In addition to the U.S. Bankruptcy Court, Performance Sports needs approval from the Superior Court of Justice in Ontario, which is overseeing insolvency proceedings in Canada.

 

Write to Peg Brickley at peg.brickley@wsj.com

 

> Dow Jones Newswires

 

November 16, 2016 11:43 ET (16:43 GMT)

 

Copyright © 2016 Dow Jones & Company, Inc.

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  • 2 months later...

BRUSSELS, Jan 25 2017 (Reuters) - The following are mergers under review by the European Commission and a brief guide to the EU merger process:

APPROVALS AND WITHDRAWALS

-- U.S. medical devices maker Abbott Laboratories to acquire U.S. diagnostics company Alere (approved Jan. 25)

-- Canada-listed holding company Fairfax and Sagard Holdings, a subsidiary of Power Corporation of Canada, to acquire joint control of sports good manufacturer PSG (approved Jan. 24)

 

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