Prem Buying - WoW!

[ValueMaven]

Announcement just hit - Prem has acquired about $150m worth of Fairfax shares in the open market!!  Way to step up!!  He is now calling Fairfax ridiculously cheap. 

[StubbleJumper]

In fairness to this forum's members, TwoCities and others called it cheap 6 or 7 weeks ago. 

 

 

SJ

[Bryggen]

Not sure how to interpret that. You rarely see CEO shares purchases announced by a press release. You usually see it through the regulator flings. While this is by any mean a positive event, I feel it is being emphasized to encourage the share price to appreciate. A move out of desperation at a time where share price took a beating the past month or so.

 

I would be curious to hear from our experienced members.

 

Maybe I am reading too much into it....

 

Maybe nothing more than an actual good news!

[Parsad]

Not sure how to interpret that. You rarely see CEO shares purchases announced by a press release. You usually see it through the regulator flings. While this is by any mean a positive event, I feel it is being emphasized to encourage the share price to appreciate. A move out of desperation at a time where share price took a beating the past month or so.

 

I would be curious to hear from our experienced members.

 

Maybe I am reading too much into it....

 

Maybe nothing more than an actual good news!

 

Are you kidding me?!  The CEO of the company puts $150M of his outside money into Fairfax and you think it's an act of desperation.  A bunch of us said that it was dirt cheap back around late March, early April, and we backed the truck up.  Now the CEO is telling you the same thing and you still can't wrap your head around it.  I would stop worrying about Fairfax's price and go back and read Securities Analysis by Ben Graham.  This is a valuation and analytical issue, not a psychological one!  Cheers!

[petec]

Not sure how to interpret that. You rarely see CEO shares purchases announced by a press release. You usually see it through the regulator flings. While this is by any mean a positive event, I feel it is being emphasized to encourage the share price to appreciate. A move out of desperation at a time where share price took a beating the past month or so.

 

I would be curious to hear from our experienced members.

 

Maybe I am reading too much into it....

 

Maybe nothing more than an actual good news!

 

Are you kidding me?!  The CEO of the company puts $150M of his outside money into Fairfax and you think it's an act of desperation.  A bunch of us said that it was dirt cheap back around late March, early April, and we backed the truck up.  Now the CEO is telling you the same thing and you still can't wrap your head around it.  I would stop worrying about Fairfax's price and go back and read Securities Analysis by Ben Graham.  This is a valuation and analytical issue, not a psychological one!  Cheers!

 

+1

 

Most buys aren't publicised with a press release.

 

But most buys aren't $150m.

[Patient Investor]

I believe that Fairfax was required to issue a press release regarding the share purchases by Prem Watsa. Per the most recent information circular filed March 6 2020, the Sixty Two Investment Company owns 50,620 subordinate voting shares and 1,548,000 multiple voting shares, representing 41.9 percent of the total votes attached to all classes of shares and Prem Watsa, Chairman and CEO, controls Sixty Two and himself beneficially owns an additional 258,790 subordinate voting shares for a total of 42.5 percent of the total votes prior to the latest purchase. As an insider and a significant shareholder (only one over 10 percent) and as a material event they would be required to make the disclosure.

 

[Bryggen]

Not sure how to interpret that. You rarely see CEO shares purchases announced by a press release. You usually see it through the regulator flings. While this is by any mean a positive event, I feel it is being emphasized to encourage the share price to appreciate. A move out of desperation at a time where share price took a beating the past month or so.

 

I would be curious to hear from our experienced members.

 

Maybe I am reading too much into it....

 

Maybe nothing more than an actual good news!

 

Are you kidding me?!  The CEO of the company puts $150M of his outside money into Fairfax and you think it's an act of desperation.  A bunch of us said that it was dirt cheap back around late March, early April, and we backed the truck up.  Now the CEO is telling you the same thing and you still can't wrap your head around it.  I would stop worrying about Fairfax's price and go back and read Securities Analysis by Ben Graham.  This is a valuation and analytical issue, not a psychological one!  Cheers!

 

Take it easy on me! ;)  All I was trying to say is that I have never seen a PR issued to announced a CEO's purchases of the company's stock. This is rather an unusual event and I was questioning the purpose (if any) of doing it that way. I realized I may have used the wrong word (desperation). Thanks to Petec for pointing out the fact that the size of the purchase may be the reason it is announced through PR. That being said, that aside, it is great news for sure and we all (shareholders) benefit from that vote of confident Prem places in FFH as evidenced today with the nice pop in share price. Cheers!

[Xerxes]

Key point is that he is putting back money in the franchise worth 6-7 times his annual dividend that he takes out. This is not options/grants or no-cost money. At least I am happy to say that I got some lower than Prem did at $350 CAD.

 

Somehow I don’t think he is going to do the same thing for Fairfax India.

[TwoCitiesCapital]

In fairness to this forum's members, TwoCities and others called it cheap 6 or 7 weeks ago. 

 

 

SJ

 

Lol +1, though I didn't buy $150 million to prove it

 

Basically just replaced 1/2 of the position that I had closed back in 2018/2019 because I couldn't get the math to work at $500-600 USD. Much lower bar at sub-$300

[ValueMaven]

Good for Prem ... the more I thought about this - the more I liked it!!!!

 

I really wish WEB did something similar w/Berkshire.  IMHO Berkshire is cheaper then FFH

[Xerxes]

Not to over analyze this, but:

 

Can we make the statement that of all the investments that Prem has done either personally or through FFH in the past decade, this one has a high chance of success with risk-reward tilted toward the upside and with good margin of safety, I.e  a classical  B Graham deep value type, in a world where that framework seem antiquated.

 

Maybe bank of Ireland come close. Though that was before I was following FFH so I wouldn’t know much of it.

 

Atlas/Seaspan I see that more as a growth investment and not Grahamiah type.

[My Own Personal Hedge Fun]

I entered a limit order to sell my Fairfax position at $370, just in case the price popped next day on this news.

 

Looks like I'm still holding. For now.

 

Debating if I'm holding just to get back to even, or because there is some actual value in the company and management.

[Parsad]

I entered a limit order to sell my Fairfax position at $370, just in case the price popped next day on this news.

 

Looks like I'm still holding. For now.

 

Debating if I'm holding just to get back to even, or because there is some actual value in the company and management.

 

If you didn't know when you bought, you might want to figure it out.  Cheers!

[ValueMaven]

Question: roughly how cheap was FFH trading when Prem bought? price to tangible BV?  price to normalized earnings?

 

[Parsad]

Question: roughly how cheap was FFH trading when Prem bought? price to tangible BV?  price to normalized earnings?

 

 

It looks like he bought at an average cost of $308 USD roughly or about $420-425 CDN per share.  It says he bought in the last few days before the press release...I would imagine it was around the 9th, 10th, 11th and 12th, where the stock was around $425 CDN or less and volumes rose.  If he is buying there, then I would imagine he is expecting a return of better than 15% annualized or more over the next few years.  Cheers!

[My Own Personal Hedge Fun]

If you didn't know when you bought, you might want to figure it out.  Cheers!

 

I decided to sell most of my position. I still have Fairfax India and willing to give that more time. Seems like they have a little more preference for quality assets in that portfolio, and I like India's 5-15 year growth potential.

[Parsad]

If you didn't know when you bought, you might want to figure it out.  Cheers!

 

I decided to sell most of my position. I still have Fairfax India and willing to give that more time. Seems like they have a little more preference for quality assets in that portfolio, and I like India's 5-15 year growth potential.

 

The irony is that Fairfax owns a good chunk of Fairfax India, and more importantly, generates really nice management fees and performance bonuses from Fairfax India.  If Fairfax India does exceedingly well, Fairfax will benefit handsomely.  If Fairfax India does average, Fairfax will still benefit from the fees.  I  would rather own the asset manager!  Cheers!

[undervalued]

So comparing FRFHF with JEF for the past 10 years, I own JEF for the past 10 or so years and it has been a value trap for that long. When comparing the 10 year chart with FRFHF, I sees similar behavior. Parsad, I think you also follow JEF and they have been trying to transform it these past two years. I have not been adding to JEF because I don't want to sink new money to it although I am still patient in holding and so far it has been a pretty big mistake as far as opportunity cost.

[bizaro86]

Question: roughly how cheap was FFH trading when Prem bought? price to tangible BV?  price to normalized earnings?

 

 

It looks like he bought at an average cost of $308 USD roughly or about $420-425 CDN per share.  It says he bought in the last few days before the press release...I would imagine it was around the 9th, 10th, 11th and 12th, where the stock was around $425 CDN or less and volumes rose.  If he is buying there, then I would imagine he is expecting a return of better than 15% annualized or more over the next few years.  Cheers!

 

The question then becomes is Prem expecting a 15% return a good predictor of future 15% returns.

[lessthaniv]

If you didn't know when you bought, you might want to figure it out.  Cheers!

 

I decided to sell most of my position. I still have Fairfax India and willing to give that more time. Seems like they have a little more preference for quality assets in that portfolio, and I like India's 5-15 year growth potential.

 

The irony is that Fairfax owns a good chunk of Fairfax India, and more importantly, generates really nice management fees and performance bonuses from Fairfax India.  If Fairfax India does exceedingly well, Fairfax will benefit handsomely.  If Fairfax India does average, Fairfax will still benefit from the fees.  I  would rather own the asset manager!  Cheers!

 

I think the upside on both is good. I give the nod to FIH.U as a deeper valuation opportunity but I own both!  ;D

[Bryggen]

Question: roughly how cheap was FFH trading when Prem bought? price to tangible BV?  price to normalized earnings?

 

 

It looks like he bought at an average cost of $308 USD roughly or about $420-425 CDN per share.  It says he bought in the last few days before the press release...I would imagine it was around the 9th, 10th, 11th and 12th, where the stock was around $425 CDN or less and volumes rose.  If he is buying there, then I would imagine he is expecting a return of better than 15% annualized or more over the next few years.  Cheers!

 

The question then becomes is Prem expecting a 15% return a good predictor of future 15% returns.

 

...and one to ask: ''is 15% a realistic expectation?''.

 

I am approaching a decade of holding FFH and I am seriously wondering if this is a realistic target as recent shareholders (10 years or less) are yet to benefit from such appreciation. It sure attracts new ( and naive) investors. I am tired of hearing the 30 years track record and while I focus on the last 10 years, I can only come to the realization that shareholders fell short of expectations.

 

yeah , yeah ... I am still around and will for quite some time, but I needed to vent and share ;)

[Parsad]

So comparing FRFHF with JEF for the past 10 years, I own JEF for the past 10 or so years and it has been a value trap for that long. When comparing the 10 year chart with FRFHF, I sees similar behavior. Parsad, I think you also follow JEF and they have been trying to transform it these past two years. I have not been adding to JEF because I don't want to sink new money to it although I am still patient in holding and so far it has been a pretty big mistake as far as opportunity cost.

 

Yes, we owned quite a bit of JEF in the fund before Covid...we sold about half when BAC fell to $18 and bought that.  We still own the rest of our JEF...it was bought around $18 as well a couple of years ago.

 

Like FFH, I think JEF is in great shape now, and has turned the corner.  Both should be trading at book value or better.  Cheers!

[Parsad]

Question: roughly how cheap was FFH trading when Prem bought? price to tangible BV?  price to normalized earnings?

 

 

It looks like he bought at an average cost of $308 USD roughly or about $420-425 CDN per share.  It says he bought in the last few days before the press release...I would imagine it was around the 9th, 10th, 11th and 12th, where the stock was around $425 CDN or less and volumes rose.  If he is buying there, then I would imagine he is expecting a return of better than 15% annualized or more over the next few years.  Cheers!

 

The question then becomes is Prem expecting a 15% return a good predictor of future 15% returns.

 

...and one to ask: ''is 15% a realistic expectation?''.

 

I am approaching a decade of holding FFH and I am seriously wondering if this is a realistic target as recent shareholders (10 years or less) are yet to benefit from such appreciation. It sure attracts new ( and naive) investors. I am tired of hearing the 30 years track record and while I focus on the last 10 years, I can only come to the realization that shareholders fell short of expectations.

 

yeah , yeah ... I am still around and will for quite some time, but I needed to vent and share ;)

 

Even during the depths of the hedge fund crisis, when Fairfax stock fell to $53 USD, I don't remember Prem buying shares in such a significant amount.  Frankly, I'm shocked that he put $150M of outside capital into Fairfax...that would be a decades worth of dividends for him.  And if he didn't borrow the money, I would imagine that's probably half his net worth outside of what is held in Sixty-Two Corporation. 

 

Then again, I've got half my net worth outside of Corner Market Capital in Fairfax and Atlas Corp right now, so maybe I shouldn't be surprised...and I'm very comfortable with both and think both have 50-100% upside over the next 2-3 years!  Cheers!

[Spekulatius]

If you didn't know when you bought, you might want to figure it out.  Cheers!

 

I decided to sell most of my position. I still have Fairfax India and willing to give that more time. Seems like they have a little more preference for quality assets in that portfolio, and I like India's 5-15 year growth potential.

 

The irony is that Fairfax owns a good chunk of Fairfax India, and more importantly, generates really nice management fees and performance bonuses from Fairfax India.  If Fairfax India does exceedingly well, Fairfax will benefit handsomely.  If Fairfax India does average, Fairfax will still benefit from the fees.  I  would rather own the asset manager!  Cheers!

 

https://tv.getyarn.io/yarn-clip/71cf3f54-184e-4143-b723-0bdce2921b4c/gif#LfJMAgFkOU.copy

[Bryggen]

Question: roughly how cheap was FFH trading when Prem bought? price to tangible BV?  price to normalized earnings?

 

 

It looks like he bought at an average cost of $308 USD roughly or about $420-425 CDN per share.  It says he bought in the last few days before the press release...I would imagine it was around the 9th, 10th, 11th and 12th, where the stock was around $425 CDN or less and volumes rose.  If he is buying there, then I would imagine he is expecting a return of better than 15% annualized or more over the next few years.  Cheers!

 

The question then becomes is Prem expecting a 15% return a good predictor of future 15% returns.

 

...and one to ask: ''is 15% a realistic expectation?''.

 

I am approaching a decade of holding FFH and I am seriously wondering if this is a realistic target as recent shareholders (10 years or less) are yet to benefit from such appreciation. It sure attracts new ( and naive) investors. I am tired of hearing the 30 years track record and while I focus on the last 10 years, I can only come to the realization that shareholders fell short of expectations.

 

yeah , yeah ... I am still around and will for quite some time, but I needed to vent and share ;)

 

Even during the depths of the hedge fund crisis, when Fairfax stock fell to $53 USD, I don't remember Prem buying shares in such a significant amount.  Frankly, I'm shocked that he put $150M of outside capital into Fairfax...that would be a decades worth of dividends for him.  And if he didn't borrow the money, I would imagine that's probably half his net worth outside of what is held in Sixty-Two Corporation. 

 

Then again, I've got half my net worth outside of Corner Market Capital in Fairfax and Atlas Corp right now, so maybe I shouldn't be surprised...and I'm very comfortable with both and think both have 50-100% upside over the next 2-3 years!  Cheers!

 

Feeling better... thanks for your always valuable input. Patience and trust are key here.

Let wait and see...and look back at this thread in 2-3 years!

cheers