Berkshire vs Brookfield vs Fairfax

[drzola]

Any new insights here?

FFH get's the Gold , BRK Silver  and BAM is Bronzed and heavily bruised so far it appears.

 

P.S. These are yy top three holdings in my personal accounts in order listed above.

[Viking]

This thread is awesome. It is always a little humbling to read what you posted a year ago… even more so 2 years ago. A key learning? Be inquisitive. Be open minded. And when the facts change… update your thesis/views. 
 

The changes in the macro environment has been crazy the past 3 years. The lingering effects of Covid (from goods to services). Inflation spiking to double digit high levels. Historic swing in interest rates. Bear markets in stocks and bonds. Emergence of of authoritarian China. De-globalization. War in Ukraine - accelerating the decline of Russia. War in the middle east. So much going on that significantly impacts intrinsic value of all companies.

[Spekulatius]

I think the direction of interest rates determined the outcome here. Rising and now higher for longer interest rates are detrimental to the private equity model, especially the Brookfield variant where they hold large stakes in subsidies.

 

The high leverage packed on assets works both ways great when prices move up and interest rates go lower, but mot so much when things go the other way.

[dealraker]

Much like those more recent to the themes, the Berkshire/Markel/Fairfax/Brookfield themes do strongly attract one another and a certain type or mindset investor group.  It has been this was for decades as I've written here Marshall Johnson of McDaniel Lewis and Co in Greensboro NC had his investors (he was a buy and hold forever analyst broker) also in to things such as NC Railroad (Norfolk Southern's route basically Raleigh to Charlotte NC now fully owned by NC) and First Citizens Bank NC and First Citizens Bank SC.  Owners heavily involved and a model of operation different enough that the simple EPS focus doesn't work.
 

One day in the late 1970's Marshall comes in to the office and says, "Charlie, update the First Citizens NC report (we did legal size stock reports on an electric typewriter)...that 'crackerjack' Buffett has just bought a slug of stock from High Point Bank and Trust Co. (Marshall handled that entitiy's trades) at 50% of book."

 

Some 7 or so years later Marshall calls and says, "They own damns and such, less than 10 times earnings."  I was on board and this was decades ago.

 

Then this Bruce Flatt guy comes and I decided he ruffled my feathers not by a small amount.  The crazy successful outcome made me as uncomfortable as I've ever been holding a stock (we privileged bunch....holding a stock makes us uncomfortable?) and my discomfort (both with Bruce and zero interest rates) increased steadily through the years and in recent times became for me intolerable.  I sold the yard sale a few months ago now, my investigation, while limited, suggested something far different than what's presented on Investor Day and Plan Value.

 

Time will tell.  Life is great...if you can stand it.  Bruce and Warren?  Not together for me.

 

 

 

 

Edited October 28, 2023 by dealraker

[Luke]

Fairfax is greatly positioned, Berkshire is a Tank but also slower, Markel tries hard to imitate big brother BRK but cant keep up and Bruce is getting shaky in the current environment. All amazing businesses but BN is definitely on place 3/4

[Whensthepaintdry?]

On 11/3/2020 at 3:02 AM, Viking said:

Here is how i would vote if i had to buy and hold for the next 10 years:

1.) BAM - Flatt is young and in his prime

2.) BRK - Buffett is very old

3.) FFH - Prem’s best years, i think, are in the rear view mirror

These were awesome posts to read through. I’m Curious, what made you pick BAM other than youth for the 10 year hold? Especially since you nailed the Fairfax call so well I would of expected you to go with Fairfax. 

[Viking]

2 hours ago, Whensthepaintdry? said:

These were awesome posts to read through. I’m Curious, what made you pick BAM other than youth for the 10 year hold? Especially since you nailed the Fairfax call so well I would of expected you to go with Fairfax. 

Of the three companies, BAM was (is) the company i understand the least. Back in Nov 2020, i voted largely based on Flatt’s public reputation/track record over previous decade.  @dealraker ‘s posts on BAM have got me thinking a little more critically about Flatt and BAM/BN today. 
 

What is interesting is the turnaround in the business results of Fairfax. And the reputation of the company and Prem. Far exceeded what anyone thought possible three years ago. Reinforces the importance of doing the work, trusting the analysis, acting on the findings, monitoring the situation. It really has been a crazy three year period.
 

 

Edited October 28, 2023 by Viking

[Viking]

4 hours ago, Spekulatius said:

I think the direction of interest rates determined the outcome here. Rising and now higher for longer interest rates are detrimental to the private equity model, especially the Brookfield variant where they hold large stakes in subsidies.

 

The high leverage packed on assets works both ways great when prices move up and interest rates go lower, but mot so much when things go the other way.

@Spekulatius , i agree interest rates have been a big factor. But Fairfax’s performance has also been driven by many other very good decisions my management:

1.) buying total return swaps giving the company exposure to 1.96 million Fairfax shares at a cost of $373; this has delivered about $900 million so far.

2.) buying back 2 million shares at $500/share.

The creativity to execute these two deals was exceptional. 
3.) selling pet insurance for $1.4 billion ($992 million after tax gain) was exceptional. 
 

There have been many more smaller ‘decisions’ made over the past three years that have worked out very well for Fairfax shareholders. In short, ‘active management’ has also worked out exceptionally well in the current whipsaw financial/economic environment.
 

[Whensthepaintdry?]

Thanks for the response. Impressive how it has turned out and how you both caught that rates would help one and hurt the other. 

[Haryana]

Keeping the duration low is likely their most important decision.

 

Otherwise people will call this a "windfall" from unpredictable interest rates.

 

Certainly, interest rates are unpredictable.

 

However, the cyclical nature of the markets is well known.

 

When you reach the South Pole, the only way you can go anywhere is North.

 

[Spekulatius]

12 hours ago, Haryana said:

When you reach the South Pole, the only way you can go anywhere is North.

You can also not go anywhere and freeze to death at the South Pole (=japan).

But yes, i absolutely agree it was a smart decision from FFH management to keep duration low. The opposite example of this is BAC for example, which also shows in their stock performance.

 

On the other hand - the thread is about 10 year performance and we are about 2 years in right now. We can say that FFH got of a great start but BAM not so much.

[sleepydragon]

7 minutes ago, Spekulatius said:

You can also not go anywhere and freeze to death at the South Pole (=japan).

But yes, i absolutely agree it was a smart decision from FFH management to keep duration low. The opposite example of this is BAC for example, which also shows in their stock performance.

 

On the other hand - the thread is about 10 year performance and we are about 2 years in right now. We can say that FFH got off a great start but BAM not so much.

BAM is also trying to get out of its circle of competence. They started a hedge fund doing systematic trading (similar to Millennium, Citadel etc), but didn’t make it work and had to liquidate the whole fund.

 

 

[CanadianMunger]

Well, sure wish I had listed to Viking in the second post of this thread!