Fairfax 2021

[Gregmal]

4 hours ago, Parsad said:

History shows that stocks will close their discount to intrinsic value, or even premiums to intrinsic value...it's as powerful as gravity.  Cheers!

You wanna team up and tender $35 for 40% of BUHF then? They own Poconos real estate, some golf and recreational/outdoors family assets. Easily worth $75 per share, has been for pretty much the company's existence. Mr. Market will eventually get it right, yea? Gravity?

[Gregmal]

4 hours ago, Parsad said:

 

This is silly Greg!  Should all closed end funds close then too by selling all of their assets?  What about Berkshire, which perpetually trades at a discount because of Buffett's age...should we put him out to pasture and sell all of Berkshire's assets?  C'mon!  Cheers!

I actually do think that there should be some rule that if the 1/3/5/10 performance looks like, eh, FFH's for example, that they should be forced to. Would definitely save folks a lot of grief with the perpetual c-suite cash grabs at companies like GE or GM(legacy GM). And the closed end funds...absolutely. If they arent making money what good are they?

[Gregmal]

1 hour ago, Gregmal said:

You wanna team up and tender $35 for 40% of BUHF then? They own Poconos real estate, some golf and recreational/outdoors family assets. Easily worth $75 per share, has been for pretty much the company's existence. Mr. Market will eventually get it right, yea? Gravity?

Actually, better example; DTLA. Theres certainly situations which gravity gets suspended. 

[modiva]

2 hours ago, Gregmal said:

I actually do think that there should be some rule that if the 1/3/5/10 performance looks like, eh, FFH's for example, that they should be forced to. Would definitely save folks a lot of grief with the perpetual c-suite cash grabs at companies like GE or GM(legacy GM). And the closed end funds...absolutely. If they arent making money what good are they?

 

@Gregmal, if that's the case companies like Microsoft wouldn't exist in their current form, and many shareholders would have missed out on returns up to 10x.  Microsoft stock didn't make any money during 2000-2013 for its shareholders.  Its 1/3/5/10 year performance was depressing during that period.  The following period turned out to be a golden era for its shareholders with 10x returns. 

[Gregmal]

5 minutes ago, modiva said:

 

@Gregmal, if that's the case companies like Microsoft wouldn't exist in their current form, and many shareholders would have missed out on returns up to 10x.  Microsoft stock didn't make any money during 2000-2013 for its shareholders.  Its 1/3/5/10 year performance was depressing during that period.  The following period turned out to be a golden era for its shareholders with 10x returns. 

Theres always exceptions but generally as a rule of thumb, forcing a company to evaluate strategic alternatives after a decade of misery would likely do way more good than harm. If you're public and just not making money for shareholders, your reasons for existing in the public form likely dont serve anyone but yourself. If nothing else it would throw cold water on(or confirm) a lot of the "well one day Mr. Market will see the value!" rhetoric. Because at least then you'd get an appraisal of the value. One can only imagine if they had done that with something like Sears. Instead a good many value investors went out in body bags. Cuz....eventually....

Edited October 4, 2021 by Gregmal

[bearprowler6]

4 minutes ago, modiva said:

 

@Gregmal, if that's the case companies like Microsoft wouldn't exist in their current form, and many shareholders would have missed out on returns up to 10x.  Microsoft stock didn't make any money during 2000-2013 for its shareholders.  Its 1/3/5/10 year performance was depressing during that period.  The following period turned out to be a golden era for its shareholders with 10x returns. 

It took a change in the CEO at Microsoft (from Ballmer to Nadella) to get the stock price moving! If that's what you are suggesting for Fairfax then I am in full agreement!

 

[bearprowler6]

7 hours ago, Parsad said:

 

This is a fallacy.  The market never gets "tired" of something.  There can be periods of stagnation, but over time, markets always reflect intrinsic value.

 

There are always questions of a permanent "discount" at Berkshire Hathaway, yet the value keeps going up because the company generates cash.  

 

As long as Fairfax does the same over time, Mr. Market will not give a damn about Prem's behavior or Fairfax's complexity.  Markel and Berkshire are as complex...no one talks about analysts not being able to understand them.  Cheers!

I was wondering how long before you waded into the discussion Sanjeev! thanks for not disappointing!

 

What I wrote is not a "fallacy". 

 

Bottom line is this....Prem and Fairfax by association are in the penalty box. Rightfully so! The company's stock performance for a better part of 10 years has been atrocious. 10 years! Sitting around and waiting for the market to stumble across all the good happening at Fairfax (e.g., Digit etc) is foolhardy. The market is aware of Digit, the hard market and Blackberry's positioning in the driverless car market. The market is also aware of low interest rates, the disaster that are Farmers Edge and Boat Rocker as well as a board of directors stacked with Prem's friends. A major restructuring is needed starting with a change at the top! Its time for Prem to move on much like Gates and Ballmer did at Microsoft. The long suffering Fairfax shareholders deserve this and will not rewarded by the market until such a catalyst occurs. 

[ourkid8]

https://www.bnnbloomberg.ca/mcewan-files-for-ccaa-after-restaurant-grocery-business-suffers-liquidity-crisis-1.1661478

 

It's a small investment for Fairfax but unfortunately went to $0 due to COVID

 

As part of its restructuring efforts, the company entered into a purchase agreement with Fairfax Financial Holdings Ltd. and McEwan himself to re-buy the business under a new numbered company 2864785 Ontario Corp. which will retain its staff of 268 employees while reducing lease obligations with a fewer amount of grocery and restaurant locations. The court has yet to approve the sale of the company to 2864785 Ontario Corp.

Edited October 4, 2021 by ourkid8

[Spekulatius]

1 hour ago, bearprowler6 said:

It took a change in the CEO at Microsoft (from Ballmer to Nadella) to get the stock price moving! If that's what you are suggesting for Fairfax then I am in full agreement!

 

I agree. If FFH would get an family outsider CEO with a good reputation, the stock would move 10% and probably never look back.

Sort of like when Occidental Petroleum stock ripped when Armand Hammer broke his rib getting out of the bathtub.

https://www.latimes.com/archives/la-xpm-1987-06-18-mn-8023-story.html

Edited October 4, 2021 by Spekulatius

[petec]

Oh, I love it when the bears come out to play. Hello, old friends

 

For me it's very simple. Fairfax trades at well below pre-covid valuations and yet everything that has happened over the last couple of years has been positive. Listed investments have worked, internal investments have flowered, combined ratios have been good, leverage has fallen, a healthy chunk of shares have been effectively taken out at a good price (the TRS), numerous deals have been completed that demystify the company and potentially create value, and the chances of higher rates in the future have arguably risen as governments progressively break monetary taboo after monetary taboo.

 

I do not think the improved investment performance and the deal activity are coincidental. I think Prem is likely to have been motivated by the bad years. I think that he is working feverishly to secure his legacy. 

 

Each to their own, but one final thought. I wonder when the last FFH follower on this board changed their mind? Not on the price/value relationship, but on whether the company is going in the right direction. I do worry that we are all slightly entrenched. Definitely the fans were during the bad years (I'm guilty here). But my personal view is that the bears might be in that position now. Time will tell.

 

FWIW I had pretty much given up by late 2019. I am not sure if that was reflected in my posts on here - I think I just posted less - but I started planning a exit. Then covid struck and the thing just got too cheap. Everything that has happened since has made me glad I added near the bottom, and I am adding more now. I think of it as a trade now, but if management nail it over the next couple of years it could morph back into a long term hold. Let's see.  

[Xerxes]

Short-med term trading aside (which pros and cons have been well documented here in the thread), for those in it in the long term, it will come down to one thing only:

 

The founder-operator-CEO ability to morph himself/herself from empire-building into being laser focus on growing value per share by shrinking the capital base. Some founder-operator-CEO cannot, some founder-operator-CEO do not want to.

 

Who can blame them. Even the mighty Buffett for better of last decade, had more fun playing the waiting game to snatch a prize than doing the boring-boring obvious thing of buying its own shares. That is why the case study of Teledyne is so interesting, where the CEO just flipped a switch purely based on what made sense going forward.

 

------------------------------------------------------

Prem bought 482,600 shares ($149 million) in 2020 at an average of $308 USD per share.

Those are now worth $191 million (barely 28% for 1 year or so). He said his timeframe is 3-5 years on conference call.

 

When he made bet in June 2020, it was a macro bet and it was not a bet on himself (going forward it will be on himself). Same as those buying today who are Seeking Alpha.

 

My sense is that he has some focus on the growing value per share if he made the trade of that size.

 

------------------------------------------------------

On Resolute and BB, i hope he knows something we don't about these two names, otherwise the optics of not-unloading aint pretty.

[Viking]

Fairfax has recently made two significant strategic changes. 
1.) no more shorting

2.) no more big insurance acquisitions (empire building)

 

The shorting losses totalled around $4 billion over 7-8 years. The biggest single cause (by far) of Fairfax’s significant underperformance has been fixed. 

 

The Allied World, Brit and International acquisitions also experienced big losses post acquisition. Allied World was year 1. Brits losses have been spread over a couple of years. But Fairfax has a demonstrated track record of being able to successfully integrate insurance businesses but it does take 4 or 5 years (which is about where we are now at with recent acquisition). Allied looks good. Brit needs to get through covid. The international operations are collectively moving in the right direction. 
 

The important takeaway for investors today is Fairfax will not be making any new large insurance acquisitions. No share dilution at US$400. And as the recent acquisitions are integrated we can expect improved performance (higher level of profitability) from the group as a whole.

 

In addition to the two changes i highlighted above, there have also been big changes in how it manages its equity holdings. I have posted on that before so i won’t bother doing so again. 
 

Fairfax can be viewed as a turn-around. But like all turn arounds we won’t really know for another year or two. Should be worth a beer at the next AGM in April? Any takers  

Edited October 4, 2021 by Viking

[glider3834]

3 hours ago, petec said:

I do worry that we are all slightly entrenched.

petec  I didn't see any value in FFH when I sold my shares in 2016 for approx CAD 700 at a premium to BV - I just couldn't see how a 15% return was even possible with a fully hedged equity portfolio. 

 

Then covid hit, FFH shares got beaten up and my view changed - look at some of the positive reactions to the Digit announcement in July from some of the posters on this board who have entrenched negative views on FFH 

 

With sustained positive performance from FFH,  those negative viewpoints will change IMO

 

 

 

Edited October 4, 2021 by glider3834

[StubbleJumper]

2 hours ago, Xerxes said:

The founder-operator-CEO ability to morph himself/herself from empire-building into being laser focus on growing value per share by shrinking the capital base. Some founder-operator-CEO cannot, some founder-operator-CEO do not want to.

 

I'm guessing that Prem wants to eventually buy back a large slug of FFH shares, but the question is how fast can it be done.   When Prem re-weighted the multiple voting shares to ensure that the Watsa family would retain control despite the issuance of a large number of subordinated voting shares, the one concession was that the re-weighting would apply for only as long as Prem held either the position of CEO or Chair (or both). 

 

Well, Prem is currently 71 years old and is probably hoping to emulate Buffett once again and work until he's older than Methuselah.  But, setting aside Prem's preferences, the life-tables say that his life expectancy is about 16 more years.  If he's at all realistic, he'd be hoping that he can still function as chair in his early 80s.  If he wants Christine and Ben to have control of Fairfax over the longer term, he needs to start buying back a crap-load of subordinate shares.  Prior to the re-weighting, Prem was able to retain control over FFH with about 40% of the votes because people had confidence in him, but I don't think any shareholders have any reason to extend that support to Ben or Christine.

 

I would agree with you that many founders cannot morph from empire building to shrinking the capital base, but we should keep in mind that Prem might have more motivation than most.

 

 

SJ

[glider3834]

2 minutes ago, StubbleJumper said:

I'm guessing that Prem wants to eventually buy back a large slug of FFH shares, but the question is how fast can it be done.

I would even suggest that is probably a daily conversation at Fairfax HQ with share price where it is - they are getting to a point where their operating performance will start to throw off a lot more cash over time & potentially greater divs from subs to holdco (as subs are in much stronger capital positions than last year) but if they want a more short term solution bearing in in mind they want to sit on their $1.7 bil cash position, they would need to sell something else like they did with Riverstone to give them $1-$2 bil to make the share buyback meaningful otherwise smaller buybacks will have to do for now. 

[TwoCitiesCapital]

4 hours ago, petec said:

Oh, I love it when the bears come out to play. Hello, old friends

 

For me it's very simple. Fairfax trades at well below pre-covid valuations and yet everything that has happened over the last couple of years has been positive. Listed investments have worked, internal investments have flowered, combined ratios have been good, leverage has fallen, a healthy chunk of shares have been effectively taken out at a good price (the TRS), numerous deals have been completed that demystify the company and potentially create value, and the chances of higher rates in the future have arguably risen as governments progressively break monetary taboo after monetary taboo.

 

I do not think the improved investment performance and the deal activity are coincidental. I think Prem is likely to have been motivated by the bad years. I think that he is working feverishly to secure his legacy. 

 

Each to their own, but one final thought. I wonder when the last FFH follower on this board changed their mind? Not on the price/value relationship, but on whether the company is going in the right direction. I do worry that we are all slightly entrenched. Definitely the fans were during the bad years (I'm guilty here). But my personal view is that the bears might be in that position now. Time will tell.

 

FWIW I had pretty much given up by late 2019. I am not sure if that was reflected in my posts on here - I think I just posted less - but I started planning a exit. Then covid struck and the thing just got too cheap. Everything that has happened since has made me glad I added near the bottom, and I am adding more now. I think of it as a trade now, but if management nail it over the next couple of years it could morph back into a long term hold. Let's see.  

 

+1 same boat here. It's all about the price. All the excuses for the current discount existed back in 2018 when it was at a premium. Other than interest rates, not much has been said that sufficiently explains why we should expect this to persist. 

 

1 hour ago, glider3834 said:

petec  I didn't see any value in FFH when I sold my shares in 2016 for approx CAD 700 at a premium to BV - I just couldn't see how a 15% return was even possible with a fully hedged equity portfolio. 

 

Then covid hit, FFH shares got beaten up and my view changed - look at some of the positive reactions to the Digit announcement in July from some of the posters on this board who have entrenched negative views on FFH 

 

With sustained positive performance from FFH,  those negative viewpoints will change IMO

 

 

 

I think he was talking about the direction of the company though. I, too, have bought and sold my position in Fairfax based on the premium/discount to NAV and my view on forward earnings, but never thought the company was headed the wrong way. 

 

As a matter of fact, what got me interested in the company was their TRS and deflation swaps which everyone hates in hindsight. 

[Viking]

1 hour ago, glider3834 said:

I would even suggest that is probably a daily conversation at Fairfax HQ with share price where it is - they are getting to a point where their operating performance will start to throw off a lot more cash over time & potentially greater divs from subs to holdco (as subs are in much stronger capital positions than last year) but if they want a more short term solution bearing in in mind they want to sit on their $1.7 bil cash position, they would need to sell something else like they did with Riverstone to give them $1-$2 bil to make the share buyback meaningful otherwise smaller buybacks will have to do for now. 

Buybacks is one of a few potential catalyst to get the share price higher. However, for the past couple of years there have been other higher priorities at Fairfax:

1.) support insurance subs growth in hard market

2.) reduce debt

3.) stock buybacks

Prem has been very on message on this topic for a couple of years now.
 

1.) the hard market in insurance pricing looks like it is in the later innings (end 2H 2022?). Given earnings and jump in their investment portfolios the insurance subs should not need much in the way of new money from Fairfax (in aggregate).

2.) $500 million in proceeds from the Riverstone sale used to repay line of credit has likely brought Fairfax’s debt levels down to acceptable levels so i think we can check this box as being done for now.

3.) that now leaves share buybacks as the only ‘unfinished’ bucket outstanding. 
 

Regarding timing for large buybacks, as has been pointed out by others, Q3 is not usually the quarter Fairfax does big buybacks. Peak hurricane season. And i think Q3 is also the quarter Fairfax completes its reserve review (not that i am expecting any issues).

 

If we see an uptick in buybacks my guess is it will start to happen after they release Q3 results at the end of October. Fairfax should have a couple hundred million available to get the buyback train going. 
 

A buyback in size will really depend on when they are able to monetize holdings. The good news is their equity holdings are up $3 or $4 billion over the past 3 quarters. So at least the valuations of some businesses are getting high enough that the potential is there (to sell at a reasonable valuation). And of course it is pretty much impossible to know what holdings will be sold and when. If we get another leg in the reflation trade later in Q4 Fairfax may get its opportunity. 

Two dates on the calendar might also come into play. Dec 31. And the date of the AGM. Page 2 of the annual report has the line “closing share price Dec 31’; this is the date from which performance is measured each year. And, as any CEO knows, it is always better to have a higher share price when you hold your annual meeting. 
 

People assume Fairfax is a serial issuer of its own stock. And they have been for many years. Why? To fund their growth in insurance. To build their empire. Now Prem has said very clearly those days are over. No more big insurance acquisitions. Ok. So let give Prem the benefit of the doubt. Let’s assume we have seen a peak in total shares outstanding (and let’s ignore growth in shares driven by stock awards as pretty much all companies do this to some degree). 
 

Now i have a question for those of you who are still reading. Has Prem ever reduce Fairfax’s share count in a year?

 

I think everyone knows the answer to this question… and it is yes! Good for you if you got it right  
 

This next question is a little more difficult. Fairfax has been in operation for 36 years. In how many of those years has the total share count fallen? 
 

Answer: 12. Since inception Fairfax has reduced share count 33% of the time. I know, I know, this can’t be true… so just ignore if it messes with your current thinking.
 

Bonus question. This one is going to be multiple choice. What is the largest amount (in percentage terms) Fairfax has reduced its share count in a year? 
a.) 5%.    b.) 8%.   c.) 16%.   d.) 25%

 

I am going to let someone else post the answer. But remember, we all know beyond a doubt that Prem ONLY knows how to issue more and more shares every year  

 

In his 2018 Letter to Shareholders Prem made the following comment:

”I mentioned to you last year that we are focused on buying back our shares over the next ten years as and when we get the opportunity to do so at attractive prices. Henry Singleton from Teledyne was our hero as he reduced shares outstanding from approximately 88 million to 12 million over about 15 years. We began that process by buying back 1.1 million shares since we began in the fourth quarter of 2017 up until early 2019 – about half for cancellation and half for various long term incentive plans we have across our company.”

Success is when preparation meets opportunity. I think we are getting closer to Fairfax starting to deliver on the aspiration laid out in the quote above….

 

Edited October 4, 2021 by Viking

[StubbleJumper]

27 minutes ago, TwoCitiesCapital said:

As a matter of fact, what got me interested in the company was their TRS and deflation swaps which everyone hates in hindsight. 

 

The deflation swaps were the right thing to do, as was the equity hedging.  The issue with both was the notional value that was being hedged with each instrument.  I have yet to see a compelling explanation about why it was a good idea to "hedge" more than 100% of FFH's equity exposure, nor have I seen a compelling explanation about why it was a good idea to "hedge" more than US$100 billion for deflation.  I put quotations around the word hedge, because if your hedge ratio exceeds 1 you aren't hedging, you are speculating. 

 

As far as the deflation swaps go, the downside wasn't too costly if you had enough conviction to agree that speculation was the right course of action.  The equity swaps had a significant downside.  Should FFH have had enough conviction to push their hedge ratio over 1?  Did FFH manage the downside well enough?  IMO, it was a risk management issue that revolved around position-sizing.  Or maybe I'm just too conservative.

 

 

SJ

[StubbleJumper]

11 minutes ago, Viking said:

Now i have a question for those of you who are still reading. Has Prem ever reduce Fairfax’s share count in a year?

 

I think everyone knows the answer to this question… and it is yes! Good for you if you got it right  
 

This next question is a little more difficult. Fairfax has been in operation for 36 years. In how many of those years has the total share count fallen? 
 

Answer: 12. Since inception Fairfax has reduced share count 33% of the time. 
 

Bonus question. This one is going to be multiple choice. What is the largest amount (in percentage terms) Fairfax has reduced its share count in a year? 
a.) 5%.    b.) 8%.   c.) 16%.   d.) 25%

 

We need to be honest with ourselves because we ourselves are the easiest to fool.  Yes, FFH has reduced its share-count on plenty of occasions, but was it *material*?  Yes, when the share price was completely retarded in the 1990s, FFH bought back a boatload (much to Prem's credit) and then when it was completely retarded the other way, they issued a boatload (once again, much to Prem's credit).  Let's deal with the reality of the two most recent decades:

 

What Prem has been saying since March/April 2018 is good.  Let's hope that the implementation reflects the stated intention.

 

SJ

 

 

***edit*** BTW, does everyone see the shares outstanding in 2015?  That's the year when Prem re-weighted the multiple voting shares to hold his control level at ~42% of the votes.  If he wants Ben and Christine to continue to control FFH after he eventually cannot fulfill the role of CEO or Chair, the share-count needs to drop *below* that of 2015.  Let's hope that is a source of motivation for the Watsa family.

 

Edited October 4, 2021 by StubbleJumper

[Viking]

50 minutes ago, StubbleJumper said:

 

We need to be honest with ourselves because we ourselves are the easiest to fool.  Yes, FFH has reduced its share-count on plenty of occasions, but was it *material*?  Yes, when the share price was completely retarded in the 1990s, FFH bought back a boatload (much to Prem's credit) and then when it was completely retarded the other way, they issued a boatload (once again, much to Prem's credit).  Let's deal with the reality of the two most recent decades:

 

What Prem has been saying since March/April 2018 is good.  Let's hope that the implementation reflects the stated intention.

 

SJ

 

 

***edit*** BTW, does everyone see the shares outstanding in 2015?  That's the year when Prem re-weighted the multiple voting shares to hold his control level at ~42% of the votes.  If he wants Ben and Christine to continue to control FFH after he eventually cannot fulfill the role of CEO or Chair, the share-count needs to drop *below* that of 2015.  Let's hope that is a source of motivation for the Watsa family.

 

Stubble, i think you know i often try and make points with extreme examples (and a little humour  ). Kind of as a counter balance to the other extreme perspectives. A way to keep me balanced and smiling  

 

There is a lot more to Prem and Fairfax than what investors have seen play out the past 7 or 8 years. So i do think looking a little further back can sometimes help provide a more accurate picture of what we are likely to see in the coming years.

 

And i appreciated your insight into ownership % and multiple voting shares. Something to file away..

Edited October 5, 2021 by Viking

[Parsad]

11 hours ago, Gregmal said:

You wanna team up and tender $35 for 40% of BUHF then? They own Poconos real estate, some golf and recreational/outdoors family assets. Easily worth $75 per share, has been for pretty much the company's existence. Mr. Market will eventually get it right, yea? Gravity?

 

You're comparing a company that has barely any data on it...I can't even find financials for it or any investor related information from its website...to Fairfax, which has a ton of information on it.  Geez!  

[Parsad]

9 hours ago, modiva said:

 

@Gregmal, if that's the case companies like Microsoft wouldn't exist in their current form, and many shareholders would have missed out on returns up to 10x.  Microsoft stock didn't make any money during 2000-2013 for its shareholders.  Its 1/3/5/10 year performance was depressing during that period.  The following period turned out to be a golden era for its shareholders with 10x returns. 

 

+1!  OSTK looked like dead money for most of its life...but if you had bought 10 years ago...it's a 15-bagger.  Cheers!  

[Parsad]

9 hours ago, bearprowler6 said:

I was wondering how long before you waded into the discussion Sanjeev! thanks for not disappointing!

 

What I wrote is not a "fallacy". 

 

Bottom line is this....Prem and Fairfax by association are in the penalty box. Rightfully so! The company's stock performance for a better part of 10 years has been atrocious. 10 years! Sitting around and waiting for the market to stumble across all the good happening at Fairfax (e.g., Digit etc) is foolhardy. The market is aware of Digit, the hard market and Blackberry's positioning in the driverless car market. The market is also aware of low interest rates, the disaster that are Farmers Edge and Boat Rocker as well as a board of directors stacked with Prem's friends. A major restructuring is needed starting with a change at the top! Its time for Prem to move on much like Gates and Ballmer did at Microsoft. The long suffering Fairfax shareholders deserve this and will not rewarded by the market until such a catalyst occurs. 

 

Rubbish!  This was said before, and it gets regurgitated whenever the company takes a hit or the stock price has not moved.  Thanks for not disappointing Stephen!

 

And again, once we get above book value, and I've sold my shares...the excuses will come pouring out of how it was different this time for this reason, and how Fairfax got lucky or Prem pulled a rabbit out of the hat...etc, etc...blah, blah, blah. 

 

And then rinse and repeat!  Cheers!

[Parsad]

3 hours ago, glider3834 said:

petec  I didn't see any value in FFH when I sold my shares in 2016 for approx CAD 700 at a premium to BV - I just couldn't see how a 15% return was even possible with a fully hedged equity portfolio. 

 

Then covid hit, FFH shares got beaten up and my view changed - look at some of the positive reactions to the Digit announcement in July from some of the posters on this board who have entrenched negative views on FFH 

 

With sustained positive performance from FFH,  those negative viewpoints will change IMO

 

 

 

 

100%!  No one is telling anyone to hold Fairfax shares forever.  I don't hold any stock forever.  I think the bulls are simply saying that the stock was dirt cheap last year, and remain cheap this year.  And once it is revalued back closer to intrinsic value, we will sell and wait for other opportunities.  

 

The bears think that we are all Prem lemmings and that we will hold the stock for the long-term.  There is a difference between admiring Prem and how we invest...yet they are convinced we are imbedded in our ways because of that admiration.  Cheers!

[nwoodman]

2 hours ago, TwoCitiesCapital said:

As a matter of fact, what got me interested in the company was their TRS and deflation swaps which everyone hates in hindsight. 

 

I thought this was an intriguing prospect to.  I remember reading a lot about the potential for debt deflation given leverage in the system. Totally agree with SJ that this was a bet, not a hedge.  They were looking for another MBS homerun.

 

I ended up buying FFH as a hedge against their low ball offer on ORH in 2009.  The deflation bets, hedges and even the shorts didn't worry me so much as Prem's rhetoric in 2017-2019 which I found quite remarkable, it just seemed plain confused and full of hubris.   Citing individuals for massive changes in positioning eg Trump in my mind didn't warrant a multiple of book.  The whole situation seemed, to quote my grandma, "discombobulated".    The irony is that the index shorts may have actually helped repair his reputation in the market declines last year.  Taking them off when he did, only inflicted double damage points.

 

I sold out completely in 2019 and reinvested the funds (and got lucky).  During the low's of 2020 ended up buying ATCO and later bought some FFH as a hedge, just in case of Fairfax played cute.  The FFH position as subsequently grown somewhat using rather inflated currency (TSLA). A lot of what we are seeing now are seeds that were actually planted in 2017 and 2018 starting to take form.  This is the best visibility/discount I can recall in the time I have been following the company. If you believe book value, then the only other low similar to this was the 9/11 sell off in 2001.    

 

It was pleasing last night to see the spike in Chemplast.  While he may have lost the title of  the Oracle of the North, perhaps the Oracle of India will suffice.  I don't say that flippantly, foisting dogs like Farmer's Edge onto the market to have them crater only makes investors more gun shy.  Chemplast is shaping up to be a win/win.

 

Edited October 5, 2021 by nwoodman