Fairfax Annual Letter

[Thrifty3000]

Surprising how many people drive their cars looking in the rear view mirror.

 

+1

[petec]

Surprising how many people drive their cars looking in the rear view mirror.

 

+1

[petec]

What I make me dislike this letter is not one of the many point brought by many here which are good. It is simply the general tone of the letter and it began right at the second paragraph.

 

In March, the S&P500 dropped 30% in 12 days. We absorbed the mark to market losses and thrived. We earned $218 million in 2020 and our book value per share increased by 0.6% (adjusted for the $10 per share dividend) to $478 per share. Our insurance companies had an outstanding year in 2020 and are growing significantly, while our investments more than overcame the March carnage by the end of 2020 and are continuing to perform well.

 

Man we made 0,6% last year and every thing was outstanding????? A little more humility please. That was a bad year and start with explaining us why it was bad. Not telling me that every thing performed well. How can you tell that investments perform well when you lost more then 500M$ on a short? That is part of the investment result.

 

Around 2001 I sold out because I was tired of the presentation of the result of insurance when there was catastrophe year. It was always something like "we had a good year if you exclude the catastrophe". How come in a good year they didn't exclude the premium collected for the catastrophe insurance? It sounds like they want the premium but don't expect to pay once in a while. If you want us to really understand how we doing without the catastrophe present us what are the premium we collected vs what we paid in 5 years periods.

 

I was back in because of all the good news for the subs but this report remember me why it will not be longterm for me. They can make a lot in 2021 but there is a not negligible possibility that they will waste it again.

 

In fairness to Prem, the insurance companies did have an outstanding year and the investments are almost all performing well. Security prices might not be, but the underlying companies (which is what Prem is referring to) largely are.

[KFS]

Surprising how many people drive their cars looking in the rear view mirror.

 

100% agree.  The failures over the past 10 years are well understood and have been beaten to death here 100x.  By the time many here are in agreement on what the front-view looks like, we will already be back to 1.3 x book value and this ridiculous opportunity will have passed. 

[petec]

Surprising how many people drive their cars looking in the rear view mirror.

 

100% agree.  The failures over the past 10 years are well understood and have been beaten to death here 100x.  By the time many here are in agreement on what the front-view looks like, we will already be back to 1.3 x book value and this ridiculous opportunity will have passed.

 

All that, plus there’s a lot of evidence that Fairfax are learning and reacting and focussing. The combination of all these factors is what matters.

[Santayana]

Whatever your view of Fairfax's failures over the years.  Does anyone really think there is any rational reason at all for them to be trading for less than they were a year ago?  Yes they've underperformed the SP500 over the past 20 years, but go back just one year and that was not the case.

[MarioP]

What I make me dislike this letter is not one of the many point brought by many here which are good. It is simply the general tone of the letter and it began right at the second paragraph.

 

In March, the S&P500 dropped 30% in 12 days. We absorbed the mark to market losses and thrived. We earned $218 million in 2020 and our book value per share increased by 0.6% (adjusted for the $10 per share dividend) to $478 per share. Our insurance companies had an outstanding year in 2020 and are growing significantly, while our investments more than overcame the March carnage by the end of 2020 and are continuing to perform well.

 

Man we made 0,6% last year and every thing was outstanding????? A little more humility please. That was a bad year and start with explaining us why it was bad. Not telling me that every thing performed well. How can you tell that investments perform well when you lost more then 500M$ on a short? That is part of the investment result.

 

Around 2001 I sold out because I was tired of the presentation of the result of insurance when there was catastrophe year. It was always something like "we had a good year if you exclude the catastrophe". How come in a good year they didn't exclude the premium collected for the catastrophe insurance? It sounds like they want the premium but don't expect to pay once in a while. If you want us to really understand how we doing without the catastrophe present us what are the premium we collected vs what we paid in 5 years periods.

 

I was back in because of all the good news for the subs but this report remember me why it will not be longterm for me. They can make a lot in 2021 but there is a not negligible possibility that they will waste it again.

 

In fairness to Prem, the insurance companies did have an outstanding year and the investments are almost all performing well. Security prices might not be, but the underlying companies (which is what Prem is referring to) largely are.

 

All those answers about the rear view. I’m talking about the present, about what is written in the 2020 annual report. We had a bad year and Prem is not candid about it. That is why he didn’t convince me that the futur will be different.

[Parsad]

I know most people hate Overstock.com and former CEO Patrick Byrne.  But I have made more money in my investing life from Overstock.com than any other investment.  Not holding it for the long-term, but simply buying it when it looked dirt cheap, and selling it when it got to fair value...and often combining it with LEAPs, so my results were crazy!

 

This year, another hated stock that I've made a killing on was Wells Fargo.  Everyone hates Wells, and they often point to Warren selling his stake as a good reason not to buy.  But not only did I buy a ton of Wells at $19, I bought a ton of Jan 22 $27.50 LEAPs for dirt cheap.  It's up threefold already and I expect it to go up another 100% before I sell later this year...can't exercise them all!

 

Another stock hated, that I bought this year was Biglari Holdings...bought at $48 and sold at $120.  I don't like Sardar and I don't like the company...but it was dirt cheap!

 

For you folks who hate Fairfax or think it's a the usual value trap...I bought a ton between $390 and $520 CDN.  I will hold it in my taxable accounts unlike BH, but I will sell most of it in my non-taxable accounts when it goes over 1.1 times book. 

 

So you don't have to like Prem or Fairfax, you don't have to disparage the business, you don't have to tell us how you got out of the stock 10 years ago...I'm here to make money, so your opinion means nothing!  Cheers!

[coc]

Let me get this straight.

 

If Prem & Co do a terrible job managing float (half of the insurance business), aren't very candid about it, make promises year after year that go unfulfilled (we'll stop losing money on shorts, we'll start investing in quality companies, we'll grow BV at 15% over the "long term" etc etc.), continue with this year after year including the current one, and board members have the temerity to point all that out and perhaps even indicate that this means the business isn't worth a premium to book, their "opinion means nothing"? We're only here to talk up the business?

[Parsad]

Let me get this straight.

 

If Prem & Co do a terrible job managing float (half of the insurance business), aren't very candid about it, make promises year after year that go unfulfilled (we'll stop losing money on shorts, we'll start investing in quality companies, we'll grow BV at 15% over the "long term" etc etc.), continue with this year after year including the current one, and board members have the temerity to point all that out and perhaps even indicate that this means the business isn't worth a premium to book, their "opinion means nothing"? We're only here to talk up the business?

 

Sorry, I should rephrase that...I mean it means nothing relative to the potential return of the investment.  The criticisms are valid, but relative to it being a good investment or not are irrelevant.

Cheers!

[petec]

What I make me dislike this letter is not one of the many point brought by many here which are good. It is simply the general tone of the letter and it began right at the second paragraph.

 

In March, the S&P500 dropped 30% in 12 days. We absorbed the mark to market losses and thrived. We earned $218 million in 2020 and our book value per share increased by 0.6% (adjusted for the $10 per share dividend) to $478 per share. Our insurance companies had an outstanding year in 2020 and are growing significantly, while our investments more than overcame the March carnage by the end of 2020 and are continuing to perform well.

 

Man we made 0,6% last year and every thing was outstanding????? A little more humility please. That was a bad year and start with explaining us why it was bad. Not telling me that every thing performed well. How can you tell that investments perform well when you lost more then 500M$ on a short? That is part of the investment result.

 

Around 2001 I sold out because I was tired of the presentation of the result of insurance when there was catastrophe year. It was always something like "we had a good year if you exclude the catastrophe". How come in a good year they didn't exclude the premium collected for the catastrophe insurance? It sounds like they want the premium but don't expect to pay once in a while. If you want us to really understand how we doing without the catastrophe present us what are the premium we collected vs what we paid in 5 years periods.

 

I was back in because of all the good news for the subs but this report remember me why it will not be longterm for me. They can make a lot in 2021 but there is a not negligible possibility that they will waste it again.

 

In fairness to Prem, the insurance companies did have an outstanding year and the investments are almost all performing well. Security prices might not be, but the underlying companies (which is what Prem is referring to) largely are.

 

All those answers about the rear view. I’m talking about the present, about what is written in the 2020 annual report. We had a bad year and Prem is not candid about it. That is why he didn’t convince me that the futur will be different.

 

On what basis did we have a bad year? The stock market valued certain assets at certain levels as it always does. On that basis, maybe. But did the insurance subs have a bad year? Did any of the big investments have a bad year operationally (ie, in the way that matters?).

 

You’re absolutely right about the short. But as one example, if you’d told me that Atlas would have sailed through the most aggressive recession in history the way it did, I’d have laughed at you. And I own it.

 

Yet it did. Who cares whether the stock (and therefore Fairfax’s BV) reflects that yet?

 

I really don’t mean to get at you. But I think Fairfax had a spectacular year, all told. It went into the first global financial pandemic in 100 years overlevered and with a raft of cyclical holdings. It came out with cash, rising book value, and an underlying CR of 93%. Works for me.

[Gregmal]

I know most people hate Overstock.com and former CEO Patrick Byrne.  But I have made more money in my investing life from Overstock.com than any other investment.  Not holding it for the long-term, but simply buying it when it looked dirt cheap, and selling it when it got to fair value...and often combining it with LEAPs, so my results were crazy!

 

This year, another hated stock that I've made a killing on was Wells Fargo.  Everyone hates Wells, and they often point to Warren selling his stake as a good reason not to buy.  But not only did I buy a ton of Wells at $19, I bought a ton of Jan 22 $27.50 LEAPs for dirt cheap.  It's up threefold already and I expect it to go up another 100% before I sell later this year...can't exercise them all!

 

Another stock hated, that I bought this year was Biglari Holdings...bought at $48 and sold at $120.  I don't like Sardar and I don't like the company...but it was dirt cheap!

 

For you folks who hate Fairfax or think it's a the usual value trap...I bought a ton between $390 and $520 CDN.  I will hold it in my taxable accounts unlike BH, but I will sell most of it in my non-taxable accounts when it goes over 1.1 times book. 

 

So you don't have to like Prem or Fairfax, you don't have to disparage the business, you don't have to tell us how you got out of the stock 10 years ago...I'm here to make money, so your opinion means nothing!  Cheers!

 

There's definitely truth to that logic....but what if you dont want to have to be that active? In that case you should just buy a 30%+ position in Berkshire Hathaway, short some ARK stuff and then go on vacation for 6 weeks and not worry about anything! Trust me, I did it!

[bizaro86]

What I make me dislike this letter is not one of the many point brought by many here which are good. It is simply the general tone of the letter and it began right at the second paragraph.

 

In March, the S&P500 dropped 30% in 12 days. We absorbed the mark to market losses and thrived. We earned $218 million in 2020 and our book value per share increased by 0.6% (adjusted for the $10 per share dividend) to $478 per share. Our insurance companies had an outstanding year in 2020 and are growing significantly, while our investments more than overcame the March carnage by the end of 2020 and are continuing to perform well.

 

Man we made 0,6% last year and every thing was outstanding????? A little more humility please. That was a bad year and start with explaining us why it was bad. Not telling me that every thing performed well. How can you tell that investments perform well when you lost more then 500M$ on a short? That is part of the investment result.

 

Around 2001 I sold out because I was tired of the presentation of the result of insurance when there was catastrophe year. It was always something like "we had a good year if you exclude the catastrophe". How come in a good year they didn't exclude the premium collected for the catastrophe insurance? It sounds like they want the premium but don't expect to pay once in a while. If you want us to really understand how we doing without the catastrophe present us what are the premium we collected vs what we paid in 5 years periods.

 

I was back in because of all the good news for the subs but this report remember me why it will not be longterm for me. They can make a lot in 2021 but there is a not negligible possibility that they will waste it again.

 

In fairness to Prem, the insurance companies did have an outstanding year and the investments are almost all performing well. Security prices might not be, but the underlying companies (which is what Prem is referring to) largely are.

 

All those answers about the rear view. I’m talking about the present, about what is written in the 2020 annual report. We had a bad year and Prem is not candid about it. That is why he didn’t convince me that the futur will be different.

 

On what basis did we have a bad year? The stock market valued certain assets at certain levels as it always does. On that basis, maybe. But did the insurance subs have a bad year? Did any of the big investments have a bad year operationally (ie, in the way that matters?).

 

You’re absolutely right about the short. But as one example, if you’d told me that Atlas would have sailed through the most aggressive recession in history the way it did, I’d have laughed at you. And I own it.

 

Yet it did. Who cares whether the stock (and therefore Fairfax’s BV) reflects that yet?

 

I really don’t mean to get at you. But I think Fairfax had a spectacular year, all told. It went into the first global financial pandemic in 100 years overlevered and with a raft of cyclical holdings. It came out with cash, rising book value, and an underlying CR of 93%. Works for me.

 

I think reporting combined ratio ex-one time events is really disingenuous. Literally the reason why people buy insurance is to protect from one time events. If you exclude them, of course your CR is going to look great.

 

Their investment performance is great if you exclude the mistakes too, but that's just not how it works.

[petec]

What I make me dislike this letter is not one of the many point brought by many here which are good. It is simply the general tone of the letter and it began right at the second paragraph.

 

In March, the S&P500 dropped 30% in 12 days. We absorbed the mark to market losses and thrived. We earned $218 million in 2020 and our book value per share increased by 0.6% (adjusted for the $10 per share dividend) to $478 per share. Our insurance companies had an outstanding year in 2020 and are growing significantly, while our investments more than overcame the March carnage by the end of 2020 and are continuing to perform well.

 

Man we made 0,6% last year and every thing was outstanding????? A little more humility please. That was a bad year and start with explaining us why it was bad. Not telling me that every thing performed well. How can you tell that investments perform well when you lost more then 500M$ on a short? That is part of the investment result.

 

Around 2001 I sold out because I was tired of the presentation of the result of insurance when there was catastrophe year. It was always something like "we had a good year if you exclude the catastrophe". How come in a good year they didn't exclude the premium collected for the catastrophe insurance? It sounds like they want the premium but don't expect to pay once in a while. If you want us to really understand how we doing without the catastrophe present us what are the premium we collected vs what we paid in 5 years periods.

 

I was back in because of all the good news for the subs but this report remember me why it will not be longterm for me. They can make a lot in 2021 but there is a not negligible possibility that they will waste it again.

 

In fairness to Prem, the insurance companies did have an outstanding year and the investments are almost all performing well. Security prices might not be, but the underlying companies (which is what Prem is referring to) largely are.

 

All those answers about the rear view. I’m talking about the present, about what is written in the 2020 annual report. We had a bad year and Prem is not candid about it. That is why he didn’t convince me that the futur will be different.

 

On what basis did we have a bad year? The stock market valued certain assets at certain levels as it always does. On that basis, maybe. But did the insurance subs have a bad year? Did any of the big investments have a bad year operationally (ie, in the way that matters?).

 

You’re absolutely right about the short. But as one example, if you’d told me that Atlas would have sailed through the most aggressive recession in history the way it did, I’d have laughed at you. And I own it.

 

Yet it did. Who cares whether the stock (and therefore Fairfax’s BV) reflects that yet?

 

I really don’t mean to get at you. But I think Fairfax had a spectacular year, all told. It went into the first global financial pandemic in 100 years overlevered and with a raft of cyclical holdings. It came out with cash, rising book value, and an underlying CR of 93%. Works for me.

 

I think reporting combined ratio ex-one time events is really disingenuous. Literally the reason why people buy insurance is to protect from one time events. If you exclude them, of course your CR is going to look great.

 

Their investment performance is great if you exclude the mistakes too, but that's just not how it works.

 

I think reporting the CR with and without one time events helps with understanding. You’ll notice I quoted the CR excluding covid losses but including other cat losses. That seems fair to me, given that I have no evidence that another pandemic is likely to happen on any sensible timeframe (unlike, say, hurricanes).

[Parsad]

I know most people hate Overstock.com and former CEO Patrick Byrne.  But I have made more money in my investing life from Overstock.com than any other investment.  Not holding it for the long-term, but simply buying it when it looked dirt cheap, and selling it when it got to fair value...and often combining it with LEAPs, so my results were crazy!

 

This year, another hated stock that I've made a killing on was Wells Fargo.  Everyone hates Wells, and they often point to Warren selling his stake as a good reason not to buy.  But not only did I buy a ton of Wells at $19, I bought a ton of Jan 22 $27.50 LEAPs for dirt cheap.  It's up threefold already and I expect it to go up another 100% before I sell later this year...can't exercise them all!

 

Another stock hated, that I bought this year was Biglari Holdings...bought at $48 and sold at $120.  I don't like Sardar and I don't like the company...but it was dirt cheap!

 

For you folks who hate Fairfax or think it's a the usual value trap...I bought a ton between $390 and $520 CDN.  I will hold it in my taxable accounts unlike BH, but I will sell most of it in my non-taxable accounts when it goes over 1.1 times book. 

 

So you don't have to like Prem or Fairfax, you don't have to disparage the business, you don't have to tell us how you got out of the stock 10 years ago...I'm here to make money, so your opinion means nothing!  Cheers!

 

There's definitely truth to that logic....but what if you dont want to have to be that active? In that case you should just buy a 30%+ position in Berkshire Hathaway, short some ARK stuff and then go on vacation for 6 weeks and not worry about anything! Trust me, I did it!

 

Yeah, that works too.  Cheers!

[Parsad]

What I make me dislike this letter is not one of the many point brought by many here which are good. It is simply the general tone of the letter and it began right at the second paragraph.

 

In March, the S&P500 dropped 30% in 12 days. We absorbed the mark to market losses and thrived. We earned $218 million in 2020 and our book value per share increased by 0.6% (adjusted for the $10 per share dividend) to $478 per share. Our insurance companies had an outstanding year in 2020 and are growing significantly, while our investments more than overcame the March carnage by the end of 2020 and are continuing to perform well.

 

Man we made 0,6% last year and every thing was outstanding????? A little more humility please. That was a bad year and start with explaining us why it was bad. Not telling me that every thing performed well. How can you tell that investments perform well when you lost more then 500M$ on a short? That is part of the investment result.

 

Around 2001 I sold out because I was tired of the presentation of the result of insurance when there was catastrophe year. It was always something like "we had a good year if you exclude the catastrophe". How come in a good year they didn't exclude the premium collected for the catastrophe insurance? It sounds like they want the premium but don't expect to pay once in a while. If you want us to really understand how we doing without the catastrophe present us what are the premium we collected vs what we paid in 5 years periods.

 

I was back in because of all the good news for the subs but this report remember me why it will not be longterm for me. They can make a lot in 2021 but there is a not negligible possibility that they will waste it again.

 

In fairness to Prem, the insurance companies did have an outstanding year and the investments are almost all performing well. Security prices might not be, but the underlying companies (which is what Prem is referring to) largely are.

 

All those answers about the rear view. I’m talking about the present, about what is written in the 2020 annual report. We had a bad year and Prem is not candid about it. That is why he didn’t convince me that the futur will be different.

 

On what basis did we have a bad year? The stock market valued certain assets at certain levels as it always does. On that basis, maybe. But did the insurance subs have a bad year? Did any of the big investments have a bad year operationally (ie, in the way that matters?).

 

You’re absolutely right about the short. But as one example, if you’d told me that Atlas would have sailed through the most aggressive recession in history the way it did, I’d have laughed at you. And I own it.

 

Yet it did. Who cares whether the stock (and therefore Fairfax’s BV) reflects that yet?

 

I really don’t mean to get at you. But I think Fairfax had a spectacular year, all told. It went into the first global financial pandemic in 100 years overlevered and with a raft of cyclical holdings. It came out with cash, rising book value, and an underlying CR of 93%. Works for me.

 

I think reporting combined ratio ex-one time events is really disingenuous. Literally the reason why people buy insurance is to protect from one time events. If you exclude them, of course your CR is going to look great.

 

Their investment performance is great if you exclude the mistakes too, but that's just not how it works.

 

I think reporting the CR with and without one time events helps with understanding. You’ll notice I quoted the CR excluding covid losses but including other cat losses. That seems fair to me, given that I have no evidence that another pandemic is likely to happen on any sensible timeframe (unlike, say, hurricanes).

 

Actually, I think Prem's reporting of insurance losses is a more accurate way to explain what the insurance businesses are doing.  If he reported only the actual number, including one-time catastrophe losses, you would have a hard time knowing if the insurance business underwriting is actually getting better. 

 

Remember when we would get hit with the huge one-time hurricanes etc, back in 2003, and we'd see a combined ratio of like 114.  How do you compare the underwriting of the insurers between now and then, if you don't have the pro-forma numbers showing what the CR is without the one-time loss?  Back then, if you removed the one-time losses, we were still writing at like 103...with higher interest rates and dividend income!  Today we're writing at 93 with very low interest rates and dividend income! 

 

Cheers!

[petec]

Exactly.

[Parsad]

What I make me dislike this letter is not one of the many point brought by many here which are good. It is simply the general tone of the letter and it began right at the second paragraph.

 

In March, the S&P500 dropped 30% in 12 days. We absorbed the mark to market losses and thrived. We earned $218 million in 2020 and our book value per share increased by 0.6% (adjusted for the $10 per share dividend) to $478 per share. Our insurance companies had an outstanding year in 2020 and are growing significantly, while our investments more than overcame the March carnage by the end of 2020 and are continuing to perform well.

 

Man we made 0,6% last year and every thing was outstanding????? A little more humility please. That was a bad year and start with explaining us why it was bad. Not telling me that every thing performed well. How can you tell that investments perform well when you lost more then 500M$ on a short? That is part of the investment result.

 

Around 2001 I sold out because I was tired of the presentation of the result of insurance when there was catastrophe year. It was always something like "we had a good year if you exclude the catastrophe". How come in a good year they didn't exclude the premium collected for the catastrophe insurance? It sounds like they want the premium but don't expect to pay once in a while. If you want us to really understand how we doing without the catastrophe present us what are the premium we collected vs what we paid in 5 years periods.

 

I was back in because of all the good news for the subs but this report remember me why it will not be longterm for me. They can make a lot in 2021 but there is a not negligible possibility that they will waste it again.

 

In fairness to Prem, the insurance companies did have an outstanding year and the investments are almost all performing well. Security prices might not be, but the underlying companies (which is what Prem is referring to) largely are.

 

All those answers about the rear view. I’m talking about the present, about what is written in the 2020 annual report. We had a bad year and Prem is not candid about it. That is why he didn’t convince me that the futur will be different.

 

On what basis did we have a bad year? The stock market valued certain assets at certain levels as it always does. On that basis, maybe. But did the insurance subs have a bad year? Did any of the big investments have a bad year operationally (ie, in the way that matters?).

 

You’re absolutely right about the short. But as one example, if you’d told me that Atlas would have sailed through the most aggressive recession in history the way it did, I’d have laughed at you. And I own it.

 

Yet it did. Who cares whether the stock (and therefore Fairfax’s BV) reflects that yet?

 

I really don’t mean to get at you. But I think Fairfax had a spectacular year, all told. It went into the first global financial pandemic in 100 years overlevered and with a raft of cyclical holdings. It came out with cash, rising book value, and an underlying CR of 93%. Works for me.

 

I think reporting combined ratio ex-one time events is really disingenuous. Literally the reason why people buy insurance is to protect from one time events. If you exclude them, of course your CR is going to look great.

 

Their investment performance is great if you exclude the mistakes too, but that's just not how it works.

 

I think reporting the CR with and without one time events helps with understanding. You’ll notice I quoted the CR excluding covid losses but including other cat losses. That seems fair to me, given that I have no evidence that another pandemic is likely to happen on any sensible timeframe (unlike, say, hurricanes).

 

Actually, I think Prem's reporting of insurance losses is a more accurate way to explain what the insurance businesses are doing.  If he reported only the actual number, including one-time catastrophe losses, you would have a hard time knowing if the insurance business underwriting is actually getting better. 

 

Remember when we would get hit with the huge one-time hurricanes etc, back in 2003, and we'd see a combined ratio of like 114.  How do you compare the underwriting of the insurers between now and then, if you don't have the pro-forma numbers showing what the CR is without the one-time loss?  Back then, if you removed the one-time losses, we were still writing at like 103...with higher interest rates and dividend income!  Today we're writing at 93 with very low interest rates and dividend income! 

 

Cheers!

 

By the way, my explanation actually brings up a fantastic point...something that is going to be very important over the next few years.

 

For insurers, there are really three things they can do to improve performance...write better policies and price them correctly; reduce expenses; generate more investment income.  We saw this in Japan, and Prem and Brian had a front-row seat for it.  But insurers have little choice but to write better policies, which will be hard for many who have annual business relations to maintain, so they will have to cut expenses or reach for yield now. 

 

This is a dangerous game for insurers.  If we thought insurance was a tough business over the last 20 years, it suddenly became extraordinarily difficult when essentially one of the legs of the stool gets kicked out from underneath.  Stability for insurers will become more precarious as they write bad business or reach for yield.  This is where discipline will benefit the likes of Berkshire, Fairfax, Markel, etc.  Cheers!

[gurjot]

Everyone's opinion does mean something.    If i was good at timing the market, i can get rich at a stock which went from 100 to 0 with 15-20% volatility over a period of time.  but reality is most people are not. Make things simple and assume there is no stock market and you bought ffh  at a reasonable price and left for last 15-20 years .  would you have made acceptable return?  the answer is no. 

 

Now looking forward i would say it is a show me time .  i have reduced my position by 90% in the last 10 years.  Would i buy at current price?  There are better opportunities else where. 

[SafetyinNumbers]

Everyone's opinion does mean something.    If i was good at timing the market, i can get rich at a stock which went from 100 to 0 with 15-20% volatility over a period of time.  but reality is most people are not. Make things simple and assume there is no stock market and you bought ffh  at a reasonable price and left for last 15-20 years .  would you have made acceptable return?  the answer is no. 

 

Now looking forward i would say it is a show me time .  i have reduced my position by 90% in the last 10 years.  Would i buy at current price?  There are better opportunities else where.

 

What expected return over the next 5 or 10 years would make you consider FFH? What are some of these better opportunities and what are their expected returns?

[bizaro86]

Everyone's opinion does mean something.    If i was good at timing the market, i can get rich at a stock which went from 100 to 0 with 15-20% volatility over a period of time.  but reality is most people are not. Make things simple and assume there is no stock market and you bought ffh  at a reasonable price and left for last 15-20 years .  would you have made acceptable return?  the answer is no. 

 

Now looking forward i would say it is a show me time .  i have reduced my position by 90% in the last 10 years.  Would i buy at current price?  There are better opportunities else where.

 

What expected return over the next 5 or 10 years would make you consider FFH? What are some of these better opportunities and what are their expected returns?

 

Not Gurjot, but I think something like E-L Financial compares favorably. Bigger discount, better investment track record, I like their investment strategy better, and doing aggressive buybacks to close the discount. I think its a 10-15% go forward return.

 

Thats probably what FFH does too if there are no big errors. And I think E-L is quite a bit less likely to have big issues.

 

Excluding the pandemic because its a one time issue not likely to repeat is fine. But in insurance one-time issues of some sort recur with regularity. Maybe not a pandemic, but an unexpected winter storm, earthquake, bad hurricane, or new type of health risk on commercial policies (asbestos 2.0) all seem possible to me.

 

 

[Parsad]

Everyone's opinion does mean something.    If i was good at timing the market, i can get rich at a stock which went from 100 to 0 with 15-20% volatility over a period of time.  but reality is most people are not. Make things simple and assume there is no stock market and you bought ffh  at a reasonable price and left for last 15-20 years .  would you have made acceptable return?  the answer is no. 

 

Now looking forward i would say it is a show me time .  i have reduced my position by 90% in the last 10 years.  Would i buy at current price?  There are better opportunities else where.

 

What expected return over the next 5 or 10 years would make you consider FFH? What are some of these better opportunities and what are their expected returns?

 

At a $455 CDN average cost, I expect Fairfax to return 15-22% annualized over the next 3 years...so it will hit $700-850 CDN conservatively over the next three years.  Holding beyond that isn't a concern...but if markets go sideways, I'm comfortable enough to hang on longer and continue to add if it remains at a significant discount.

 

Personally, in this market, I see fewer and fewer opportunities as good.  If you think you know of some, please share.  Cheers!

[FairFacts]

Everyone's opinion does mean something.    If i was good at timing the market, i can get rich at a stock which went from 100 to 0 with 15-20% volatility over a period of time.  but reality is most people are not. Make things simple and assume there is no stock market and you bought ffh  at a reasonable price and left for last 15-20 years .  would you have made acceptable return?  the answer is no. 

 

Now looking forward i would say it is a show me time .  i have reduced my position by 90% in the last 10 years.  Would i buy at current price?  There are better opportunities else where.

 

What expected return over the next 5 or 10 years would make you consider FFH? What are some of these better opportunities and what are their expected returns?

 

At a $455 CDN average cost, I expect Fairfax to return 15-22% annualized over the next 3 years...so it will hit $700-850 CDN conservatively over the next three years.  Holding beyond that isn't a concern...but if markets go sideways, I'm comfortable enough to hang on longer and continue to add if it remains at a significant discount.

 

Personally, in this market, I see fewer and fewer opportunities as good.  If you think you know of some, please share.  Cheers!

 

Parsad, you are too conservative!

 

(all numbers in US$).

 

Fairfax stated objective is to compound bv at 15%.

 

BV at 12/31/20 was $478, if compounded for the next three years it increases as follows: Yr 1 $550, Yr 2 $632, yr 3 $727.

After three years the multiple should revert towards the historical mean ~1.2x bv (if they execute at 15% growth the multiple could well be significantly greater than 1.2).

 

At a multiple of 1.0 and BV of $727 = share price of $727, at a multiple of 1.2 = a share price of $872.

 

If they fail to execute at this level then the long-term investment thesis is gone. I sense that they are better positioned now than in recent history and hopefully have learnt from their mistakes.

 

The bottom line for me is (and always has been) that they have an uncanny knack of staying defensive enough to weather the storm(s). I think this is sometimes overlooked!

[bizaro86]

I think using their stated plan of 15% compounding for anything is very aggressive. They haven't come close to that in the past, while constantly reiterating it. If you have your own growth forecast worked out that's great, but using that one is awfully trusting where trust hasn't been earned, imo.

[Santayana]

Although they haven't achieved it in the recent past, it's a bit of a stretch to say they've never come close to it when they've compounded at close to 18% over the long-term.