if it were not for this thing or that

[ERICOPOLY]

"One time" cat losses will always be a part of insurance... 

But given that they are messaging that they are never going to short anything again whatsoever, how were the results over the past ten years excluding the losses from shorting?  Has anyone already figured out roughly what the annual rate of growing book value would have been?

 

[Gregmal]

My problem with a lot of companies who hand waive about "one-offs" is always having "one-offs" can kind of being a normal occurrence and thus they arent really one-offs. An AC unit on one of my rentals just went and it cost me $5k. If that is it on the AC I should expect to be good for 10-15 years sans the $100 every other year servicing. But if every year Im getting pinched for $5k, its not one off LOL. But nevertheless its been somewhat amazing seeing the arrogance of the FFH shareholder base. Theyre fine and complacent with it all and its all good so who cares? What do you think about these other managers who behave like Prem and their entities trade at massive discounts to NAV? "I dont care about other managers"...Why not make a few really easy and simple changes and rewrite the narrative in a way that will help enhance the multiple? "I'm fine with the narrative!"....How is this different from the past? Unless you are a very short term/speculative trader, FFH has been a really shitty investment for a while now.."I dont care, if it goes lower I'll just buy moar!"...

 

But to answer directly, the result on the non short investment side haven't been great either. But to each their own. I recall my little brother buying Pokemon cards and my Dad saying "you're wasting your money"...now little bro looks good. Maybe there's hope for the FFH-ers but personally think its a no brainer to just look up one thread and go there. Maybe cut BRK at the $200 level on some LEAP calls if you want more torque. But Ive said this all before so maybe I'm just being redundant. 

[Xerxes]

You are not redundant, but people have different ways to manage their portfolio.

 

Some of us (i.e. myself), did not meaningfully owned FFH prior to Covid, so we don't carry any bias. I think north of 65% of my FFH share-count has been bought post-Covid and at a good discount, yet it doesnt make it to the top 3 position. Buying FFH and discussing it doesn't mean that we do not have anything else or do anything else. I was happy to buy Microstrategy @ $380 ish in Dec 2020 and dump it for $1050 some weeks later. I was happy to sell BB @ $25 CAD in Jan (cost being in mid-single digit). I was happy to dump Uber at north of $55 in Q1 and with it good third of LSPD.

 

FFH creates discussion (and controversy) so people tend to post a lot, but (except for a few) i think the quantity of FFH posts are NOT correlated to the % size of it in their portfolio. Perhaps this could be a good survey, to see how many people actually have a large outsize position in FFH. I think that has more merit than the content of FFH bull's numerous posts, which is well discussed.

 

As point of reference on a different name, I bought BEP.UN and BIP.UN exactly at about the sametime: during the market swoon of mid/late Dec 2018.

BEP.UN has been an homerun of a sort, while BIP.UN has not done much, and i am sure we can write a PhD thesis on Brookfield's arrogance and their dealing with minority interest and its complexity, yet that does't make that entity a bad hold.

 

 

[flesh]

3 hours ago, Gregmal said:

My problem with a lot of companies who hand waive about "one-offs" is always having "one-offs" can kind of being a normal occurrence and thus they arent really one-offs. An AC unit on one of my rentals just went and it cost me $5k. If that is it on the AC I should expect to be good for 10-15 years sans the $100 every other year servicing. But if every year Im getting pinched for $5k, its not one off LOL. But nevertheless its been somewhat amazing seeing the arrogance of the FFH shareholder base. Theyre fine and complacent with it all and its all good so who cares? What do you think about these other managers who behave like Prem and their entities trade at massive discounts to NAV? "I dont care about other managers"...Why not make a few really easy and simple changes and rewrite the narrative in a way that will help enhance the multiple? "I'm fine with the narrative!"....How is this different from the past? Unless you are a very short term/speculative trader, FFH has been a really shitty investment for a while now.."I dont care, if it goes lower I'll just buy moar!"...

 

But to answer directly, the result on the non short investment side haven't been great either. But to each their own. I recall my little brother buying Pokemon cards and my Dad saying "you're wasting your money"...now little bro looks good. Maybe there's hope for the FFH-ers but personally think its a no brainer to just look up one thread and go there. Maybe cut BRK at the $200 level on some LEAP calls if you want more torque. But Ive said this all before so maybe I'm just being redundant. 

Just an fyi, I always appreciate greg's variant perspective. It's definitely recurring for ff at this point. Is it in the future? Your brk leap comp is curious. Thanks. 

[Parsad]

4 hours ago, Gregmal said:

My problem with a lot of companies who hand waive about "one-offs" is always having "one-offs" can kind of being a normal occurrence and thus they arent really one-offs. An AC unit on one of my rentals just went and it cost me $5k. If that is it on the AC I should expect to be good for 10-15 years sans the $100 every other year servicing. But if every year Im getting pinched for $5k, its not one off LOL. But nevertheless its been somewhat amazing seeing the arrogance of the FFH shareholder base. Theyre fine and complacent with it all and its all good so who cares? What do you think about these other managers who behave like Prem and their entities trade at massive discounts to NAV? "I dont care about other managers"...Why not make a few really easy and simple changes and rewrite the narrative in a way that will help enhance the multiple? "I'm fine with the narrative!"....How is this different from the past? Unless you are a very short term/speculative trader, FFH has been a really shitty investment for a while now.."I dont care, if it goes lower I'll just buy moar!"...

 

But to answer directly, the result on the non short investment side haven't been great either. But to each their own. I recall my little brother buying Pokemon cards and my Dad saying "you're wasting your money"...now little bro looks good. Maybe there's hope for the FFH-ers but personally think its a no brainer to just look up one thread and go there. Maybe cut BRK at the $200 level on some LEAP calls if you want more torque. But Ive said this all before so maybe I'm just being redundant. 

 

I think you're looking at Fairfax in a vacuum...since it has underperformed for the last decade, it means management will underperform for another decade. 

 

MSFT was stagnant from 2000 to 2015.  Assuming MSFT was the same company in 2015 under Nadella, because it underperformed from 2000-2015 under Ballmer meant you missed one hell of a ride from 2015 on. 

 

It's the same view people had when I was talking about JEF.  Since Handler struggled after taking over from Steinberg & Cummings, meant JEF would continue to struggle under Handler.  Again, people missed a great opportunity to own a terrific investment bank at dirt cheap prices.  I see Prem making similar "simplification changes" at FFH, that Handler did at JEF...streamline, get the core working optimally and go back to what we do best.

 

Doesn't mean I'll hold FFH, MSFT or JEF forever, but all three had very opportune moments to invest, and many people missed all three.  Cheers!

[cwericb]

4 hours ago, Gregmal said:

My problem with a lot of companies who hand waive about "one-offs" is always having "one-offs" can kind of being a normal occurrence and thus they arent really one-offs. An AC unit on one of my rentals just went and it cost me $5k. If that is it on the AC I should expect to be good for 10-15 years sans the $100 every other year servicing. But if every year Im getting pinched for $5k, its not one off LOL. But nevertheless its been somewhat amazing seeing the arrogance of the FFH shareholder base. Theyre fine and complacent with it all and its all good so who cares? What do you think about these other managers who behave like Prem and their entities trade at massive discounts to NAV? "I dont care about other managers"...Why not make a few really easy and simple changes and rewrite the narrative in a way that will help enhance the multiple? "I'm fine with the narrative!"....How is this different from the past? Unless you are a very short term/speculative trader, FFH has been a really shitty investment for a while now.."I dont care, if it goes lower I'll just buy moar!"...

 

But to answer directly, the result on the non short investment side haven't been great either. But to each their own. I recall my little brother buying Pokemon cards and my Dad saying "you're wasting your money"...now little bro looks good. Maybe there's hope for the FFH-ers but personally think its a no brainer to just look up one thread and go there. Maybe cut BRK at the $200 level on some LEAP calls if you want more torque. But Ive said this all before so maybe I'm just being redundant. 

 

 

Greg, here is the one that gets me....

 

“I wish Prem Watsa would pay a little more attention to Fairfax’s share price.” Someone always comes back like...
“Oh no, no no, he should just concentrate on running the company.”

 

Yeah? Would you feel that way if you needed to sell some shares?

 

Well, this IS the 21st century. In my very humble opinion it wouldn’t hurt Fairfax one little iota to be a little proactive in promoting the strengths of the company and polish up its image. Just for starters, their website looks like a kid designed it in 1985. And I don’t care what Berkshire’s site looks like because Fairfax is not Berkshire.  

Check out  www.fairfax.ca Slick, eh.

 

There is an old saying, “A shiny apple will always sell for more than one just fell off the tree.” Fairfax needs a little polish on their image.

 

In 20016 and again in 2018, FFH was pushing towards $800 C per share. Today things are looking great and shares have jumped all the way up to $560 C from $350 - where share price was in October 2020. So, at the lofty figure of $560 it has finally increased to where it was SEVEN - YEARS - AGO. (Sorry for the caps because I try not to swear here.)

 

I think that Fairfax is essentially a good company. I think Fairfax should have a great future. But this company needs to grow up and realize that perception is important. So here is a hint. If Fairfax has a PR department, fire them. If they don’t, get one!

 

And it that doesn’t tick off some people here enough...
        I have seen several situations where Prem has NOT come off all that well in public. So rather than promoting Prem Watsa all the time and polishing his personal image and boost his ego, how about hiding him in a back room for a while and let a PR department polish up the company image.

[bearprowler6]

19 minutes ago, cwericb said:

 

 

Greg, here is the one that gets me....

 

“I wish Prem Watsa would pay a little more attention to Fairfax’s share price.” Someone always comes back like...
“Oh no, no no, he should just concentrate on running the company.”

 

Yeah? Would you feel that way if you needed to sell some shares?

 

Well, this IS the 21st century. In my very humble opinion it wouldn’t hurt Fairfax one little iota to be a little proactive in promoting the strengths of the company and polish up its image. Just for starters, their website looks like a kid designed it in 1985. And I don’t care what Berkshire’s site looks like because Fairfax is not Berkshire.  

Check out  www.fairfax.ca Slick, eh.

 

There is an old saying, “A shiny apple will always sell for more than one just fell off the tree.” Fairfax needs a little polish on their image.

 

In 20016 and again in 2018, FFH was pushing towards $800 C per share. Today things are looking great and shares have jumped all the way up to $560 C from $350 - where share price was in October 2020. So, at the lofty figure of $560 it has finally increased to where it was SEVEN - YEARS - AGO. (Sorry for the caps because I try not to swear here.)

 

I think that Fairfax is essentially a good company. I think Fairfax should have a great future. But this company needs to grow up and realize that perception is important. So here is a hint. If Fairfax has a PR department, fire them. If they don’t, get one!

 

And it that doesn’t tick off some people here enough...
        I have seen several situations where Prem has NOT come off all that well in public. So rather than promoting Prem Watsa all the time and polishing his personal image and boost his ego, how about hiding him in a back room for a while and let a PR department polish up the company image.

 

cwericb....you have hit the nail on the head. Fairfax is run entirely to satisfy the ego of Prem Watsa. Maximizing shareholder return is not the objective. Nothing more needs to be said. Sanjeev will no doubt disagree however the fact remains....Fairfax is trading where it was 7 years ago and well below where it traded on Jan 1/20. Furthermore, the share performance from the pandemic lows in March/April 2020 have been good but nothing spectacular compared to any number of other insurers, financial entities or a myriad of other stocks many of whom are discussed on this site. This lack of performance would be unacceptable in any other publicly traded entity except for the fact that Prem controls the company through his multiple voting shares. In my view, he is sadly taking advantage of a very good and loyal shareholder base. 

[Gregmal]

24 minutes ago, Parsad said:

 

I think you're looking at Fairfax in a vacuum...since it has underperformed for the last decade, it means management will underperform for another decade. 

 

MSFT was stagnant from 2000 to 2015.  Assuming MSFT was the same company in 2015 under Nadella, because it underperformed from 2000-2015 under Ballmer meant you missed one hell of a ride from 2015 on. 

 

It's the same view people had when I was talking about JEF.  Since Handler struggled after taking over from Steinberg & Cummings, meant JEF would continue to struggle under Handler.  Again, people missed a great opportunity to own a terrific investment bank at dirt cheap prices.  I see Prem making similar "simplification changes" at FFH, that Handler did at JEF...streamline, get the core working optimally and go back to what we do best.

 

Doesn't mean I'll hold FFH, MSFT or JEF forever, but all three had very opportune moments to invest, and many people missed all three.  Cheers!

Its not really a statement of "the past has sucked so the future will"...but more so "whats changed?". And when I ask that Im always presented with the outside stuff. Which is great. A securities portfolio thats gone up 35% should have some correspondence maybe minus some liquidation and tax discount or whatever. But with almost every turnaround story I've ever encountered, the change needs to be internal. You can buy BRG because of leverage and Sunbelt MF being on fire and its trades at a big discount to a growing NAV....but its a bad apple with behavior and alignment problems. You can buy APTS who is undergoing a company wide transformation, from the asset focus, to the management, to the capital structure. Guess which one I want?

 

There's a general saying about folks setting themselves up for failure when they disagree with the current state of things yet blame outside factors rather than themselves. Sitting around waiting for all the perceived externals to change is just a poor use of time, especially when the real change can happen much quicker if its acknowledged and implemented internally. The issue with FFH is the bad behavior. Investing is often like gambling. You play 10 blackjack hands and Im sure someone will point to winning 4/5/6 times as evidence of something. But if the process is wrong, thats a problem. Prem has a decade of problems and poor process bogging down the company and rather than take some simple steps to change that, he and many shareholders are banking on external things like "hard insurance market", "crap stocks have rallied"...and you're all just missing the underlying issue and hoping it changes due to the external. And it might, but thats just a tough game to play. Put this side by side with BRK and tell me why it s a better investment? Only angle is because its smaller and may have more upside...which like I suggested earlier, is nullified by just cutting some leverage into BRK with LEAPS. 

[Parsad]

6 minutes ago, Gregmal said:

 

Put this side by side with BRK and tell me why it s a better investment? Only angle is because its smaller and may have more upside...which like I suggested earlier, is nullified by just cutting some leverage into BRK with LEAPS. 

 

I'm not sure comparing Fairfax to the greatest investor of all time and arguably the greatest company of all time is fair. 

 

Now if you ask me which has the better prospects going forward for the next 2-3 years...MKL, RE, WTM, Y or FFH...my money is on FFH.  Cheers!

[Gregmal]

I dont think you have to directly compare it to BRK although it has been done before, but ultimately every investment to me, is really just a risk adjusted expectation of a return. You can buy something super speculative and if you assess your odds of losing 100% at 0, -50% at 20%, and -20% at 50%, while the odds of making +10% to be 90%, 20%-50% to be 40%, and 100%+ to be 10%, I mean those are good odds. When you weigh things, I dont see any advantage in FFH over BRK as a place to put capital. If you are a mandated investor, IE an ETF operator, and your only choices are MKL, FFH, WTM, Y, etc...I get it. But for the average investor, I dont. Its one of the main reasons I hate the fuckers at Korn Ferry, Glass Lewis, etc who do proxy stuff and compensation advisory....WTF do peer groups have to do with an investors options for their capital? Its a hoax to say "well, other companies in our sector sucked so its ok we did too"...especially when you have a large degree of discretion about where you(as an NEO) are investing shareholder resources. 

[Parsad]

4 minutes ago, Gregmal said:

I dont think you have to directly compare it to BRK although it has been done before, but ultimately every investment to me, is really just a risk adjusted expectation of a return. You can buy something super speculative and if you assess your odds of losing 100% at 0, -50% at 20%, and -20% at 50%, while the odds of making +10% to be 90%, 20%-50% to be 40%, and 100%+ to be 10%, I mean those are good odds. When you weigh things, I dont see any advantage in FFH over BRK as a place to put capital. If you are a mandated investor, IE an ETF operator, and your only choices are MKL, FFH, WTM, Y, etc...I get it. But for the average investor, I dont. Its one of the main reasons I hate the fuckers at Korn Ferry, Glass Lewis, etc who do proxy stuff and compensation advisory....WTF do peer groups have to do with an investors options for their capital? Its a hoax to say "well, other companies in our sector sucked so its ok we did too"...especially when you have a large degree of discretion about where you(as an NEO) are investing shareholder resources. 

 

I'm not sure we are actually disagreeing here.  Like I said, I look at every investment based on opportunity cost and whether it is discounted to intrinsic value.  That not only applies to FFH, but even BRK.  I'm a huge proponent of no "forever hold" stock.  

 

The reason the board is called the Corner of Berkshire and Fairfax isn't because of Berkshire or Fairfax's performance.  It has to do with the lessons learned from Buffett and Prem during my life...about developing an intellectual framework, integrity, life lessons, how to treat people, etc. 

 

Prem may have his faults as some on here state, but even the biggest hater has to admit that at least he puts his money where his mouth is and attempts to be transparent, fair with shareholders and try to do the best that he can.

 

It's easy to post stuff about people under anonymity (not you), because people know that their own faults and failures will never see the light of day.  Everyone is Tom Brady until they actually have to throw a real ball against a charging Khalil Mack or JJ Watt!  Cheers!

[glider3834]

1 hour ago, cwericb said:

Well, this IS the 21st century. In my very humble opinion it wouldn’t hurt Fairfax one little iota to be a little proactive in promoting the strengths of the company and polish up its image. Just for starters, their website looks like a kid designed it in 1985. And I don’t care what Berkshire’s site looks like because Fairfax is not Berkshire.  

Check out  www.fairfax.ca Slick, eh

Honestly you have raised a good point - I agree the website needs to be optimised for mobile so that information is more accessible to investors - I have an android & when I click on the menu headings eg 'Financials' or 'News" on my mobile it will automatically direct me to the first menu item eg "Shareholder letters' under 'Financials'. I am unable to select 'Annual reports' for example on my mobile. Does anyone else have this problem?

 

I think there should be an Investor relations email as well - this is useful for international investors who might want to submit a question outside normal business hours.

 

Fairfax's shareholder letters are excellent in terms of communicating what is going on 'under the hood' but I agree that the website could also highlight some key messages around key investments, track record and even commitments to ESG & their incredible support for charitable endeavours. 

 

I know Fairfax believe in keeping their head office running costs low & let their results do the talking , however, even with a small marketing/IT cost they could deliver a big punch in terms of articulating their attractiveness as an investment. 

 

 

[glider3834]

2 minutes ago, glider3834 said:

Honestly you have raised a good point - I agree the website needs to be optimised for mobile so that information is more accessible to investors - I have an android & when I click on the menu headings eg 'Financials' or 'News" on my mobile it will automatically direct me to the first menu item eg "Shareholder letters' under 'Financials'. I am unable to select 'Annual reports' for example on my mobile. Does anyone else have this problem?

 

I think there should be an Investor relations email as well - this is useful for international investors who might want to submit a question outside normal business hours.

 

Fairfax's shareholder letters are excellent in terms of communicating what is going on 'under the hood' but I agree that the website could also highlight some key messages around key investments, track record and even commitments to ESG & their incredible support for charitable endeavours. 

 

I know Fairfax believe in keeping their head office running costs low & let their results do the talking , however, even with a small marketing/IT cost they could deliver a big punch in terms of articulating their attractiveness as an investment. 

 

 

I don't have an email but I would also like to communicate my comments to IR team at Fairfax

Edited August 9, 2021 by glider3834

[Candyman1]

2 hours ago, cwericb said:

“I wish Prem Watsa would pay a little more attention to Fairfax’s share price.”

 

Prem bought $150 million of FFH stock, but I get it, he does not care about the stock price. lol

Edited August 9, 2021 by Candyman1

[modiva]

The biggest question is what is the discount for a) past mistakes and b) lack of current visible corrective actions? Is it 50%? Or is it 5%?

 

It is trading at 50% discount now and isn't it too steep?

 

The book value is ~$600 USD (including Digit's gains to be added in Q3/Q4). 

Industry peers are trading at ~1.4x and a case made that it should trade at 1.5x -- fair value is $840-900 USD. 

Fairfax is not just an insurer and investor, but are also becoming a disruptive tech VC with big successes like Digit. 

 

Edited August 9, 2021 by modiva

[glider3834]

9 minutes ago, Candyman1 said:

 

Prem bought $150 million of FFH stock, but I get it, he does not care about the stock price. lol

One of the key reasons why I made FFH my largest position end of last year

 

Its turned into a pretty good investment for Prem so far too - perhaps that speaks volumes on his ability as an investor as well

[glider3834]

1 hour ago, Gregmal said:

I dont see any advantage in FFH over BRK as a place to put capital.

I have a small indirect position in BRK but honestly I don't see a stronger investment case for BRK over FFH at the moment - a big reason for that is just the law of large numbers - how many investment options does BRK that could really turn the needle versus FFH? 

 

Also where do you see fair value for BRK? And why?

 

[modiva]

41 minutes ago, modiva said:

The biggest question is what is the discount for a) past mistakes and b) lack of current visible corrective actions? Is it 50%? Or is it 5%?

 

It is trading at 50% discount now and isn't it too steep?

 

The book value is ~$600 USD (including Digit's gains to be added in Q3/Q4). 

Industry peers are trading at ~1.4x and a case made that it should trade at 1.5x -- fair value is $840-900 USD. 

Fairfax is not just an insurer and investor, but are also becoming a disruptive tech VC with big successes like Digit. 

In 2018, Fairfax was trading at 1.3x.  What is it that made the market to discount 50% now, when it was trading closer to fair value 3 years ago.  It is ironic that the situation vastly improved in the last 3 years and some corrective changes were announced (e.g., no more shorting).  

Edited August 9, 2021 by modiva

[cwericb]

1 hour ago, Candyman1 said:

 

Prem bought $150 million of FFH stock, but I get it, he does not care about the stock price. lol

 

No question that Prem has a lot of skin in the game, but I doubt he has plans to sell those shares any time soon, if ever. He knew the shares were undervalued at the time, had the money and reeled in a bunch more shares of his own company.   But to put things in perspective, Prem is a billionaire. One billion is $1,000 million. $150 mil is not as significant as it might seem.

 

I doubt he looks at his shares the same way as most investors in the company do. Investors don’t have the same attachment or loyalty to Fairfax that Watsa has. After all, it is HIS company and his timeline is likely unlimited. If he passes on, the shares likely go to the family. I also think that in his mind that he and the company are essentially one and the same.  

 

Most investors are looking to take a profit and move on and invest elsewhere, aren’t they? Prem and Fairfax are attached at the hip. Prem simply saw an opportunity to buy back part of his empire at an attractive price.

 

I would view Prem’s buying shares quite differently from the average CEO buying shares in a company that employs him. The average CEO hasn’t built the company from scratch over 40 years. Most CEO’s don’t own a substantial portion of the company they manage and if the average CEO gets a better deal with another company, off they go. Prem is never going to sell out and move to another company as an employee.   

[Xerxes]

Gregmal,

 

For a moment forget about Prem, out of curiosity, what are your thoughts about Sokol's new outfit: Atlas. 

[Viking]

4 hours ago, Gregmal said:

Its not really a statement of "the past has sucked so the future will"...but more so "whats changed?". And when I ask that Im always presented with the outside stuff. Which is great. A securities portfolio thats gone up 35% should have some correspondence maybe minus some liquidation and tax discount or whatever. But with almost every turnaround story I've ever encountered, the change needs to be internal. You can buy BRG because of leverage and Sunbelt MF being on fire and its trades at a big discount to a growing NAV....but its a bad apple with behavior and alignment problems. You can buy APTS who is undergoing a company wide transformation, from the asset focus, to the management, to the capital structure. Guess which one I want?

 

There's a general saying about folks setting themselves up for failure when they disagree with the current state of things yet blame outside factors rather than themselves. Sitting around waiting for all the perceived externals to change is just a poor use of time, especially when the real change can happen much quicker if its acknowledged and implemented internally. The issue with FFH is the bad behavior. Investing is often like gambling. You play 10 blackjack hands and Im sure someone will point to winning 4/5/6 times as evidence of something. But if the process is wrong, thats a problem. Prem has a decade of problems and poor process bogging down the company and rather than take some simple steps to change that, he and many shareholders are banking on external things like "hard insurance market", "crap stocks have rallied"...and you're all just missing the underlying issue and hoping it changes due to the external. And it might, but thats just a tough game to play. Put this side by side with BRK and tell me why it s a better investment? Only angle is because its smaller and may have more upside...which like I suggested earlier, is nullified by just cutting some leverage into BRK with LEAPS. 

 

ok. So “what’s changed?”

1.) record top line net premiums written; +25% most recent quarter and poised to continue

2.) record underwriting profit (Q2 and 1H?)

- given lag between written and earned premiums should see strong top and bottom line growth for at least next 18 months

3.) record total investment results past 9 months (were CDS gains higher?)

4.) record 9 month EPS

5.) record book value of US$540 with another $40 coming (Digit) shortly

6.) lowest cost of capital in history (lowered significantly over past 12 months): debt has been extended at lower rates

7.) Digit poised to be next grand slam investment win (+ $2.5 billion)

8.) Atlas is poised to be a home run investment win (+$1 billion)

9.) Initiated TRS for 1.95 million FFH shares

10.) strategy change with insurance companies: no more large acquisitions 

- resulted in significant share issuance in past

11.) strategy change with investing: no more shorting 

- resulted in billions of losses in past

 

Greg, do you disagree with anything written above?

 

There are another 10 or 15 smaller but significant developments from the past 24 months that i could list that all have built value for Fairfax shareholders. Bottom line, much has changed at Fairfax over the past few years.
 

Now one thing has not changed at Fairfax: Prem is still CEO  

 

PS: i am pretty sure about all the ‘record’ comments above… please correct me if i am wrong

Edited August 10, 2021 by Viking

[Gregmal]

52 minutes ago, Xerxes said:

Gregmal,

 

For a moment forget about Prem, out of curiosity, what are your thoughts about Sokol's new outfit: Atlas. 

I love it from afar and think its a phenomenal situation. However Ive made a couple attempts to kind of get comfortable understanding that space myself, and then still, run into people who know what theyre talking about there and realize I should just go back to what I understand LOL. 

[Gregmal]

@Viking I dont disagree but a lot of that is externally influenced. Every insurance company(relatively speaking) is in a good place. Markets are at ATHs and even Robinhoods are printing big gains. Record earnings, record book value, big investment gains, it gets redundant, but thats fairly common place right now. So these things get priced in, for better or for worse. You follow Stelco and I follow CLF...do those valuations make sense? There is built in sentiment with most of this stuff and its preceded by sector or company specific expectation. And only until its proven otherwise, do those change. If the steel co's print another 2-4 Q of these numbers, the shares probably double. But again, within the sector, there are those that trade a premium valuations and those that dont. Out of everything you listed, numbers 9 and 10 to me have the potential if there's real follow through, to have a greater impact on improving the multiple. In a vacuum, when you have a great market for the insurance co's you want the company who's either best of breed, or undergoing a major turnaround(insurance just being an example). Anything in between is kind of a waste of time. FFH is not best of breed. And while some are saying theres a turnaround, I just dont see any internal effort. I just see results that are consistent with what everyone else is printing in those spaces and a valuation that is indicative of a deserved discount. Thats what I see as needing to change here. Or put another way, if the above results continue for another 12 months, are there not plenty of other companies who could boast those same type of results but get more credit for it? Or someone who is really undergoing a big time turnaround, IE levered to the tilt but paying it down/new management reinventing the company, etc?

Edited August 10, 2021 by Gregmal

[Viking]

1 hour ago, Gregmal said:

@Viking I dont disagree but a lot of that is externally influenced. Every insurance company(relatively speaking) is in a good place. Markets are at ATHs and even Robinhoods are printing big gains. Record earnings, record book value, big investment gains, it gets redundant, but thats fairly common place right now. So these things get priced in, for better or for worse. You follow Stelco and I follow CLF...do those valuations make sense? There is built in sentiment with most of this stuff and its preceded by sector or company specific expectation. And only until its proven otherwise, do those change. If the steel co's print another 2-4 Q of these numbers, the shares probably double. But again, within the sector, there are those that trade a premium valuations and those that dont. Out of everything you listed, numbers 9 and 10 to me have the potential if there's real follow through, to have a greater impact on improving the multiple. In a vacuum, when you have a great market for the insurance co's you want the company who's either best of breed, or undergoing a major turnaround(insurance just being an example). Anything in between is kind of a waste of time. FFH is not best of breed. And while some are saying theres a turnaround, I just dont see any internal effort. I just see results that are consistent with what everyone else is printing in those spaces and a valuation that is indicative of a deserved discount. Thats what I see as needing to change here. Or put another way, if the above results continue for another 12 months, are there not plenty of other companies who could boast those same type of results but get more credit for it? Or someone who is really undergoing a big time turnaround, IE levered to the tilt but paying it down/new management reinventing the company, etc?

Greg, i am not sure i understand your reference to ‘externally influenced’. The reason Fairfax is able to grow its top line so much the past couple of years (take advantage of the hard market) is because it has been a disciplined underwriter in the past and therefore is now able to grow net written premiums 25%. This is a sign of solid management behaviour. 
 

Now is Fairfax best in class when it comes to underwriting? No they are not. And that is a very different discussion. 
 

And has the overall equity market been going up? Yes. Does that negate what is going on at Fairfax? No. It was their decision a couple of years ago to pivot from ICICI (monetize) to Digit. And it is working out exceptionally well. Putting $1.1 billion into Atlas is looking more and more like a very good decision. I also like their decision to get exposure to 1.95 million FFH shares via the TRS. And as i said before, there are lots more examples of what look to me to be solid decisions by management. 
 

Now is Prem a watchout for me? Yes. But i will judge him be what he says and does. (When my kids mess up they pay the consequences and we all move on. I do not keep harping at them afterwards.) Prem messed up. He has admitted some errors and corporate strategy has been modified. I am open mined to what will come next. If i see more big errors i will move on. Not complicated. 

 

The reason i like Fairfax right now is i like the risk / reward with the shares are trading at US $450. I think i understand the company. And i have owned it on and off for 20 years and done very well in the past when my analysis has identified a similar set up. We will see what the future holds  

Edited August 10, 2021 by Viking

[glider3834]

2 hours ago, cwericb said:

 

No question that Prem has a lot of skin in the game, but I doubt he has plans to sell those shares any time soon, if ever. He knew the shares were undervalued at the time, had the money and reeled in a bunch more shares of his own company.   But to put things in perspective, Prem is a billionaire. One billion is $1,000 million. $150 mil is not as significant as it might seem.

 

I doubt he looks at his shares the same way as most investors in the company do. Investors don’t have the same attachment or loyalty to Fairfax that Watsa has. After all, it is HIS company and his timeline is likely unlimited. If he passes on, the shares likely go to the family. I also think that in his mind that he and the company are essentially one and the same.  

 

Most investors are looking to take a profit and move on and invest elsewhere, aren’t they? Prem and Fairfax are attached at the hip. Prem simply saw an opportunity to buy back part of his empire at an attractive price.

 

I would view Prem’s buying shares quite differently from the average CEO buying shares in a company that employs him. The average CEO hasn’t built the company from scratch over 40 years. Most CEO’s don’t own a substantial portion of the company they manage and if the average CEO gets a better deal with another company, off they go. Prem is never going to sell out and move to another company as an employee.   

Out of interest - was Prem's insider buy on open market of US$150 mil one of the largest ever - I have never seen an executive insider buy of this size before?