Fairfax Stock - New All Time High

[Parsad]

1 hour ago, nwoodman said:

It may have nothing to do with FFH, a market wide margin call would have this baby throw out with the bath water in a heart beat, just the same with Berkshire.  The point is to not get called yourself called or have the stomach to sit through it even with no margin.  Hence the stress testing.
 

In a 50% off market sale, is Fairfax going to be your number 1 pick? 

 

Costco!  Cheers!

[Parsad]

3 hours ago, giulio said:

It looks to me as people are assuming that ffh could drop 50%+ in one single session. What could trigger such event? Fraud accusations? Insufficient/overstated reserves? What's the probability of that happening?

Why would a thoughtful, concentrated investor, having followed the company for many years, not being able to exit at a smaller loss? 

 

Btw, Thank you @SafetyinNumbers and @Parsad for sharing your thoughts.

And congratulations on the terrific results!!

 

G

 

I bought BRK at 0.55 times book value in late 1999/early 2000.  

 

I bought FFH twice...once at 0.35 times book value in 2003 and again at 0.6 times book value in 2020.

 

It's not that it is going to happen...but it could very well happen for various reasons. 

 

In BRK's case it was because tech stocks were hot and quality non-tech companies were completely unloved.

 

In FFH's case it was reinsurance losses combined with hedge fund attacks in 2003 and actually nothing significant in 2020 other than the pandemic.

 

Buying BRK in 2000 was riskless...it was just unloved.

 

Buying FFH in 2020 was riskless...also unloved.

 

Buying FFH in 2003 was full of risk as their balance sheet wasn't that strong after reinsurance losses...but I was young and had the balls to buy because I trusted Prem.

 

If I had to do it again today, as I approach retirement now and am not as young as I was in 2000 and 2003, I would buy BRK in 2000 and I would buy FFH in 2020...but I would not have bought FFH in 2003.

 

I want to buy money-making stocks, with good balance sheets, at deep discounts with little risk these days...unloved!  Cheers!

[Junior R]

8 hours ago, Parsad said:

 

$10M+.  Returns outside of PDH have been phenomenal.  I've averaged about 20% annualized for 20 years on my personal investments. You take out PDH and we've done about 18% annualized in MPIC Fund I, LP since 2006...too bad I can't do that!    

 

Cheers!

Lol would that be in USD or CAD

[73 Reds]

56 minutes ago, Parsad said:

 

I bought BRK at 0.55 times book value in late 1999/early 2000.  

 

I bought FFH twice...once at 0.35 times book value in 2003 and again at 0.6 times book value in 2020.

 

It's not that it is going to happen...but it could very well happen for various reasons. 

 

In BRK's case it was because tech stocks were hot and quality non-tech companies were completely unloved.

 

In FFH's case it was reinsurance losses combined with hedge fund attacks in 2003 and actually nothing significant in 2020 other than the pandemic.

 

Buying BRK in 2000 was riskless...it was just unloved.

 

Buying FFH in 2020 was riskless...also unloved.

 

Buying FFH in 2003 was full of risk as their balance sheet wasn't that strong after reinsurance losses...but I was young and had the balls to buy because I trusted Prem.

 

If I had to do it again today, as I approach retirement now and am not as young as I was in 2000 and 2003, I would buy BRK in 2000 and I would buy FFH in 2020...but I would not have bought FFH in 2003.

 

I want to buy money-making stocks, with good balance sheets, at deep discounts with little risk these days...unloved!  Cheers!

Yep, don't buy stocks that can "go to 0" without having an exit plan.  Strong balance sheets prevent a stock from going to 0.  Money making companies don't go to 0 while making money.  The whole discussion about "going to 0" really makes no sense because if somehow a high quality company were to become worthless overnight, that would likely be the least of our worries.

[Junior R]

3 minutes ago, 73 Reds said:

Yep, don't buy stocks that can "go to 0" without having an exit plan.  Strong balance sheets prevent a stock from going to 0.  Money making companies don't go to 0 while making money.  The whole discussion about "going to 0" really makes no sense because if somehow a high quality company were to become worthless overnight, that would likely be the least of our worries.

Also its hard to go to 0 when each of the companies are separate companies vs the holding company...Its more about risk reward if you buy FFH at 1.4 there is possibility it corrects...The real big risk to FFH is what happens when Prem leaves and his son/daughter take over

[SafetyinNumbers]

30 minutes ago, Junior R said:

Also its hard to go to 0 when each of the companies are separate companies vs the holding company...Its more about risk reward if you buy FFH at 1.4 there is possibility it corrects...The real big risk to FFH is what happens when Prem leaves and his son/daughter take over

I agree that it’s really hard for it to go to zero especially in the current set up given how much excess capital they are creating. The stock is still well below 1.2x adjusted forward BV and with buybacks in place, I think any decline in the multiple would reverse pretty quickly. I don’t think there is a real big risk when Ben takes over as Chairman although the company will probably look very different by the time that happens. 

[Parsad]

7 hours ago, Junior R said:

Lol would that be in USD or CAD

 

In Canadian.  But I wouldn't be surprised if that number isn't the same in the US in most major cities with high housing costs.

 

Cheers!

[Xerxes]

Anyone knows if FFH has ever closed above $1700  ? I know it went above it as shown in the 52-week high but not closed. Correct ?
 

except maybe today. If it holds up. 

[Junior R]

1 minute ago, Xerxes said:

Anyone knows if FFH has ever closed above $1700  ? I know it went above it as shown in the 52-week high but not closed. Correct ?
 

except maybe today. If it holds up. 

Nope never might be first time

[Xerxes]

7 minutes ago, Junior R said:

Nope never might be first time

good ending for end of Q3. 

[Spooky]

On 9/23/2024 at 11:08 AM, Parsad said:

I want to buy money-making stocks, with good balance sheets, at deep discounts with little risk these days...unloved!  Cheers!

 

Thanks for the insights Parsad. Are there any stocks, sectors or markets which you view as unloved today?

 

[dartmonkey]

$1285, within centimeters of the all-time high set yesterday.

 

For context, Fairfax closed at 1,041.43 on Feb 7 and dropped to as low as $909 on Feb 8, with the publication of the junky Muddy Waters screed. A week later, it closed back at 1,041.52 as that report was thouroughly debunked by Fairfax. With the publication of solid results in the annual report and two solid reports for Q1 and Q2, and a steady stream of positive developments for the company, the share price closed yesterday 22% higher, at 1,265.98, and it's up another $15 so far today. 

 

You would think that after going from a dividend-adjsted share price of $335 on Jan 1st, 2001 to $459 at the beginning of 2022, $644 for 2023 and $1030 for 2024, shares might be getting pricey at today's price of $1285, but that is still 7.8x the last 4 quarters' net income. If there's one thing nicer than a stock that has moved up a lot, it's a stock that has moved up a lot and that is still bargain priced.

 

[UK]

10 minutes ago, dartmonkey said:

$1285, within centimeters of the all-time high set yesterday.

 

For context, Fairfax closed at 1,041.43 on Feb 7 and dropped to as low as $909 on Feb 8, with the publication of the junky Muddy Waters screed. A week later, it closed back at 1,041.52 as that report was thouroughly debunked by Fairfax. With the publication of solid results in the annual report and two solid reports for Q1 and Q2, and a steady stream of positive developments for the company, the share price closed yesterday 22% higher, at 1,265.98, and it's up another $15 so far today. 

 

You would think that after going from a dividend-adjsted share price of $335 on Jan 1st, 2001 to $459 at the beginning of 2022, $644 for 2023 and $1030 for 2024, shares might be getting pricey at today's price of $1285, but that is still 7.8x the last 4 quarters' net income. If there's one thing nicer than a stock that has moved up a lot, it's a stock that has moved up a lot and that is still bargain priced.

 

[Viking]

3 hours ago, dartmonkey said:

$1285, within centimeters of the all-time high set yesterday.

 

For context, Fairfax closed at 1,041.43 on Feb 7 and dropped to as low as $909 on Feb 8, with the publication of the junky Muddy Waters screed. A week later, it closed back at 1,041.52 as that report was thouroughly debunked by Fairfax. With the publication of solid results in the annual report and two solid reports for Q1 and Q2, and a steady stream of positive developments for the company, the share price closed yesterday 22% higher, at 1,265.98, and it's up another $15 so far today. 

 

You would think that after going from a dividend-adjsted share price of $335 on Jan 1st, 2001 to $459 at the beginning of 2022, $644 for 2023 and $1030 for 2024, shares might be getting pricey at today's price of $1285, but that is still 7.8x the last 4 quarters' net income. If there's one thing nicer than a stock that has moved up a lot, it's a stock that has moved up a lot and that is still bargain priced.

Over the past 4 years, we have been learning a few things that we did not know about Fairfax:

1.) Their business model is unique in P/C insurance and very powerful when management is executing well.

2.) Their management team is very good. And they have been executing exceptionally well for the past 6 or 7 years. 
3.) Their P/C insurance operations are very good. Much better than most people think.

4.) After 6 years of hard work, they have largely fixed the problems that existed in their equity portfolio. A headwind has flipped and become a tailwind. 

5.) Record earnings (continuously, over many years) + excellent capital allocation (like Fairfax has been doing) + compounding = significant increase in intrinsic value.

 

The question that i have not seen answered anywhere (in any great detail) is just what is this company actually worth today?
 

The problem is most answers to this question lean heavily on past results. To get a proper answer, the answer needs to be focussed primarily on the future. IMHO, record earnings, excellent capital allocation and compounding provide the best clues. (If intrinsic value compounds at mid-teens average per year over the next couple years, how likely is it that EPS will decline over that same time horizon?)

Most analysts are raising their P/BV multiple in lock step with the stock price moving higher. So they don’t look stupid. Well, everyone except Morningstar, that is (and there are no words to describe their Fairfax ‘analysis’ - it is borderline criminal it is so bad).

Edited October 3 by Viking

[mananainvesting]

@Viking What would be the lowest price you would sell your $FRFHF shares today? (Which should closely reflect what its worth according to you). I would probably sell my shares at $2000 USD, as I think there is a high chance Fairfax will earn 15% ROE over the foreseeable future and selling any lower is not worth the hassle of redeploying money in other ideas. 

[Viking]

1 hour ago, mananainvesting said:

@Viking What would be the lowest price you would sell your $FRFHF shares today? 

 

@mananainvesting, I can't actually answer that question. My answer would be gibberish. Because it would lack important context about my personal situation (my specific reasons for selling).

 

With Fairfax I have a large core position. I then flex this core position up and down. Sometimes by quite a bit. What I do with the flex part of my portfolio primarily depends on what Mr. Market does.

 

But even the sizing of my core position can fluctuate up and down. Again, depending on the facts and fundamentals at Fairfax. And what is going on in the general market (what do other opportunities look like). And what is going on in my head. And taxes are becoming an important factor for part of my Fairfax position (a very good problem).

 

A couple of new wrinkles for me this year are retirement and estate planning considerations. I will be 60 next year so these two topics have been becoming more important to me (I am at the learnings stage).

 

On the retirement angle, I am beginning to think I probably should have 2 or 3 years of living expenses socked away in a cash type account (thanks to comments from others of this board recently). This is not a big deal, but it likely means I will reduce the weightings of all of my individual holdings.

 

On the estate planning angle, if I am ever hit by a bus my family needs to know what to do with all of the different investment portfolios (we are all hit by the Father Time bus eventually). A year ago I started to shift part of our portfolios into broad based ETF/index funds (mostly XIC.TO and VOO). A year later, I love how I feel about it - so much so that I have shifted more into ETF/index funds. This is providing my family with a clear roadmap of what to do the day I am no longer around (or able) to manage our investments.

 

In recent years, taxes have also become an important factor for me. I may sell a chunk of Fairfax in a non-registered account to lock in a large gain for tax purposes.

 

I also have some philosophical things rattling around in my head. I like reading Morgan Housel's stuff. His view is at my age I should be focussed on 'preservation of capital' not maximizing 'return on capital.' Buffett (or Munger) have said a similar thing: 'why would you risk what you need for what you don't need'. Does it make sense for me to have a concentrated position in a stock given my current situation (I have enough)?

 

I also change my mind a lot. At the margin. I like to try things. And then wait and see how I feel afterwards. Was it a good decision? or not? My price target might change next week (it might go up and it might go down). 

 

Anyways, this post is probably reading like the writing of a complete nut job. All I can say is it has worked for me for 25 years     

Edited October 3 by Viking

[SafetyinNumbers]

2 hours ago, mananainvesting said:

@Viking What would be the lowest price you would sell your $FRFHF shares today? (Which should closely reflect what it’s worth according to you). I would probably sell my shares at $2000 USD, as I think there is a high chance Fairfax will earn 15% ROE over the foreseeable future and selling any lower is not worth the hassle of redeploying money in other ideas. 

@mananainvesting asks a great question for the board.
 

How do you decide when to trim or sell all of your Fairfax position. All of the inputs you may consider are interesting to me.

 

My plan is not to sell any until I forecast forward ROE below 10%. I think it will be very hard to do that. 

Edited October 3 by SafetyinNumbers

[UK]

8 hours ago, Viking said:

Over the past 4 years, we have been learning a few things that we did not know about Fairfax:

1.) Their business model is unique in P/C insurance and very powerful when management is executing well.

2.) Their management team is very good. And they have been executing exceptionally well for the past 6 or 7 years. 
3.) Their P/C insurance operations are very good. Much better than most people think.

4.) After 6 years of hard work, they have largely fixed the problems that existed in their equity portfolio. A headwind has flipped and become a tailwind. 

5.) Record earnings (continuously, over many years) + excellent capital allocation (like Fairfax has been doing) + compounding = significant increase in intrinsic value.

 

 

My plan: lets just wait until this filters to every value (and/or other) investor and is repeated ad nauseam at every investing podcast, so instead of complaining about M7, FED and frothy market, they will finally get on board en masse. Then we will sure find out what it is really worth and what appropriate multiple is:)

 

[UK]

5 hours ago, Viking said:

I also change my mind a lot. At the margin. I like to try things. And then wait and see how I feel afterwards. Was it a good decision? or not? My price target might change next week (it might go up and it might go down). 

 

Anyways, this post is probably reading like the writing of a complete nut job. All I can say is it has worked for me for 25 years     

 

Totally makes sense to me!

[UK]

5 hours ago, SafetyinNumbers said:

@mananainvesting asks a great question for the board.
 

How do you decide when to trim or sell all of your Fairfax position. All of the inputs you may consider are interesting to me.

 

My plan is not to sell any until I forecast forward ROE below 10%. I think it will be very hard to do that. 

 

As of today, except if size of total allocation will start to interfere with my sleep, I think I would not be worried until at least 1.5 BV and perhaps would still own a very big position up to 1.7 BV.  Now, IIRC previously you have said, that the higher the multiple, the better, but I will think about this when/if we get there first:))

[Parsad]

19 hours ago, Spooky said:

 

Thanks for the insights Parsad. Are there any stocks, sectors or markets which you view as unloved today?

 

 

I stick to North American stocks, and in my circle, I'm having a very hard time finding stuff.  But we go through these periods and then either markets correct or a sector corrects and opportunity appears.  I'm a solid 50% cash in most accounts.  My trading accounts are at 65% cash. 

 

While US t-bill rates have somewhat held until recently, Canadian t-bill rates started falling a couple of months ago.  I did buy a bunch of Canadian high-dividend REITS a few months ago, which have done well and continue to pay fat dividends.  But I'm sitting on a large amount of cash and will wait to deploy when something strikes me as cheap.

 

But I've been doing this for 25 years now and it works really well!  Cash doesn't burn a hole in my pocket and I've managed to smooth out the bumps that don't let other people sleep well at night.  Cheers!

[73 Reds]

12 hours ago, Viking said:

 

@mananainvesting, I can't actually answer that question. My answer would be gibberish. Because it would lack important context about my personal situation (my specific reasons for selling).

 

With Fairfax I have a large core position. I then flex this core position up and down. Sometimes by quite a bit. What I do with the flex part of my portfolio primarily depends on what Mr. Market does.

 

But even the sizing of my core position can fluctuate up and down. Again, depending on the facts and fundamentals at Fairfax. And what is going on in the general market (what do other opportunities look like). And what is going on in my head. And taxes are becoming an important factor for part of my Fairfax position (a very good problem).

 

A couple of new wrinkles for me this year are retirement and estate planning considerations. I will be 60 next year so these two topics have been becoming more important to me (I am at the learnings stage).

 

On the retirement angle, I am beginning to think I probably should have 2 or 3 years of living expenses socked away in a cash type account (thanks to comments from others of this board recently). This is not a big deal, but it likely means I will reduce the weightings of all of my individual holdings.

 

On the estate planning angle, if I am ever hit by a bus my family needs to know what to do with all of the different investment portfolios (we are all hit by the Father Time bus eventually). A year ago I started to shift part of our portfolios into broad based ETF/index funds (mostly XIC.TO and VOO). A year later, I love how I feel about it - so much so that I have shifted more into ETF/index funds. This is providing my family with a clear roadmap of what to do the day I am no longer around (or able) to manage our investments.

 

In recent years, taxes have also become an important factor for me. I may sell a chunk of Fairfax in a non-registered account to lock in a large gain for tax purposes.

 

I also have some philosophical things rattling around in my head. I like reading Morgan Housel's stuff. His view is at my age I should be focussed on 'preservation of capital' not maximizing 'return on capital.' Buffett (or Munger) have said a similar thing: 'why would you risk what you need for what you don't need'. Does it make sense for me to have a concentrated position in a stock given my current situation (I have enough)?

 

I also change my mind a lot. At the margin. I like to try things. And then wait and see how I feel afterwards. Was it a good decision? or not? My price target might change next week (it might go up and it might go down). 

 

Anyways, this post is probably reading like the writing of a complete nut job. All I can say is it has worked for me for 25 years     

How can one decide in advance on an appropriate price at which to sell?  Besides all the personal factors involved, doesn't the decision depend on how the company is doing once it reaches that price and what other investment alternatives are available at that time?    

[Junior R]

5 hours ago, Parsad said:

 

I stick to North American stocks, and in my circle, I'm having a very hard time finding stuff.  But we go through these periods and then either markets correct or a sector corrects and opportunity appears.  I'm a solid 50% cash in most accounts.  My trading accounts are at 65% cash. 

 

While US t-bill rates have somewhat held until recently, Canadian t-bill rates started falling a couple of months ago.  I did buy a bunch of Canadian high-dividend REITS a few months ago, which have done well and continue to pay fat dividends.  But I'm sitting on a large amount of cash and will wait to deploy when something strikes me as cheap.

 

But I've been doing this for 25 years now and it works really well!  Cash doesn't burn a hole in my pocket and I've managed to smooth out the bumps that don't let other people sleep well at night.  Cheers!

Mostly likely during earnings 

[Dinar]

5 hours ago, Parsad said:

 

I stick to North American stocks, and in my circle, I'm having a very hard time finding stuff.  But we go through these periods and then either markets correct or a sector corrects and opportunity appears.  I'm a solid 50% cash in most accounts.  My trading accounts are at 65% cash. 

 

While US t-bill rates have somewhat held until recently, Canadian t-bill rates started falling a couple of months ago.  I did buy a bunch of Canadian high-dividend REITS a few months ago, which have done well and continue to pay fat dividends.  But I'm sitting on a large amount of cash and will wait to deploy when something strikes me as cheap.

 

But I've been doing this for 25 years now and it works really well!  Cash doesn't burn a hole in my pocket and I've managed to smooth out the bumps that don't let other people sleep well at night.  Cheers!

Parsad, you should do the work on Arcosa and New England Realty.  Both are insanely cheap.

[Parsad]

1 hour ago, Dinar said:

Parsad, you should do the work on Arcosa and New England Realty.  Both are insanely cheap.

 

Arcosa is not cheap by any means.  With New England Realty, I have a bunch of REITS that have solid, consistent earnings, so it would just overlap what I already have in real estate.  Thanks for the ideas though!  Cheers!