Fairfax 2023

[Haryana]

1 minute ago, sleepydragon said:

it’s not just returns . It’s also about risk adjusted returns, the sharpe ratio and maximum drawdowns. Brk is much better in that sense. Smaller drawdowns needs to longer holding periods. One is less likely to sell when the stock is down.

 

Mere fundamentals like including dividends when comparing is likely more important than advanced jargon like sharpe ratio.

 

[Munger_Disciple]

I was re-reading Prem's 2022 annual letter & he shows a table of gross premiums written and float from 1985 to 2022. I noticed that the ratio of float/gross premiums written has shrunk from 2.4 in 2010 to 1.1 in 2022. It used to be roughly 1.6 in the decade prior to 2010.

 

Dos this mean that Fairfax is writing a lot more short tail insurance these days compared to the past? 

 

[SafetyinNumbers]

2 hours ago, Haryana said:

 

Mere fundamentals like including dividends when comparing is likely more important than advanced jargon like sharpe ratio.

 

Sleepydragon is explaining why BRK has a premium valuation to FFH based on how it trades but not based on expected returns. A lot of people don’t own Fairfax for this reason but it’s not a good reason for long term investors.
 

"Warren Buffett always puts it best: 'We prefer a lumpy 15% return to a smooth 12% return.' Investors who’d rather have the reverse...should ask themselves whether their aversion to volatility is mostly financial or mostly emotional."

— Howard Marks

 

 

Edited July 4, 2023 by SafetyinNumbers

[Parsad]

4 hours ago, Munger_Disciple said:

I was re-reading Prem's 2022 annual letter & he shows a table of gross premiums written and float from 1985 to 2022. I noticed that the ratio of float/gross premiums written has shrunk from 2.4 in 2010 to 1.1 in 2022. It used to be roughly 1.6 in the decade prior to 2010.

 

Dos this mean that Fairfax is writing a lot more short tail insurance these days compared to the past? 

 

 

Might be due to a couple of reasons:

• Recent acquisitions like Brit and Allied are more diverse, rather than pure reinsurers.
• Sold run-off businesses that probably had more long-tail claims.
• Didn't really enjoy a hard insurance market for a number of years until 2022.

Cheers!

[sleepydragon]

13 hours ago, SafetyinNumbers said:

Sleepydragon is explaining why BRK has a premium valuation to FFH based on how it trades but not based on expected returns. A lot of people don’t own Fairfax for this reason but it’s not a good reason for long term investors.
 

"Warren Buffett always puts it best: 'We prefer a lumpy 15% return to a smooth 12% return.' Investors who’d rather have the reverse...should ask themselves whether their aversion to volatility is mostly financial or mostly emotional."

— Howard Marks

 

 

yeah, I own both Brk and FFH. I am just saying for mom and pop investors it’s easier to hold on to Brk. Brk’s price is more stable also because Brk’s execution is more consistent. But I bought because like Vikings said the past hedging program hid the true earning power of the business.

[Luke]

31 minutes ago, sleepydragon said:

yeah, I own both Brk and FFH. I am just saying for mom and pop investors it’s easier to hold on to Brk. Brk’s price is more stable also because Brk’s execution is more consistent. But I bought because like Vikings said the past hedging program hid the true earning power of the business.

I just worry that at a 700b Marketcap, outperforming will get harder and harder for BRK. 

[jbwent63]

19 hours ago, Haryana said:

 

https://www.morningstar.com/stocks/pinx/frfhf/chart

 

 

 

I'm not sure if its me or not. Did BRK.A not close at June 30 with a price of $517,810 and the B share at $341? I'm not sure why Morningstar would be showing $459,210 as a closing value for the A shares on the same date.

[Munger_Disciple]

14 hours ago, Parsad said:

 

Might be due to a couple of reasons:

• Recent acquisitions like Brit and Allied are more diverse, rather than pure reinsurers.
• Sold run-off businesses that probably had more long-tail claims.
• Didn't really enjoy a hard insurance market for a number of years until 2022.

Cheers!

 

Thanks @Parsad, makes sense to me. I would think that even in the current hard insurance market, they are likely writing more short tail insurance.

Edited July 4, 2023 by Munger_Disciple

[newtovalue]

Look at Eurobank GO!  Almost close to taking out the May 22 high.

 

Almost $100 per share CAD in EUROBANK exposure here (if it was MTM). Wonder what the long term play is here for Fairfax? 

 

 

[Haryana]

On 7/3/2023 at 2:42 PM, treasurehunt said:

 

Not sure what's going on with the yahoo charts, but they don't match up with yahoo's own historical price data. FFH.TO closed at 200.50 CAD on July 3, 2003. Thus the price return over the past 20 years is about +395% in CAD. The USD-CAD exchange rate was almost exactly the same 20 years ago as it is today, so that doesn't make a difference either. Maybe the chart has a starting date of March 2003; FFH.TO traded at below 80 CAD then according to yahoo's historical data.

 

 

4 hours ago, jbwent63 said:

I'm not sure if its me or not. Did BRK.A not close at June 30 with a price of $517,810 and the B share at $341? I'm not sure why Morningstar would be showing $459,210 as a closing value for the A shares on the same date.

 

The symptoms of brainwashing are very similar to that of an addiction.
You come up with all kinds of excuses when the truth is staring you in the face.
Your confusions and delusion with data is just further evidence of the brainwash effect.
Are you in market without a basic charting tool that can compare total returns of two securities?
Anything can happen in the future that nobody can predict but let us be rational with historical numbers.

 

[gfp]

5 hours ago, jbwent63 said:

I'm not sure if its me or not. Did BRK.A not close at June 30 with a price of $517,810 and the B share at $341? I'm not sure why Morningstar would be showing $459,210 as a closing value for the A shares on the same date.

 

The way morningstar's chart works, they are telling you that Berkshire's A shares increased by that dollar amount during the period.  It isn't the closing price.

[Haryana]

21 hours ago, SafetyinNumbers said:

Sleepydragon is explaining why BRK has a premium valuation to FFH based on how it trades but not based on expected returns. A lot of people don’t own Fairfax for this reason but it’s not a good reason for long term investors.
 

"Warren Buffett always puts it best: 'We prefer a lumpy 15% return to a smooth 12% return.' Investors who’d rather have the reverse...should ask themselves whether their aversion to volatility is mostly financial or mostly emotional."

— Howard Marks

 

 

 

So Warren Buffett himself is teaching us against the use of risk-adjusted return (Sharpe ratio) but we are still looking for an excuse to use the Sharpe ratio to justify our reverence for the one and only, the chosen one, the Prophet (Oracle of Omaha). This is wonderful.

 

[LC]

Here's a question: 

 

If you accept that the stock price is a rough estimation of intrinsic value (over a long time horizon), is it reasonable to accept stock price volatility as a rough estimation of intrinsic risk over a similarly long time horizon?

Edited July 4, 2023 by LC

[Haryana]

On 7/3/2023 at 2:42 PM, Parsad said:

 

It's because of what date you use. 

 

If you adjust the CDN date to mid-May 2023 the stock was at a lower price, thus from that point it outperformed BRK over 20 years.  You can play with it and change the starting date to see the differences in performance. 

 

I think mine used around May 19, 2023 ending June 29th, 2023...with no dividends included!  Add the dividends and the return is higher during that exact period.  Cheers!

 

Parsad Sir, Happy Birthday!

 

(just a note that your chart likely included the dividends and that is a good thing, thanks)

 

[gfp]

It's pretty great that the corner of Berkshire and Fairfax message board was named after two securities that are almost tied in performance this millennium, with the smaller up-and-comer, Fairfax, clocking in at 846% vs. Berkshire's 826%.  Going forward it is likely that Fairfax will continue to outperform Berkshire over long periods due primarily to the size difference.  Unfortunately my dividends are taxed so Berkshire is ahead for this taxable American.

 

Edited July 4, 2023 by gfp

[Munger_Disciple]

7 minutes ago, glider3834 said:

yes 

 

my table below - data taken from annual reports

 

 

That's outstanding @glider3834, great detective work!

[glider3834]

On 7/4/2023 at 10:14 AM, Munger_Disciple said:

I was re-reading Prem's 2022 annual letter & he shows a table of gross premiums written and float from 1985 to 2022. I noticed that the ratio of float/gross premiums written has shrunk from 2.4 in 2010 to 1.1 in 2022. It used to be roughly 1.6 in the decade prior to 2010.

 

Dos this mean that Fairfax is writing a lot more short tail insurance these days compared to the past? 

 

yes 

 

my figures below - from annual reports

 

edit note: accidentally deleted so re-posting

 

[glider3834]

3 minutes ago, Munger_Disciple said:

 

That's outstanding @glider3834, great detective work!

[sholland]

On 6/19/2023 at 11:27 AM, This2ShallPass said:

To the insurance experts on the board, can you pls suggest 2-3  companies that are close to Fairfax from hurricane exposure standpoint? 

 

I'm giddy about Fairfax prospects over the next few years as well. But it's ~30% of my pf and I want to be prudent, so planning to take small otm hedge to reduce my losses in a worst case event.

 

You might want to look at shorting Florida insurer UVE. I shorted it (unprofitably) in 2017, 2018, and 2019 on the belief that 1) the Florida Legislature passed laws that screwed up the market and 2) a repeat of the following hurricanes would bankrupt the company:

 

Repeat of 1926 Miami Hurricane

Repeat of 1928 Great Okeechobie Hurricane

Repeat of 1947 Fort Lauderdale Hurricane

Repeat of 1992 Hurricane Andrew

 

I can provide more information if this is something you are interested in as I believe the Florida insurance situation has not changed much since I last looked at in 2019. 

[Parsad]

11 hours ago, Luca said:

I just worry that at a 700b Marketcap, outperforming will get harder and harder for BRK. 

 

That's what I thought too!  Until Apple burst through 2T and kept compounding to 3T!

 

It will get tougher and slower for BRK to find investments.  But a lot of their core holdings, including their amazing insurance businesses, should keep the pot growing for another century.

 

Cheers!

[Parsad]

5 hours ago, newtovalue said:

Look at Eurobank GO!  Almost close to taking out the May 22 high.

 

Almost $100 per share CAD in EUROBANK exposure here (if it was MTM). Wonder what the long term play is here for Fairfax? 

 

 

 

The funny thing is that Eurobank may still be considerably undervalued!  Should trade at book or better over the next couple of years.  That being said, I wouldn't mind if they take a little off the table here.

 

Cheers!

[Parsad]

3 hours ago, LC said:

Here's a question: 

 

If you accept that the stock price is a rough estimation of intrinsic value (over a long time horizon), is it reasonable to accept stock price volatility as a rough estimation of intrinsic risk over a similarly long time horizon?

 

You could, but look at the volatility of META, AMZN, TSLA and even COST over the last 10+ years.  These stalwarts and outperformers today had periods of extreme volatility.  Was COST really as risky as the others?  Cheers!

[Parsad]

3 hours ago, Haryana said:

 

Parsad Sir, Happy Birthday!

 

(just a note that your chart likely included the dividends and that is a good thing, thanks)

 

 

Thank you Haryana...another year, another ring on the old trunk!  Cheers!

[Xerxes]

1 hour ago, Parsad said:

 

Thank you Haryana...another year, another ring on the old trunk!  Cheers!

happy birthday champ !!

all the best 

[Parsad]

1 hour ago, Xerxes said:

happy birthday champ !!

all the best 

 

Thanks Xerxes!