Fairfax book value or share price will touch US $ 2000 before 2027 end.

[Luca]

7 hours ago, Haryana said:

BRK vs FFH over 20 years:

 

Great stuff...

[Luca]

The total amount invested in India is also quite significant to the market cap, Watsa was bullish...likely a lot of great things to come in the future too...

[Saluki]

5 hours ago, Luca said:

The total amount invested in India is also quite significant to the market cap, Watsa was bullish...likely a lot of great things to come in the future too...

 

Yes, I'm glad I double dipped. FRFHF is my 4th biggest position and I have a mid size position in Fairfax India. 

[Haryana]

FFH vs BRK over 20 years:

 

[juniorr]

FFH seems to have better prospective the BRK in the next  5 years

[cwericb]

Yup, well aware of that chart as a long term investor in Fairfax (since 2007) who has yet to sell a share. But what has bugged me over the years was all the bitching and complaining on here about "Fairfax's lost decade" and the poor decisions FFH had made (hedges). So I am just wondering where that "lost decade" is on this chart?

 

Furthermore, one might suggest that this "lost decade" (if such a thing existed) was actually time well spent framing the company into what it is today.

 

Also, what some here may not realize, is that over the years there were several times when markets tanked, yet Fairfax share price stayed constant or actually increased balancing off shareholder's losses in the rest of their portfolios and helping shareholders sleep at night.

 

Just my humble two cents worth.

 

 

 

[StubbleJumper]

31 minutes ago, cwericb said:

So I am just wondering where that "lost decade" is on this chart?

 

In fairness, if the stock price is all you are looking at, it's not hard at all to find a "lost decade."  The stock price in January 2010 was US$392 and then it dropped below that level during the covid market displacement and stayed below that level for most of the first wave of covid (heck even in Sept 2022 it was only US$457).  The dividends were a mitigating factor that provided a modest, positive return over that time but it's not hard at all to cherry-pick a start-date and end-date that give you an unsatisfactory market return over a decade.

 

The question of whether there was a lost decade from an operational or capital allocation perspective is entirely a different question.  I would say that there have been occasional poor investment and risk management decisions by FFH over the entire course of its existence, rather than there being only one decade with poor decisions.  You just hope that the shrewd decisions outweigh the poor in terms of frequency and magnitude!

 

 

SJ

[cwericb]

With all due respect SJ, I think you are cherry picking dates. Let's compare apples to apples. If you want to take the January 2010 share price of $392, then we should take the January 2020 share price of $585.

 

So if one bought FFH in January 2010, his holdings would have increased by $193/share -  or by 50% ten years later. But add in the $100 from accumulated dividends and we get a total return of $293/share for a total return of 75%.  But, if my figures are correct, during the same period the TSX Composite Index rose by only 45%.

 

So during "the lost decade", Fairfax actually exceeded the performance of the TSX.

 

But Fairfax wasn't exactly sleeping during the decade. They were building a company that from January 2021 to January 2024 produced a phenomenal share price increase of 300% in just 3 years. So I certainly wouldn't consider the decade as 'lost'.

 

Two quotes come to mind:

      "Patience is a virtue" - William Langland

     "Results will be lumpy" - Prem Watsa

 

[StubbleJumper]

30 minutes ago, cwericb said:

With all due respect SJ, I think you are cherry picking dates. Let's compare apples to apples. If you want to take the January 2010 share price of $392, then we should take the January 2020 share price of $585.

 

So if one bought FFH in January 2010, his holdings would have increased by $193/share -  or by 50% ten years later. But add in the $100 from accumulated dividends and we get a total return of $293/share for a total return of 75%.  But, if my figures are correct, during the same period the TSX Composite Index rose by only 45%.

 

So during "the lost decade", Fairfax actually exceeded the performance of the TSX.

 

But Fairfax wasn't exactly sleeping during the decade. They were building a company that from January 2021 to January 2024 produced a phenomenal share price increase of 300% in just 3 years. So I certainly wouldn't consider the decade as 'lost'.

 

Two quotes come to mind:

      "Patience is a virtue" - William Langland

     "Results will be lumpy" - Prem Watsa

 

 

Of course I was cherry picking dates, and I blatantly announced the fact that I did so!  But, the fact is that that there is nothing magical about a 10-year hold.  I cherry-picked an 12-year hold that had a disappointing return.  Frankly the mythical person who actually bought at the beginning of that period and sold at the end, would clearly belly-ache about a "lost decade."  And the points that I cherry-picked were not the only points of 10-ish years with disappointing market returns.  That is an indisputable fact that the chart makes abundantly clear!  As I said, it's not all that hard to find a couple of points with disappointing returns over 10 years.

 

But, more importantly, the market return and the growth in IV are not always in sync.  The opportunity available in 2021/22 when you could buy FFH at 0.7x or 0.8x BV show that disconnect.  At that point, the market was saying that FFH was worth more dead than alive!  The market was saying that management was destroying value, and not just destroying a little bit of it, but a great deal of it.  So, there was a considerable disconnect between market results and IV.

 

Nonetheless, if market results are your only point of focus, you can certainly easily find a decade of disappointment.

 

 

SJ

Edited June 7 by StubbleJumper

[cwericb]

10 hours ago, StubbleJumper said:

Nonetheless, if market results are your only point of focus, you can certainly easily find a decade of disappointment.

SJ

 

"Disappointment" or impatience?

 

Some time ago Prem Watsa clearly warned all of us that future results would be "lumpy" while building the company to where it is today. And that is exactly what happened. So I am not sure it is fair to criticize them for not concentrating on the price of their shares while doing that. The proof, as the old saying goes "is in the pudding" and the 'pudding' is the 300% share price increase we have seen in the past 3 years.

 

Also it would seem a little disingenuous to look at Fairfax's performance during that 10 year period in isolation. Put things into perspective. During that same 10 year period, Fairfax actually outperformed the Canadian stock market.

 

I guess in short, as one of those who stuck with Fairfax during those ten years, I have not been disappointed. Frustrated at times for sure, but in the end, not dissappointed.

 

 

[TwoCitiesCapital]

1 hour ago, cwericb said:

 

"Disappointment" or impatience?

 

Some time ago Prem Watsa clearly warned all of us that future results would be "lumpy" while building the company to where it is today. And that is exactly what happened. So I am not sure it is fair to criticize them for not concentrating on the price of their shares while doing that. The proof, as the old saying goes "is in the pudding" and the 'pudding' is the 300% share price increase we have seen in the past 3 years.

 

Also it would seem a little disingenuous to look at Fairfax's performance during that 10 year period in isolation. Put things into perspective. During that same 10 year period, Fairfax actually outperformed the Canadian stock market.

 

I guess in short, as one of those who stuck with Fairfax during those ten years, I have not been disappointed. Frustrated at times for sure, but in the end, not dissappointed.

 

 

 

I don't think anyone interprets "lumpy" as going nowhere for 10-years. It's more of "there won't be consistency to annual returns" - not "you'll have negative real returns over the course of a decade"

I owned Fairfax back in 2010. I held for 8-years and sold out at some point in 2018 after admitting I had been wrong about the return prospects of the company. I sold because my returns were nominally positive, but very disappointing, relative to other options over that period. It was also hard to see how Fairfax would make enough to justify $500+ share with interest rates at zero, the equity portfolio being dominated by Blackberry, and insurance not doing anything special. 

 

Had I held in 2018, I would have ultimately ended up fine - but would have had suffered another 3-4 years of very disappointing returns before some strokes of luck AND the long-term efforts of the Fairfax team building value that was largely hidden in 2018 paid off. It could have very easily ended up differently and we might still be struggling for $500-600/sh 

 

 

Edited June 7 by TwoCitiesCapital

[juniorr]

the real issue that caused no growth from 2012 to 2019 was the negative bets they had placed on the market. When those bets paid of with great financial crisis FFH got over confident....they have learned from there past mistakes so the future should be better where this can annually compounded 15% to 20% a year...The one risk that still around is the swaps. They need to close that

Edited June 9 by juniorr

[SafetyinNumbers]

15 hours ago, juniorr said:

the real issue that caused no growth from 2012 to 2019 was the negative bets they had placed on the market. When those bets paid of with great financial crisis FFH got over confident....they have learned from there past mistakes so the future should be better where this can annually compounded 15% to 20% a year...The one risk that still around is the swaps. They need to close that

How much risk is there really in the swaps? 

[juniorr]

9 minutes ago, SafetyinNumbers said:

How much risk is there really in the swaps? 

If stock drops due to market pull back it could cause fairfax to make payments to the entity that issued the swaps quarterly or what ever the term is... which will impact earnings

[SafetyinNumbers]

2 hours ago, juniorr said:

If stock drops due to market pull back it could cause fairfax to make payments to the entity that issued the swaps quarterly or what ever the term is... which will impact earnings

Sounds transient. How big a dip below BV do you think is sustainable?

[juniorr]

59 minutes ago, SafetyinNumbers said:

Sounds transient. How big a dip below BV do you think is sustainable?

They should be able to sustain a drop unless stock price goes down 20% ...that would impact earnings ..It would better for them to close the swaps and just eliminate any risk to earnings...Swaps work really good when stock prices follows the direction but if it goes other way could start causing some serious impact

[Phoenix01]

If the stock price goes up, they make money.  If the price goes down they buy back more shares.

 

Not seeing the down side as long as the business continues to deliver lots of cashflow.

[Viking]

The FFH-TRS is an investment for Fairfax. From my perspective there are two important considerations:

1.) What is a share of Fairfax worth? 

2.) What are the risks of a big drawdown in Fairfax's shares? (With the probability of it actually happening.)

 

On the first point, to state the obvious, Fairfax KNOWS what Fairfax is worth - or at least they know much better than the rest of us. If they still own the FFH-TRS position it likely tells you something about how they view valuation.

 

On the second point, Fairfax is generating record (or close to) earnings. And they look very well positioned for the next 3 or 4 years (I don't look out longer than that). If Fairfax's stock sells off, Fairfax will likely be in a position to buy back a ton of shares at low prices. That is what they did in 2020 and 2021 when they had no money. Well today, the cash is rolling in.

 

Volatility has been great for Fairfax's earnings (looking at the past 5 years). Active management exploits volatility (that is when Mr Market is behaving like an idiot - acting very irrational). Fairfax investors worry about volatility... it is kind of ass backwards. If history is any guide, Fairfax investors should be praying for volatility. I say this tongue in cheek (a little).

Edited June 10 by Viking

[Hektor]

2 hours ago, Viking said:

Fairfax investors worry about volatility... it is kind of ass backwards.

[Crip1]

10 hours ago, Phoenix01 said:

If the stock price goes up, they make money.  If the price goes down they buy back more shares.

 

Not seeing the down side as long as the business continues to deliver lots of cashflow.

I would THINK that the investment committee modeled this out and continues to update the model to gauge how various changes in share price impact the swaps. And, of course, that model would need to be multi-dimensional to account for what would happen with a super-cat that would double-hit the company by driving the share price much lower at a time when cash would not be as readily available to buy the depressed shares. My expectation/hope would be that when looking at all the possible outcomes, we're looking at "heads I win, tails I don't lose much".  

 

-Crip