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

[Luke]

7 hours ago, Haryana said:

BRK vs FFH over 20 years:

 

Great stuff...

[Luke]

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:

 

[Junior R]

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

[Junior R]

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? 

[Junior R]

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?

[Junior R]

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

[Haryana]

On 12/28/2023 at 12:50 PM, Viking said:

@Ross812 from my perspective the big unknown with Fairfax is asset sales/monetizations/revaluations. Will be get one big one - +$500 million - over the next 4 years? Two big ones? Or do we get a number of smaller ones - $250 million to $500 million - like the 2 we saw in 2023 (Ambridge and GIG).

- Digit IPO and getting to 74% ownership

- Anchorage IPO - BIAL

- Stelco - does it get taken out?

- AGT Food Ingredients - delivered +$100 million in EBITDA in 2022 (if i remember correctly). Time to spin out?

- Foran Mining - will we need more copper in about 2 years?

I could go on. Fairfax has lots of levers to pull to surface significant value.

 

Bottom line, one or two big moves here (or a number of smaller moves) would really move the needle in terms of BV growth, which would likely pop the stock price. What i like about Fairfax today is most investors expect zero in their earnings estimates / valuation models for big gains. I don’t build them into my models (until they are announced) - hence why i think my estimates will likely prove to be conservative.

 

Did you vote No by mistake because you see a lot of potential but still cannot even about double in 4 years?

 

[Viking]

2 hours ago, Haryana said:

Did you vote No by mistake because you see a lot of potential but still cannot even about double in 4 years?

 

@Haryana, here is how I was thinking back in December.

 

The question asked was pretty straight forward: "Will Fairfax book value or share price touch US $ 2000 before 2027 end."

 

I voted "no."

 

The book value part was the easiest. Fairfax would need to compound book value by about 22.5% (21% plus 1.5% to account for the dividend). That was higher than my base case back then. 

 

 

What about the stock price?

 

This was a little harder. But not much. The share price would need to compound by about 23% per year (21.5% plus 1.5% to account for the dividend). That was higher than my base case back then. 

 

I do expect multiple expansion to happen (that is why it was harder). 

 

 

Where do we sit today regarding the share price?

 

If we assume a 10% return for the last 5 months of 2024, the share price will still need to compound at about 20.5% from 2025-2027 (19.0% plus 1.5% to account for the dividend). That is still higher than my base case.

 

 

What is my base case?

 

From where we are today, I think Fairfax can deliver a CAGR of 15% over the next 4 years (including the dividend). If the stars align (a couple of large asset sales, continued multiple expansion, no big negative surprises etc) we could see a double in the share price over the next 4 years (including all dividend payments). BUT I DON'T FOCUS ON LOOKING OUT THAT FAR. My focus is on the next year or two - because that is what I can see with the most clarity.

 

Looking a couple of years out, it really comes down to management - and i really like what the management team at Fairfax has been doing since 2018. So i am pretty optimistic about Fairfax’s prospects looking out 4 or 5 years into the future.

Edited August 7 by Viking

[StubbleJumper]

25 minutes ago, Viking said:

BUT I DON'T FOCUS ON LOOKING OUT THAT FAR

 

 

As time goes on, you sound more and more like me...

 

 

SJ

[Viking]

54 minutes ago, StubbleJumper said:

As time goes on, you sound more and more like me...

 

SJ

“Good artists copy; great artists steal.” Picasso/Steve Jobs  

[Parsad]

On 6/7/2024 at 9:06 AM, TwoCitiesCapital said:

 

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 

 

 

 

I think shareholders don't understand the extent of what could have occurred during that 2009/2010 period and the decade after.  They keep hammering the point that Prem made poor investments and the equity hedges were destructive to shareholder value during that period.

 

But anyone who clearly remembers it, should also remember that we were on the verge of a catastrophe that might have turned out worse than the Great Depression...if you can imagine that!

 

Fairfax was positioned for Japan post 1989...not a lost decade but a lost generation!  Everything understood within economics suggested that monetary and fiscal policy would not have any significant effect and basically the world would have to work through the problem over time...decades possibly!

 

Lo' and behold, quantitative easing combined with loose monetary policy and massive injections of capital, unclogged the illiquidity gumming up the works.  Keynes was wrong and Milton Friedman was proven somewhat correct.

 

Now, what if Keynes was right and it didn't work?  Even Bernanke and Geithner were still doubtful it would work when they suggested it, but there wasn't really any other choice available.  Then that lost decade for FFH would have been a period of capital preservation while virtually every other company in the world, including Berkshire, would have taken a massive hit to equity.

 

So you live and learn!  History told Prem that this was a shitstorm of epic proportions.  Yet, some brave decisions by global officials avoided what would have been unimaginable economic devastation.  Now suddenly you look like a fool, yet all you were doing was trying to protect your investors.

 

Cheers!