Fairfax 2024

[MMM20]

2 hours ago, Hektor said:

That, in my view, is not honorable. MW should have approached FFH for comments before going public with their thesis, in my opinion.

Maybe I’m not honorable enough but this didn’t bother me. I don’t check my facts with management before broadcasting an idea (even shorts) most of the time. What bothered me was pretty much entirely the whole “using your big platform to spread misinformation to move the market for a few days” thing. 
 

Edited February 12, 2024 by MMM20

[glider3834]

31 minutes ago, gfp said:

 

The Muddy Waters graph of book values appear to be each year's CAGR in Book value since some arbitrary day they are calling "the GFC."  So it isn't the book value growth for those years, but those end-dates.

 

The actual BV growth for those years (which is probably what most casual observers understood it as) was this:

 

2017: +24.7%

2018: -1.5%

2019: +14.8%

2020: +0.6%

2021: +34.2%

2022: +6%

 

(and 2023 comes out this week and should look pretty good)

 

* one thing about posting Fairfax's actual annual results as above is that the bumpiness goes against the narrative that this is a GE-style smoothed manipulator. 

yep the narrative -  I looked at the chart & thought it looked odd 

[Gregmal]

Again, the guy had an objective and it probably was already achieved. A 5 year old could quickly glance at what he was saying and see his objective if they had any previous familiarity with how he operates. Its magician level hand waiving. Look at this hand! he says, when what you want to be doing is paying attention to his other hand.

 

He has a formula for this sort of smash and grab stuff, the "thesis" is just arbitrary and tangentially necessary to justify him doing it. Continuing to talk about it and analyze it just validates what is clearly nonsense. The P/B metric was necessary when operations were mediocre from 2010-2020....When you've stabilized operations and will be producing steady earnings of the magnitude that they will, you need to change the way you value the company. 

[MMM20]

5 minutes ago, Gregmal said:

The P/B metric was necessary when operations were mediocre from 2010-2020....When you've stabilized operations and will be producing steady earnings of the magnitude that they will, you need to change the way you value the company. 

 

The question is if/when this ever becomes the consensus view. Maybe a fool's errand to even think about.

 

Edited February 12, 2024 by MMM20

[Xerxes]

wow.
Did MuddyWaters helped FFH by establishing a technical floor for a previously “overbought” stock !!

[gfp]

1 minute ago, MMM20 said:

 

The question is if/when this ever becomes the consensus view. Maybe a fool's errand to even think about.

 

I wouldn't hold your breath.  Berkshire is still being valued based on price-to-book value all these years later.

[MMM20]

Our guy @hardcorevalue with a great summary https://tidefall.substack.com/p/short-attacks-and-tobacco-stocks

[MMM20]

1 hour ago, gfp said:

 

I wouldn't hold your breath.  Berkshire is still being valued based on price-to-book value all these years later.

 

Fair enough, and that's why I just read Bloomstran's opuses breaking down intrinsic value in gory detail.

 

I guess therein lies the opportunity.

 

Edited February 12, 2024 by MMM20

[Viking]

This part of Fairfax's press release looks interesting.

 

At the end of 2022, the CAGR for BVPS was 17.8% (Fairfax 2022AR).

 

In the press release from this morning it has the CAGR as 18.9%. Can someone explain the difference?

 

Edited February 12, 2024 by Viking

[Spooky]

2 hours ago, dealraker said:

Yes but it does go somewhat further that the starting point during a positive investor view is simply going to be somewhat negative as to outcome vs a starting point that's questioning the model.  I wasn't aware enough to sell the stock when obviously it, the business and stock, wasn't performing all that well.  But I have bought/added the stock over 30 times in the last several years.

 

Thus the outcome is crazy good despite...

 

So while it is up to Fairfax on how to deal with the MW accusations it is up to the investor to deal with stock ownership.  I don't think any of us are capable of avoiding negative blasts or accusations, but I do think that even if some of the accusations are accurate that it is up to the investor to judge that effect on your decisions as to stock ownership.

 

A great example as I've mentioned so many times is the insurance broker contingency commissions, something that I considered quite accurate as to Spitzer's complaint.  Yet that was buying euphoria, not selling manadate, time.  In hindsight (remember I owned but did not buy more) while I have made many millions on these investments I, likely one of the most knowledgable investors holding the stocks, was the main idiot in the room for not buying more.

 

Knowing yourself, monitoring yourself, rather than trying to control the wild-ass happenings as to "shorts" or whatever the hell they are?   Well we just watched a Super Bowl, that quarterback that went on the field seemed to control himself rather impressively ----- despite having quite the yard sale of a game up until the overtime.

 

Who are you? The mirror tells all.  We all can't live by the grievance...but it is the popular theme of the world today.  Fairfax?  To me it is a place to be invested and probably will be far less risky from here that some of the most trusted and successful technology stocks that are likely (in my view) not in any way shape or form capable of giving investors what they expect going forward.  

 

Thanks for this post Dealraker. So much wisdom embedded within it.

 

 

[Libs]

<A great example as I've mentioned so many times is the insurance broker contingency commissions, something that I considered quite accurate as to Spitzer's complaint>

 

Sorry for a quick derail here, but I remember this well. I was in the thick of it as a branch (So Cal.) marketing manager for one of the major insurers. This was the mid 90's. We came up with the genius idea of offering bonuses to the brokers (Marsh Mac, Gallagher, etc.) if they put X amount of business with us for the year. It never occurred to us how unseemly it was! But of course, in keeping with Munger's teachings about incentives, brokers would, especially at year-end, put clients with the wrong carrier, to hit the goal. Not very ethical.

 

To go on a further tangent- at this same time (actually 2000) Buffett thought it was OK to 'rent out' Berkshire's balance sheet. As I recall AIG took him up on that. Most of us thought Brandon ( Gen Re head) took the fall for him on that one. A very rare lapse of judgement on Buffett's part IMO.

 

End of tangent. I think Dealraker has made me nostalgic for my old P & C days.

 

 

 

 

 

 

 

 

Edited February 12, 2024 by Libs

[Maverick47]

17 minutes ago, Viking said:

This part of Fairfax's press release looks interesting.

At the end of 2022, the CAGR for BVPS was 17.8% (Fairfax 2022AR).

 

In the press release from

this morning it has the CAGR as 18.9%. Can someone explain the difference?

 

@Viking  Maybe the inclusion of dividends or not?  Paragraph 2 of the 2022 letter refers to a 37 year book value including dividends CAGR as being 18.5%.  Still a good jump from there to 18.9 by adding one more year, but not as incongruous as moving from 17.8 to 18.9.  Likely an early read on how helpful 2023 was….

[Viking]

26 minutes ago, Maverick47 said:

@Viking  Maybe the inclusion of dividends or not?  Paragraph 2 of the 2022 letter refers to a 37 year book value including dividends CAGR as being 18.5%.  Still a good jump from there to 18.9 by adding one more year, but not as incongruous as moving from 17.8 to 18.9.  Likely an early read on how helpful 2023 was….

 

@Maverick47 great catch. From the 2022AR:

 

[SharperDingaan]

1 hour ago, Gregmal said:

Again, the guy had an objective and it probably was already achieved. A 5 year old could quickly glance at what he was saying and see his objective if they had any previous familiarity with how he operates. Its magician level hand waiving. Look at this hand! he says, when what you want to be doing is paying attention to his other hand.

 

He has a formula for this sort of smash and grab stuff, the "thesis" is just arbitrary and tangentially necessary to justify him doing it. Continuing to talk about it and analyze it just validates what is clearly nonsense. The P/B metric was necessary when operations were mediocre from 2010-2020....When you've stabilized operations and will be producing steady earnings of the magnitude that they will, you need to change the way you value the company. 

 

This is why we have the plastic bag; ain't in the playbook, and nobody grabs a slashing wolverine without getting at least a few wounds. Targets are supposed to roll over, not slash your throat! Fellow 'peers' pull back to watch the show, and place their bets! .... against MW.

 

SD  

[Hamburg Investor]

2 hours ago, SafetyinNumbers said:

You’re welcome and congratulations. If an 11% CAGR is your worst return “by miles” since 2011, you should just keep doing what you’re doing.

 

 

"By miles" was meant before the catch up of FFH. My other bigger longterm holdings since the crash in October 2011 (that was my - lucky - starting point) are BRK, MKL, DHR (including the Spinoffs), Brookfield (including the Splits) and Smurfit Kappa. They all performed better and the gap widend a lot from the beginning of 2017. Of course, since 2022 Fairfax catched up a lot, still it lags the others, most by miles. But I am hopeful, that will change now.

[dartmonkey]

49 minutes ago, Viking said:

This part of Fairfax's press release looks interesting.

 

At the end of 2022, the CAGR for BVPS was 17.8% (Fairfax 2022AR).

 

In the press release from this morning it has the CAGR as 18.9%. Can someone explain the difference?

 

 

Yes, this is intriguing. We already had, from 1985 to 2022, a 37-y annual growth rate of 16.1% for share value. Share price was $802.07 (CDN) at the end of 2022 and $1222.51 at the end of 2023, a 52.4% gain. If you add a 52.4% gain to 37 years of 16.1% gains, you get a 16.9% annualized gain, definitely an improvement over 16.1%, but still far from 18.0%. Perhaps this is adjusted for dividend payments ($10US in 2023), but it's not enough to get to 18.0%. Shares peaked at $1404 before the MW report, which would get us up to about a 17.4% gain, still not quite there, but close.

 

What about book value per share? Using the same reasoning, with a 37-year annual growth rate of 17.8% at the end of 2022, we would obviously need a pretty big gain in 2023 to get that rate up to 18.9%; in fact, the number would be =(1,189^38)/(1,178^37) = 1.677-1 = 67.7%. Does anyone think that 2023 was THAT good? As a reality check, Jan1 2023 BV was 657.68 USD, and that was up to $876.55 on Sept 30 2023, for a 33.3% gain (non-annualized) over 9 months. That would require a 25.8% (non-annualized) gain in Q4, which is a bit hard to believe, but not unfathomable, if the changed the mark on something big. 

 

Thursday evening is getting harder to wait for...

[gfp]

You should not use the 17.8% BVPS growth figure to compare to the 18.9%.  You should use the 18.5% figure that includes dividends.

[Maverick47]

The 18.9 figure does include dividends for all prior periods while 17.8 excludes them.  The comparable 37 yr CAGR including dividends is 18.5.  Using the same sort of calculations I’m estimating a 34.6% gain in book value in full year 2023, not far off the 33.3 non annualized value through Q3.  So maybe an $884 book value per share when we see the full year report Thurs evening?  

[gfp]

17 minutes ago, Maverick47 said:

Using the same sort of calculations I’m estimating a 34.6% gain in book value in full year 2023, not far off the 33.3 non annualized value through Q3.  So maybe an $884 book value per share when we see the full year report Thurs evening?  

 

Hard for me to estimate but I would expect a pretty decent mark to market gain on the bond book for the quarter.

[dartmonkey]

20 minutes ago, Maverick47 said:

The 18.9 figure does include dividends for all prior periods while 17.8 excludes them.  The comparable 37 yr CAGR including dividends is 18.5.  Using the same sort of calculations I’m estimating a 34.6% gain in book value in full year 2023, not far off the 33.3 non annualized value through Q3.  So maybe an $884 book value per share when we see the full year report Thurs evening?  

That would make sense - although the PR doesn't say whether the 18.9% number is with or without dividends, the jump would be too big to go from 17.8% to 18.9%, but from 18.5% to 18.9%, it's doable. But then, we should also account for the 2023 $10 dividend. I don't know how they do this calculation exactly, but to go from $657.68 on Jan 1 to a 34.6% gain for the full year gain, that would presumably take us from $657.68 to 657.68*1.346-10 = $875/sh at year end, no? About the same as Q3... 

[SafetyinNumbers]

6 minutes ago, dartmonkey said:

That would make sense - although the PR doesn't say whether the 18.9% number is with or without dividends, the jump would be too big to go from 17.8% to 18.9%, but from 18.5% to 18.9%, it's doable. But then, we should also account for the 2023 $10 dividend. I don't know how they do this calculation exactly, but to go from $657.68 on Jan 1 to a 34.6% gain for the full year gain, that would presumably take us from $657.68 to 657.68*1.346-10 = $875/sh at year end, no? About the same as Q3... 

 

Makes me think that’s just the CAGR to the end of Q3, which makes sense if they didn’t want to release financial information early.

[gfp]

3 minutes ago, SafetyinNumbers said:

 

Makes me think that’s just the CAGR to the end of Q3, which makes sense if they didn’t want to release financial information early.

Good point - that sounds right to me, given I expect higher reported book value growth in q4.

[treasurehunt]

1 hour ago, dartmonkey said:

 

Yes, this is intriguing. We already had, from 1985 to 2022, a 37-y annual growth rate of 16.1% for share value. Share price was $802.07 (CDN) at the end of 2022 and $1222.51 at the end of 2023, a 52.4% gain. If you add a 52.4% gain to 37 years of 16.1% gains, you get a 16.9% annualized gain, definitely an improvement over 16.1%, but still far from 18.0%. Perhaps this is adjusted for dividend payments ($10US in 2023), but it's not enough to get to 18.0%. Shares peaked at $1404 before the MW report, which would get us up to about a 17.4% gain, still not quite there, but close.

 

What about book value per share? Using the same reasoning, with a 37-year annual growth rate of 17.8% at the end of 2022, we would obviously need a pretty big gain in 2023 to get that rate up to 18.9%; in fact, the number would be =(1,189^38)/(1,178^37) = 1.677-1 = 67.7%. Does anyone think that 2023 was THAT good? As a reality check, Jan1 2023 BV was 657.68 USD, and that was up to $876.55 on Sept 30 2023, for a 33.3% gain (non-annualized) over 9 months. That would require a 25.8% (non-annualized) gain in Q4, which is a bit hard to believe, but not unfathomable, if the changed the mark on something big. 

 

Thursday evening is getting harder to wait for...

 

I am getting somewhat different numbers.

 

The 2022 letter to shareholders says this: "Since we began in 1985, 37 years ago, our book value per share has compounded at 18.5% (including dividends) annually while our common stock price has compounded at 17.3%(including dividends) annually." According to the latest press release, these numbers are 18.9% and 18.0% respectively over 38 years.

 

This implies that BVPS increase in 2023 is between 33% and 37%. The range is due to rounding; at 33%, the compounded BVPS increase is 18.85% and at 37%, it works out to 18.95%.

[dartmonkey]

Quote

 

I am getting somewhat different numbers.

 

The 2022 letter to shareholders says this: "Since we began in 1985, 37 years ago, our book value per share has compounded at 18.5% (including dividends) annually while our common stock price has compounded at 17.3%(including dividends) annually." According to the latest press release, these numbers are 18.9% and 18.0% respectively over 38 years.

 

This implies that BVPS increase in 2023 is between 33% and 37%. The range is due to rounding; at 33%, the compounded BVPS increase is 18.85% and at 37%, it works out to 18.95%.

 

 

 

Part of the problem is the IFRS restatement. BV gain for the first 3 quarters of 2023 took it from $657.68 on Dec 31, 2022 to $762.28 at the end of Q3, for a 15% gain, not 33-37%. But all those historical numbers will have to be restated up, too, if we figure we can compare new IFRS BV to old GAAP BV. Anyway, I guess the numbers they stated were probably for Q3 so there's no scoop in this latest PR. We'll see if Q4 bumps us up any further.

 

[Viking]

1 hour ago, SafetyinNumbers said:

Makes me think that’s just the CAGR to the end of Q3, which makes sense if they didn’t want to release financial information early.

Yes, that makes sense.