Fairfax 2024

[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. 

[Hektor]

5 hours 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. 

Understood. Overtime, what credibility will MW have? Once they go after high profile companies and are exposed as nothing burgers, why would stocks crash on their report?

[MMM20]

10 minutes ago, Hektor said:

Understood. Overtime, what credibility will MW have? Once they go after high profile companies and are exposed as nothing burgers, why would stocks crash on their report?

 

Once you have the platform to pull off a few of these and make tens of millions, who cares? You ride off into the sunset or just hang out on your Texas ranch with your tigers and shoot at cans or whatever. You see the incentive to manipulate markets without repercussion. We should eventually see a crackdown on this sort of behavior.

 

Edited February 12 by MMM20

[Hektor]

4 minutes ago, MMM20 said:

Once you have the platform pull off a few of these and make tens of millions, who cares? You ride off into the sunset or maybe in this case just hang out on your Texas ranch and hang out with your tigers and shoot at cans or whatever. You see the incentive to manipulate markets without repercussion and that's that's why we should eventually see a crackdown on this particular sort of behavior. But yeah, not holding my breath.

[dartmonkey]

Understood. Overtime, what credibility will MW have? Once they go after high profile companies and are exposed as nothing burgers, why would stocks crash on their report?

 

I have lost most of my sympathy for Muddy Waters, whom I previously considered fairly courageous in revealing genuinely fraudulent companies. But yes, it is sad that they have squandered their reputation by firing this blank. In addition to harming lots of shareholders who will have taken fright and who will now regret selling their shares at a 10% discount, they have also squandered their future credibility for taking on the kinds of truly fraudulent firms the have targeted in the past, like Sino-Forest (a Chinese-Canadian pseudo-miner that turned out to be a complete fraud), JOYY, GSX Techedu, French retailer Casino, Luckin Coffee, etc. etc. Most of them genuine turds.

[Gregmal]

Like most other sleaze balls, a lot of short sellers figured out it was easier and more profitable to just capitalize on fear and propaganda inspired panic, rather than actually letting their investment research play out. I mean its the epitome of a scheme to sit there and pitch some fundamental investment case, and then transact the same day on what is purely a non fundamental development. The Citron guy used to hammer this sort of thing all the time and I heard he got in trouble for it...."stock ABC has these fundamentals drivers" he'd shout in a loudmouthed research report. Then 3 days later he'd declare victory and it was always a good chuckle cuz we all know nothing happened other than the stock moving; largely because of him causing it to. 

[Xerxes]

I could only imagine how many people Prem pulled in to work over the weekend just for that note that came this morning. 

[Parsad]

17 minutes ago, Xerxes said:

I could only imagine how many people Prem pulled in to work over the weekend just for that note that came this morning. 

 

Prem doesn't do that.  I'm not sure they were that pissed off with the shorts this time as they were back in 2003.  They know the situation is different.  They are in far better shape fundamentally and have enough cash flow to power the ship for years. 

 

Back in 2003, catastrophe losses and the size of the reinsurance recoverable portfolio left them vulnerable, especially when listed on the NYSE and there were massive FTD's.  Totally different situation this time.  The shorts were in it for a quick gain to reduce their short losses...unlike in 2003 where they wanted to run Fairfax into bankruptcy. 

 

2003 was a very coordinated fraud on a massive scale...you had analysts, journalists and huge hedge funds coordinating their attack over a fairly long period of time.  This time it was a minor smash and grab...petty theft!  

 

Cheers!

[This2ShallPass]

15 hours ago, SafetyinNumbers said:

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

 

If you look at the US OTC FRFHF, return from 2011 start to now is only 180% (including divi but not reinvested). That's ~8% CAGR.

Edited February 13 by This2ShallPass
Corrected mistake of CAGR

[SafetyinNumbers]

3 hours ago, This2ShallPass said:

If you look at the US OTC FRFHF, return from 2011 start to now is only 180% (including divi but not reinvested). That's ~8% CAGR.

I live in CAD so that’s what I posted. It’s weakened a lot since then apparently. Including dividends it’s 9.21% in USD according to this website at least.

 

 

[Tommm50]

I notice a significant difference in the percentage change in the stock price on the OTC U.S. stock and Fairfax on the Canadian exchange. I'd guess it's the forex rate difference between U.S. and Canadian dollars but the seems like a lot. Any comments?

[glider3834]

58 minutes ago, Tommm50 said:

I notice a significant difference in the percentage change in the stock price on the OTC U.S. stock and Fairfax on the Canadian exchange. I'd guess it's the forex rate difference between U.S. and Canadian dollars but the seems like a lot. Any comments?

I would suspect CAD weakening close to 1% against USD

[This2ShallPass]

16 hours ago, SafetyinNumbers said:

I live in CAD so that’s what I posted. It’s weakened a lot since then apparently. Including dividends it’s 9.21% in USD according to this website at least.

I was also surprised at the big difference in performance, CAD is down >25% from start of 2011 (-1.8%/yr).

 

Anyone know what caused this big weakening? In 2011 CAD was par to USD.

[glider3834]

the repurchase of minority interests in Allied World in 2022 (highlighted in yellow) reduced book value, but I can't find this in MW report

 

[glider3834]

It looks like Fairfax's take private, acquisition offer of CAD $20.73 (US$15.30) for Recipe was within the fair market value range provided by independent valuators Greenhills (see below) who were appointed to give a fairness opinion on the transaction to Recipe's Sellers/Minority Shareholders ie not Fairfax. 

 

The offer price also appears to be close to the mid-point of the discounted cash flow (DCF) analysis valuation for the Recipe's shares and this is what Fairfax use for their market price for Recipe for FY2022.

 

 

 

 

Edited February 14 by glider3834

[SafetyinNumbers]

9 hours ago, This2ShallPass said:

I was also surprised at the big difference in performance, CAD is down >25% from start of 2011 (-1.8%/yr).

 

Anyone know what caused this big weakening? In 2011 CAD was par to USD.

A combination of the USD wrecking ball that outperforms all currencies for technical reasons over the long term and oil prices being down, especially in real terms from $110 in 2011.