value_hunter Posted January 21 Share Posted January 21 3 hours ago, LC said: Yes - but that’s just part of the picture (which you have done a really great job illustrating to this entire board). Rates going down would of course present reinvestment risk for FFHs large fixed income portfolio. And similarly on the flip side, rate increases provide an opportunity. And it’s important to note management has done a great job taking advantage of 2023’s rise in rates. But what will falling rates do to the rest of the income streams? I’d imagine the equity portfolio would rise. And low rates would be a barrier to entry in the insurance market. At the end of the day whether I think rates will rise or drop (I don’t have a strong opinion but I lean towards ‘higher for longer’), I think it presents opportunities to Fairfax either way. And management has done a good job these past few years on the big decisions (I have a more mixed opinion of them on the smaller deals eg blackberry, KW, etc). Why are you concerned about KW deal? Just because of the recent price drop? Or you think the KW deal is fundamentally flawed? Link to comment Share on other sites More sharing options...
UK Posted January 21 Share Posted January 21 21 hours ago, Viking said: Fairfax: The Big Fish that Got Away? “The stock market is there to serve you and not to instruct you.” Warren Buffett Investors have lots of regrets. Missed opportunities. Not buying a stock that afterwards turns into a big winner. Or selling a winning position way too early. ‘The big fish that got away’ kind of story. In 2021, Fairfax’s shares returned 44%. An investor looking at Fairfax in early 2022 might have concluded ‘dang, missed that one!’ and not invested. In 2022, Fairfax’s shares returned 21%. Most stocks got crushed in the bear market of 2022, so Fairfax’s performance compared to the averages was exceptional. That same investor, looking at Fairfax in early 2023, might have come to the same conclusion: ‘dang, missed that one! For the second year in a row!’ and not invested again. The fish story just got bigger. Well, here we are now in early 2024. How did Fairfax's stock do in 2023? It was up another 55%. Over the past three years shares are up 170%. Investors who did not buy shares (or sold their position too early) over the past three years are left asking themselves what happened? How did they miss out? And what should they do now? The fish story is turning into a whopper of a tale. Three weeks into 2024 the stock is up another 5%. This puts the total increase at 184% since Dec 31, 2020, making it almost a two-bagger in Peter Lynch’s parlance. Fairfax, the ‘big fish,’ continues to taunt investors. What is the lesson to be learned? By itself, the increase in Fairfax’s share price of 184% since Dec 31, 2020, tells you little (nothing?) about Fairfax’s valuation today. This is because price (if used by itself) is a terrible valuation tool. Over the past three years, 'investors' who used price as their primary valuation tool for Fairfax have been led astray. As Buffett teaches us, a stock price exists to serve investors, not instruct them. Let’s take the discussion in a slightly different direction to see what we can learn. What happens if we increase the timeframe? Let’s humour ourselves and play the price game for a little longer. But this time with a couple of added twists. Let’s zoom out - instead of looking at Fairfax’s share price for the past three years, let’s look at the share price for the past 9 years. And let’s include operating earnings - let’s make our analysis a little more robust. From 2015 to 2019 (right before Covid hit), Fairfax’s share price traded in a pretty tight band around US$500. About 50% of the time Fairfax’s share price was over $500 and the other 50% of the time it was under $500. So for 5 years straight investors felt Fairfax was worth about US$500/share. Over this 5-year span, operating earnings at Fairfax averaged about $1.07 billion per year. So from 2015-2019, investors felt $1.07 billion in operating earnings warranted a Fairfax share price of about US$500. Let’s now compare this historical period to today to see what we can learn. Let’s start with the share price. Fairfax’s share price closed today at about US$970/share. The stock is up 94% from the average of about $500/share from 2015-2019. Let’s now look at operating earnings. Operating earnings are forecasted to come in at about $4.4 billion for 2023. That is an increase of 305% from the average of $1.07 billion from 2015-2019. My current estimate is for operating earnings to increase in 2024 to about $4.6 billion. Because the share count has come down meaningfully in recent years, this would put operating earnings per share over $200/share in 2024. This is 359% more than the average from 2015-2019 (about $44/share). Importantly, the increase in operating earnings is durable (the average duration of the fixed income portfolio was increased to 3.1 years in October 2023, which locks in interest income for the next couple ofyears, the largest component of operating income). Let’s put the two together. Fairfax’s stock is up about 90% over the past 9 years. And operating earnings per share - the high quality stuff - is forecasted to be up 359% (over the trend from 2015-2019). High quality earnings have exploded and the stock price has increased modestly. Valuation: Buffet teaches us that a stock is worth the present value of the cash flows (things like operating earnings) that are expected to be generated in the future. Conclusion Looking at Fairfax’s share price and using a 3-year time horizon it is easy to conclude the stock must be crazy expensive today. Looking at Fairfax’s share price and using a 9-year time horizon (and including operating earnings) it is easy to conclude the stock must be crazy cheap today. How can it be both crazy cheap and crazy expensive at the same time? The answer, of course, is that it can’t be both. Let’s circle back to my original comment - using the share price, on its own, as your primary tool to value Fairfax is pretty dumb. As we begin 2024, that big fish (called Fairfax) is once again staring investors right in the face. And guess what? It’s probably going to slip away from them yet again. And in another couple of years, they will think back to today and likely kick themselves. And the story of ‘the big fish that got away’ will get even bigger. ————— How do the traditional valuation metrics look today? Fairfax’s stock has a PE of 5.9 (to Yahoo Finance’s estimate of 2023 earnings). The ROE for 2023 is tracking to be a little over 20%, which is very good. Price to book value (P/BV) is 1.11, which is very low - and this could come down to around 1.05 when Fairfax reports Q4 results in a few weeks. Expensive? Really? ————— What happened in recent years to spike operating earnings so much at Fairfax? Lots of things. Below is one of them. Fairfax is a P/C insurance company. Net premiums written have grown from $6.1 billion in 2014 to an estimated $26.4 billion in 2024 (my current estimate), an increase of 331% over 10 years. Now over-lay this exceptional growth over 10-straight years with the much more modest increase seen in Fairfax’s stock price over the same time frame. Things that make you go hymmm… Great post! Thank you! Link to comment Share on other sites More sharing options...
LC Posted January 21 Share Posted January 21 20 hours ago, value_hunter said: Why are you concerned about KW deal? Just because of the recent price drop? Or you think the KW deal is fundamentally flawed? No I don't think it's fundamentally flawed, they mention a strong LTV for the properties supporting the deal - at its core it looks to me like Fairfax is helping out a partner who is in a poor market right now. And throwing in for some equity as well. OK fine. But it just seems like a reach, similar to continuing to fund Blackberry. At small amounts and with long-term partners, OK I am willing to extend benefit of the doubt. But this kind of cheeky stuff is how they went about putting on billions of deflation hedges. FFH as an investment continues to work if they just stick to (around) their knitting and not trying to outsmart everyone in every market. Link to comment Share on other sites More sharing options...
Thrifty3000 Posted January 21 Share Posted January 21 On 1/20/2024 at 12:23 PM, Viking said: Fairfax: The Big Fish that Got Away? “The stock market is there to serve you and not to instruct you.” Warren Buffett Investors have lots of regrets. Missed opportunities. Not buying a stock that afterwards turns into a big winner. Or selling a winning position way too early. ‘The big fish that got away’ kind of story. In 2021, Fairfax’s shares returned 44%. An investor looking at Fairfax in early 2022 might have concluded ‘dang, missed that one!’ and not invested. In 2022, Fairfax’s shares returned 21%. Most stocks got crushed in the bear market of 2022, so Fairfax’s performance compared to the averages was exceptional. That same investor, looking at Fairfax in early 2023, might have come to the same conclusion: ‘dang, missed that one! For the second year in a row!’ and not invested again. The fish story just got bigger. Well, here we are now in early 2024. How did Fairfax's stock do in 2023? It was up another 55%. Over the past three years shares are up 170%. Investors who did not buy shares (or sold their position too early) over the past three years are left asking themselves what happened? How did they miss out? And what should they do now? The fish story is turning into a whopper of a tale. Three weeks into 2024 the stock is up another 5%. This puts the total increase at 184% since Dec 31, 2020, making it almost a two-bagger in Peter Lynch’s parlance. Fairfax, the ‘big fish,’ continues to taunt investors. What is the lesson to be learned? By itself, the increase in Fairfax’s share price of 184% since Dec 31, 2020, tells you little (nothing?) about Fairfax’s valuation today. This is because price (if used by itself) is a terrible valuation tool. Over the past three years, 'investors' who used price as their primary valuation tool for Fairfax have been led astray. As Buffett teaches us, a stock price exists to serve investors, not instruct them. Let’s take the discussion in a slightly different direction to see what we can learn. What happens if we increase the timeframe? Let’s humour ourselves and play the price game for a little longer. But this time with a couple of added twists. Let’s zoom out - instead of looking at Fairfax’s share price for the past three years, let’s look at the share price for the past 9 years. And let’s include operating earnings - let’s make our analysis a little more robust. From 2015 to 2019 (right before Covid hit), Fairfax’s share price traded in a pretty tight band around US$500. About 50% of the time Fairfax’s share price was over $500 and the other 50% of the time it was under $500. So for 5 years straight investors felt Fairfax was worth about US$500/share. Over this 5-year span, operating earnings at Fairfax averaged about $1.07 billion per year. So from 2015-2019, investors felt $1.07 billion in operating earnings warranted a Fairfax share price of about US$500. Let’s now compare this historical period to today to see what we can learn. Let’s start with the share price. Fairfax’s share price closed today at about US$970/share. The stock is up 94% from the average of about $500/share from 2015-2019. Let’s now look at operating earnings. Operating earnings are forecasted to come in at about $4.4 billion for 2023. That is an increase of 305% from the average of $1.07 billion from 2015-2019. My current estimate is for operating earnings to increase in 2024 to about $4.6 billion. Because the share count has come down meaningfully in recent years, this would put operating earnings per share over $200/share in 2024. This is 359% more than the average from 2015-2019 (about $44/share). Importantly, the increase in operating earnings is durable (the average duration of the fixed income portfolio was increased to 3.1 years in October 2023, which locks in interest income for the next couple ofyears, the largest component of operating income). Let’s put the two together. Fairfax’s stock is up about 90% over the past 9 years. And operating earnings per share - the high quality stuff - is forecasted to be up 359% (over the trend from 2015-2019). High quality earnings have exploded and the stock price has increased modestly. Valuation: Buffet teaches us that a stock is worth the present value of the cash flows (things like operating earnings) that are expected to be generated in the future. Conclusion Looking at Fairfax’s share price and using a 3-year time horizon it is easy to conclude the stock must be crazy expensive today. Looking at Fairfax’s share price and using a 9-year time horizon (and including operating earnings) it is easy to conclude the stock must be crazy cheap today. How can it be both crazy cheap and crazy expensive at the same time? The answer, of course, is that it can’t be both. Let’s circle back to my original comment - using the share price, on its own, as your primary tool to value Fairfax is pretty dumb. As we begin 2024, that big fish (called Fairfax) is once again staring investors right in the face. And guess what? It’s probably going to slip away from them yet again. And in another couple of years, they will think back to today and likely kick themselves. And the story of ‘the big fish that got away’ will get even bigger. ————— How do the traditional valuation metrics look today? Fairfax’s stock has a PE of 5.9 (to Yahoo Finance’s estimate of 2023 earnings). The ROE for 2023 is tracking to be a little over 20%, which is very good. Price to book value (P/BV) is 1.11, which is very low - and this could come down to around 1.05 when Fairfax reports Q4 results in a few weeks. Expensive? Really? ————— What happened in recent years to spike operating earnings so much at Fairfax? Lots of things. Below is one of them. Fairfax is a P/C insurance company. Net premiums written have grown from $6.1 billion in 2014 to an estimated $26.4 billion in 2024 (my current estimate), an increase of 331% over 10 years. Now over-lay this exceptional growth over 10-straight years with the much more modest increase seen in Fairfax’s stock price over the same time frame. Things that make you go hymmm… I wouldn’t be surprised to see the share price increase 35% this year - barring any black swans. Link to comment Share on other sites More sharing options...
villainx Posted January 22 Share Posted January 22 19 hours ago, Thrifty3000 said: I wouldn’t be surprised to see the share price increase 35% this year - barring any black swans. I'm so unsophisticated an investor. Price stays low, great for buybacks, but I get impatient, should I just sell to move to something with more upside. Price goes up, what are they doing buying back shares?!?! maybe I should buy more if it keeps going up. Link to comment Share on other sites More sharing options...
Haryana Posted January 22 Share Posted January 22 On 1/20/2024 at 11:23 AM, Viking said: Fairfax: The Big Fish that Got Away? “The stock market is there to serve you and not to instruct you.” Warren Buffett Investors have lots of regrets. Missed opportunities. Not buying a stock that afterwards turns into a big winner. Or selling a winning position way too early. ‘The big fish that got away’ kind of story. In 2021, Fairfax’s shares returned 44%. An investor looking at Fairfax in early 2022 might have concluded ‘dang, missed that one!’ and not invested. In 2022, Fairfax’s shares returned 21%. Most stocks got crushed in the bear market of 2022, so Fairfax’s performance compared to the averages was exceptional. That same investor, looking at Fairfax in early 2023, might have come to the same conclusion: ‘dang, missed that one! For the second year in a row!’ and not invested again. The fish story just got bigger. Well, here we are now in early 2024. How did Fairfax's stock do in 2023? It was up another 55%. Over the past three years shares are up 170%. Investors who did not buy shares (or sold their position too early) over the past three years are left asking themselves what happened? How did they miss out? And what should they do now? The fish story is turning into a whopper of a tale. Three weeks into 2024 the stock is up another 5%. This puts the total increase at 184% since Dec 31, 2020, making it almost a two-bagger in Peter Lynch’s parlance. Fairfax, the ‘big fish,’ continues to taunt investors. What is the lesson to be learned? By itself, the increase in Fairfax’s share price of 184% since Dec 31, 2020, tells you little (nothing?) about Fairfax’s valuation today. This is because price (if used by itself) is a terrible valuation tool. Over the past three years, 'investors' who used price as their primary valuation tool for Fairfax have been led astray. As Buffett teaches us, a stock price exists to serve investors, not instruct them. Let’s take the discussion in a slightly different direction to see what we can learn. What happens if we increase the timeframe? Let’s humour ourselves and play the price game for a little longer. But this time with a couple of added twists. Let’s zoom out - instead of looking at Fairfax’s share price for the past three years, let’s look at the share price for the past 9 years. And let’s include operating earnings - let’s make our analysis a little more robust. From 2015 to 2019 (right before Covid hit), Fairfax’s share price traded in a pretty tight band around US$500. About 50% of the time Fairfax’s share price was over $500 and the other 50% of the time it was under $500. So for 5 years straight investors felt Fairfax was worth about US$500/share. Over this 5-year span, operating earnings at Fairfax averaged about $1.07 billion per year. So from 2015-2019, investors felt $1.07 billion in operating earnings warranted a Fairfax share price of about US$500. Let’s now compare this historical period to today to see what we can learn. Let’s start with the share price. Fairfax’s share price closed today at about US$970/share. The stock is up 94% from the average of about $500/share from 2015-2019. Let’s now look at operating earnings. Operating earnings are forecasted to come in at about $4.4 billion for 2023. That is an increase of 305% from the average of $1.07 billion from 2015-2019. My current estimate is for operating earnings to increase in 2024 to about $4.6 billion. Because the share count has come down meaningfully in recent years, this would put operating earnings per share over $200/share in 2024. This is 359% more than the average from 2015-2019 (about $44/share). Importantly, the increase in operating earnings is durable (the average duration of the fixed income portfolio was increased to 3.1 years in October 2023, which locks in interest income for the next couple ofyears, the largest component of operating income). Let’s put the two together. Fairfax’s stock is up about 90% over the past 9 years. And operating earnings per share - the high quality stuff - is forecasted to be up 359% (over the trend from 2015-2019). High quality earnings have exploded and the stock price has increased modestly. Valuation: Buffet teaches us that a stock is worth the present value of the cash flows (things like operating earnings) that are expected to be generated in the future. Conclusion Looking at Fairfax’s share price and using a 3-year time horizon it is easy to conclude the stock must be crazy expensive today. Looking at Fairfax’s share price and using a 9-year time horizon (and including operating earnings) it is easy to conclude the stock must be crazy cheap today. How can it be both crazy cheap and crazy expensive at the same time? The answer, of course, is that it can’t be both. Let’s circle back to my original comment - using the share price, on its own, as your primary tool to value Fairfax is pretty dumb. As we begin 2024, that big fish (called Fairfax) is once again staring investors right in the face. And guess what? It’s probably going to slip away from them yet again. And in another couple of years, they will think back to today and likely kick themselves. And the story of ‘the big fish that got away’ will get even bigger. ————— How do the traditional valuation metrics look today? Fairfax’s stock has a PE of 5.9 (to Yahoo Finance’s estimate of 2023 earnings). The ROE for 2023 is tracking to be a little over 20%, which is very good. Price to book value (P/BV) is 1.11, which is very low - and this could come down to around 1.05 when Fairfax reports Q4 results in a few weeks. Expensive? Really? ————— What happened in recent years to spike operating earnings so much at Fairfax? Lots of things. Below is one of them. Fairfax is a P/C insurance company. Net premiums written have grown from $6.1 billion in 2014 to an estimated $26.4 billion in 2024 (my current estimate), an increase of 331% over 10 years. Now over-lay this exceptional growth over 10-straight years with the much more modest increase seen in Fairfax’s stock price over the same time frame. Things that make you go hymmm… Not undervalued enough, still, to double or touch US2000 in four years? Link to comment Share on other sites More sharing options...
Hamburg Investor Posted January 22 Share Posted January 22 On 1/20/2024 at 7:23 PM, Viking said: Fairfax: The Big Fish that Got Away? “The stock market is there to serve you and not to instruct you.” Warren Buffett Investors have lots of regrets. Missed opportunities. Not buying a stock that afterwards turns into a big winner. Or selling a winning position way too early. ‘The big fish that got away’ kind of story. In 2021, Fairfax’s shares returned 44%. An investor looking at Fairfax in early 2022 might have concluded ‘dang, missed that one!’ and not invested. In 2022, Fairfax’s shares returned 21%. Most stocks got crushed in the bear market of 2022, so Fairfax’s performance compared to the averages was exceptional. That same investor, looking at Fairfax in early 2023, might have come to the same conclusion: ‘dang, missed that one! For the second year in a row!’ and not invested again. The fish story just got bigger. Well, here we are now in early 2024. How did Fairfax's stock do in 2023? It was up another 55%. Over the past three years shares are up 170%. Investors who did not buy shares (or sold their position too early) over the past three years are left asking themselves what happened? How did they miss out? And what should they do now? The fish story is turning into a whopper of a tale. Three weeks into 2024 the stock is up another 5%. This puts the total increase at 184% since Dec 31, 2020, making it almost a two-bagger in Peter Lynch’s parlance. Fairfax, the ‘big fish,’ continues to taunt investors. What is the lesson to be learned? By itself, the increase in Fairfax’s share price of 184% since Dec 31, 2020, tells you little (nothing?) about Fairfax’s valuation today. This is because price (if used by itself) is a terrible valuation tool. Over the past three years, 'investors' who used price as their primary valuation tool for Fairfax have been led astray. As Buffett teaches us, a stock price exists to serve investors, not instruct them. Let’s take the discussion in a slightly different direction to see what we can learn. What happens if we increase the timeframe? Let’s humour ourselves and play the price game for a little longer. But this time with a couple of added twists. Let’s zoom out - instead of looking at Fairfax’s share price for the past three years, let’s look at the share price for the past 9 years. And let’s include operating earnings - let’s make our analysis a little more robust. From 2015 to 2019 (right before Covid hit), Fairfax’s share price traded in a pretty tight band around US$500. About 50% of the time Fairfax’s share price was over $500 and the other 50% of the time it was under $500. So for 5 years straight investors felt Fairfax was worth about US$500/share. Over this 5-year span, operating earnings at Fairfax averaged about $1.07 billion per year. So from 2015-2019, investors felt $1.07 billion in operating earnings warranted a Fairfax share price of about US$500. Let’s now compare this historical period to today to see what we can learn. Let’s start with the share price. Fairfax’s share price closed today at about US$970/share. The stock is up 94% from the average of about $500/share from 2015-2019. Let’s now look at operating earnings. Operating earnings are forecasted to come in at about $4.4 billion for 2023. That is an increase of 305% from the average of $1.07 billion from 2015-2019. My current estimate is for operating earnings to increase in 2024 to about $4.6 billion. Because the share count has come down meaningfully in recent years, this would put operating earnings per share over $200/share in 2024. This is 359% more than the average from 2015-2019 (about $44/share). Importantly, the increase in operating earnings is durable (the average duration of the fixed income portfolio was increased to 3.1 years in October 2023, which locks in interest income for the next couple ofyears, the largest component of operating income). Let’s put the two together. Fairfax’s stock is up about 90% over the past 9 years. And operating earnings per share - the high quality stuff - is forecasted to be up 359% (over the trend from 2015-2019). High quality earnings have exploded and the stock price has increased modestly. Valuation: Buffet teaches us that a stock is worth the present value of the cash flows (things like operating earnings) that are expected to be generated in the future. Conclusion Looking at Fairfax’s share price and using a 3-year time horizon it is easy to conclude the stock must be crazy expensive today. Looking at Fairfax’s share price and using a 9-year time horizon (and including operating earnings) it is easy to conclude the stock must be crazy cheap today. How can it be both crazy cheap and crazy expensive at the same time? The answer, of course, is that it can’t be both. Let’s circle back to my original comment - using the share price, on its own, as your primary tool to value Fairfax is pretty dumb. As we begin 2024, that big fish (called Fairfax) is once again staring investors right in the face. And guess what? It’s probably going to slip away from them yet again. And in another couple of years, they will think back to today and likely kick themselves. And the story of ‘the big fish that got away’ will get even bigger. ————— How do the traditional valuation metrics look today? Fairfax’s stock has a PE of 5.9 (to Yahoo Finance’s estimate of 2023 earnings). The ROE for 2023 is tracking to be a little over 20%, which is very good. Price to book value (P/BV) is 1.11, which is very low - and this could come down to around 1.05 when Fairfax reports Q4 results in a few weeks. Expensive? Really? ————— What happened in recent years to spike operating earnings so much at Fairfax? Lots of things. Below is one of them. Fairfax is a P/C insurance company. Net premiums written have grown from $6.1 billion in 2014 to an estimated $26.4 billion in 2024 (my current estimate), an increase of 331% over 10 years. Now over-lay this exceptional growth over 10-straight years with the much more modest increase seen in Fairfax’s stock price over the same time frame. Things that make you go hymmm… I reay really appreciate your postings. Thank you. Link to comment Share on other sites More sharing options...
Viking Posted January 22 Share Posted January 22 1 hour ago, Haryana said: Not undervalued enough, still, to double or touch US2000 in four years? @Haryana If Fairfax's stock went up 20% each of the next 4 years then we would see a price of US$2,000. Three things drive a stock price: 1.) earnings 2.) multiple 3.) shares outstanding My view is much of the increase we have seen in Fairfax over the past three years is being driven by much higher earnings and much lower share count. The P/BV multiple has not expanded much from its historical range - one could argue the multiple is actually below its historical average. If we get multiple expansion in the coming years then I think investors will be very happy. Solid earnings + lower share count + multiple expansion = very happy shareholders. Link to comment Share on other sites More sharing options...
Thrifty3000 Posted January 23 Share Posted January 23 6 hours ago, villainx said: I'm so unsophisticated an investor. Price stays low, great for buybacks, but I get impatient, should I just sell to move to something with more upside. Price goes up, what are they doing buying back shares?!?! maybe I should buy more if it keeps going up. Selling an asset to buy a cheaper asset is a perfectly logical thing to do (assuming you’ve rationally factored in taxes and relative risks). It sounds like you’re overly influenced by price, which will make investing very uncomfortable at times. I recommend focusing more attention on learning how to appraise the value of a business. The more confidently you can estimate how much a business is worth to a rational buyer the less emotionally-attached to prices you’ll become. A trick that has been incredibly helpful for me… I created a spreadsheet where I track MY portion of the look through earnings from my equity investments. So, for example, If I have 100 shares of Fairfax and I estimate the normal earnings to be $150 per share then in my spreadsheet I would show MY total Fairfax earnings as $15,000. If I have 1,000 shares of BRK and assume $25 per share of look through earnings then I would add $25,000 to my spreadsheet. With Fairfax and BRK combined I would have $40,000 of earnings. (I look at those earnings almost like my salary. I want my “salary” to be big, steady and growing over time.) Notice I haven’t mentioned stock price, because my number one priority is the quality and growth potential of MY earnings. With that mentality, if I can at anytime sell all my Fairfax and BRK shares to buy assets producing significantly more than that $40,000 of look through earnings then I am happy to do it. I treat that like getting a pay raise - which is fun and motivating. This approach helps ensure that the only way I can confidently sell one asset for another is if I’m confident in my analysis and able to transact at attractive prices. Link to comment Share on other sites More sharing options...
Crip1 Posted January 23 Share Posted January 23 2 hours ago, Thrifty3000 said: A trick that has been incredibly helpful for me… I created a spreadsheet where I track MY portion of the look through earnings from my equity investments. So, for example, If I have 100 shares of Fairfax and I estimate the normal earnings to be $150 per share then in my spreadsheet I would show MY total Fairfax earnings as $15,000. If I have 1,000 shares of BRK and assume $25 per share of look through earnings then I would add $25,000 to my spreadsheet. With Fairfax and BRK combined I would have $40,000 of earnings. (I look at those earnings almost like my salary. I want my “salary” to be big, steady and growing over time.) Notice I haven’t mentioned stock price, because my number one priority is the quality and growth potential of MY earnings. With that mentality, if I can at anytime sell all my Fairfax and BRK shares to buy assets producing significantly more than that $40,000 of look through earnings then I am happy to do it. I treat that like getting a pay raise - which is fun and motivating. This approach helps ensure that the only way I can confidently sell one asset for another is if I’m confident in my analysis and able to transact at attractive prices. In the past I have thought about doing that, but never took the time to do so. To what extent do you feel this exercise impacts your buying and selling? -Crip Link to comment Share on other sites More sharing options...
Thrifty3000 Posted January 23 Share Posted January 23 10 minutes ago, Crip1 said: In the past I have thought about doing that, but never took the time to do so. To what extent do you feel this exercise impacts your buying and selling? -Crip I almost never buy or sell. I have a handful of core investments that I’ve owned and followed for years. I have about 3% of my portfolio in some tracking positions that I’ve held for over 2 years while getting to know them better. I have a watchlist of companies I’m either trying to learn more about or waiting for the right price to buy. I find it very hard to find companies that I like better than my core holdings. Though it does happen. I’ve exited 7 or 8 positions in the last 5 years. Half were core holdings and half were trackers. Looking at equity earnings like a salary makes me think much more like a business owner when I’m buying parts of the businesses that are paying my “salary.” Also, once you give yourself enough “raises” - via more and better investments - you’ll be able to replace your actual salary with your equity “salary.” Link to comment Share on other sites More sharing options...
frommi Posted January 23 Share Posted January 23 Thats a very good idea, i track my dividend income in a similar sheet since 5 or 6 years and it is a great motivation. Tracking earnings is probably even better , i think i will add that to my sheet. Thanks! Link to comment Share on other sites More sharing options...
Luca Posted January 23 Share Posted January 23 10 hours ago, Thrifty3000 said: Selling an asset to buy a cheaper asset is a perfectly logical thing to do (assuming you’ve rationally factored in taxes and relative risks). It sounds like you’re overly influenced by price, which will make investing very uncomfortable at times. I recommend focusing more attention on learning how to appraise the value of a business. The more confidently you can estimate how much a business is worth to a rational buyer the less emotionally-attached to prices you’ll become. A trick that has been incredibly helpful for me… I created a spreadsheet where I track MY portion of the look through earnings from my equity investments. So, for example, If I have 100 shares of Fairfax and I estimate the normal earnings to be $150 per share then in my spreadsheet I would show MY total Fairfax earnings as $15,000. If I have 1,000 shares of BRK and assume $25 per share of look through earnings then I would add $25,000 to my spreadsheet. With Fairfax and BRK combined I would have $40,000 of earnings. (I look at those earnings almost like my salary. I want my “salary” to be big, steady and growing over time.) Notice I haven’t mentioned stock price, because my number one priority is the quality and growth potential of MY earnings. With that mentality, if I can at anytime sell all my Fairfax and BRK shares to buy assets producing significantly more than that $40,000 of look through earnings then I am happy to do it. I treat that like getting a pay raise - which is fun and motivating. This approach helps ensure that the only way I can confidently sell one asset for another is if I’m confident in my analysis and able to transact at attractive prices. Yes very good way to think about ones portfolio! My current portfolio has more than 2x the earnings per $ compared to the SP 500, has higher ROIC than the SP 500 and higher sales growth than the SP 500...good life Link to comment Share on other sites More sharing options...
MMM20 Posted January 23 Share Posted January 23 (edited) 15 hours ago, Thrifty3000 said: A trick that has been incredibly helpful for me… I created a spreadsheet where I track MY portion of the look through earnings from my equity investments. So, for example, If I have 100 shares of Fairfax and I estimate the normal earnings to be $150 per share then in my spreadsheet I would show MY total Fairfax earnings as $15,000. If I have 1,000 shares of BRK and assume $25 per share of look through earnings then I would add $25,000 to my spreadsheet. With Fairfax and BRK combined I would have $40,000 of earnings. (I look at those earnings almost like my salary. I want my “salary” to be big, steady and growing over time.) Notice I haven’t mentioned stock price, because my number one priority is the quality and growth potential of MY earnings. With that mentality, if I can at anytime sell all my Fairfax and BRK shares to buy assets producing significantly more than that $40,000 of look through earnings then I am happy to do it. I treat that like getting a pay raise - which is fun and motivating. This approach helps ensure that the only way I can confidently sell one asset for another is if I’m confident in my analysis and able to transact at attractive prices. This is great advice when paired with a focus on business quality. The mistake people can make is ending up with a bunch of melting ice cubes or highly levered and fragile high current yields. Fairfax seems like a great example of both a high earnings yield (seemingly now structurally robust, if volatile) and high future eps growth - possibly for a pretty damn long time. Hey, maybe the market will eventually catch on. Edited January 23 by MMM20 Link to comment Share on other sites More sharing options...
vinod1 Posted January 23 Share Posted January 23 (edited) 14 hours ago, Thrifty3000 said: A trick that has been incredibly helpful for me… I created a spreadsheet where I track MY portion of the look through earnings from my equity investments. So, for example, If I have 100 shares of Fairfax and I estimate the normal earnings to be $150 per share then in my spreadsheet I would show MY total Fairfax earnings as $15,000. If I have 1,000 shares of BRK and assume $25 per share of look through earnings then I would add $25,000 to my spreadsheet. With Fairfax and BRK combined I would have $40,000 of earnings. (I look at those earnings almost like my salary. I want my “salary” to be big, steady and growing over time.) Notice I haven’t mentioned stock price, because my number one priority is the quality and growth potential of MY earnings. With that mentality, if I can at anytime sell all my Fairfax and BRK shares to buy assets producing significantly more than that $40,000 of look through earnings then I am happy to do it. I treat that like getting a pay raise - which is fun and motivating. This approach helps ensure that the only way I can confidently sell one asset for another is if I’m confident in my analysis and able to transact at attractive prices. This is exactly what I do. Buffett talked about this several times as well but very few people seem to have paid attention to it. In addition, I have a 10 year expected earnings number as well. While I look at current earnings as my salary, I try to put together a portfolio that gives me the highest 10 year salary possible. If I had only current normalized earnings, there is a psychological pressure to juice it via a tendency to buy cheap stocks with high earnings yield like GM or banks. This forces me 1) to avoid melting ice cubes 2) focus on business quality 3) reduces impact of stock price fluctuations - I worry less about why isnt it going up? As long as earnings keep growing up I am happy. Vinod Edited January 23 by vinod1 Link to comment Share on other sites More sharing options...
Thrifty3000 Posted January 23 Share Posted January 23 33 minutes ago, MMM20 said: This is great advice when paired with a focus on business quality. The mistake people can make is ending up with a bunch of melting ice cubes or highly levered and fragile high current yields. Fairfax seems like a great example of both a high current earnings yield (seemingly now structurally robust, if volatile) and high prospective earnings growth - possibly for a pretty damn long time. Hey, maybe the market will eventually catch on. Yes, earnings quality and growth are essential. (Ideally, you have a high quality present value estimate.) Link to comment Share on other sites More sharing options...
Crip1 Posted January 23 Share Posted January 23 13 hours ago, Thrifty3000 said: I almost never buy or sell. I have a handful of core investments that I’ve owned and followed for years. I have about 3% of my portfolio in some tracking positions that I’ve held for over 2 years while getting to know them better. I have a watchlist of companies I’m either trying to learn more about or waiting for the right price to buy. I find it very hard to find companies that I like better than my core holdings. Though it does happen. I’ve exited 7 or 8 positions in the last 5 years. Half were core holdings and half were trackers. Looking at equity earnings like a salary makes me think much more like a business owner when I’m buying parts of the businesses that are paying my “salary.” Also, once you give yourself enough “raises” - via more and better investments - you’ll be able to replace your actual salary with your equity “salary.” So, a few questions (and I truly appreciate your intellectual generosity): Is the file as simple as Company A earned x per share so my portion of the earnings is x times the share amount owned? (Column A is Company, Column B is EPS, Column C is Shares owned, Column D is Column B times Column C) If it's more complicated, what else to do capture? I assume that you do not look at dividends except to add them to share count if you reinvest...is that right? Do you adjust for one-time charges? Do you attempt to convert this to Cash-Flow by adding Depreciation/Amortization and deducting Cap Ex? Do you update this quarterly or annually? -Crip Link to comment Share on other sites More sharing options...
gfp Posted January 23 Share Posted January 23 simultaneous all time closing highs in Berkshire & Fairfax - who'd of thought? The CoBF namesakes are holding up. Link to comment Share on other sites More sharing options...
juniorr Posted January 23 Share Posted January 23 Quote BlackBerry Announces Proposed Private Offering of $160 Million of Convertible Senior Notes https://www.prnewswire.com/news-releases/blackberry-announces-proposed-private-offering-of-160-million-of-convertible-senior-notes-302042511.html Maybe Fairfax is pulling out of the debt offering...Better options out there Link to comment Share on other sites More sharing options...
StubbleJumper Posted January 24 Share Posted January 24 3 hours ago, juniorr said: https://www.prnewswire.com/news-releases/blackberry-announces-proposed-private-offering-of-160-million-of-convertible-senior-notes-302042511.html Maybe Fairfax is pulling out of the debt offering...Better options out there Well that promises to be interesting. I wonder what terms BB will get from a lender other than FFH. SJ Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted January 24 Author Share Posted January 24 24 minutes ago, StubbleJumper said: Well that promises to be interesting. I wonder what terms BB will get from a lender other than FFH. SJ I’m guessing the buyer is already short. Coupon probably not too high, relying on the volatility and optionality to pay the majority of the financial cost. I’m not a convert expert but my guess would be a conversion price 30-50% above the recent price and a coupon in line with the reference risk free rate. Maybe 5% dilution and that’s only if the stock goes up a lot which no one seems to believe can happen. It looks optically expensive but it’s a pretty tiny market cap. I’m not sure if there is room for margin improvement and or growth but with a new CEO it might happen and create a lot of Social Value. I don’t own any. If anyone does, please consider sharing your thesis. Link to comment Share on other sites More sharing options...
Parsad Posted January 24 Share Posted January 24 5 hours ago, gfp said: simultaneous all time closing highs in Berkshire & Fairfax - who'd of thought? The CoBF namesakes are holding up. +1! Cheers! Link to comment Share on other sites More sharing options...
Intelligent_Investor Posted January 24 Share Posted January 24 Close to $1k USD Link to comment Share on other sites More sharing options...
gfp Posted January 24 Share Posted January 24 Just now, Intelligent_Investor said: Close to $1k USD according to my quote services, FRFHF did touch $1000 this morning. Link to comment Share on other sites More sharing options...
Hoodlum Posted January 24 Share Posted January 24 This may explain some of the rise this week in share price. I expect we will see increases in target price from others over the next month. https://www.marketbeat.com/instant-alerts/tse-ffh-analyst-earnings-estimates-2024-01-24/ Of course these are in Cdn dollars. Quote Equities research analysts at Cormark increased their FY2023 EPS estimates for Fairfax Financial in a report released on Monday, January 22nd. Cormark analyst J. Fenwick now expects that the company will post earnings of $254.77 per share for the year, up from their prior forecast of $227.84. The consensus estimate for Fairfax Financial's current full-year earnings is $186.80 per share. Cormark also issued estimates for Fairfax Financial's Q4 2023 earnings at $89.13 EPS, FY2024 earnings at $189.16 EPS and FY2025 earnings at $211.65 EPS. Link to comment Share on other sites More sharing options...
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