Fairfax 2024

[Dinar]

35 minutes ago, whatstheofficerproblem said:

Since Trump favors cuts and spending, which is bad for the deficit because without additional taxes there will be issuance of more bonds, the bonds are selling off. Fairfax's bond portfolio duration was 3.5 years, the yields are up. How will this effect the mark-to-market value of the bonds in the interim?

It should be offset by the higher discount factor on the insurance liabilities. 

[UK]

51 minutes ago, whatstheofficerproblem said:

Since Trump favors cuts and spending, which is bad for the deficit because without additional taxes there will be issuance of more bonds, the bonds are selling off. Fairfax's bond portfolio duration was 3.5 years, the yields are up. How will this effect the mark-to-market value of the bonds in the interim?

 

Short term wise bond portfolio is matched with insurance liabilities and longer term higher rates is way better for FFH and I think the latter is also more important.

[UK]

7 hours ago, SafetyinNumbers said:

I went on a podcast and spoke mostly about Fairfax.

 

https://t.co/x7v5g2OvGf

 

Thanks! This will be the first thing I will listen to asap:)

[MarioP]

23 hours ago, SafetyinNumbers said:

I went on a podcast and spoke mostly about Fairfax.

 

https://t.co/x7v5g2OvGf

Terrefic podcast. And don’t skip it because you know Fairfax. There is lots of interesting things, specialy your view of how the market work now that it is dominated by quants and indexers.

 

And I must confess something : I’m one of those value guy who never bought Fairfax India because I didn’t want to pay the fees . I will have a serious look at it now that I know that they are waived until at least 21.

[SafetyinNumbers]

14 minutes ago, MarioP said:

Terrefic podcast. And don’t skip it because you know Fairfax. There is lots of interesting things, specialy your view of how the market work now that it is dominated by quants and indexers.

 

And I must confess something : I’m one of those value guy who never bought Fairfax India because I didn’t want to pay the fees . I will have a serious look at it now that I know that they are waived until at least 21.

Thanks for listening! On FIH, the fees aren’t waived until the most recent book value ~$21.5, just that they are already paid up to the end of 2023 and any additional since then to end of Q324 already accrued above the 5% hurdle rate.

[mananainvesting]

@SafetyinNumbers: Fantastic Podcast! Enjoyed the listen just like your previous podcast with Bill Brewster.

[Viking]

On 11/5/2024 at 3:32 PM, SafetyinNumbers said:

I went on a podcast and spoke mostly about Fairfax.

 

https://t.co/x7v5g2OvGf

@SafetyinNumbers , i finally got the time to listen to your podcast (I am just finishing up my vacation). You did a fantastic job! It was very comprehensive. It was a great review for me on many topics. And i also learned a great deal. It also provided me with some ideas that might make interesting long post articles in the future. Thank you!

[Haryana]

9 hours ago, mananainvesting said:

@SafetyinNumbers: Fantastic Podcast! Enjoyed the listen just like your previous podcast with Bill Brewster.

Here is that for easy reference 

https://podcasters.spotify.com/pod/show/william-brewster1/episodes/Charles-Frischer-and-Asheef-Lalani---Fairfax-Is-A-Fat-Pitch-e2757vs

 

Edited Thursday at 10:17 AM by Haryana

[Haryana]

11 hours ago, SafetyinNumbers said:

Thanks for listening! On FIH, the fees aren’t waived until the most recent book value ~$21.5, just that they are already paid up to the end of 2023 and any additional since then to end of Q324 already accrued above the 5% hurdle rate.

Would you agree with the following perspective - 

The fee is already paid up to the current book value ($21.5). So, if the book value grows only 5% (~$1) in a year from now and also the market price catches up from $15 to $22.5, then all of this 50% price gain will be without paying any fee. 

Edited Thursday at 09:30 AM by Haryana

[SafetyinNumbers]

Thanks @mananainvesting and @Viking! Viking I’m looking forward to what you come up with. I find your analysis extremely helpful!

 

@Haryana I think that makes sense on the performance fees but it’s hard to believe the discount closes entirely except if investors really want to own BIAL post IPO. 

[Hoodlum]

@SafetyinNumbers will appreciate this.  CIBC’s chief market technician Sid Mokhtari has listed Fairfax as one of his top 10 TSX momentum stocks.  

 

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-cibcs-chief-market-technician-shares-his-latest-top-10-momentum-driven/

 

Quote

We run stocks against one another and those that come up in our tables, they tend to be selected based on the relative performance. Onex, for instance, is in an emerging backdrop, Sun Life is in an emerging backdrop, Fairfax is in an emerging backdrop, as they are showing better relative strength acceleration. So, within financials, it’s not that banks are not doing too well, that is not at all the call, it’s just that these three companies are now collectively showing better potential for relative strength acceleration. And that means these stocks are probably going to produce better alpha relative to the banks that have done quite well over the past six months.

 

[SafetyinNumbers]

1 hour ago, Hoodlum said:

@SafetyinNumbers will appreciate this.  CIBC’s chief market technician Sid Mokhtari has listed Fairfax as one of his top 10 TSX momentum stocks.  

 

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-cibcs-chief-market-technician-shares-his-latest-top-10-momentum-driven/

 

 

Thanks! I think that’s part of why it did well on Nov 1

[mananainvesting]

Alphyn Capital Q3 letter discussing Fairfax. 

 

https://www.alphyncap.com/uploads/1/4/1/2/14123551/acml_2024-q3.pdf

[Haryana]

Found it interesting @SafetyinNumbers on the podcast, came up with $2700 as intrinsic value by adding equity and float while I had the exact same number calculated from a different perspective.

 

 

Edited Friday at 03:40 AM by Haryana

[gfp]

21 minutes ago, mananainvesting said:

Alphyn Capital Q3 letter discussing Fairfax. 

 

https://www.alphyncap.com/uploads/1/4/1/2/14123551/acml_2024-q3.pdf

 

This line was weird - "

Fairfax also continued its share repurchase program, spending $678 million in the quarter"

 

Pretty sure it was more like $189 million in the quarter.

Do we know who this manager is?  A board member here?  Underperforming the S&P 500 by over 10% annually over a long period of time is a tough sell

[mananainvesting]

17 minutes ago, gfp said:

 

This line was weird - "

Fairfax also continued its share repurchase program, spending $678 million in the quarter"

 

Pretty sure it was more like $189 million in the quarter.

Do we know who this manager is?  A board member here?  Underperforming the S&P 500 by over 10% annually over a long period of time is a tough sell

Good catch on the share repurchase. I don't know the manager, the letter has a name at the top.

[Haryana]

14 hours ago, SafetyinNumbers said:

@Haryana I think that makes sense on the performance fees but it’s hard to believe the discount closes entirely except if investors really want to own BIAL post IPO. 

The discount may turn to premium in 1 year or 5 years but the points being:

1. The fee is already paid on the increase in book value

2. Whenever the share price catches up to book value, all that gain will be fee-free

3. Upto 5% of additional gain each year is also fee-free

4. Buyer has benefit that fee on the increased book is already paid-for by the seller

[dartmonkey]

8 hours ago, Haryana said:

3. Upto 5% of additional gain each year is also fee-free

Not that it makes that much of a difference, but I believe that the 5% hurdle is non-compounded, meaning that at this point it is only about 2.5%. I’d have to dig up the documents that convinced me of that but I believe it’s true.

[Haryana]

I think you are correct on the fee hurdle rate being less as was discussed on forum here earlier. The main point is that people dislike the hedge fund like fee but that is why there is big discount to book value. So, therefore, this is opportunity to get a high quality hedge fund without actually paying the fee upto the catchup to bookvalue.

 

The high fee is justified as the investments like Bial would be otherwise unavailable to the common public. Ben's fund, for example, requires you to be an accredited investor to buy. 

 

Only when the price goes up that people will think the fee is justified and everything must be alright. The price of Fairfax had to cross $1000 for opinion to Uturn, for Fairfax India that price might be $20 or $25. 

[wondering]

I know its still a bit early (2 months away) but I thought I would start the seemingly annual debate on the Fairfax dividend.

 

If you would have asked me 18 months will Fairfax increase the dividend from $10/share US - my answer would have been - No way!  Surprise, surprise - Fairfax increased the dividend to $15/share US last year.

 

Now if you asked me the same question this year, I am not so sure.  I think there is a good possibility (50%?) that they raise the dividend to 17-20/share.  I know Fairfax will never be known as a huge dividend-payer, but since the stock price has rose so much in one year, I thought the probability that they raise the dividend again so that the dividend yield is 1.3 - 1.6%.  (currently hovering around 1%).

 

Thoughts...

 

Related to this is that I listened to @SafetyinNumbers podcasts recently.  Part of his argument of why the Fairfax price remains low is that the stock doesn't screen well with the quants.  Based on this argument I was wondering if a few years of dividends increases would be looked on a favourable with the quants?

[Hoodlum]

2 hours ago, wondering said:

I know its still a bit early (2 months away) but I thought I would start the seemingly annual debate on the Fairfax dividend.

 

If you would have asked me 18 months will Fairfax increase the dividend from $10/share US - my answer would have been - No way!  Surprise, surprise - Fairfax increased the dividend to $15/share US last year.

 

Now if you asked me the same question this year, I am not so sure.  I think there is a good possibility (50%?) that they raise the dividend to 17-20/share.  I know Fairfax will never be known as a huge dividend-payer, but since the stock price has rose so much in one year, I thought the probability that they raise the dividend again so that the dividend yield is 1.3 - 1.6%.  (currently hovering around 1%).

 

Thoughts...

 

Related to this is that I listened to @SafetyinNumbers podcasts recently.  Part of his argument of why the Fairfax price remains low is that the stock doesn't screen well with the quants.  Based on this argument I was wondering if a few years of dividends increases would be looked on a favourable with the quants?

I don’t believe we will see yearly dividend increases. I think the next increase won’t be for another year and that will be at $20.  This would be in line with their 15% ROE per year.
 

Fairfax is better off investing their earnings rather than distributing more of it to shareholders. 

Edited Sunday at 01:55 AM by Hoodlum

[sholland]

I believe that I once read that the only reason Fairfax established a dividend is because Prem personally wanted more money, but didn’t think it was fair to shareholders to increase his compensation. The dividend is a way for Prem to get more money while shareholders get the same too.

[yqsun]

On 11/7/2024 at 12:14 AM, Haryana said:

Here is that for easy reference 

https://podcasters.spotify.com/pod/show/william-brewster1/episodes/Charles-Frischer-and-Asheef-Lalani---Fairfax-Is-A-Fat-Pitch-e2757vs

 

 

If you don’t have three hours to watch the full two videos, here’s a 16-minute condensed audio version, summarized using Google’s powerful AI tool, "NotebookML":
https://notebooklm.google.com/notebook/1931e09c-c74b-4d26-a25c-e03245e79347/audio

 

** Please refer to my 2022 post, where I shared tips on bypassing most online news paywalls.

 

 

Edited Sunday at 06:24 PM by yqsun
Add info on bypassing paywalls

[gfp]

1 hour ago, sholland said:

I believe that I once read that the only reason Fairfax established a dividend is because Prem personally wanted more money, but didn’t think it was fair to shareholders to increase his compensation. The dividend is a way for Prem to get more money while shareholders get the same too.

Well since the company just bought $304 million USD worth of shares from him for cash I suppose he won't be pushing for another dividend increase.

[SafetyinNumbers]

1 hour ago, gfp said:

Well since the company just bought $304 million USD worth of shares from him for cash I suppose he won't be pushing for another dividend increase.

My guess is that he bought the shares on margin probably using his original stake as collateral. But he did sell enough to pay off the loan and have a nice pile of cash and stock left over.