What did you learn this week at Fairfax Week?

[SafetyinNumbers]

Hi everyone,

 

if you attended FFH week or listened to the AGMs, please share what you learned that was new?

 

[Xerxes]

As someone who is into history, I really liked Prem comparing the opportunity in India to that of Singapore in the 50s and 60s.
 

He was not saying that India will be like Singapore but rather that you could have bought (in Singapore case) the financials betting that it will be center of finance and trade in south east. 
 

He was giving the audience the opportunity to imagine what could the foundational bedrock industries that one can invest and hold in India. 
 

Much like how Michael Saylor likes to talk about owning the bedrock of the “digital Manhattan”, but just in the real world. 
 

Another big take away was for me was how big the privatization will be in India. I definitely like to increase my FIH exposure over time. 
 

Here is another example from our own Canadian business history. CN was a crown corporation that was privatize in the 90s and IPO at $3-4 a share. 3000% and some 25 years later it is close to $180. Having Hunter Harrison at later stage helped but the real bet was on the secular growth in trade in North America. If Harrison never existed it would have been another player. 
 

 

Edited April 12 by Xerxes

[SafetyinNumbers]

42 minutes ago, Xerxes said:

As someone who is into history, I really liked Prem comparing the opportunity in India to that of Singapore in the 50s and 60s.
 

He was not saying that India will be like Singapore but rather that you could have bought (in Singapore case) the financials betting that it will be center of finance and trade in south east. 
 

He was giving the audience the opportunity to imagine what could the foundational bedrock industries that one can invest and hold and India. 
 

Much like how Michael Saylor likes to talk about owning the bedrock of the “digital Manhattan”, but just in the real world. 
 

Another big take away was for me was how big the privatization will be in India. I like to increase my FIH exposure over time. 
 

Here is another example from our own Canadian business history. CN was a crown corporation that was privatize in the 90s and IPO at $3-4 a share. 3000% and some 25 years later it is close to $180. Having Hunter Harrison at later stage helped but the real bet was on the secular growth in trade in North America. If Harrison never existed it would have been another player. 
 

 

That’s terrific. It really does seem like things in India are going to accelerate once the election is over in June. 

[dr.malone]

Hi All, 

 

I'm back from the AGM, hadn't been there since 2017 so was nice to see some people again and of course, the leadership team at FFH and related companies.

 

Here are my notes from all the events I went to. Any mistakes are mine alone and could be I heard wrong, etc.

 

Fairfax India:

 

Prem has known Chandran for 62 years! Prem is also good friends with MSFT CEO Nadella.

They bot back 2.9 mill shares at 12.97 in 2023

FFH took about 2% per year in fees over a 9 year period from FFH India.

India will be the 3rd largest economy in 3 years, growing at 7% per year.

It took India 60 years after independence to hit $1 trillion GDP, and after that, they have been adding $1 trillion to GDP every 7 years or so (could be wrong on this, was trying to type fast! pls someone correct me if I was wrong).

IIFL net interest margin is 9.8%! CSB NIM is 5.2%! what would US Bank CEOs give to have those kinds of NIMs?!

Lots of privatization to come in India. The government currently holds around 50-60% of the banks. FFH India expects to participate in this privatization but will definitely not be issuing shares at these levels. Could bring in outside investors.

 

After the meeting, I stopped by the Bengaluru Airport booth and had a very nice chat with the team there, and these are my notes:

Air India signed an agreement with BIAL to offer more international flights to Europe and US. I asked them what routes do they want to see and they said non-stop from San Fran and Seattle. American used to fly from Seattle and United from San Fran but both stopped during covid. They earn 4x more in carrier landing fees from intl flights than domestic. Also, since the intl traveler will generally need to be at the airport 2-3 hours before their flight, they end up spending more at the shops and restaurants. 

460 acres of real estate around the airport will be developed into offices, airline catering, business parks, hotels, concerts/event venues. No residential is allowed. Work from home does not exist in India because offices provide better working environment than working from home.  

 

Helios Fairfax:

 

This meeting was sparsely attended, maybe at most 20-30 of us. My notes:

$319 million of assets, legacy sales mostly done. got 90% recovery ratios on legacy fairfax africa assets, did not do a fire sale. 

Currently looking at countries like Morocco, Egypt, Ghana, Kenya and Nigeria.

NBA Africa's future is exciting, they own a small part of it. New CEO is the right guy to drive growth from here. 

My thoughts:

Fairfax had some really bad African assets. They literally went 0-8 or something like that. Helios decided to not keep a single business or stock that FFH owned.

Prem was lucky to find these guys. Tope and Baba came across as intelligent, honest and hard-working. They did not sugar coat the results, they said they are not satisfied with the returns generated so far and are working hard every day to drive value. They have a lot of skin in the game and Tope said he has also been buying in the open market. 

Fundraising is huge for them. They have beefed up their capital raising team and are looking at places like Japan and the middle east for investors. If they can raise the funds they want to raise, then that will bode well for TopCo to earn fees for Helios Fairfax.

 

FFH Shareholder dinner:

 

British American Tobacco buy was presented, along with a company called TerraVest Industries. BAT seems interesting.

Viking and someone else also gave their thoughts on the muddy waters report. Viking, it was nice to meet you and thank you for all your work on this board!

The FFH team came around 9 pm, Prem said hello to everyone and then turned the mics over to Eurobank CEO and then David Sokol. My thoughts are that Mr. Sokol is a very impressive individual and the kind of guy who would have succeeded at anything in life!

Brian Bradstreet and couple other FFH guys spoke but only for very few minutes. That was a bummer. I can listen to that guy for hours...

Francis Chou closed the night out with his insurance guys. I wasn't familiar with Wintaai and the insurance firm he had bought so it was great listening to him. I also was not familiar with the deal they did with Progressive but it sounds like he made one hell of a deal!

 

FFH Annual Meeting:

 

"Culture is our most important asset but it's not shown on the balance sheet."

Prem will be stepping away from doing the quarterly conference calls. Peter Clarke will take over.

Only 35 people total at the holding company.

Operating income outlook strong over the next 4 years. $4 billion per year is expected, $125 per share before any investment gains. 

$32 billion of global insurance premiums including GIG, combined ratio: 93.2%.

Return on investment portfolio: 8.4%, Float: $35.1 billion, or $1525/share. 

Bond duration now right around 3 years.

They have grown book value 18.9% per year over 38 years.

 

Q & A session:

 

Very bullish on Greece, business friendly Prime Minister, expect to make a lot of money there over next 3-5 years. They bought their first shares of Eurobank at 31 euros! Bought next tranche at 1 euro and then more at 45 cents. It's now at 1.91 and still very undervalued.

Andy Bernard: Getting 5% price increases in some lines. property market still strong after Hurricane Ian. 

US re-insurance market still very strong, both property and casualty.

Allied World: Every region doing well, well diversified with $7 billion in premiums. Pricing slowing down, expense ratio is in the low 20s, company is scaled well to handle a slowdown. Social inflation, litigation funding, and tort bar are all big challenges for us.

FFH did a $1 billion bond issue a couple weeks ago that had $4 billion in demand. Locked in a great rate, could not do it today because of how much rates have gone up since then. They have the ability to move very fast when opportunities present themselves in the market. 

Kennedy Wilson: 14 year partnership with FFH. In 45 days, pacific western bank lost $13 billion in deposits. They called KW and said they want to sell their entire $4 billion construction loan portfolio. KW has since added an additional $2 billion in construction loans, either student housing or multi family. These loans have low leverage and high quality borrowers.

Atlas: doubled ship count over past few years. Great timing because the cost to build a new ship has increased by about 30%. Contracted revenue backlog is $18 billion. They dont like their ships to sit idle. They dont try and earn the highest dollar per contract. better to be steady over time and have the ships sailing than sitting idle.

Prem used to go to the Berkshire meeting when there was less than 200 people. He said there was a shareholder dinner on Sunday night when Ajit Jain used to join them and then the annual meeting was on Monday.

Blackberry: John Chen just couldn't grow the business. For now, they are just watching. My guess is any rally in the stock and they will quickly sell.

Lost $70 million from the Maui wildfires.

Exposure to China and Chinese investments is limited. They have a $75 million stake in Alltrust that has done fine but they prefer democratic countries.

TRS: counterparties are Canadian banks, terms have been extended to 2027, banks have hedged their exposure, no risk of contract being unilaterally canceled (that would also severely jeopardize that bank's ability to provide investment banking services to FFH!).

 

After the meeting, I caught up with Brian Bradstreet and talked with him briefly:

 

Somewhat bullish on bonds here. Have not done much since last October. Likely to stay under 5 years duration. Sticking with high-quality government paper as of now unless corporate spreads blow out from here. Thinks rates will stay higher and for longer than most people think. Recalled bond investing during the early 80s and the Volcker years. 

 

That's all for now. Thanks for reading and look forward to hearing feedback/comments/questions etc.

 

Dr. Malone

[nwoodman]

@dr.malone great notes and thanks to everyone else that has posted.  Was there mention of IDBI?  No great surprise if it was off limits but you never know

 

 

[SafetyinNumbers]

1 hour ago, nwoodman said:

@dr.malone great notes and thanks to everyone else that has posted.  Was there mention of IDBI?  No great surprise if it was off limits but you never know

 

 

There was no explicit mention of IDBI but it was alluded to that the decision would be post India election (early June). Generally I got the sense that activity will pick up across the board in India once the election is over.

Also, I was the “someone else” who had the opportunity to sit on the panel with Viking at the dinner. I hope I made sense even if I wasn’t memorable!

[Xerxes]

12 minutes ago, SafetyinNumbers said:

There was no explicit mention of IDBI but it was alluded to that the decision would be post India election (early June). Generally I got the sense that activity will pick up across the board in India once the election is over.

Also, I was the “someone else” who had the opportunity to sit on the panel with Viking at the dinner. I hope I made sense even if I wasn’t memorable!

lol

[Xerxes]

13 minutes ago, SafetyinNumbers said:

There was no explicit mention of IDBI but it was alluded to that the decision would be post India election (early June). Generally I got the sense that activity will pick up across the board in India once the election is over.

Also, I was the “someone else” who had the opportunity to sit on the panel with Viking at the dinner. I hope I made sense even if I wasn’t memorable!

it was brought up in FIH meeting and not FFH meeting. 
 

Basically the question was : “we heard rumours, if true will it be through FFH balance sheet or FIH?”

 

Prem confirmed that it is a rumour and such. But not worry they can get creative with large transactions given FIH’ situation.
 

In fact I would say he was borderline confident. 

[Xerxes]

If anyone has notes from the British Tobacco that was presented I would appreciate if they could post.  
 

Also please don’t be shy to share stuff that was outside the televised AGM that was FFH related 

 

 

[SafetyinNumbers]

1 hour ago, Xerxes said:

If anyone has notes from the British Tobacco that was presented I would appreciate if they could post.  
 

Also please don’t be shy to share stuff that was outside the televised AGM that was FFH related 

 

 

@hardcorevalue presented BAT so he can probably help.

[SafetyinNumbers]

1 hour ago, Xerxes said:

it was brought up in FIH meeting and not FFH meeting. 
 

Basically the question was : “we heard rumours, if true will it be through FFH balance sheet or FIH?”

 

Prem confirmed that it is a rumour and such. But not worry they can get creative with large transactions given FIH’ situation.
 

In fact I would say he was borderline confident. 

I asked the question about using a structure where FIH was the GP. I thought the answer suggested it was the likely possibility but others in the room didn’t have the same takeaway. 

[Crip1]

7 hours ago, dr.malone said:

 

After the meeting, I caught up with Brian Bradstreet and talked with him briefly:

 

Somewhat bullish on bonds here. Have not done much since last October. Likely to stay under 5 years duration. Sticking with high-quality government paper as of now unless corporate spreads blow out from here. Thinks rates will stay higher and for longer than most people think. Recalled bond investing during the early 80s and the Volcker years. 

 

 

First and foremost, thanks for the update...definitely appreciated.

 

Treasury rates peaked in October, and they've not "done much since"...nicely done. After hitting the valley around the start of 2024, have been slowly rising since and then rocketed higher over the past week. It would really be interesting to know if they are going to use this decline in pricing to push out duration.

 

-Crip

[hardcorevalue]

I recorded the audio and will post it with the slides this week on our substack and in this thread 

 

it’s about 12 minutes long 

 

https://tidefall.substack.com

[Xerxes]

3 hours ago, SafetyinNumbers said:

I asked the question about using a structure where FIH was the GP. I thought the answer suggested it was the likely possibility but others in the room didn’t have the same takeaway. 

thanks. If that was you, I think then I saw you on video conference in Q&A for FIH for a brief period. 
 

thanks for your contribution to this forum 

[thowed]

As someone 'across the pond' in the UK, I'm very grateful to all of you, esp. @dr.malone for these detailed notes & presentations.

 

Don't suppose any of you guys were the ones who presented Terravest?  That and FFH have been my main purchases in the last 12 months.

[Jaygo]

43 minutes ago, thowed said:

As someone 'across the pond' in the UK, I'm very grateful to all of you, esp. @dr.malone for these detailed notes & presentations.

 

Don't suppose any of you guys were the ones who presented Terravest?  That and FFH have been my main purchases in the last 12 months.

It was Chris waller of plural investing. It was a really good presentation. I don’t think it was filmed but he has been on a few pods lately with the same information. I think the links are in the Terravest thread. 
 

He and I discussed further at the agm and he has some really in depth knowledge of Terravest. 

[valueventures]

5 minutes ago, Jaygo said:

It was Chris waller of plural investing. It was a really good presentation. I don’t think it was filmed but he has been on a few pods lately with the same information. I think the links are in the Terravest thread. 
 

He and I discussed further at the agm and he has some really in depth knowledge of Terravest. 

Are you considering a position? I started one earlier this year - missed some of the run-up, but captured some as well.

 

Chris was just featured on Yet Another Value Podcast. 

[thowed]

Thanks @Jaygo.  Yes, I read the Plural presentation, very thorough, and one of the podcasts. There were some other good write-ups last year too if anyone's interested like this: 

 

https://www.fairwayresearch.com/p/terravest-industries

 

And our dear Packer also covered it in one of his letters.

 

[Jaygo]

23 minutes ago, valueventures said:

Are you considering a position? I started one earlier this year - missed some of the run-up, but captured some as well.

 

Chris was just featured on Yet Another Value Podcast. 

I originally invested in 2021, after I learned about it on twitter and did some work for a small position. Since then have done some more work to get more comfortable. Sitting at about a 3% position. I like it but have my reservations as well.

[keegomaster]

7 hours ago, thowed said:

Thanks @Jaygo.  Yes, I read the Plural presentation, very thorough, and one of the podcasts. There were some other good write-ups last year too if anyone's interested like this: 

 

https://www.fairwayresearch.com/p/terravest-industries

 

And our dear Packer also covered it in one of his letters.

 

How could one get access to Packer's letters? 

[thowed]

If you're not invested, I think they might float around on the internet.  reddit has a valueinvesting thing I think that has a good selection of quarterly letters.

[hardcorevalue]

On 4/15/2024 at 1:24 PM, Xerxes said:

thanks. If that was you, I think then I saw you on video conference in Q&A for FIH for a brief period. 
 

thanks for your contribution to this forum 

ha yes that was me! thanks!

Weird seeing my name in the transcript as I go through it now

[hardcorevalue]

from our stock pitch event (just audio)

$BTI $BATS

https://www.youtube.com/watch?v=-5lP1qv-4IY

 

[gfp]

pretty sneaky how you subliminally inserted the nutrition information of the Tim Hortons menu into your post

[yesman182]

1 hour ago, hardcorevalue said:

from our stock pitch event (just audio)

$BTI $BATS

https://www.youtube.com/watch?v=-5lP1qv-4IY

 

 @hardcorevalue thanks for posting the link. Did you end up talking to Ken Dart about the dividend? I kind of assumed since he isn't paying tax, he was a fan of the large dividend.