Q3 - 2024

[nwoodman]

Just got thru the CC

 

1.  I know we all hate analysts but I really appreciated the quantity and quality of follow questions.  Hopefully some reputations are being cemented.

 

2. Listening rather than reading does provide a little extra.  No doubt I am repeating myself but the senior team is just so polished or rather thoughtful and rational.  I am echoing sentiments already conveyed on this board but Fairfax seems to be so advanced in  succession planning.  A credit to Prem.

 

3.  If I had to nominate one section of the Q&A that supports a multi-year investment thesis it was this reply by Peter Clark reiterating what they have previously said:

 

“Sure. The duration on our bond liabilities on around 3.5 years. So it's a little longer than it

was last quarter. And if you look at our liabilities, it's relatively close. We don't match on purpose, but where we sit today, liability duration is close to our asset duration.

And you can sort of see that in the IFRS 17 numbers, that we had a big loss on

discounting, about $750 million, $760 million. That was offset almost very closely with

the $800-plus million of gains on our bond portfolio. So we're pretty much matched

where we are today. As far as going forward, I think all that we could say on that is we're

very happy that the fixed income portfolio is very liquid. And with the duration of 3.5

years, it gives us lots of flexibility for opportunities in the future.

We don't have any significant exposure on the corporate side. Our corporate bonds are

1 to 2 years, very short dated. So that is an opportunity if credit spreads should widen in the future.”

 

l won’t be alone, but last night saw the biggest daily change in my net worth.  A humble thanks to everyone who has contributed via this board to aid my understanding of this company and investing in general.

[Santayana]

Thanks for sharing.  Only 6 exclamation points

 

[Haryana]

On 10/31/2024 at 4:14 PM, Viking said:

Looks like another solid quarter to me.

 

A question for board members: are the gains from the Stelco sale and the take out of Peak Achievement (Bauer) not yet realized? I.E. they will be realized when Fairfax reports Q4 earnings?
 

From the Q3 call transcript:

"Net gains on investments does not include the expected pre-tax gain of $366 million on the sale of Stelco that was announced in July."

 

For the Peak, probably, the gain to carrying value may be more discretionary based on their cashflow/income projection.

[Parsad]

38 minutes ago, nwoodman said:

Just got thru the CC

 

1.  I know we all hate analysts but I really appreciated the quantity and quality of follow questions.  Hopefully some reputations are being cemented.

 

2. Listening rather than reading does provide a little extra.  No doubt I am repeating myself but the senior team is just so polished or rather thoughtful and rational.  I am echoing sentiments already conveyed on this board but Fairfax seems to be so advanced in  succession planning.  A credit to Prem.

 

3.  If I had to nominate one section of the Q&A that supports a multi-year investment thesis it was this reply by Peter Clark reiterating what they have previously said:

 

“Sure. The duration on our bond liabilities on around 3.5 years. So it's a little longer than it

was last quarter. And if you look at our liabilities, it's relatively close. We don't match on purpose, but where we sit today, liability duration is close to our asset duration.

And you can sort of see that in the IFRS 17 numbers, that we had a big loss on

discounting, about $750 million, $760 million. That was offset almost very closely with

the $800-plus million of gains on our bond portfolio. So we're pretty much matched

where we are today. As far as going forward, I think all that we could say on that is we're

very happy that the fixed income portfolio is very liquid. And with the duration of 3.5

years, it gives us lots of flexibility for opportunities in the future.

We don't have any significant exposure on the corporate side. Our corporate bonds are

1 to 2 years, very short dated. So that is an opportunity if credit spreads should widen in the future.”

 

l won’t be alone, but last night saw the biggest daily change in my net worth.  A humble thanks to everyone who has contributed via this board to aid my understanding of this company and investing in general.

 

+1!  Cheers!

[Junior R]

1 hour ago, nwoodman said:

Just got thru the CC

 

1.  I know we all hate analysts but I really appreciated the quantity and quality of follow questions.  Hopefully some reputations are being cemented.

 

2. Listening rather than reading does provide a little extra.  No doubt I am repeating myself but the senior team is just so polished or rather thoughtful and rational.  I am echoing sentiments already conveyed on this board but Fairfax seems to be so advanced in  succession planning.  A credit to Prem.

 

3.  If I had to nominate one section of the Q&A that supports a multi-year investment thesis it was this reply by Peter Clark reiterating what they have previously said:

 

“Sure. The duration on our bond liabilities on around 3.5 years. So it's a little longer than it

was last quarter. And if you look at our liabilities, it's relatively close. We don't match on purpose, but where we sit today, liability duration is close to our asset duration.

And you can sort of see that in the IFRS 17 numbers, that we had a big loss on

discounting, about $750 million, $760 million. That was offset almost very closely with

the $800-plus million of gains on our bond portfolio. So we're pretty much matched

where we are today. As far as going forward, I think all that we could say on that is we're

very happy that the fixed income portfolio is very liquid. And with the duration of 3.5

years, it gives us lots of flexibility for opportunities in the future.

We don't have any significant exposure on the corporate side. Our corporate bonds are

1 to 2 years, very short dated. So that is an opportunity if credit spreads should widen in the future.”

 

l won’t be alone, but last night saw the biggest daily change in my net worth.  A humble thanks to everyone who has contributed via this board to aid my understanding of this company and investing in general.

 

 

This was one of the best investment opportunities for the board or those who follow Fairfax...The opportunity was driven by some mistakes Fairfax made in the past that made the market miss price this stock...it gave people the opportunity to buy a cheap stock with high margin of safety and gave Fairfax the opportunity to buy the TRS on itself, which accounted for 2b in gains far (might be wrong)...This might not be your NVDA but its one where there is not to much needed to understand how this will play out in the long run....Similar to Stelco where the CEO stated couple months before the buyout that in the future they would entertain a buyout...

[mananainvesting]

Scotia raised target to $2200 from $2100 CAD.

[Haryana]

On 10/31/2024 at 5:15 PM, mananainvesting said:

If anyone has any recent/old Marval fund letter, could you please share mananainvesting@gmail.com. It would be good to see how Ben writes/thinks and what the fund holds. Hopefully we get to see his shareholder letter next year for Fairfax India. Much appreciate the share. 

https://duckduckgo.com/?q=marval+guru 

[UK]

10 hours ago, gfp said:

here is a PDF of the CC transcript as posted on interactive brokers for those interested

FFH Q3 cc transcript.pdf 113.4 kB · 46 downloads

Thanks!

[mananainvesting]

59 minutes ago, Haryana said:

https://duckduckgo.com/?q=marval+guru 

Thanks

[mananainvesting]

If the Marval guru fund inception date is 2019, what did Fairfax invest in 2017 ($50M)? 

[mananainvesting]

Got my answer, so they let Ben manage $50M for companies within the Fairfax group. 

 

[UK]

Sorry if this was posted already recently, but there was a podcast and video with Ben last year:

 

https://youtu.be/pJ7AKSQ2xBc

https://vimeo.com/862872315

 

I think he is quite bright and still very young. Looks promising as a steward of FFH in the future.

 

[UK]

Now, I admit I am a little bit off line these days (Autumn school holidays:)), but does anyone has a good explanation of what has happened with FFH price yesterday:)? The results seem to be great, insurance in particullar, but does anyone expected this kind of market reaction? I do not see any news of them being added to that index or something, which was my first thought after seeing the price action:)

 

No drama longterm wise though. Still cheap. Keep calm and carry on:)

[Haryana]

On 10/29/2024 at 4:47 PM, SafetyinNumbers said:

...

I think the stock will rally after earnings as the index arbs will be more aggressive after that risk is out of the way. 

Looks like a good explanation for the price action today. 

However, it also means that the Tsx60 add is starting to get priced in advance of the add. 

[Parsad]

46 minutes ago, UK said:

Now, I admit I am a little bit off line these days (Autumn school holidays:)), but does anyone has a good explanation of what has happened with FFH price yesterday:)? The results seem to be great, insurance in particullar, but does anyone expected this kind of market reaction? I do not see any news of them being added to that index or something, which was my first thought after seeing the price action:)

 

No drama longterm wise though. Still cheap. Keep calm and carry on:)

 

Don't try and figure out price action.  Buy cheap, sell dear...rinse and repeat!  Cheers!

[ASTA]

Finally I knew this was better than bonds in 2012 on my way to Bengaluru airport to see if it’s any good. 4 day trip $2000 business class paid for by yesterday  and I actually saw that one of the few connections that Lufthansa is introducing the new allegris business class is to Bengaluru. Missed the new business class by 1 week o well.

Edited November 2 by ASTA

[RockNation]

 I stumbled across this board during the MW fiasco. Since then it has been a pleasure to see like minded individuals engage and react to the continuing market recognition and the unfolding of the business affairs at Fairfax. I browse Seeking Alpha (where I go by SnowOwl) but you need to be super careful about who you engage with or what you read there. CoBF has a higher contributor quality (or views I am more aligned with?) I purchased my first shares of Fairfax in 2016 but only began to invest heavily over time as the thesis got better. 

Congrats to the many Fairfax longs here and I am thankful to discover this board. It is a great resource and the conversations that take place here can contribute positively to any rational investors mental and thesis framework. 

[MMM20]

 

I told myself I’d sell when we started seeing this again, but something tells me he’s still ahead of the curve. 
 

Edited November 2 by MMM20

[Hoodlum]

RBC raised their target to US$1500 US with an upside of US$1650.  I think we will see analyst start to chase the stock price over the next year in order to keep ahead of it.

 

Even National Bank raised their target twice this week.  On Wed they went from $2100 to $2200, then on Friday raised it to $2400.

 

 

[Hoodlum]

Fairfax didn’t provide any guidance on the claims for Hurricane Milton, but BRK did mention they expect $1.3-1.5B in claims.  Based on past hurricane claims that would translate to about $500M for Fairfax (1/3).  This was about what I was expecting based on Fairfax’s 1% share of the initial ~$50B reinsurance loss estimate. 
 

Most of this would be offset from the $366M gain on the sale of Stelco. 
 

Edited November 2 by Hoodlum

[drzola]

Jaygo; For my current accounts, any US Dividends are subject to 15% witholding tax in USD TFSA and Non Registered accounts. Only my USD RRSP account is safe from dividend witholding tax and currency exchange.

[Jaygo]

5 minutes ago, drzola said:

Jaygo; For my current accounts, any US Dividends are subject to 15% witholding tax in USD TFSA and Non Registered accounts. Only my USD RRSP account is safe from dividend witholding tax and currency exchange.

Yes that was my concern but a Canadian company paying USD dividends to a Canadian tax payer should not be paying withholding taxes even if I hold the USD version right? 

 

I think that was the argument at least.

[drzola]

I believe that is correct. 

[cwericb]

Well, days like Friday just don't come along often (if ever) and I have to admit that I am still somewhat in shock.

 

I am just a little guy who doesn't profess to really know much stocks  and essentially I just buy a few and rarely sell. My  portfolio has just 19 stocks and Fairfax represents slightly over 50% of my holdings so a jump of 9% yesterday certainly made for a very good day.

 

But my third largest holding after Fairfax and Royal Bank is Aecon Construction (ARE). Yesterday Aecon jumped 18.7%. Further contributing to a great day, were five of my other stocks that each gained in excess of 2% on a day when when the Toronto Stock Exchange was up less than half of one percent. 

 

So with a lot of good luck and much help from this board through the years, (Thank you all!!), I am up 46.25% so far in 2024. 

 

Fairfax is still looking pretty good and I have yet to sell a share since I made my initial purchase in 2007 at around $215. (Yes capital gains is going to kill me.) But what I don't understand is seeing board members share their portfolios here and notice some where Fairfax is not listed among their holdings.

 

I mean not only does the name "Fairfax' appear in the very title of the board, but COBF must contain the most detailed and thorough examination of any company listed on the TSX.

 

PS. In 2006 I had never bought a stock. But in looking for an investment, I stumbled on one of the predecessors of this board set up by Sanjeev. Followed it daily for about a year and by late 2007 jumped into Fairfax with both feet, so I owe a big, big Thank You to Sanjeev and fellow members here.

 

 

[LC]

@cwericb

I'm in a similar boat: Today, Fairfax and Aecon respectively made up 40% and 25% of my investable portfolio (there are some 401k stuff with limited options, and private RE/businesses I exclude from this). Friday was a pretty solid day.

 

Even after Friday's spike, neither Fairfax nor Aecon look particularly expensive:

 

Fairfax trades now at like 1.3x book, for a company with guaranteed earnings for the next few years and management with a real plan to leverage that.

Aecon is trading still in the mid single digit PE-range  given their run-rate adjusted earnings, with industry tailwinds behind them.

 

My goal thru end of year is the remaining call it 35% of my portfolio needs a harder look. JOE, Citi, the MSG complex, FRPH, O&G, etc...this stuff has value but unsure timelines.