CIBC says Fairfax is likely to be added to the S&P/TSX 60 in December 2024 - sell decisions

[John Hjorth]

14 minutes ago, SafetyinNumbers said:

I’m curious when you did the exercise did you factor in the related float and how much the earnings were from that? ...

 

@SafetyinNumbers,

 

No, I did not. I did only look at the results from General Re consolidated to Berkshire, consolidated back then.

 

19 minutes ago, SafetyinNumbers said:

... I’m curious what the total return has been so far. ...

 

The person to ask about what General Re contributions to Berkshire Hathaway Group equity over time would be Berkshire CFO Marc Hamburg. Unfortunately it makes no sense asking him, because he is providing information to us as investors as the Berkshire CFO, while he is not in the business of answering investor questions.

[Parsad]

2 hours ago, SafetyinNumbers said:

I’m curious when you did the exercise did you factor in the related float and how much the earnings were from that? I’m curious what the total return has been so far.

 

The question isn't if GenRe was a mistake or it has earned its purchase price...but that when issuing overvalued stock, often the target companies are also overvalued to a degree. 

 

Berkshire issued stock for GenRe and Dexter shoes...both turned out to be mistakes to some degree because he overpaid...even with overpriced stock.

 

It's not that Fairfax can't used overvalued stock to acquire other businesses.  Just that when FFH is overvalued, so are other insurers and target companies.  Hopefully, if the stock price does become significantly overvalued and they use it, they will get lucky and find quality, target companies that are worth less than their intrinsic value.

 

Cheers!

[SafetyinNumbers]

1 hour ago, Parsad said:

 

The question isn't if GenRe was a mistake or it has earned its purchase price...but that when issuing overvalued stock, often the target companies are also overvalued to a degree. 

 

Berkshire issued stock for GenRe and Dexter shoes...both turned out to be mistakes to some degree because he overpaid...even with overpriced stock.

 

It's not that Fairfax can't used overvalued stock to acquire other businesses.  Just that when FFH is overvalued, so are other insurers and target companies.  Hopefully, if the stock price does become significantly overvalued and they use it, they will get lucky and find quality, target companies that are worth less than their intrinsic value.

 

Cheers!

Using expensive paper helps with margin of safety, no question. 

[yesman182]

@SafetyinNumbers It seems like a few pages back you made the argument that getting added to the index will be a long term tailwind. If you believe that is true, why not advocate for listing in the US and getting in the S&P500. Wouldn't that be a much larger tailwind? 

[SafetyinNumbers]

11 minutes ago, yesman182 said:

@SafetyinNumbers It seems like a few pages back you made the argument that getting added to the index will be a long term tailwind. If you believe that is true, why not advocate for listing in the US and getting in the S&P500. Wouldn't that be a much larger tailwind? 

Fairfax is Canadian and I don’t think moving to the US is something Prem wants to do. I’m not advocating for the 60 add. It’s just something that’s going to happen. 

[cwericb]

31 minutes ago, yesman182 said:

@SafetyinNumbers It seems like a few pages back you made the argument that getting added to the index will be a long term tailwind. If you believe that is true, why not advocate for listing in the US and getting in the S&P500. Wouldn't that be a much larger tailwind? 

Being listed in the US will NOT happen. Fairfax has been there, done that.

[Parsad]

On 12/13/2024 at 7:51 AM, cwericb said:

Being listed in the US will NOT happen. Fairfax has been there, done that.

 

+1!  Cheers!

[Crip1]

On 12/13/2024 at 9:51 AM, cwericb said:

Being listed in the US will NOT happen. Fairfax has been there, done that.

Well, never say never. True that listing on the US exchange was as close to a disaster as one can get, but Fairfax is a far different animal now...far different. Short attacks can happen to any company at any time, but the financial situation of the company at that time made it an attractive short-target. It's FAR less attractive as a short target now. 

 

Not advocating for them to do so, but what looked to be a "never" years ago seems to be a "Not very likely, but one never knows" now.

 

-Crip

[Parsad]

11 hours ago, Crip1 said:

Well, never say never. True that listing on the US exchange was as close to a disaster as one can get, but Fairfax is a far different animal now...far different. Short attacks can happen to any company at any time, but the financial situation of the company at that time made it an attractive short-target. It's FAR less attractive as a short target now. 

 

Not advocating for them to do so, but what looked to be a "never" years ago seems to be a "Not very likely, but one never knows" now.

 

-Crip

 

There really is no need to be listed on the NYSE or Nasdaq, nor index inclusion.  If Fairfax is adequately capitalized, running their insurance businesses well and making sensible investment decisions, they will always have a loyal shareholder base and be in a position where they could buy back their shares if the opportunity presents itself.  Everything else is kind of irrelevant.  Cheers!

[Parsad]

Test

[vakilkp]

30 minutes ago, Parsad said:

Test

I see it in case you are testing functionality

[backtothebeach]

It's that time of the year again - index inclusion speculation. Will March 2025 be the month?

 

FFH is currently #29 in market cap.

https://companiesmarketcap.com/canada/largest-companies-in-canada-by-market-cap/

[SafetyinNumbers]

6 hours ago, backtothebeach said:

It's that time of the year again - index inclusion speculation. Will March 2025 be the month?

 

FFH is currently #29 in market cap.

https://companiesmarketcap.com/canada/largest-companies-in-canada-by-market-cap/

Float cap matters more than market cap. On that basis it’s 24th!

 

Plus a chart that shows the progression of the weighting and rank for the past few years. 
 

 

 

[Hoodlum]

Fairfax was NOT added to the index.

 

https://www.newswire.ca/news-releases/s-amp-p-dow-jones-indices-announces-changes-to-the-s-amp-p-tsx-composite-index-889012339.html

[gfp]

1 minute ago, Hoodlum said:

Fairfax was NOT added to the index.

 

https://www.newswire.ca/news-releases/s-amp-p-dow-jones-indices-announces-changes-to-the-s-amp-p-tsx-composite-index-889012339.html

Isn't Fairfax already in the composite index?  

[Hoodlum]

3 minutes ago, gfp said:

Isn't Fairfax already in the composite index?  

 

oops.  You are right.  I should have looked at that more closely.  Still not seeing anything for the 60.

 

[dartmonkey]

1 minute ago, Hoodlum said:

 

oops.  You are right.  I should have looked at that more closely.  Still not seeing anything for the 60.

 

That means they weren't added to the TSX 60. They announce all the changes in the same press release, so no news about the TSX 60 means there were no changes. It would look like this:

 

[gfp]

Ah... yes - no news is the news.  Just like the crypto summit!

[backtothebeach]

Nothing about the TSX 60:
 

https://www.newswire.ca/news-releases/s-amp-p-dow-jones-indices-announces-changes-to-the-s-amp-p-tsx-composite-index-898335010.html

[Parsad]

3 hours ago, backtothebeach said:

Nothing about the TSX 60:
 

https://www.newswire.ca/news-releases/s-amp-p-dow-jones-indices-announces-changes-to-the-s-amp-p-tsx-composite-index-898335010.html

 

It won't happen for Fairfax until it becomes so blatantly obvious that a moron would have to look at it and say, what about Fairfax?  Just like it took Berkshire forever as well.  Cheers!

[SafetyinNumbers]

4 hours ago, backtothebeach said:

Nothing about the TSX 60:
 

https://www.newswire.ca/news-releases/s-amp-p-dow-jones-indices-announces-changes-to-the-s-amp-p-tsx-composite-index-898335010.html

Low probability as long as AQN hangs around 20bp based on precedent. RBA also went into the Composite today so they have more competition since it’s an industrial. We might have to wait until something in the 60 gets bought and creates a spot.

[Hamburg Investor]

If you are a net buyer of FFH (this is what you are per definition as long as you are not selling more stocks as your personal share of FFHs buybacks is, or am I wrong?), you should be happy with low demand for FFH.
 

High demand means higher prices and all you want being a net buyer is low pricing.
 

That‘s true for tomatoes and for stock. If you’re selling tomatoes, hope for strong demand, otherwise, not.

 

So I expect for most us this news is good news. 

[RichardGibbons]

Nah, a really great outcome for anyone who owns Fairfax is for the shares to spike overnight to, say, $100,000 per share-- massively overvalued--with the market remaining constant. Then you can sell your Fairfax shares and buy something cheaper.

If you own inventory of a good in a marketplace with a bunch of goods, all of which you can buy or sell, then you want the value of goods you own to dramatically increase, and the value of goods you don't own to decrease.

 

The Buffett saying about wanting the market to be low when you're a net buyer only applies an idealized case where you either can't sell or if there's only one thing you can trade, the market.

[Hamburg Investor]

I agree with the 100k scenario. But is that likely and if so, would the question of TSX60 make a difference on the path to such a scenario? 
 

But let’s look at other scenarios (imho much more likely): What if FFH would get part of the TSX within 3 years and FFH would be valued just „somwhat“ higher than without that happening. Let’s say, FFH would be valued on average with plus 20 per cent (take any number you think is realistic… I‘d go for 10 to 25) in comparison to not being part of the TSX. Personally - of course all thing equal - I wouldn’t sell FFH at prices at 1.8 pb ratio (so todays 1.5 pb plus 10 per cent; maybe I’d sell a bit at 2.5 pb ratio and at 3.0 a lot - depending on other ideas; but the TSX wouldn’t bring FFH near that goal). So sticking to more expensive FFH the TSX wouldn’t change anything, but one thing: Buybacks would get more expensive and less attractive. 

 

Still I think Buffett is right: Don’t forget, the idea focusses on the „ifs“ of the only 2 scenarios, you can choose from in every second. Sell. Own. It says „as long as you are not a seller.“ So it focusses on the point of selling. That’s the only time you want the price to be on the spike of a century. So your scenario with the 100k applies to the same logic. You wanna sell at 100k? Fine, but why not get than an extra push to 120k, while you are speaking to your broker?
 

Anyway: Maybe you would be a seller, if FFH would get up another 10% or 20% or XX% (choose your number you find likely) when taken to the TSX? Fine, than you might be happy for that final push. If not, not.

 

But my personal guess would be (and I might be wrong!), that for most cobf members, price would have to spike way more than that (even though less than in your 100k scenario). And than, the general idea applies logical: You want „your“ company to buy back on the cheap site, as growth of intrinsic value per share accelerates all the more. Why should I want the opposite, so less growth in intrinsic value?

[vinod1]

On 6/7/2025 at 4:05 AM, RichardGibbons said:

Nah, a really great outcome for anyone who owns Fairfax is for the shares to spike overnight to, say, $100,000 per share-- massively overvalued--with the market remaining constant. Then you can sell your Fairfax shares and buy something cheaper.

If you own inventory of a good in a marketplace with a bunch of goods, all of which you can buy or sell, then you want the value of goods you own to dramatically increase, and the value of goods you don't own to decrease.

 

The Buffett saying about wanting the market to be low when you're a net buyer only applies an idealized case where you either can't sell or if there's only one thing you can trade, the market.

 

90x BV sure, but we should be talking about more realistic cases.

 

I think many of us bought in the $450-$480 range a couple of years ago when BV is like $480ish. Say it spiked to $900 immediately, I would have been tempted and most likely would have sold off my entire position at that price.

 

But instead it went up gradually while the improvement in business fundamentals are becoming more visible each year. Even as it climbed it is still quite attractive so I was able to hold on and even add to it.

 

If I find a business that is going to grow at high rates of return I would want it to remain at a reasonable price for as long as possible. 

 

Imagine Buffett selling Geico because someone offered to buy it at 4x BV or whatever he paid soon after purchase.