Fairfax 2025

[KFRCanuk]

1 minute ago, Munger_Disciple said:

 

Thanks @gfp! I was trying to find the head count from 2014 AR but they don't seem to have an aggregate number, but they did disclose the employee numbers for the various groups under the corporate umbrella. I need to sum these up in a spreadsheet when I have sometime this weekend. 

 

The chatGPT answer and I can't spell.

 

 

[gfp]

Here's some of the stock trading activity from the Fairfax 13F

https://www.dataroma.com/m/holdings.php?m=FFH

 

Sold completely out of GOOGL, INTC, QSR and TGNA

[Castanza]

5 minutes ago, gfp said:

Here's some of the stock trading activity from the Fairfax 13F

https://www.dataroma.com/m/holdings.php?m=FFH

 

Sold completely out of GOOGL, INTC, QSR and TGNA

 

Dropping GOOGL is interesting. Either doesn't like the capex or calling top on AI or both? Cost basis was probably sub ~90 if I remember right. 

[gfp]

You kinda hope they bought CVS over Christmas and blew it out yesterday but somehow I doubt it

[dartmonkey]

2 hours ago, gfp said:

You kinda hope they bought CVS over Christmas and blew it out yesterday but somehow I doubt it

I guess all we know is that they bought it in Q4, so somewhere between $42 and $67, and it is now at $66, so it could be about breakeven if they bought it at the beginning of the quarter, or it could be up as much as $65m if they happened to buy it in December when it was at its lowest. 

 

Looking at other mark to market positions like Blackberry, we are not told anything about the cost basis, the way Berkshire used to report its big positiions, so I guess we will probably never know.

 

Still, it seems like a safe thing to own, at 18 times pretty steady earnings. 4.8% dividend yield, buys back a lot of shares, industry that's not going away... 

[gfp]

2 minutes ago, dartmonkey said:

I guess all we know is that they bought it in Q4, so somewhere between $42 and $67, and it is now at $66, so it could be about breakeven if they bought it at the beginning of the quarter, or it could be up as much as $65m if they happened to buy it in December when it was at its lowest. 

 

Looking at other mark to market positions like Blackberry, we are not told anything about the cost basis, the way Berkshire used to report its big positiions, so I guess we will probably never know.

 

Still, it seems like a safe thing to own, at 18 times pretty steady earnings. 4.8% dividend yield, buys back a lot of shares, industry that's not going away... 

 

There might be some detail in the various NAIC filings for the Fairfax subs.  I usually only pull Odyssey's filing since they each cost a few bucks but maybe I should start reading them for more of the big subsidiaries.  Q4 NAIC filings aren't out yet

[Hoodlum]

Peter included this comment as a part of his presentation.  I wonder if Fairfax is now leaning more towards higher constant interest rates and so may not lock in to additional long bonds until they become even more favorable.  The possibility of a long period of US tariffs could also be fueling this thinking.

 

Also, if rates stay where they are, which we think they might, interest income could be even higher over the next few years

Edited Friday at 10:39 PM by Hoodlum

[SafetyinNumbers]

I like that we dig into all of the details and question every decision. But I wonder if FFH shareholders are more critical of its management team than BRK and MKL shareholders are of their respective management teams. If so, does it hurt the multiple? One way I could see how it would if, someone sold their shares because of a capital allocation / investment decision. I met a fund of funds investor at the Markel AGM two years ago who sold FFH when the TRS were announced because he didn’t like financial engineering. FFH just closed part of that trade which has made $2b+ in 4 years with arguably nothing at risk. 
 

I try to focus on the big picture because it’s hard to see how ROE doesn’t average above 15% over the next 5 years. I use a 90% confidence interval which is based on my judgement so it may not be worth much to you! In the past 4 years, no individual investment decision made me consider selling my shares so I’m doubting something will over the next 4 years.
 

That being said, it’s still important to analyze every capital allocation decision and consider both the downside and the upside. There is a big difference between a 15% ROE and a 25% ROE over the next 4-5 years and the odds of each outcome are probably closer than most people think. I think I have this framing because hedging is off the table and I think they are focused on quality. Perhaps most investors don’t believe that part and those will be the ones who sell below 2.5x book value. 

 

[Hektor]

I feel if FAIRFAX changed their name from all caps to a mixed cap fAIrfax, the multiple will explode. 

[Viking]

1 hour ago, SafetyinNumbers said:

I like that we dig into all of the details and question every decision. But I wonder if FFH shareholders are more critical of its management team than BRK and MKL shareholders are of their respective management teams. If so, does it hurt the multiple? One way I could see how it would if, someone sold their shares because of a capital allocation / investment decision. I met a fund of funds investor at the Markel AGM two years ago who sold FFH when the TRS were announced because he didn’t like financial engineering. FFH just closed part of that trade which has made $2b+ in 4 years with arguably nothing at risk. 
 

I try to focus on the big picture because it’s hard to see how ROE doesn’t average above 15% over the next 5 years. I use a 90% confidence interval which is based on my judgement so it may not be worth much to you! In the past 4 years, no individual investment decision made me consider selling my shares so I’m doubting something will over the next 4 years.
 

That being said, it’s still important to analyze every capital allocation decision and consider both the downside and the upside. There is a big difference between a 15% ROE and a 25% ROE over the next 4-5 years and the odds of each outcome are probably closer than most people think. I think I have this framing because hedging is off the table and I think they are focused on quality. Perhaps most investors don’t believe that part and those will be the ones who sell below 2.5x book value. 

@SafetyinNumbers, very well said. Too much information can be a big problem - especially when it is inconsequential. Because it can sometimes lead to actions that are not in your long term best interests (psychological failings). 
 

There is sometimes a lot of chatter on Fairfax’s 13F holdings on Twitter… and the stocks being discussed are tiny in size. I think it is very helpful to keep looking at the size ranking of Fairfax’s largest equity holdings - to keep grounded in what really matters. Interesting that both Eurobank and FFH-TRS got a little smaller in recent months (still dominant positions). 

Edited Saturday at 01:24 AM by Viking

[Haryana]

For that, out of the blue, funny question on the call, some info.

 

https://www.business-standard.com/industry/news/meta-to-build-50-000-km-subsea-cable-to-connect-us-india-brazil-s-africa-125021402027_1.html

 

“Meta is investing in India – one of its largest markets – bringing the world’s longest, highest-capacity, and most technologically advanced subsea cable project to connect India, the US, and other locations,”

[mananainvesting]

Post on X, BMO's report on Fairfax:

 

 

 

[Santayana]

9 hours ago, gfp said:

Here's some of the stock trading activity from the Fairfax 13F

https://www.dataroma.com/m/holdings.php?m=FFH

 

Sold completely out of GOOGL, INTC, QSR and TGNA

Kind of wild to see ORLA as the biggest holding now.  I think what that mostly shows is how this bucket is becoming less and less and meaningful to the overall picture.

 

[This2ShallPass]

15 hours ago, Munger_Disciple said:

 

Do we know how much the employee count went up in the last 10 years? If it is mostly due to the growth of the company & if it is truly implemented as @SafetyinNumbers says (just using a portion of employee comp to buy shares for them in the open market to encourage stock ownership by employees; I would like to see a reference though), I would have slightly less heartburn. 

We should know employee count that receive stock (unless it's given to all employees). No need to argue the merits of SBC, it's definitely helpful. But Fairfax went from $150M to $2.8B in 11 years. Doesn't that seem excessive? 

 

[djokovic1]

@SafetyinNumbers completely agree with the below 

Related to this I find BMO’s next 2 years consensus nonsensically low.

 

“I try to focus on the big picture because it’s hard to see how ROE doesn’t average above 15% over the next 5 years. I use a 90% confidence interval which is based on my judgement so it may not be worth much to you! In the past 4 years, no individual investment decision made me consider selling my shares so I’m doubting something will over the next 4 years.
 

That being said, it’s still important to analyze every capital allocation decision and consider both the downside and the upside. There is a big difference between a 15% ROE and a 25% ROE over the next 4-5 years and the odds of each outcome are probably closer than most people think. I think I have this framing because hedging is off the table and I think they are focused on quality. Perhaps most investors don’t believe that part and those will be the ones who sell below 2.5x book value. “

[Maverick47]

6 hours ago, This2ShallPass said:

We should know employee count that receive stock (unless it's given to all employees). No need to argue the merits of SBC, it's definitely helpful. But Fairfax went from $150M to $2.8B in 11 years. Doesn't that seem excessive?

I’m not well versed in stock based incentive plans, but I think you may be comparing the market value of total Treasury stock years ago to the current market value of Treasury stock today?  For round numbers, say about 400,000 shares 11 years ago in the Treasury at $400 US$ per share gets us close to the $150M and roughly 2 million shares at $1400 US $ per share gets us the $2.8 billion figure today?

 

But only about 10% of the Treasury shares are being reissued for use in SBC in a given year recently, or about $280 million market value through Q3 2024 in @Viking’s sheet.  So maybe what we’re seeing is that the company has taken advantage of years of below book value market prices to build roughly a 10 year stockpile of Treasury shares to be used for future stock based incentive grants.  Currently they are purchasing roughly the same number of shares as are granted each year, so the Treasury share count has been stable at close to 2 million shares the last few years.  

I think we could look back at prior annual reports and see how much the current market value of $2.8 billion Treasury stock actually cost the company to acquire.  In previous years where the company clearly believed the stock was undervalued, I think we can see that they purchased more shares for the Treasury than were needed to offset those years’ actual share grants.  Probably that was partly to scale up the Treasury share count for use with higher employee counts after the Allied World acquisition and others, but it also might reflect a value oriented management choosing to buy more shares for the Treasury in years when Mr. Market provided good value for doing so.

 

 

 

[Crip1]

5 hours ago, Maverick47 said:

I’m not well versed in stock based incentive plans, but I think you may be comparing the market value of total Treasury stock years ago to the current market value of Treasury stock today?  For round numbers, say about 400,000 shares 11 years ago in the Treasury at $400 US$ per share gets us close to the $150M and roughly 2 million shares at $1400 US $ per share gets us the $2.8 billion figure today?

 

But only about 10% of the Treasury shares are being reissued for use in SBC in a given year recently, or about $280 million market value through Q3 2024 in @Viking’s sheet.  So maybe what we’re seeing is that the company has taken advantage of years of below book value market prices to build roughly a 10 year stockpile of Treasury shares to be used for future stock based incentive grants.  Currently they are purchasing roughly the same number of shares as are granted each year, so the Treasury share count has been stable at close to 2 million shares the last few years.  

I think we could look back at prior annual reports and see how much the current market value of $2.8 billion Treasury stock actually cost the company to acquire.  In previous years where the company clearly believed the stock was undervalued, I think we can see that they purchased more shares for the Treasury than were needed to offset those years’ actual share grants.  Probably that was partly to scale up the Treasury share count for use with higher employee counts after the Allied World acquisition and others, but it also might reflect a value oriented management choosing to buy more shares for the Treasury in years when Mr. Market provided good value for doing so.

 

 

 

11 years ago it was a decidedly different company, unarguably worse compared to now. One has to consider that the attractiveness of company shares now is noticeably higher than it was 11 years ago.

 

That has to be part of it. 

 

-Crip

 

Edited Saturday at 09:50 PM by Crip1

[Munger_Disciple]

9 hours ago, This2ShallPass said:

We should know employee count that receive stock (unless it's given to all employees). No need to argue the merits of SBC, it's definitely helpful. But Fairfax went from $150M to $2.8B in 11 years. Doesn't that seem excessive? 

 

 

As @Maverick47 pointed out, the SBC cost (i.e., cost of replenishing the treasury shares marked for employee comp) in 2024 was $240mm, not $2.8B.

Edited Saturday at 07:17 PM by Munger_Disciple

[villainx]

2 hours ago, Maverick47 said:

but it also might reflect a value oriented management choosing to buy more shares for the Treasury in years when Mr. Market provided good value for doing so.

 

If this is true, it's scary foresight.  Scary in a good way.

 

[Viking]

1 hour ago, villainx said:

 

If this is true, it's scary foresight.  Scary in a good way.

 

 

4 hours ago, Maverick47 said:

I’m not well versed in stock based incentive plans, but I think you may be comparing the market value of total Treasury stock years ago to the current market value of Treasury stock today?  For round numbers, say about 400,000 shares 11 years ago in the Treasury at $400 US$ per share gets us close to the $150M and roughly 2 million shares at $1400 US $ per share gets us the $2.8 billion figure today?

 

But only about 10% of the Treasury shares are being reissued for use in SBC in a given year recently, or about $280 million market value through Q3 2024 in @Viking’s sheet.  So maybe what we’re seeing is that the company has taken advantage of years of below book value market prices to build roughly a 10 year stockpile of Treasury shares to be used for future stock based incentive grants.  Currently they are purchasing roughly the same number of shares as are granted each year, so the Treasury share count has been stable at close to 2 million shares the last few years.  

I think we could look back at prior annual reports and see how much the current market value of $2.8 billion Treasury stock actually cost the company to acquire.  In previous years where the company clearly believed the stock was undervalued, I think we can see that they purchased more shares for the Treasury than were needed to offset those years’ actual share grants.  Probably that was partly to scale up the Treasury share count for use with higher employee counts after the Allied World acquisition and others, but it also might reflect a value oriented management choosing to buy more shares for the Treasury in years when Mr. Market provided good value for doing so.

Great comments on an important topic. This also looks like a good example of where Fairfax is thinking long term when they are making decisions.

[This2ShallPass]

On 2/13/2025 at 4:19 PM, Viking said:

 

@Maverick47 Yes I was looking at column that showed shares for share based awards. If they have just stockpiled for future years, then it's great (scarily good) capital allocation. Looks like most of this stock was acquired 2019 and before at much lower prices. $250M/yr for SBC is reasonable for a company of Fairfax's size.

 

[This2ShallPass]

1 minute ago, This2ShallPass said:

@Maverick47 Yes I was looking at column that showed shares for share based awards. If they have just stockpiled for future years, then it's great (scarily good) capital allocation. Looks like most of this stock was acquired 2019 and before at much lower prices. $250M/yr for SBC is reasonable for a company of Fairfax's size.

 

One more question, where is the gain for all those 2m shares recorded? Say they purchased those for an average of $500 and are sitting at a $2B gain now.

 

If we just use the 2m shares to increase diluted shares and calculate eps based on that, aren't we knocking Fairfax unnecessarily and not giving credit to that good capital allocation decision?

 

[SafetyinNumbers]

38 minutes ago, This2ShallPass said:

One more question, where is the gain for all those 2m shares recorded? Say they purchased those for an average of $500 and are sitting at a $2B gain now.

 

If we just use the 2m shares to increase diluted shares and calculate eps based on that, aren't we knocking Fairfax unnecessarily and not giving credit to that good capital allocation decision?

 

The employee is getting the gain and Fairfax is recording the expense based on the share price when the grant was made. I assume it goes through compensation expense based on the vesting to keep with the matching principle. As shareholders I suppose we benefit from a lower compensation expense. 

[This2ShallPass]

7 hours ago, SafetyinNumbers said:

As shareholders I suppose we benefit from a lower compensation expense. 

So if an employee gets 1000 shares of Fairfax today, compensation expense for Fairfax should have been $1.4M but will only be $500k.

 

The fact that they're still not using treasury stock but buying in the market to cover for employee shares tells us that they believe SP is undervalued. Maybe they'll deploy this bazooka when the SP is a double or triple from here! I look forward to Viking writing about this as one of the most imp capital decisions in his 2035 review

 

@Viking based on this discussion, we shouldn't be counting treasury stock towards diluted shares in the table. That's the answer I got in Google as well  - "No, treasury stock should not be counted towards diluted shares because it is not considered outstanding."

[SafetyinNumbers]

3 hours ago, This2ShallPass said:

So if an employee gets 1000 shares of Fairfax today, compensation expense for Fairfax should have been $1.4M but will only be $500k.

 

The fact that they're still not using treasury stock but buying in the market to cover for employee shares tells us that they believe SP is undervalued. Maybe they'll deploy this bazooka when the SP is a double or triple from here! I look forward to Viking writing about this as one of the most imp capital decisions in his 2035 review

 

@Viking based on this discussion, we shouldn't be counting treasury stock towards diluted shares in the table. That's the answer I got in Google as well  - "No, treasury stock should not be counted towards diluted shares because it is not considered outstanding."

The compensation expense is based on when the shares are awarded but it hits the income statement as the vest. I think the accounting is correct to exclude the shares from the BVPS calculation but to keep them in the diluted EPS calculation as they are promised to employees much like with in-the-money stock options.

Edited Sunday at 11:47 AM by SafetyinNumbers