Fairfax 2026

[SafetyinNumbers]

8 minutes ago, bearprowler6 said:

What you call "hand waving nonsense" is a list of reasons why Fairfax will not achieve the P/E or Price/Book multiples that other you and others on here think it should.  Tracking intrinsic value is key and Fairfax's IV has gone up nicely but the market will not reward it as you think it should because of all these issues. 

Unsurprisingly, I disagree. I think the multiple is driven by revenue growth. The multiple expanded from 0.6x to 1.7x during the last hard market. I suspect the longer we have to wait for the next hard market, the higher the multiple will go before it ends. 

[73 Reds]

13 minutes ago, dealraker said:

I thoroughly enjoy inve sting discussions with you Reds.  You are (as usual ;-)) challenging...but in a good way.  The issue for me always is that I am not good at writing what I mean to deliver.  I'm terrible at it as a matter of fact, so it becomes too much work at times.  LOL.

Well, we're both old, crotchety at times but share the same general philosophy about investing.

[dealraker]

5 minutes ago, bearprowler6 said:

4 times BV was a different time for this company. Can it happen again? Sure! Will it happen  again? Highly unlikely! We should all be thankful if we get to 1.75 or 2 which as things are structured currently is not in the cards! 

Along with many other experiences and things as related to Fairfax I have the book that Viking sent me.  I look at that book every single day as it sits on my shelf.  Those things solidify my decision to yawn about today's stock price.

[djokovic1]

2 hours ago, bearprowler6 said:

There is a reason the market is unwilling to reward Fairfax with  high price to book multiple and it has nothing to do with the market not knowing about the company or not understanding its business model. 

 

Having been extolling the virtues of Fairfax for the last 2 years to anyone who will listen, I have to completely disagree with this.

Most investors I know had never seriously looked at it. Even the ones who knew about Fairfax and insurance and have invested in Berkshire and Markel have not considered Fairfax due to 2010-2020.

If you (or anyone else) thinks 2010-2020 can repeat itself from today's starting point (which I think is the main reason for your concern), then I wouldn't be invested in Fairfax. I think the chance of a lost decade again is close to 0 given the current setup. 

Edited 15 hours ago by djokovic1

[Milu]

There definitely seems to be a lot of PTSD or scar tissue with the long term Fairfax holders. 10 years of a stock going nowhere would do that to a person. I’ve recently been buying Fairfax for the first time so don’t have any baggage around what the stock did in the past or that it recently had a 20% pullback. It’s still a small position at around 3% of portfolio but I’m hoping to add more over the coming months. I’m still not fully convinced Prem and co have shaken that habit of trying to buy turnaround stories, I thought they had but then seeing them take decent stake in under armour feels like they are back to the RIM/Blackberry days. I’m not sure why they didn’t take a leaf out of buffets playbook and just buy high quality large compounders like Coca Cola, Moodys, Apple etc. if only Prem had a Charlie munger sidekick to help him see the light. Maybe my assessment is wrong and they have genuinely got these type of value traps out of the system. 

Edited 15 hours ago by Milu

[dartmonkey]

57 minutes ago, bearprowler6 said:

What you call "hand waving nonsense" is a list of reasons why Fairfax will not achieve the P/E or Price/Book multiples that other you and others on here think it should.  Tracking intrinsic value is key and Fairfax's IV has gone up nicely but the market will not reward it as you think it should because of all these issues. 

I think most of us here are happy enough with the recent ~20% annual BV increases (or intrinsic value increases, if you will) and can settle for continuing 15-20% BV increases, regardless of the temper tantrums the market might take with its multiples. Multiple expansion is icing on the cake, but the cake is value expansion. Since we're at a low multiple already, multiple contraction looks unlikely, at least in the medium- to long-term, and if there is further multiple contraction, it will just make value expansion happen faster thanks to share repurchases. 

 

To get back to the original point about whether selling shares might be a good idea, I think this is what is setting this board ahum, as it goes against the instincts of value investors to sell low. It would be nice to have a small position that could be made bigger, but selling now is a horrifying concept for many of us, myself included. No wonder people are shaking their heads in dismay.

 

I don't think it's denial - if the company were performing poorly, most of us would probably agree that sometimes it's better to take a loss than stick with a loser. But if the company is performing well, as is my belief, then it is naturally shocking to think about throwing in the towel at the exact wrong time, when multiples have just contracted.

[Eldad]

Reading through the Annual report and I have a question for you Canadians. 
 

Recipe 4% SSS growth is pretty good. These MW Eat restaurants are very high end Indian in London/UK and are an interesting idea for expansion. 
 

Olive Garden Canada I would think would be a great thing to own but maybe is not as popular in Canada. 
 

Tell me what you Canadians think of these other brands:

Swiss Chalet

St Hubert

Harveys

Montanas 

NY Fries

Kelseys

East Side Marios

Original Joes

State & Main

Anejo

The Landing

Elephant & Castle

Fresh

Pickle Barrel

Blanco

Bier Markt

 

Any of them worth a damn? 

[Viking]

48 minutes ago, Eldad said:

Reading through the Annual report and I have a question for you Canadians. 
 

Recipe 4% SSS growth is pretty good. These MW Eat restaurants are very high end Indian in London/UK and are an interesting idea for expansion. 
 

Olive Garden Canada I would think would be a great thing to own but maybe is not as popular in Canada. 
 

Tell me what you Canadians think of these other brands:

Swiss Chalet

St Hubert

Harveys

Montanas 

NY Fries

Kelseys

East Side Marios

Original Joes

State & Main

Anejo

The Landing

Elephant & Castle

Fresh

Pickle Barrel

Blanco

Bier Markt

 

Any of them worth a damn? 

@Eldad, Recipe is a really interesting holding. Here are some thoughts:

 

I really like the spinout of the Keg last year. I wish there was more disclosure of what they did and the financial impacts. I am not convinced that a roll-up (centralization) strategy actually works all that well in this industry with the types of restaurants Recipe has. I think decentralization works much better - hence why I like the Keg spinoff. Given Fairfax’s extreme decentralized structure I am not sure why they did what they did with Recipe beginning in 2010. 
 

Rate of return is important. How much equity did Fairfax put in when they took Recipe private in 2022? How much did Fairfax then spend to buy out minority partners and KRIF last year?
 

How much is Fairfax earning (cash flow) each year on equity? The Keg spinout becomes important. I think depreciation is large each year for Recipe - so cash flow is more important than reported earnings. 
 

Recipe’s model is two-fold: franchising and operating restaurants (some are corporate). Franchising is an asset lite business model. Owning and running restaurants is not. 
 

Sorry, I have more questions than answers today… A lot has been going on at Recipe over the past 18 months:

• Takeout of minority partner
• Take-private of Keg Royalties Income Fund
• Spin out of the Keg - now being run by Joffrey
• Purchase of rights/restaurants of Olive Garden Canada

I wonder if it doesn’t make sense for Recipe to split even further:

• Quick serve: Harveys, NY Fries
• Casual dining: St Huber, Swiss Chalet, Montanas, Kelseys etc
• Small niche concepts

The restaurant business is very entrepreneurial. Recipe likely has an opportunity to boost returns by getting smaller. 
 

Having said all that, my guess is Recipe is currently delivering very good returns to Fairfax. And that is because Fairfax was able to take it private at a very low price and a modest amount of cash from the mothership (Recipe took on some debt to pay for part of the take-out). I think the restaurant business in Canada had been doing very well in recent years - part of the reason is Canadians are travelling to the US less and eating out more (with the money saved from not travelling). 

 

Edited 13 hours ago by Viking

[Parsad]

10 hours ago, bearprowler6 said:

Parsad,

 

I appreciate your reply however your comments do not address the question I asked or the issue at hand. So let me try again.

 

Two long time members of this board  (Crip1 and cwericb) both posted about the decline they have experienced in their overall portfolios this year which is largely due to their outsized positions in Fairfax and that company's almost 20% share price decline year to date. They both had to recently explain to their spouses what had happened and both struggled to come up with anything concrete. 

 

Maybe the decline in Fairfax's share price will be a short term issue and things will go back to where they were very soon. My question related to what they both would do and what would others in similar circumstances do if the share price decline lasts longer term...say another 7 year lean cycle. I highly doubt that the spouses of both of these guys will be as accepting of the long term perspective if the share price decline lasts 5 years or more. 

 

None of us are getting any younger. Personally I am 66 and have been fully retired since I was 54. I  hold about a 9% weighting in Fairfax in my overall family's portfolio. I am up over 13% ytd despite the almost 20% decline in Fairfax's share price so far this year. I have been a Fairfax shareholder since 1999. I can say for certain that I am not at all interested in waiting out another 7 year lean  period. Dollar price averaging into Fairfax's share price weakness is not something I am interested in doing. 

 

So I am sincerely asking Crip1, cwericb and anyone else how they are thinking about this issue? Perhaps doing nothing is the right move? Perhaps dollar cost averaging into Fairfax's share price weakness should be considered? But should selling out at this time also be considered---especially for those board members who are a little older and for whom Fairfax makes up a large portion of their portfolios?

 

 

 

 

I think position sizing and practical expectations from investments is the most important thing for anyone who needs their money sooner rather than later.

 

A few months ago, people were screaming on here that FFH at 2 times book might be cheap.  Now at 1.2 times book they are contemplating what they will do in a prolonged slump.  At 1 times book or less, the bulls will start to think about selling rather than buying.  

 

So the practical thing to do was average the position size down as the price went up and average back in as the price goes down.  That is if you think the long-term prospects for Fairfax are better than the S&P500.  If you do that, your spouse won't be contemplating why you held a flat position for 7 years or longer...because it won't be flat.

 

If you don't think the investment is something you want to hold for 10 years or longer, you shouldn't hold it for even a year!  That thinking may not be practical in this scenario...but it is the correct view.  And if you are retiring sooner rather than later, your portfolio construction and allocation should be in a way where you don't need, nor want to sell FFH, as the price drops to where a rational investor would want to start to accumulate again.

 

Cheers!

[MMM20]

5 hours ago, bearprowler6 said:

In discussing this years performance with their spouses, which is the right thing to do in my view, they struggled to really explain why it happened which is a difficult situation

Are you you weren’t misinterpreting “there is no good reason” as “there is a good reason but I don’t know it”…? Seems like that might be the crux of the consternation.

 

Edited 13 hours ago by MMM20

[Eldad]

7 minutes ago, Viking said:

@Eldad, Recipe is a really interesting holding. Here are some thoughts:

 

I really like the spinout of the Keg last year. I wish there was more disclosure of what they did and the financial impacts. I am not convinced that a roll-up (centralization) strategy actually works all that well in this industry with the types of restaurants Recipe has. I think decentralization works much better - hence why I like the Keg spinoff. Given Fairfax’s extreme decentralized structure I am not sure why they did what they did with Recipe beginning in 2010. 
 

Rate of return is important. How much equity did Fairfax put in when they took Recipe private in 2022? How much did Fairfax then spend to buy out minority partners and KRIF last year?
 

How much is Fairfax earning (cash flow) each year on equity? The Keg spinout becomes important. I think depreciation is large each year for Recipe - so cash flow is more important than reported earnings. 
 

Recipe’s model is two-fold: franchising and operating restaurants (some are corporate). Franchising is an asset lite business model. Owning and running restaurants is not. 
 

Sorry, I have more questions than answers today… A lot has been going on at Recipe over the past 18 months:

• Takeout of minority partner
• Take-private of Keg Royalties Income Fund
• Spin out of the Keg - now being run by Joffrey
• Purchase of rights/restaurants of Olive Garden Canada

I wonder if it doesn’t make sense for Recipe to split even further:

• Quick serve: Harveys, NY Fries
• Casual dining: St Huber, Swiss Chalet, Montanas, Kelseys etc
• Small niche concepts

The restaurant business is very entrepreneurial. Recipe likely has an opportunity to boost returns by getting smaller. 
 

Having said all that, my guess is Recipe is currently delivering very good returns to Fairfax. And that is because Fairfax was able to take it private at a very low price. I think the restaurant business in Canada had been doing very well in recent years - part of the reason is Canadians are travelling to the US less and eating out more (with the money saved from not travelling). 

 

Thanks

[Hamburg Investor]

4 hours ago, bearprowler6 said:

Many current investors into Fairfax have bought in in the last 4-5 tears and have only known the good times.

 

 

- How do you know that? My impression is a totally different one: That those are only very limited. Most posting here are either longterm holders or they were in before 2021 sometime. That’s a tiny tiny percentage of all FFH holders and I don’t know if you are referring to those posters here or if you have other data points; would be interesting to learn more about that.

 

4 hours ago, bearprowler6 said:

This years' unexpected price decline, which no one predicted,

 

I don‘t follow you here. The price decline isn’t unexpected for the most writers here. Most people had no „expectation“ at all regarding the price. And I can‘t recall anybody predicting any price at all anytime and I am reading constantly nearly everyday here. What I read is, that people are happy or unhappy if the process goes up or down. Some want it to go up fast and others slow or later (like me). But that’s not the same as expectation or prediction. There was a fun question some time ago, if we‘d think the price would be over/under x dollar in 2027 or so. Were you reading that as an expectation or prediction? I didn’t read it like that. 
 

 

Nearly all writers here seem to reference there postings on intrinsic value. Price is debated often, but I don‘t read anybody „expecting“ or „predicting“ any price. Guessing for fun about pricing in x years? Yes. Thinking about longterm results? A lot. But that’s a big difference to expectations and predictions.

 

 

4 hours ago, bearprowler6 said:

older individuals who now who a very large amount of Fairfax stock both in dollar amount and percentage terms.

My perception (which might be wrong): The individuals having a big portion in FFH here in the forum are from different ages - not in there 20s and not so many in there 30s, but all other ages. Most were putting a lot into FFH between 2020 and 2022. And than it compounded rapidly.

 

4 hours ago, bearprowler6 said:

In discussing this years performance with their spouses, which is the right thing to do in my view, they struggled to really explain why it happened which is a difficult situation.

Don’t agree. Noone knows anytime, why a stock goes up or down shortterm. So it’s the realistic, everyday situation, that people tell them only guesses to spouses if they should (and the should not!) tell them anything about price moves, why a price changed.
 

I can tell my wife, why I think FFH will be worth much more in 10 years than it is today. And that’s what I do. I tell her, that it’s a good business in my view, not a stock. But I always tell her, that this only means the chances are relatively good, that FFH will be selling a lot higher in 10 years compared to other things, we could put our money to, and better than the average, but that the Market is crazy, so that price could all be different, as there’s a Mr. Market etc. Telling a narrative about stock price evolution should be avoided imho anytime, as it could give listeners a wrong layer of security feelings; as if price would be predictable. And if that layer of explaining breaks, which ultimately will happen, when prices fall, emotions get through and people/spouses do irrational things, won’t believe you anymore etc. And for a reason. 

Every narrative about stock price evolution - the more over half a year - is just nonsense.
 

So when you write, that having no narrative for explaining the shortterm moves would be a bad situation, than I totally disagree.
 

The fault happend before on your site imho: You were telling your spouse nonsense about the „why“ before, as there is no „why“ shortterm and often not even longterm. At least, that’s what I always tell my wife: „I don’t know, why the stock went up or down now and I do not have any idea, if it will move higher or lower.“ I don’t know how often I told her, that Mr. Market is not predictable. We discussed, if FFHs business could really be worth double as much in less than 2 years; we came to the conclusion, that this was nonsense, which shows, that price should not be taken too serious. 

 

 „Only thing I can tell you: Fairfax is firing on all cylinders these days and Mr. Market doesn’t offer enough money for that.“ That‘s what I told her often and still tell her. 

 

 

5 hours ago, bearprowler6 said:

I then posed the question, if the recovery take more than 5 years what are they thinking about doing now?

 

I don’t get this question. It’s based on a false assumption. Any stock could be worth less in five years, crash, or skyrocket… By definition, you only know what has happened to stock pricings of any stock over the next 5 years after the next 5 years. How can you base a decision on that today? That’s the case with every single stock, not FFH specific. So it’s a misleading question. If we knew which stock would go up before, we should buy it. But why think about something, that obviously isn’t possible?

In another post before you were adressing that FFHs share price was lead by the insurance cycle (you named the soft markets) in a major way over the decades. Is there really a pattern, that’s so clear? I never analyzed price patterns in depth, but it would clearly be an interesting finding, if there is such a pattern! My gut feeling (and it’s nothing more, I could be totally off here!) would be, that there were other patterns (e. g. hypes and short attacks, bad insurance years, derivative bets). Do you have more information about that pattern to share?

 

 

5 hours ago, bearprowler6 said:

I suggest you should be reflecting on this question  far more than you are rather spouting out  the usual talking points about intrinsic value because at some point it will be a very valid question for you and your family and based on what you wrote you will fail them miserably.

I would not suggest that. There is no use in trying to find clear winners on the stock market over 5 years, even 10. Anything can happen anytime. Imho if you’re investment horizon isn’t long enough, or if a potential loss is no option for x per cent of your portfolio, than you shouldn‘t own stocks with that. 

[bearprowler6]

29 minutes ago, Parsad said:

 

I think position sizing and practical expectations from investments is the most important thing for anyone who needs their money sooner rather than later.

 

A few months ago, people were screaming on here that FFH at 2 times book might be cheap.  Now at 1.2 times book they are contemplating what they will do in a prolonged slump.  At 1 times book or less, the bulls will start to think about selling rather than buying.  

 

So the practical thing to do was average the position size down as the price went up and average back in as the price goes down.  That is if you think the long-term prospects for Fairfax are better than the S&P500.  If you do that, your spouse won't be contemplating why you held a flat position for 7 years or longer...because it won't be flat.

 

If you don't think the investment is something you want to hold for 10 years or longer, you shouldn't hold it for even a year!  That thinking may not be practical in this scenario...but it is the correct view.  And if you are retiring sooner rather than later, your portfolio construction and allocation should be in a way where you don't need, nor want to sell FFH, as the price drops to where a rational investor would want to start to accumulate again.

 

Cheers!

I am 66 and have been fully retired since I was 54. Because of our investment success my wife was able to fully retire one year earlier at 53. My Fairfax position sizing is right for me at about 8-9% of my overall portfolio even after this drawdown.  I have been a long time shareholder )since Nov/99) with an average cost base of $211.80 CAD. Screaming for 2 times book? Today they were suggesting 4 times book is in sight? Ridiculous.

I decide to take on all the hard core value investors on this board today because I know that numerous new investors into Fairfax  (bought in in the last 3-5 years) have only seen upside but us longer term shareholders know the dark side. A few brave souls supported what I was trying to accomplish today and one or two even suggested I was onto something because they had let their Fairfax portfolio sizing grow too large and are now after the 20% sell off are regretting not addressing this sooner. 

[MMM20]

2 hours ago, Milu said:

buy high quality large compounders like Coca Cola, Moodys, Apple

Your point is a valid one (and of course we should all learn from Munger) but I think it’s also worth mentioning that many folks just went off the cliff paying up to 40-50x doing exactly that and now find themselves down 60%+ (and of course declaring many of these still great companies broken). We know there is a price too high for even the best business and these style boxes come in and out of favor and always go too far. I’m waiting for someone to ask why Fairfax isn’t also participating in this GOOGL fundraise…

 

Edited 12 hours ago by MMM20

[SafetyinNumbers]

1 hour ago, bearprowler6 said:

I am 66 and have been fully retired since I was 54. Because of our investment success my wife was able to fully retire one year earlier at 53. My Fairfax position sizing is right for me at about 8-9% of my overall portfolio even after this drawdown.  I have been a long time shareholder )since Nov/99) with an average cost base of $211.80 CAD. Screaming for 2 times book? Today they were suggesting 4 times book is in sight? Ridiculous.

I decide to take on all the hard core value investors on this board today because I know that numerous new investors into Fairfax  (bought in in the last 3-5 years) have only seen upside but us longer term shareholders know the dark side. A few brave souls supported what I was trying to accomplish today and one or two even suggested I was onto something because they had let their Fairfax portfolio sizing grow too large and are now after the 20% sell off are regretting not addressing this sooner. 

What do you think Fairfax is worth @bearprowler6?

[bearprowler6]

1 minute ago, SafetyinNumbers said:

What do you think Fairfax is worth @bearprowler6?

Worth? More than it is currently trading at now however I do not believe we will ever get to the actual worth or IV of the company unless Prem decides to liquidate. Which is not going to happen. Also,  I am concerned that this drawdown will last longer than most expect. 

[Castanza]

25 minutes ago, bearprowler6 said:

I am concerned that this drawdown will last longer than most expect. 

Based on? 

[SafetyinNumbers]

40 minutes ago, bearprowler6 said:

Worth? More than it is currently trading at now however I do not believe we will ever get to the actual worth or IV of the company unless Prem decides to liquidate. Which is not going to happen. Also,  I am concerned that this drawdown will last longer than most expect. 

The size of the discount and how fast intrinsic value is growing seem like important parts of the discussion. What’s the point otherwise? It might as well be technical analysis. 

Edited 11 hours ago by SafetyinNumbers

[bearprowler6]

33 minutes ago, Castanza said:

Based on? 

Based on the length of the prior hard market, the capital that has recently entered the market, the benign cat losses, and my discussions with industry executives including my next door neighbour who is a senior executive for one of the world's largest reinsurance brokers. 

 

Why do you think/hope otherwise?

[bearprowler6]

22 minutes ago, SafetyinNumbers said:

The size of the discount and how fast intrinsic value is growing seem like important parts of the discussion. What’s the point otherwise? It might as well be technical analysis. 

and your point is what? I have acknowledged that Fairfax's IV is higher than the current share price and that IV has been growing nicely. The gap between share price and IV has widened this year with no evidence that it will narrow any time soon. 

[SafetyinNumbers]

9 minutes ago, bearprowler6 said:

and your point is what? I have acknowledged that Fairfax's IV is higher than the current share price and that IV has been growing nicely. The gap between share price and IV has widened this year with no evidence that it will narrow any time soon. 

The discount doesn’t have to narrow to produce satisfactory absolute returns. My hurdle rate is only 10% and based on my outlook for ROE, I expect BVPS to grow 15-25% CAGR over the next 5 years. Of course, the P/B multiple could fall further. It’s already dropped ~25% from where it peaked last July. I think there is resistance to it falling much further as the company accelerates buybacks when the multiple falls and it has the capital to do so because the insurance market is soft. 

[SafetyinNumbers]

18 minutes ago, bearprowler6 said:

Based on the length of the prior hard market, the capital that has recently entered the market, the benign cat losses, and my discussions with industry executives including my next door neighbour who is a senior executive for one of the world's largest reinsurance brokers. 

What percentage of profits come from underwriting?

[Gregmal]

I mean the only thing one should be really concerned with is how stable will earnings be over the next 3-5 years, and whether Fairfax continues to buyback stock. The multiple will always fluctuate over time. If the share count decreases and earnings stay stable let alone grows, who cares?

[Buffett_Groupie]

8 hours ago, SafetyinNumbers said:

This assumes no underwriting discipline and ignores they have a boat load of reserves. It also ignores that if CR’s go to a 100, the market will harden and they will see multiple expansion. 
 

We can see that the equity portfolio is likely marked a third under fair value so losses have to be incredibly big before we see impairment. Odds are low. 

 

They are currently positioned well for an increase or decrease in rates. Plus it would take years before it impacts BVPS growth. Good things could also happen like credit spreads widen. 
 

More hand waving. 

@SafetyinNumbersPlease explain how an investment can be positioned well for both "an increase or decrease in rates", it's like saying both the casino and the gamblers are making money on each transaction, right?

[tnathan]

6 hours ago, Milu said:

There definitely seems to be a lot of PTSD or scar tissue with the long term Fairfax holders. 10 years of a stock going nowhere would do that to a person. I’ve recently been buying Fairfax for the first time so don’t have any baggage around what the stock did in the past or that it recently had a 20% pullback. It’s still a small position at around 3% of portfolio but I’m hoping to add more over the coming months. I’m still not fully convinced Prem and co have shaken that habit of trying to buy turnaround stories, I thought they had but then seeing them take decent stake in under armour feels like they are back to the RIM/Blackberry days. I’m not sure why they didn’t take a leaf out of buffets playbook and just buy high quality large compounders like Coca Cola, Moodys, Apple etc. if only Prem had a Charlie munger sidekick to help him see the light. Maybe my assessment is wrong and they have genuinely got these type of value traps out of the system. 

+1 commented on this before. Its nonsensical to buy something like UA especially when there are some truly amazing businesses on sale. I'll trust the process because I love the business structure but fundamentally disagree with the equity investing