Fairfax 2026

[Viking]

12 minutes ago, Txvestor said:

I don't know if it's intentional or not, or perhaps related to their bigger size allowing it, but I do see them doing more private equity type investments, a lot more control investments, or atleast having significantly more board representation rather than minority public market positions.
An obvious exception to this being their recent position in UnderArmour. 
The lost decade errors not withstanding, I see them as vastly superior capital allocators than pretty much any of their investee management, who tend to be more operators.
So their closer involvement is a good idea in this sphere. AGT foods recent balance sheet restructuring is a good example. 

I think Wade Burton talked about public versus private on the most recent conference call (strengths and weaknesses of each). I think he said they are agnostic - they want the best investment. The more I hear Wade talk the more I like him. Very logical and rational. 

[Parsad]

Not sure how many people know this, but Francis would have been the first and probably only mutual fund manager to have bought CDS for his funds, if the regulators had been a tiny bit faster in approving his request. 

 

Francis had made a request to regulators to allow him to buy CDS in the Chou Funds, but by the time regulators approved the request, the CDS prices had started to move.

 

He was also instrumental in Brian and Fairfax looking at the CDS in the first place and buying more as things started to look worse.  Cheers!

[Maverick47]

1 hour ago, Parsad said:

Not sure how many people know this, but Francis would have been the first and probably only mutual fund manager to have bought CDS for his funds, if the regulators had been a tiny bit faster in approving his request. 

 

Francis had made a request to regulators to allow him to buy CDS in the Chou Funds, but by the time regulators approved the request, the CDS prices had started to move.

 

He was also instrumental in Brian and Fairfax looking at the CDS in the first place and buying more as things started to look worse.  Cheers!

I didn’t have a clue what a CDS was at the time, but had a coworker who was involved, not with buying them, but creating and selling them to other companies on behalf of the property casualty company I worked for.  
 

We used to have quarterly q and a sessions with employees being allowed to ask senior management about the quarterly results.  A few quarters in a row we recorded some losses from the part of the company that he was working in, which involved investing in and selling derivatives such as CDS’s.  I was sort of the lone employee gadfly who was willing to ask questions about negative items to management, and I believe I’d been influenced by Buffett’s comment that derivatives were financial instruments of mass destruction, so a few quarters in a row I asked the leadership why we were involved in creating and selling financial instruments that we were losing money on, in an area we had no specific expertise in.  
 

Sometime later, but before the GFC in 2008, the company announced that they were shutting down that department and my coworker had to find a job elsewhere.

All by way of noting how unusual it was at the time for someone like Francis Chou to be working with an insurance company, understanding what a credit default swap was, how valuable they would be in certain economic environments,  and encouraging Fairfax to purchase substantial amounts of them.  

 

I was happy the company I worked for simply avoided a major problem and a near death experience such as AIG with their Financial Products division experienced by not selling credit default swaps to other parties.  But I’m not aware of any insurance company other than Fairfax that took the right side of that trade….
 

Kudos to Francis!

 

 

[SafetyinNumbers]

8 hours ago, Txvestor said:

They lagged the benchmarks significantly to the extent that a colleague of mine said they look more like gamblers than investors. 

The expected value investing style can look like gambling which is why most BRK and MKL investors who use a deterministic style of investing avoid Fairfax. They don’t like the portfolio. The goal of expected value investing is absolute returns not relative returns with the expectation of being wrong a third of the time. Post GFC, quality was repriced significantly higher and stocks that don’t screen well were repriced lower which hurt returns along with the accounting impact as ownership in more investments >20% increased.

[steph]

What I probably miss in the analysis of past FFH actions is the simple fact that sometimes a bad decision can lead to a good outcome and/or a good decision can lead to a bad outcome. Investing is about probabilities and you have to accept that. 

 After the CDS trade they were geniuses and after the deflation and equity hedges they were idiots...and that is still the way most of us see it up to today. 

To me all those investments were bad decisions. 

The CDS trade was not better than the other ones.  Those are all trades were timing is important.  They were all done with the idea that you put very little upfront with huge payback if successful.  

But it misses the simple fact that FFH should be there for the long run and should simply let their businessmodel do the magic of compounding over many years and decades.  Why try to do a quick shot? 

Don't get me wrong...I am a big fan of Prem and FFH.  I am a shareholder since 2005 and never thought about selling, on the contrary.  But I never liked those investments.  

But as Viking stated above, I just love the bussinessmodel and am amazed how well it has done even with decades of poor underwriting and some big investment mistakes.  It says a lot about the long term potential. 

[SafetyinNumbers]

1 hour ago, steph said:

What I probably miss in the analysis of past FFH actions is the simple fact that sometimes a bad decision can lead to a good outcome and/or a good decision can lead to a bad outcome. Investing is about probabilities and you have to accept that. 

 After the CDS trade they were geniuses and after the deflation and equity hedges they were idiots...and that is still the way most of us see it up to today. 

To me all those investments were bad decisions. 

The CDS trade was not better than the other ones.  Those are all trades were timing is important.  They were all done with the idea that you put very little upfront with huge payback if successful.  

But it misses the simple fact that FFH should be there for the long run and should simply let their businessmodel do the magic of compounding over many years and decades.  Why try to do a quick shot? 

Don't get me wrong...I am a big fan of Prem and FFH.  I am a shareholder since 2005 and never thought about selling, on the contrary.  But I never liked those investments.  

But as Viking stated above, I just love the bussinessmodel and am amazed how well it has done even with decades of poor underwriting and some big investment mistakes.  It says a lot about the long term potential. 

I have a lot more empathy for these decisions. The risk generated by the GFC and a subsequent deflation were potentially existential. I don’t like participating in resulting. 

[Maverick47]

1 hour ago, SafetyinNumbers said:

I have a lot more empathy for these decisions. The risk generated by the GFC and a subsequent deflation were potentially existential. I don’t like participating in resulting. 

I agree.  I think the company was just trying to ensure it didn’t die, so that it would be able to keep a string of annual results moving forward in the future.

 

In a series of annual performance figures, the only thing worse than a number of subpar or negative years would be a zero, meaning the company had died.

I can think of a number of value investing phrases that are apropos in this regard, such as “to finish first, one must first finish.”

 

A company is an artificial person, with one significant advantage over the human beings who manage it:  it can be immortal as long as its managers don’t allow it to be killed.   
 

Charlie Munger was known to share the thought that “All I want to know is where I’m going to die, so I’ll never go there”.

 

I appreciate the fact that the human beings who manage Fairfax think about how and where their company might die, and try to manage its affairs so that it doesn’t go there.  In doing so, they increase the likelihood that it will survive and continue to compound value for its shareholders well beyond their own lifespans.

 

Sometimes they purchase insurance against catastrophes that happen, such as buying CDS’s in advance of the GFC, or keeping bond durations low in periods of historically low interest rates so that mark to market losses won’t  hinder the company’s financial strength and solvency when rates began to rise again.

 

Other times they purchase insurance against catastrophes that didn’t occur, such as global deflation after the GFC.

These were all decisions to purchase insurance against events that could kill or severely injure the company.  Since the company is still alive and thriving, I consider them all to be successful, whether the feared for events occurred or not.