Fairfax 2026

[MMM20]

1 hour ago, rogermunibond said:

@MMM20 that's funny.  Ian Cumming and Joe Steinberg of Leucadia fame bought four wineries the first in 2000 iirc.  They opined in every shareholder letter about how bad they were as businesses but they liked wine and wine lubricated camaraderie.

 

Eventually they spun off the wineries in 2013 as Crimson Wine Group.  It's publically traded on the OTC but tiny and still a terrible business. lol

Honestly I was only half joking about the KW land redevelopment or Recipe synergies. Is there anything unique about this one? Are Canadians really loyal to it?
 

Scratching my head down here in the US as I’ve read for years about how volumes are struggling and even Napa and Sonoma wineries are closing left and right. And if Prem thinks it’s cyclical, why not buy STZ, TAP, BUD, DEO?
 

Edited 8 hours ago by MMM20

[rogermunibond]

Looking through the deal press release, seems like this is much more of a retail, distribution business.  101 store locations plus an importer business in addition to the wine and liqueur brands.

[hardcorevalue]

All I will say Fairfax often has many headscratching investments! 

If this wasn't in Canada, would they have bought it?

[mananainvesting]

4 minutes ago, hardcorevalue said:

All I will say Fairfax often has many headscratching investments! 

If this wasn't in Canada, would they have bought it?

Do you think they did the deal to help a Canadian Company? ex like how Blackberry investment likely was about saving a Canadian company (my guess)? or do you think they understand Canada better?

I think there is a lot of hidden value in Andrew Peller real estate portfolio that could be unearthed with Capital that Andrew Peller could not. 

[hardcorevalue]

Has the real estate angle been discussed any where, that would interest me more.

 

Although I don't think it worked out very well when they took that angle with ToysRus

[Duke In Shadows]

this narrative of Prem supposedly making capital allocation decisions for philanthropic reasons is tired.  

[Viking]

A Review of 2014 to 2017: Old Fairfax – Too Many “Chronically-Leaking Boats”

 

This article #3 in my historical review of some of Fairfax's investments.

 

 

“My conclusion from my own experiences and from much observation of other businesses is that a good managerial record (measured by economic returns) is far more a function of what business boat you get into than it is of how effectively you row… Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” – Warren Buffett – Berkshire Hathaway 1985AR

 

 

Fairfax defines value investing as purchasing securities at prices below intrinsic value while maintaining a margin of safety. The approach is explicitly long term and places unusual emphasis on downside protection and the avoidance of permanent capital loss.

 

From 2014 to 2017, Fairfax doubled the size of its insurance business through aggressive international expansion. As a result, the company's investment portfolio grew significantly.

 

Fairfax also expanded its equity holdings. During this four-year period, it established approximately 20 new positions and invested roughly $3.9 billion.

 

The results were mixed. A number of investments performed well. Unfortunately, many did not.

 

 

New Purchases: Too Many Clunkers

 

Over the years, Fairfax invested approximately $2.2 billion in eight companies that would go on to produce disappointing results.

 

Two investments largely went nowhere:

• Astarta
• AGT Food and Ingredients

While neither investment resulted in a significant loss of capital, both generated little return for shareholders over a decade. The opportunity cost was substantial. Capital tied up in stagnant investments cannot be deployed into better opportunities.

 

Six other investments performed much worse:

• Fairfax Africa
• EXCO Resources
• APR Energy
• Farmers Edge
• Boat Rocker
• McEwan Group

These investments resulted in significant capital losses.

 

Given Fairfax's emphasis on downside protection and avoiding permanent capital loss, the results were particularly disappointing.

 

 

What Was the Problem?

 

The problem was not that Fairfax had losing investments. Every investor has losers.

The problem was that too many investments shared the same weaknesses.

 

A pattern emerged across many of the holdings:

• Weak management
• Weak balance sheets
• Weak profitability

Many suffered from all three.

 

From 2014 to 2017, Fairfax accumulated too many businesses that could fairly be described as chronically-leaking boats.

 

The Overall Portfolio Was Getting Worse

 

The problem extended beyond the new purchases.

 

At the same time Fairfax was making these investments, its equity hedges were forcing the company to sell some of its strongest holdings. Several existing investments were also struggling, including BlackBerry, Resolute Forest Products and Recipe.

 

Fairfax was selling some of its better businesses while adding a number of weaker ones.

 

The overall quality of the equity portfolio was deteriorating.

 

Why This Was a Problem for Fairfax

 

Weak businesses tend to share two characteristics.

 

First, they often consume capital. Companies with weak economics frequently require additional investment simply to survive.

 

Second, they demand management attention. Turnarounds are rarely passive investments.

 

Neither was a good fit for Fairfax.

 

Years of losses from the equity hedges had already reduced financial flexibility. At the same time, Fairfax operated with a highly decentralized structure and a lean head office. The company was not built to oversee numerous troubled businesses simultaneously.

 

As business performance deteriorated, many investments required additional capital and more management attention.

 

The situation became increasingly difficult to manage.

 

The Real Lesson

 

In hindsight, the issue was not bad luck.

 

The issue was process.

 

Fairfax's investment framework had drifted too far toward lower-quality businesses at precisely the time the company needed to move in the opposite direction.  

 

“Time is the enemy of the terrible company.”

 

Many of the companies Fairfax was buying required additional capital, intensive oversight and successful turnarounds to generate acceptable returns. Those requirements were increasingly at odds with Fairfax's decentralized operating model and lean corporate structure.

 

The result was a growing mismatch between the businesses Fairfax was buying and the organization Fairfax had become.

 

Fairfax eventually recognized the problem and adjusted its approach.

 

The result was the birth of what I like to call New Fairfax. That article - the last in our series - will be out tomorrow. 

[73 Reds]

17 minutes ago, Viking said:

 

A Review of 2014 to 2017: Old Fairfax – Too Many “Chronically-Leaking Boats”

 

This article #3 in my historical review of some of Fairfax's investments.

 

 

“My conclusion from my own experiences and from much observation of other businesses is that a good managerial record (measured by economic returns) is far more a function of what business boat you get into than it is of how effectively you row… Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” – Warren Buffett – Berkshire Hathaway 1985AR

 

 

Fairfax defines value investing as purchasing securities at prices below intrinsic value while maintaining a margin of safety. The approach is explicitly long term and places unusual emphasis on downside protection and the avoidance of permanent capital loss.

 

From 2014 to 2017, Fairfax doubled the size of its insurance business through aggressive international expansion. As a result, the company's investment portfolio grew significantly.

 

Fairfax also expanded its equity holdings. During this four-year period, it established approximately 20 new positions and invested roughly $3.9 billion.

 

The results were mixed. A number of investments performed well. Unfortunately, many did not.

 

 

New Purchases: Too Many Clunkers

 

Over the years, Fairfax invested approximately $2.2 billion in eight companies that would go on to produce disappointing results.

 

Two investments largely went nowhere:

• Astarta
• AGT Food and Ingredients

While neither investment resulted in a significant loss of capital, both generated little return for shareholders over a decade. The opportunity cost was substantial. Capital tied up in stagnant investments cannot be deployed into better opportunities.

 

Six other investments performed much worse:

• Fairfax Africa
• EXCO Resources
• APR Energy
• Farmers Edge
• Boat Rocker
• McEwan Group

These investments resulted in significant capital losses.

 

Given Fairfax's emphasis on downside protection and avoiding permanent capital loss, the results were particularly disappointing.

 

 

What Was the Problem?

 

The problem was not that Fairfax had losing investments. Every investor has losers.

The problem was that too many investments shared the same weaknesses.

 

A pattern emerged across many of the holdings:

• Weak management
• Weak balance sheets
• Weak profitability

Many suffered from all three.

 

From 2014 to 2017, Fairfax accumulated too many businesses that could fairly be described as chronically-leaking boats.

 

The Overall Portfolio Was Getting Worse

 

The problem extended beyond the new purchases.

 

At the same time Fairfax was making these investments, its equity hedges were forcing the company to sell some of its strongest holdings. Several existing investments were also struggling, including BlackBerry, Resolute Forest Products and Recipe.

 

Fairfax was selling some of its better businesses while adding a number of weaker ones.

 

The overall quality of the equity portfolio was deteriorating.

 

Why This Was a Problem for Fairfax

 

Weak businesses tend to share two characteristics.

 

First, they often consume capital. Companies with weak economics frequently require additional investment simply to survive.

 

Second, they demand management attention. Turnarounds are rarely passive investments.

 

Neither was a good fit for Fairfax.

 

Years of losses from the equity hedges had already reduced financial flexibility. At the same time, Fairfax operated with a highly decentralized structure and a lean head office. The company was not built to oversee numerous troubled businesses simultaneously.

 

As business performance deteriorated, many investments required additional capital and more management attention.

 

The situation became increasingly difficult to manage.

 

The Real Lesson

 

In hindsight, the issue was not bad luck.

 

The issue was process.

 

Fairfax's investment framework had drifted too far toward lower-quality businesses at precisely the time the company needed to move in the opposite direction.  

 

“Time is the enemy of the terrible company.”

 

Many of the companies Fairfax was buying required additional capital, intensive oversight and successful turnarounds to generate acceptable returns. Those requirements were increasingly at odds with Fairfax's decentralized operating model and lean corporate structure.

 

The result was a growing mismatch between the businesses Fairfax was buying and the organization Fairfax had become.

 

Fairfax eventually recognized the problem and adjusted its approach.

 

The result was the birth of what I like to call New Fairfax. That article - the last in our series - will be out tomorrow. 

Interesting observations and history lesson.  Why do you think that after 2017 they still remain averse to most well-followed, larger public equities which require no active management?  

[Viking]

34 minutes ago, 73 Reds said:

Interesting observations and history lesson.  Why do you think that after 2017 they still remain averse to most well-followed, larger public equities which require no active management?  

I don’t think they are averse. I think they go to where they see the most value. Here is a question for you. The two biggest investments they made in 2018 were Seaspan and Stelco. What is/was the return (CAGR) each of these investments generated since then? 

Edited 2 hours ago by Viking

[73 Reds]

4 minutes ago, Viking said:

I don’t think they are averse. I think they go to where they see the most value. Here is a question for you. The two biggest investments they made in 2018 were Seaspan and Stelco. What is/was the return (CAGR) each of these investments generated since then? 

Sure they've done well (you can answer the question more precisely, LOL).  Your point about spreading themselves too thin in 2014-2017 explains a lot.  But there have been some excellent stocks bantered about on this forum over the years that would seem to fit in their wheelhouse that require no involvement on their part at all, yet with rare exception they often take the more difficult path.  Not a criticism, just a question as to why.

[mananainvesting]

3 hours ago, hardcorevalue said:

Has the real estate angle been discussed any where, that would interest me more.

 

Although I don't think it worked out very well when they took that angle with ToysRus

I wrote about it on X
 

 

[Viking]

22 minutes ago, 73 Reds said:

Sure they've done well (you can answer the question more precisely, LOL).  Your point about spreading themselves too thin in 2014-2017 explains a lot.  But there have been some excellent stocks bantered about on this forum over the years that would seem to fit in their wheelhouse that require no involvement on their part at all, yet with rare exception they often take the more difficult path.  Not a criticism, just a question as to why.

A: CAGR = 25% (I think that is in the ballpark for both holdings)
 

I think Fairfax has been doing quite well since 2018 with their equity portfolio. 

Short answer: they are wired the way they are wired. These days, I like it. I don’t always understand it. But I didn’t like/understand the Stelco purchase - and I was the idiot. My focus these days with Fairfax is results - how are the individual positions performing and, more importantly, how is the total portfolio performing. Over the past 5 years they have been hitting the ball out of the park - so I am a happy camper.

 

PS: they did load up on ‘quality’ big caps coming out the the Great Financial Crisis. Their problem was they had to sell them too early to cover losses from the equity hedges/shorts. Its not like they have never done it before. 

Edited 2 hours ago by Viking

[mananainvesting]

The construction project for a developer at Port Moody Winery would be in the range of $800- $900M CAD per John Peller (Prior CEO). See transcript from their 2023-11 call. Now, where Real Estate is currently in Canada it might not be Viable, but definitely worth a lot in the right hands over time. 

[73 Reds]

2 minutes ago, Viking said:

A: CAGR = 25% (I think that is in the ballpark for both holdings)
 

I think Fairfax has been doing quite well since 2018 with their equity portfolio. 

Short answer: they are wired the way they are wired. These days, I like it. I don’t always understand it. But I didn’t like/understand the Stelco purchase - and I was an idiot. My focus these days with Fairfax is results - how are the individual positions performing and, more importantly, how is the total portfolio performing. They are hitting the ball out of the park - So I am a happy camper.

Yes, no argument.  But to play devil's advocate, stock indices have done extraordinarily well since 2018 too.  Not to suggest they invest in broad equity indices but there a lot of public companies that have done very well.

[Viking]

13 minutes ago, 73 Reds said:

Yes, no argument.  But to play devil's advocate, stock indices have done extraordinarily well since 2018 too.  Not to suggest they invest in broad equity indices but there a lot of public companies that have done very well.

S&P500 total return has been ~12.7% since 2018. Fairfax’s equity portfolio has smoked that return over the same timeframe. Especially if you calculate Fairfax’s CAGR using carrying value (which is comically low) and include FFH-TRS (which has a very low cost basis). The problem is people do not appear to want to follow the math… (in fairness, it is complicated to calculate). 
 

PS: I am not trying to be punchy… I am in a good mood today (hate that when it happens) - I am trying to add some humour to my answers to make them more entertaining. 

Edited 2 hours ago by Viking

[mananainvesting]

Another important thing is the retail wine store licenses the company owns. 

[mananainvesting]

 Andrew Peller Ice Wine Portfolio imo is super under penetrated outside of Canada. I think India is going to be an amazing market for the company. My grandma loves wine (but adds sugar to it) so this time when I went to India took her a bottle of Ice Wine and she loved it, in fact all my cousins did too! This could potentially be the Moutai of India! (I know it is a long shot!, but we are not paying anything for it!) 

[73 Reds]

1 minute ago, Viking said:

S&P500 total return has been ~12.7% since 2018. Fairfax’s equity portfolio has smoked that return over the same timeframe. Especially if you calculate Fairfax’s CAGR using carrying value (which is comically low) and include FFH-TRS. The problem is people do not appear to want to follow the math… (in fairness, it is complicated to calculate). 

Sure, we would expect Fairfax's equity investments to outperform the S&P 500.  Still do.  All of us here share the same expectation (otherwise, the index is easy to buy and hold).  But that doesn't really address the question.  We often like to compare Fairfax to Berkshire; Buffett didn't shy away from investments just because they were popular or widely held, some of which have made for excellent long term holdings.  Just don't see why some obvious (even to me) great companies from the last 20 or 30 years never crossed their radar screens.  

[Hoodlum]

Fairfax announced new $300M Notes offering.   

 

https://www.fairfax.ca/press-releases/fairfax-launches-c300-million-senior-notes-offering/

[SafetyinNumbers]

28 minutes ago, 73 Reds said:

Sure, we would expect Fairfax's equity investments to outperform the S&P 500.  Still do.  All of us here share the same expectation (otherwise, the index is easy to buy and hold).  But that doesn't really address the question.  We often like to compare Fairfax to Berkshire; Buffett didn't shy away from investments just because they were popular or widely held, some of which have made for excellent long term holdings.  Just don't see why some obvious (even to me) great companies from the last 20 or 30 years never crossed their radar screens.  

Arguably the expected return for the equity portfolio to justify the stock price is under 5% given the leverage. I really don’t expect them to beat the S&P 500 in the equity portfolio but think they can over long periods of time. Currently the accounting returns are significantly lagging the economic returns so much I think over the next 5 years 15% for accounting returns is more likely than 5%. The last three years they have done 20% according to Wade on the most recent conference call. 
 

Fairfax is about generating absolute returns not relative returns. I think it’s similar to my own process. Beating the market over the long term is the output but it’s not a goal seeking exercise. Fairfax has the added benefit of the leverage due to float and borrowing at the holdco which can turn “pedestrian” equity portfolio returns into 15%+ BVPS growth. 
 

[SafetyinNumbers]

6 minutes ago, Hoodlum said:

Fairfax announced new $300M Notes offering.   

 

https://www.fairfax.ca/press-releases/fairfax-launches-c300-million-senior-notes-offering/

 
Probably prepping for the K shares redemption 

 

[Parsad]

7 hours ago, MMM20 said:

Honestly I was only half joking about the KW land redevelopment or Recipe synergies. Is there anything unique about this one? Are Canadians really loyal to it?
 

Scratching my head down here in the US as I’ve read for years about how volumes are struggling and even Napa and Sonoma wineries are closing left and right. And if Prem thinks it’s cyclical, why not buy STZ, TAP, BUD, DEO?
 

 

Peller is one of the largest players in Canada.  I suspect this is one of those Recipe type investments to consolidate the industry over time.  The wine pays for the land...the land goes up over time in value.  Cheers!

[Viking]

It is always good to run the numbers. And size matters - focus on the largest holdings. Fairfax's largest holding by a country mile is Eurobank. How has it performed YTD?

 

Value creation = ~$1.3 billion. Rate of return = 25%. Outstanding. The company just paid Fairfax a dividend ($95 million).

 

But that timeframe is too short. Five year return is better. How has it performed since Dec 31, 2020? 

 

Value creation = $6.0 billion. Annual rate of return = 45%. 

 

Investors? A big yawn.

 

Let's expand the analysis.

 

What is Fairfax's second largest holding?

 

It is FFH-TRS. How has it performed over the past 5 years? Despite being flat year over year, it has been outstanding. 

 

What is Fairfax's third largest holding?

 

Poseidon. How has it performed over the past 5 years? It has been outstanding, with a big investment gain coming in Q2.

 

BIAL? Orla? I could go on and on... 

 

Fairfax's equity investment have been having an epic run over the past 5 years. And investors? They aren't happy...

 

Edited 12 minutes ago by Viking