Santayana Posted March 25, 2009 Share Posted March 25, 2009 Buying JNJ, LUK, PFE, etc. assures us of at least an average 15% average annual return going forward 5 years with limited downside from the present prices. What in the world makes you say this? There are no sure ways to double your money every 5 years! Link to comment Share on other sites More sharing options...
Partner24 Posted March 25, 2009 Share Posted March 25, 2009 Hi Al, no problem with that :) Link to comment Share on other sites More sharing options...
Uccmal Posted March 25, 2009 Share Posted March 25, 2009 Buying JNJ, LUK, PFE, etc. assures us of at least an average 15% average annual return going forward 5 years with limited downside from the present prices. What in the world makes you say this? There are no sure ways to double your money every 5 years! From these low stock prices it is a pretty good bet. 4% minimun on dividends and 11% capital gains from depressed price levels. Shouldn't be too difficult over the next 5 years. Better downside protection than common stock. Link to comment Share on other sites More sharing options...
Santayana Posted March 25, 2009 Share Posted March 25, 2009 I thought you were talking about the common. Are you referring to some preferreds or convertibles with the downside protection? Link to comment Share on other sites More sharing options...
Uccmal Posted March 25, 2009 Share Posted March 25, 2009 I thought you were talking about the common. Are you referring to some preferreds or convertibles with the downside protection? FFH holds ABH debentures and other debt. ABH may be having to convert much of its debt to equity to stay afloat. This will leave FFH holding a large amount of common shares of ABH. The risk in this is far higher than the risk in the examples I cited. The whole thread gives the full context of our discussion. Link to comment Share on other sites More sharing options...
niels12think Posted March 25, 2009 Share Posted March 25, 2009 Or maybe it can be seen as an inflation hedge - in case inflation should run wild some time down the road Wide moat businesses that can pass the cost increases to their customers are more efficient as inflation hedges in my opinion. A business that has overcapacity in it's industry and secular declining demand don't basicaly have time on it's side. My thinking is that high inflation will in reality wipe out all debt while preserving the real value of hard assets. When the debt is wiped out, then the operational risks are also lowered and valuation increases further. Having heavy debt inside the investments shields the owner from the downside risk of the debt. Using convertible debt provides high interest income in the interim until conversion and makes sure you will not yourself be wiped out by the inflation. Cheers Link to comment Share on other sites More sharing options...
Santayana Posted March 25, 2009 Share Posted March 25, 2009 I thought you were talking about the common. Are you referring to some preferreds or convertibles with the downside protection? FFH holds ABH debentures and other debt. ABH may be having to convert much of its debt to equity to stay afloat. This will leave FFH holding a large amount of common shares of ABH. The risk in this is far higher than the risk in the examples I cited. The whole thread gives the full context of our discussion. I have been following the rest of the thread, but was following up on your point of buying JNJ, PFE and LUK assuring you of 15% annualized gains. I agree they may be less risky than ABH, but still don't see the connection between that and basically saying you can double your money in 5 years risk free. Link to comment Share on other sites More sharing options...
Uccmal Posted March 25, 2009 Share Posted March 25, 2009 I never said risk free! Your just nit-picking. Besides: For a non-institutional investor beating 15% should be fairly easy. Walter Shloss did it for over 40 years, FFH has done it for over 20 in their equity portfolio, WEB accomplished it for 40 years, Leucadia has done it for two decades. Enough said! Link to comment Share on other sites More sharing options...
Santayana Posted March 26, 2009 Share Posted March 26, 2009 Ok, I guess I was just interpreting the word "assure" to mean a sure thing, and thus risk free. I really don't think that is nitpicking, but if that's how you feel, and aren't willing to justify/explain your comment further, then I guess you're right and there's nothing more to say. Link to comment Share on other sites More sharing options...
Uccmal Posted March 26, 2009 Share Posted March 26, 2009 My mistake: Replace the word assured: with the phrase "a basket of high quality companies with wide moats and growing businesses would seem to be a better place to put 530 M US than ABH". That being said there are plenty of investors including FFH who have had greater than 15% past returns over longer periods than 5 years. Link to comment Share on other sites More sharing options...
Santayana Posted March 26, 2009 Share Posted March 26, 2009 My mistake: Replace the word assured: with the phrase "a basket of high quality companies with wide moats and growing businesses would seem to be a better place to put 530 M US than ABH". Now that's a statement I can agree with! Although, one way FFH has managed to have such great returns over the years is by making bets like this. Some may fail, but the ones that work out more than make up for the losses. In terms of generating inflation beating returns, I think that is easier over a longer period of time than a shorter one. That is you could make the statement about the next 20 more easily than the next 5. I'm sure that all the investors you mentioned with great historical returns would all say that 5 years is too short of a time frame for them to make any statement about their expected returns. Link to comment Share on other sites More sharing options...
omagh Posted July 16, 2009 Share Posted July 16, 2009 Is the $600M number new? I realize that the top-line number isn't all FFH, but I'm assuming that they're in for half for ~$300M. It might be worth a question (what's FFH's current exposure to ABH) at the next quarterly call if anyone from the board is going to be on the call... http://www.bloomberg.com/apps/news?pid=20601082&sid=aVrZ5b43eVfk AbitibiBowater won court approval on June 4 to borrow as much as $600 million from Fairfax Financial Holdings Ltd. and Avenue Investment LP, according to court documents. Earlier this month a securitization facility was granted that will provide the company with as much as $300 million for the next 12 to 18 months. -O http://business.theglobeandmail.com/servlet/story/RTGAM.20090319.wabitibi19/BNStory/Business/home In for a penny, in for a pound. FFH is investing another 180 Million. Wow! I wonder why Prem thinks this is a good idea? I wonder whether he is just stubbornly refusing to admit defeat? $180m is another $10/share. Surely there must be better opportunities out there for a large block of money like that? Link to comment Share on other sites More sharing options...
SharperDingaan Posted July 17, 2009 Share Posted July 17, 2009 FFH is simply being very swift. If they do nothing they will lose their investment but if they keep it alive (1) they will eventually take out a truly extraordinary return (2) they will always have prefered access to all future forestry deal flow & (3) there is little competition, & the additional risk they take on now is relatively small for what they get. The real money is when this industry gets restructured, & that has always been the premise behind their forestry/pulp investments. Long term business decision. SD Link to comment Share on other sites More sharing options...
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