Jump to content

Why We Love FFH


Uccmal
 Share

Recommended Posts

Canadian Business Magazine did a piece in the most recent issue on CEO and Director Renumeration at the largest 100 Canadian publicly traded companies.

 

Results:  97/100 for highest pay check: Prem Watsa - we know he makes that up with the dividend but thats okay by me. 

 

And:  96/100 for highest total directors fees

 

Other notables: Linamar, E-L Financial

Link to comment
Share on other sites

Why I love FFH:

1.) trust management (years ago I placed a very large bet back when the stock fell to $70 and it was based on this)

2.) investment returns (they are as bright as any group I know)

 

Jury is out:

1.) how good they are at underwriting (need to see how they exit this soft market)

Link to comment
Share on other sites

Few reasons:

- Trustable and friendly people

- Skilled long term investors

- Low cost

- The return I had since the last 7 years!

- Simplify my investing life.

All of the above, esp the return since 2003! FFH singlehandedly has made my personal ROR go over 10% ove the past 3 years! My fingers should be getting itchy by now to take profits but heck no, I have continued to buy until very recently. Never in my life have I felt better about a very large position and yearning it to be even larger!

Link to comment
Share on other sites

Tough to argue any of the positive points above. 

 

However, would would be a realistic entry point to get into FFH right now (for discussion purposes).

 

I wrote an article a couple years ago when it was trading under $250 how it was a good time to get in (it was trading way below book). 

 

What are people's thoughts of a good entry point?  10% below book?  20% below book?  Invest now? 

 

I always thought investing is played backwards - what to invest in now?  I think it is better to find the great companies/businesses and then wait for the "fat pitch".  So we all know FFH is a great run company, great manager.  So what is the good entry price assume today's fundamentals? 

Link to comment
Share on other sites

Sea Island - I don't want to debate your comment, since it is an opinion.  But can you support your comment - why cheaper? 

 

Also, I assume from your comment you think now is good entry point (or at least as good at $250). 

Link to comment
Share on other sites

Tough to argue any of the positive points above. 

However, would would be a realistic entry point to get into FFH right now (for discussion purposes).

I wrote an article a couple years ago when it was trading under $250 how it was a good time to get in (it was trading way below book). 

What are people's thoughts of a good entry point?  10% below book?  20% below book?  Invest now? 

I always thought investing is played backwards - what to invest in now?  I think it is better to find the great companies/businesses and then wait for the "fat pitch".  So we all know FFH is a great run company, great manager.  So what is the good entry price assume today's fundamentals? 

Great questions bcoz I've had the same ?s over the past year.  ;) I have bought at 10% discount to book during my last purchase. But again, the question of whether to buy FFH right now is relative to other "very large" positions I am willing to take! It is one thing to find fat pitches on my own right now versus being able to buy FFH or BRK who are doing the very same thing...buying fat pitches, in all likelihood much better than I can. So in my worldview I have chosen to load up on the smartest & trustworthy capital allocators, during a 1-in-50 year bear market, at very low (no) cost! Arguably, who knows, I may be giving up potential outsized returns (>15%) in other fat pitches. I am chosing "known" versus "unknown" possibilities.

 

Like others have posted here, when it comes to shareholder friendly owners, Prem and WEB make the very top of my list. Not willing to try others when I have been able to buy them at reasonable prices and they are doing my work of fishing for fat pitches. I am very content with a 10-15% return over the next decade without working too hard!

Link to comment
Share on other sites

Invest now?

 

I think that the intrinsic value of FFH is far higher now than it was few years ago. Yes, the stock somewhat followed the economical progress that FFH made, but it was dirt cheap at the beginning. So, even if FFH is near a multiyears high, to me, the price/intrinsic value is still attractive today.

 

In the future, I think that people will look at what the P&C insurance sector stock prices on a chart and, some will say "Gee, they were lucky then", especially at some of the best like FFH, MKL, WRB, etc. "Luck" is the opportunities that the market gives you to buy or sell something. "Success" is somewhat related to not sucking your thumb.

 

But I guess it is also a matter of the margin of safety that you ask for. With FFH, the margin of safety that the market actually provide is enough to me. I would be happy it they were thousands of FFH kind of businesses and managers out there and I could choose the cheapests of them all, but that's not the case. That being said, at the actual price, I'm confident that in 10 years, I'll be happy with the return that I'll have with FFH.

 

Just my own opinion.

 

Cheers!

 

 

 

 

 

Link to comment
Share on other sites

Partner24 (and I should be working but this is more interesting) - I haven't looked at WRB in a while, but I owned it 3 - 4 years ago and I remember being pissed at the CEO compensation.  First - is my memory right?  If so, is that an issue for you (i.e. not in Prem's or WEB's class)? 

 

I could be wrong on this however.  And for the record, I don't believe high CEO compensation is a reason to not own a stock. For example, if Steve Jobs was making $100 million a year and Apple was a $100 stock, I would buy Apple hand over fist. 

 

In general, high compensation better come with results and be worth it.  Otherwise, I am out.

 

 

 

 

Link to comment
Share on other sites

Really nice quality ball caps at the AGM

 

Yeah.  Lightweight. Not much impact on their balance sheet. Really cool, good flow through air conditioning in that Sea Island humidity.  :)

 

The pennypinchers are the survivors.  But companies that lever up their beach property in a bubble. . . ? ? ?  Well, that's another story.  :)

Link to comment
Share on other sites

Bronco, aside from the March 2009 aboration, I believe that FFH is better reserved with an understated book value today vs. 3-4 years ago when they were at a deeper discount to book but book may have been more overstated. Certainly if you added to your position in 2009 at $250, that would be a better buy than today but I would also argue that the company is even stronger today than they were in 2009. (Odyssey RE, Zenith etc.)

Link to comment
Share on other sites

Partner, I couldn't agree more.

 

As I see it, the difference between now and previous "buy points" in FFH ($250 in 2009, $100 in 2006) is that FFH now deserves a bigger multiple to book for the following reasons:

 

1) FFH is now materially over-reserved, the company has pretty much said so. This means book is understated.

 

2) The balance sheet is much stronger than it was in 2006 . . . while the balance sheet was strong in 2009, everything else was cheap then too.  Right now I think FFH is cheaper compared to other opportunities than it was in 2009

 

3) Their competitive position has never been better, because of the large organization (currently causing high expense ratios), the worldwide footprint through acquisitions, and the demise of AIG

 

Finally, we are in a soft insurance market and a fairly valued stock market . . . this suggest to me that FFH will have the opportunity to make a lot of money when either of these things change. I think we are going to see their book value grow significantly (in excess of 15% per year) over the next few years, it just might not happen in the next 12 months.

 

 

Link to comment
Share on other sites

twacowfca, they aren't making any more beach front property...wait, are they?

 

You never know.  There's a fellow near you who lost two beachfront lots after a hurricane grazed the vicinity many years ago.  I understand that he continues to pay $1.00 in tax each year on each lot in the hope that that the next hurricane may return his underwater property to him.  :)

Link to comment
Share on other sites

Bronco,

 

I never owned WRB because in my book, they are very good underwriters, but they do not have the same talent at investing.

 

To me, insurance is two sides of a coin. Underwriting and investing. Both can makes you rich or "kill" you. So I have to be at leat confortable with both, but I would prefer to be confortable with underwriting (very low or no cost float) and very appealed with investing. Investing can truly helps when you are in a soft market. Just take a look at FFH book value per share CAGR over that soft market period.

 

Cheers!

 

 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...