What percentage of your portfolio is in Fairfax Financial?

[rick_v]

I truly hope that all you guys mentioning stakes of 20-30%+ in Fairfax are either passive investors or older in age.

 

I think its a shame for a young or professional value investor to have such a large percentage of their portfolio in a stock like Fairfax. Afterall, even if Fairfax doubles in a few years that is not how you are going to generate alpha or get rich for that matter...

 

As a young or professional value investor you should be studying Fairfax and Buffet's performance to identify your own value plays. Thats where the alpha will come from.

 

It is very easy with permanent capital to find securities which will outperform the market when you are looking in the 0-250m range. This range is not looked at by Prem, Buffet, and most of the other major value investors anymore due to their size. As such it represents where I see most of the opportunity for up and coming value investors.

 

Just my thoughts...

[Uccmal]

40% - Majority still in 2011 leaps.  I am in the position of having to finally close out the leap position which is proving a little tricky.  I have been coverting leaps to pink sheet shares and selling them that way to get a better price. 

 

As per your comment rickv... It is hard to beat a 300% gain in 1.7 years - the leaps. 

 

I agree with your comment that FFH Common stock is not the best investment for an ambitious value investor.  They will be hard pressed to beat 17-18% going forward.  There are of course worse investments (most!).  FFH now is more like holding a real productive version of cash, rather than a value investment, especially with all the hedging they do.  Natural hedges built in.

[Guest Bronco]

Rickv - perhaps you have some suggestions on generating alpha?  Examples of great value plays?  I find the best asset of a board like this is idea generation, so please share.

 

As some know, my biggest position is Loews (for the record).  Small (less than 5%) FFH position.

 

I wonder if Buffett wasn't CEO of BRK - would he own or be buying BRK right now.  Logic would tell you the answer is no, but just a discussion topic.  I still think the time to buy BRK at this point is when Buffett is outa there.  But then one must look at how capital allocation will be moving forward.

 

 

 

[Partner24]

rick, I guess it's also a matter of humility.  I guess See page 10:

 

http://www.fairfax.ca/Assets/Downloads/100305ceo.pdf

 

Someone to beat that? How many so called "sophisticated professionnal" investors have beat that long term track record? Some, but surely not a lot!

 

It's not very usual for an individual investor who studied value investing to delegate the investment decisions to someone else. I try to focus on the after tax long term return, not my ego, and frankly, so far, that policy led to satisfying returns with FFH

 

http://www.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1284407160000&chddm=771628&chls=IntervalBasedLine&cmpto=TSE:.GSPTSE;INDEXSP:.INX&cmptdms=0;0&q=TSE:FFH&ntsp=0

 

and I've been able to finance a home without the need of CMHC, do some work on it and keep 50% of my money for retirement.

 

That being said, it's also a matter of time to spend on research. I don't have the time to search for enough ideas. It would be a different story if I was doing that full time.

 

Cheers!

 

 

 

 

[Guest Bronco]

Partner - you bring up a good point - it is hard to gain an edge with limited time.

 

Guys like the hedgies and GS can kill you.

 

Best way is to delegate (i.e. WEB and Prem) or find good businesses and wait for good prices.

 

We are all smart enough to find good businesses, that I am convinced of.  Being patient, discipline and waiting for good prices....very tough.  Also very subjective.  Buffett waited 5 years with tons of cash before the 2008/2009 crash.  Man is he good.

 

[mranski]

5% started around 2%, so now it's a huge concentrated weighting with no additional purchases

 

[coc]

I truly hope that all you guys mentioning stakes of 20-30%+ in Fairfax are either passive investors or older in age.

 

I think its a shame for a young or professional value investor to have such a large percentage of their portfolio in a stock like Fairfax. Afterall, even if Fairfax doubles in a few years that is not how you are going to generate alpha or get rich for that matter...

 

As a young or professional value investor you should be studying Fairfax and Buffet's performance to identify your own value plays. Thats where the alpha will come from.

 

It is very easy with permanent capital to find securities which will outperform the market when you are looking in the 0-250m range. This range is not looked at by Prem, Buffet, and most of the other major value investors anymore due to their size. As such it represents where I see most of the opportunity for up and coming value investors.

 

Just my thoughts...

 

I'm surprised you all let this go. I'd like to comment on two things, both of which I consider nonsense.

 

1. It is "very easy" to find securities that will outperform the market.

2. Holding Fairfax is inferior to running around finding these "very easy" securities.

 

I think investors vastly underestimate how good Warren Buffett was at his job back in the 1950's and 1960's when he was buying these niche securities. He's even better now, but obviously runs so much capital that his returns are lower. There seems to be this "Buffett envy" going on in value investing circles whereby investors feel the need to look for little cigar butts similar to what Warren used to - largely influenced by his talks to students and his biography.

 

And yet, I have seen precious few investors who have successfully done it. Beyond the platitude that smaller areas of the market are "inefficient," there are considerable risks. You are usually investing in second rate businesses that destroy value, or at least are not really building any. Often these businesses are run by inexperienced managers and have little advantage over their competitors. Thus, the business risks you assume are big ones, although most investors think a cheap valuation makes up for it. Sometimes, but not always.

 

Take for an example Dempster Mill Mftg - a well known Buffett investment way back when. If you think through the situation, there was a good probability that the investment was not a wise one. It took heroic efforts by a new manager to keep Dempster from going under, and even then, it was not an absolute home run. Yet, most Buffetteers admire these types of investments Warren used to make.

 

But what was Warren's largest partnership investment? American Express, a well known company then and now, not a micro-cap dishwasher manufacturer. He also had a successful investment in Disney, and one in GEICO, again two companies that were well known. What was probably his best stock investment at Berkshire? The Washington Post, not exactly "unknown."

 

Yet we're told that he made all of his great returns back then because he could look small. Well, as with everything in life, the answer is yes and no. I think there is a great myth that you need to look where no-one else is looking and be creative in the investment process. That you should get points for creativity or something. But the very same people propagating this myth are students of Charlie Munger, who once wrote to Wesco shareholders that "We try to profit more from always remembering the obvious then grasping the esoteric."

 

Let's talk about a few more of Warren's home runs. Petrochina, one of the largest companies on the planet. Freddie Mac, one of the largest companies on the planet. Coca-Cola, the most well-known brand on the planet. BYD, one of China's most well-known and well-respected companies. These are investments where, for the first 5-10 years, he made 25%+ compound annual returns. Who are these people not getting rich by consistently generating 25% compound returns? Where is this stock market where 25% annual returns don't generate "alpha"? Why do small investors need to run around looking at micro-caps?

 

***

 

Let's also look at some other legendary investors. What sort of returns did they achieve and what were they buying? Lou Simpson - 20%+ type returns buying very well known companies. Rick Guerin - 25% type returns investing in a pretty broad range of securities small and large. Ruane, Cunniff - 15% over 40 years investing in large stocks. Eddie Lampert at ESL - you would probably know of almost every company he ever invested in - 30% CAGR for a 15-20 year period. Glenn Greenberg at Chieftain - did 25% for about 20 years, again you'd probably recognize almost every stock he owned.

 

These guys are legends, they're all rich, and they invested in a huge range of securities.

 

Who do we know of that was investing in small securities that no one has heard of? Here's two: Schloss and Graham. Did either of them do 50% compounded? Hell no. They're hall-of-famers with 15-20% returns. Do I need to bring up Charlie's returns? What has he bought over time?

 

So I dispute this notion that investors are somehow doing themselves a disservice by sticking with companies they know well and that others know well. Well-known companies are often just as mispriced as small ones. "To a man with a hammer, everything looks like a nail," says Munger. Yet the Buffetteers seem to only admire one tool for finding cheap stocks (size constraints), when myopia, ignorance, and a host of other biases are just as powerful in creating misvalued securities.

 

To wrap this up a little, I'm not saying there aren't lots of small mispriced stocks. Buffett did very well with them, and there are probably others doing great, too. But recognize two things: 1. Huge CAGR's are really, really hard. 2. You can do extremely well investing in larger companies, great companies, and well-known companies, without a lot of the risks of investing in broken-down nags. This is well proven.

 

So if you rationally evaluate Fairfax and come to the conclusion that you're going to get 15-20%+ CAGR (eminently reasonable given the fact that they are a relatively small player in a gigantic global insurance market and are run by one of the smarter investment teams on the planet), don't worry about how much "alpha" you're not generating by looking elsewhere. Was it a mistake to invest in Berkshire when it had a billion dollar market cap and was well known? I repeat, there are no points for creativity. Don't forget it takes a unique cast of mind to just sit on some great companies and compound at high rates with no taxes, professional investor or not.

 

I'm probably not going to convert anyone who believes strongly that they have to be looking in the dirty alleys for cheap stocks, but if you're on the fence, hopefully this is food for thought.

[RRJ]

I'm so glad you wrote this.  As a long-time student of Buffett and Munger, and the other legends you mention, I have had some success investing in the best large-cap, well known companies bought at good valuations.  But I haven't been able to move down the size chain, despite a lot of serious effort. 

 

I subscribe to Value Line's Small and MidCap edition, and pore over that religiously, and see plenty of cheap stocks -- but they are usually inferior companies or have other problems.  I know there are plenty of values out there, but to find the truly cheap values is very hard, not very easy.  And it takes a ton more time than "settling" for superior returns by buying the well known best companies in the world when they are at least 30% below intrinsic value, and then letting the company to the work.

 

I won't get super rich doing this, but I won't get poor either.  And I have been outperforming the S&P by a good measure for the past several years. 

 

I am always open to any advice on how to make the leap to finding the ten baggers though.  That's why I read this excellent board.  Thanks to all by the way for all I learn here. 

[zarley]

Well-known companies are often just as mispriced as small ones.

 

Amen.  Excellent post coc.  I've made more money in SHLD over the past 2 years than any other position I've owned.  I've bought under $30 and sold over $100 and bought again at $60.  It's still a large holding because I see it as an opportunity to do reasonably well over the long term.

 

As for Fairfax, it's 17% of my portfolio, my second largest holding.  It didn't start as my second biggest holding, but I got a good price, and continue to hold it as it is a very good company which remains reasonably priced. 

 

As an individual, perhaps I just don't have the time to find micro-cap cigar butts.  Maybe I just wouldn't know one if I saw one.  Anyway, I don't see them, but I do see reasonably priced stocks like FFH, SHLD, and BRK with decent upside.  I'll hold on to them and wait for them to get overpriced and go from there.  It may not be alpha-maximizing, but it fits my limitations, and IMO, offers a very good chance at adequate returns.

[Guest longinvestor]

I truly hope that all you guys mentioning stakes of 20-30%+ in Fairfax are either passive investors or older in age.

 

............ is not looked at by Prem, Buffet, and most of the other major value investors anymore due to their size. As such it represents where I see most of the opportunity for up and coming value investors.

 

Just my thoughts...

I'm surprised you all let this go. I'd like .... "We try to profit more from always remembering the obvious then grasping the esoteric."

. .... 1. Huge CAGR's are really, really hard. 2. You can do extremely well investing in larger companies, great companies, and well-known companies, without a lot of the risks of investing in broken-down nags........

COC, great first post! Welcome aboard.

 

It is easy to delude oneself in looking for needles in the haystack and end up being a busybody in the name of value investing!

 

 

[coc]

Glad I was able to speak what some others seem to be thinking as well. I just think it's a big mistake to get rid of a great company that has a long way to run because you feel you're not being creative or you think you can do a great margin better investing in obscure companies. This reminds me of Peter Lynch's discussion about how pharmaceutical executives feel the compulsion to invest in oil stocks and oil executives in pharmaceutical stocks. Don't mistake me: if you see a no-brainer opportunity in a small company, by all means go for it...just be aware that much of the time, you're getting low valuation but accepting other, just as relevant, risks. Ben Graham used to own a whole host of stocks to hedge against these risks. Seth Klarman is similar.

 

It also helps if you gently remind yourself that you're probably not Warren Buffett and that 15 or 20% annual returns will make anyone with a reasonable pile of capital very wealthy over time. I've observed this board for awhile and it seems a few guys here made a tremendous amount of money with just one boring investment! Fairfax. Are we prepared to tell them that it's a "real shame" they held so much Fairfax? Whether they are less intelligent or creative than someone who does it buying an obscure zamboni manufacturer, I don't really know or care...the end result is the same.

 

To the original poster I quoted, I don't mean to pick on you, and I bet you have a reasoned view for your argument. I just want to present the other side.

[Myth465]

Thanks for your thoughts coc and welcome to the board.

[rick_v]

There is a lot to respond to and I truly don't have the time so I will just cover it in broad strokes...

 

1) For the guy that mentioned the LEAPS, come on are you seriously going to put a significant part of your net worth or capital in a FFH LEAP? thats not a sensible strategy, sure you have generated some alpha on a small insignificant amount of capital through LEAPS but you are not going to take 100% of your net worth and put it into a portfolio of FFH LEAPS.

 

2) For the other guys touting the FFH or Hamblin Watsa stock picking performance I would say you too are missing the point as that has no bearing on the stock itself. If you look at the actual FFH equity it has generated 8.78% annualized in the last decade. This is not how you get rich in life. Sure if you have a retirement nest egg or you are a passive investor that will satisfy your needs, but not Buffet nor Watsa would get off on such a return in their early days investing.

 

Remember when you start to manage billions of dollars your priorities change, you are looking just as much at capital preservation than to generate alpha.

 

I personally would not be happy with a 9% annualized return compounded. I have done that DCF for the remaining years of my life.. I would rather just go fishing or play golf.

 

One more thing Bronco, I am 100% certain Buffet wouldn't be investing in BRK and this is due to the fact that I know what he has done with his personal net worth outside of BRK. He has been super agressive turning the cash he had outside of Buffet Partnership minus the BRK stake of around $18M in 1970 to over $500M today.

 

Do you know what buffet's largest personal stock holding was in the last 10 years, it was a company called Fastenal.

 

The ones who disagree with this point are truly academics. And have yet to deploy serious capital. People like Prem or Buffet didn't get to where they are by being passive investors looking for 8-9% a year. I respect that for some investors this is a world and more. But if you are a young and passionate value investor or a fiduciary that has represented your skills to partners, it is completely pathetic to buy and hold BRK or FFH and think you are going to generate any alpha, or get RICH for that matter.

 

You need to be working 16-18 hour days researching and finding the next play based on the principles that the market is a voting machine in the short-run and a weighing machine in the long run. You do that and you will get rich or generate alpha.

 

With regards to providing examples, I have shared more ideas on this board than I am honestly comfortable with. I am 100% confident they will outperform as a basket FFH.

 

Just one stock I was heavily ridiculed for (APP) we are up over 60% in less than a month and only about 10% of the restructuring has been initiated. It's not easy but to find good plays bur for an inquisitive mind that is constantly on the lookout for plays plenty exist, and to quote munger: " why should something be easy that if done right once can make your family rich beyond belief forever"

 

 

 

Cheers!

[savant]

Do you know what buffet's largest personal stock holding was in the last 10 years, it was a company called Fastenal.

 

 

I own this stock after Buffett mentioned the CEO in an interview once. Truly good managers and have shown tremendous returns. They also have a significant competitive advantage due to the network effect. Out of curiosity rick_v, how do you know that Buffett actually owns this stock?

[bonechip1]

People like Prem or Buffet didn't get to where they are by being passive investors looking for 8-9% a year.

 

He has been super agressive turning the cash he had outside of Buffet Partnership minus the BRK stake of around $18M in 1970 to over $500M today.

 

If this is true, turning $18 million to $500 million in 40 years is hardly aggressive - a CAGR of 8.7% -  Buffett should have just invested his P.A. in the index and gone golfing.

[shalab]

rick_v => Buffett's compounding rate in his personal account is 8.8% for 40 years which pales in comparison to the compounding rate at BRK which comes in at 20%. If Buffett had compounded his 18 million at 20%, it would be worth 26 billion. Something to ponder...

 

 

[bonechip1]

By the way, really enjoy your posts COC.  Do you have any more info on Rick Guerin than what's in Damn Right, and Buffett's Superinvestors essay?  He absolutely killed it - 33% per year gross over 18 years, despite losing 42% and 34% of his capital in '73 and '74.  I have thought of going to the Daily Journal Corp annual meeting just to meet the legend (he is the Vice-Chairman of DJCO)

[twacowfca]

WEB put almost all of the $18 M he had taken out of the partnership back into Diversified Retailing and BRK within a few months. :)

 

 

[twacowfca]

By the way, really enjoy your posts COC.  Do you have any more info on Rick Guerin than what's in Damn Right, and Buffett's Superinvestors essay?  He absolutely killed it - 33% per year gross over 18 years, despite losing 42% and 34% of his capital in '73 and '74.  I have thought of going to the Daily Journal Corp annual meeting just to meet the legend (he is the Vice-Chairman of DJCO)

 

However, I think he lost most of that later in one operation where he threw good money after bad, with the error compounded with leverage.

[rick_v]

Shalab, you cannot compare Buffet using net cash to invest all his worth outside of BRK, and BRK which is a compounding machine which incorporates a form of leverage (float) and is his ultimate canvas.

 

What I am trying to prove is that with his personal funds he continued to seekout value type plays such as FAST and even Diversified retailing is a good example, he also owned the Illinois Bank personally. At some point I am sure buffet made enough personally to be satisfied and I know that going into the crisis he had mostly treasuries. I don't think he looked at his personal cash hoard as the fuel for his net worth, rather the cash he had he would continue to deploy in value type plays where he saw fit.

 

Also, BRK 40 years ago is not the same BRK and Buffet himself will tell you that.

 

The bottom line is this. Unless you are running your own public vehicle that incorporates some sort of leverage, generating 8-10% per year annualized is not going to make you rich.

 

Lest not forget that the only reason he had 18m$ in this first place in the 1970's was due to his out of this world alpha generation in the previous 15 years. By doing exactly what I am preaching here. Being young, agressive, following the concepts of Graham to seek out value. There was no such thing as BRK yet, BRK as you know is a mistake it is just a manifestation of value investment strategies with extreme focus multiplied over time.

 

I don't want to discount the quality of this board, it truly is of great quality. But there is a difference between the passive investors who have a full-time job or are retired looking to just grow their net worth at good rates and following the scuttlebut for fun and general hobby, and the young or professional investors who are passionate about utilizing value investment techniques in order to replicate or emulate their idols.

 

I am in the second camp. And I think there are many of you here who are also in that camp. So for those that are, I Am simply proving and its black and white, there is no room for debate here: buying BRK or FFH and expecting to generate substantial alpha or to get rich or build a unique track record is simply not going to happen.

 

Seeking out value in your own plays, specifically plays under $250M is the way to go. As you manage more capital you can look at under $1b companies as well. But to truly generate significant alpha you are gonna have to go there. And when I say significant alpha I am not even talking about 20-30% per year, I am talking about finding the 10 baggers, the 5 baggers, the 20 baggers. The ones that can be found with a lot of work, permanent capital, and patience.

 

Good night!

[Parsad]

Rick, I agree with certain aspects of your argument, and I agree with certain aspects of coc's...but please stop using the word "alpha!"  I feel like slapping someone!  ;D  Cheers!

[shalab]

rick_v, your point is valid as the other poster mentioned, Buffett probably put his money into BRK as both he and Charlie had their significant net worth in BRK. He never bought whole businesses in his personal account.

 

Nice discussion, we continue to learn from the masters...

[Josh4580]

rick v, these micro and small cap nook-and-cranny opportunities are mainly discussed on sites such as VIC (Value Investor Club), Sum Zero, and value oriented blogs.  Maybe we need an additional Category on Corner of Berkshire & Fairfax for these micro/small cap special situations such as the one I posted on Tronox, the one you posted on APP, or many of Harry Long's interesting small caps. 

 

I think that would help make this board more useful for us younger, more entrepreneurial investors who are looking for the multi-baggers and have the time to do the research.

[Parsad]

And when I say significant alpha I am not even talking about 20-30% per year, I am talking about finding the 10 baggers, the 5 baggers, the 20 baggers. The ones that can be found with a lot of work, permanent capital, and patience.

 

Please don't be offended, but I've heard this many times before.  Hardly any of those managers who said this in the past, are doing a few percentage points better than the index without leverage, if that!  They got hit by something called the "Great Credit Crunch of 2008."  Many of these managers had spectacular results over a relatively short period of time...some of it was skill and some of it was dumb luck.  Many of them don't run funds anymore, or their results have been stagnant for years.  Some are even private investors and they've flaunted such braggadocio.  I've heard it all before...I've done 20%, 40%, 80%...the big money is in China stocks...the big money is in tech...the big money is in commodities...been there, seen it! 

 

The best one was ten years ago, when Alnesh (my investment partner, cousin and best friend) told me "not to come crying to him when he's wiping his ass with $100 bills" after he was about to invest in 360 Networks and I didn't want to invest with him...that's why he does the accounting folks!  He shortly thereafter became a Buffett disciple as well!  ;D  But I'm sure there were alot of people putting up great numbers before the "Tech Wreck" who were never heard from again.

 

I've found that in this industry, many people talk a big game, but very few actually follow through...Buffett disciples or not.  Primarily this is because they slip off the foundation of their investment process, but usually it's because they truly don't have the full psychological temperament to do well long-term.  Notice, how some 3000+ hedge funds perished during 2008 & 2009.  Smart people doing stupid things - pure and simple!  All searching for the elusive "alpha" (whatever the hell that is) through 2007 and into 2008.  Suddenly those stupendous results look like sh*t because you didn't protect on the downside.  Take a look at Mark Sellers...amazing results for a while and then he found Contango...sure let's go 90% in when oil is over $100 per barrel!

 

Sorry if this sounds a bit harsh, but I'm trying to save you some pain.  Focus on your investment process and don't worry about convincing the rest of the world on how right you are.  You are correct...investors with small sums not only can find quality ideas on a regular basis, but should focus on very small, less followed companies.  You are 100% correct here, regardless of what anyone says.  I can tell you even Prem and Buffett would both agree with you here.  But the business of running a fund isn't just about great results, it's also about durability.  The greatest thing about Buffett isn't his numbers, but his durability, regardless of the economic environment!  Cheers!       

 

 

[coc]

I'd like to respond to a few points. First off, as Parsad said, please stop using the word "alpha." It implies you believe in the tooth-fairy known as "beta."

 

Second, let's knock down this straw-man argument that I'm saying a 8-9% return is OK. I'm not. And I never mentioned that investing in BRK at this point would make anyone rich. The devil is in the details.

 

But you have made the point, several times, that one needs to invest in the "0-250M" area to "get rich" and "generate alpha." You also disparaged investors who own Fairfax rather than "working 16-18 hrs a week" to find obscure ideas.

 

The point I made in my original post was that Buffett and many others have, time and time again, found ideas that compound at 25% P.A.+ in very well known companies - $1B+ (some much larger) market capitalizations. I've yet to hear you respond to that, except to call it an "academic argument." I manage money for a living, so I am not making an "academic argument." I also pointed out that the hall-of-fame investors have generated, on various bases of capital, 20-25% P.A. returns, at best, which says to me that telling some up and comer to shoot higher is an exercise in Type-A masturbation.

 

You keep setting up these ridiculous "black and white" arguments that make you sound like Glenn Beck. Here's one:

 

"So for those that are, I Am simply proving and its black and white, there is no room for debate here: buying BRK or FFH and expecting to generate substantial alpha or to get rich or build a unique track record is simply not going to happen."

 

This is absolutely not "black and white," except for the fact that you're leaving open to interpretation the definition of "significant alpha." Is 5% P.A. better than the index significant. You'd be in the top 1% of money managers. Is 10% better significant? You'd be a hall of famer. Is 15% significant? You'd have beat basically every manager I've heard of or studied. These don't seem to content you....does 40% P.A.? That implies turning $1 into $30 over the next ten years. Who is putting those type of numbers up? What do you consider "significant alpha?"

 

Also, regarding Fairfax specifically. What is keeping it from earning investors 20% P.A. over the next decade? That would make it about 6x as large...about $50B. Why is that impossible given his track record? And if you are willing to accept this, what stock market return are you assuming in which 20% P.A. is not "significant alpha?"

 

Let's also go back to this "unique" argument. What the hell does that have to do with anything? What is a "unique" track record? I'm going to invoke my zamboni argument here...there seems to be this fetish with making money off of obscure ideas rather than mainstream ideas. If someone bought Berkshire in the mid-80's, when it was well-known, are they not unique? Maybe not, but they're probably rich.

 

You want 10-baggers? Let's name a couple from the last decade. Autozone. Penn Gaming. Apple. Are these obscure $100M companies? Freddie Mac was a 20-bagger in the 90's...everyone knew about it. It was just evaluated with the wrong lens. Coke was a 10-bagger. Recently, Petrochina was what a 7-bagger in a few years for Warren?  What sucky investments!

 

You're also not providing us with any concrete numbers. You've said that 20-30% annually is not good enough. Really? If I were to turn $1 into $15 over the next 10 years, I'd be earning around 30% annually. What a crappy decade! You're telling the young investors on this board that, unless they are mythically successful and work until they drop, they are doomed to be poor and unknown! This is insane.

 

And this company you admire that Warren owns? Fastenal? Its market cap is $8 billion. Not "0-250M." It's a well known company, not obscure, and it wouldn't take a 100-hour work week to discover it.

 

Also, you've pointed out that Fairfax only returned 9% over the last decade. Do us a favor and extend that out a few more years (before 2000) and see what the CAGR comes to...you're choosing a time period that fits your argument. How convenient to forget its 15 or 20 year CAGR.

 

"With regards to providing examples, I have shared more ideas on this board than I am honestly comfortable with. I am 100% confident they will outperform as a basket FFH."

 

You seem to be highly confident in your skills. I would like to see a long term (10 years or more) track record to back that up. I'd love to see these 50% annual returns that seem to be found very easily. And don't ask me for mine...I'm not claiming to be Warren re-incarnate, I'm trying to talk everyone down from their ridiculous return expectations and making themselves feel bad because they're not "working hard enough" as if investing was like plumbing. In fact, I've looked at a lot of guys who attempt those returns and fall flat because they are speculating on crappy little companies with little investment value.

 

I honestly think you're just spitting out platitudes without any critical thinking behind them. Extremely high returns (which I arbitrarily define as anything above 20% P.A. over time) have been generated in a lot of different ways, including buying one boring old company and sitting on it. There are no extra points for the following: working a lot of hours, looking at small stocks, finding a "new idea," having higher turnover, or emulating Buffett's personal portfolio because it's the cool thing to do.

 

And lastly, before I'm executed for heresy, I'm not disparaging these "nook and cranny" ideas. There are plenty of good ones. I want to find the next NAFI trading at 1x earnings just like ya'll. I've even *gasp* owned some small stocks.

 

But I'm against reducing this whole game to some cut and dry argument that buying stocks below X market cap is somehow "better" (financially, intellectually, sexually) than buying larger ones that people might have heard of (not necessarily mega-caps, I'm talking $500M - $30B in size). Go study Lampert's 13F's from the pre-Sears days and tell me he needed micro-caps to generate the returns he generated.

 

 

PS someone asked about Guerin and unfortunately no, I have no further info. I'm just going off of the comments from Superinvestors of G&Dville and stuff in other generally available material. He may have made some missteps late in his career, no doubt.