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Prem and Fairfax Financial During the Tech Bubble: An Article From 1999


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Yes, Canadians love a free donut, just like we do south of the border, but food alone couldn't explain the unusual turnout for a mere annual meeting. The story also used the phrase "the Warren Buffett of Canada." That's a sure hook line, and I put a call into Fairfax asking for a financial packet the very next day. Within a week, I had received and consumed 13 years worth of annual reports.


What I found was unbelievable -- Mr. V. Prem Watsa, the founder and resident genius behind Fairfax, has put together a 13-year record that is so good, I am embarrassed as an investment professional not to have been aware of it. (Not to mention crying over not owning the stock!)


It turns out that, for the 13 years ended in December 1998, Mr. Watsa compounded his company's book value per share at a 41% annual rate. Putting that in perspective, Buffett and Munger have grown Berkshire's book value at 27.3% a year (true, they never sell, so book value reflects the portfolio's historical cost). And Fairfax stock has compounded at 48% annually, while the company's been earning an average return on equity of 20.4%. In fact, there are just one Canadian and two U.S. companies whose stock prices have compounded faster over these 13 years. Do I have your attention now?


So who's Prem Watsa? Try reading the annual report at the Web site and you'll get the picture. There is no investor relations staff, only 15 people at HQ, and they don't take calls from whiny analysts and shareholders. The annual report is in Berkshire style -- full of forthright disclosure and detailed information -- although Prem does lack the gifted pen that Warren wields with such flourish.

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