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A fair critic to FFH


Partner24
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Me and a lot of my family members have been shareholders of FFH since 2003. In most of the cases, you would say "So what?", but given what happened with FFH since then, I think that it's fair to conclude that we're far from being "day traders"...

 

But I think it's fair to say that when you call Fairfax to ask a fair question, you can expect to have a nearly mediocre service and sincerely this is annoying. Fairfax is a public company!

 

I understand that they can get annoyed with people who are asking "Why did the stock price did % up or down today", "I think that you'll get x,xx earnings per share for the next quarter, am I right?" or questions like that, but I've called to ask a fair question about their equity swaps (short positions), wich is not a simple thing to understand, and both times I got a "they are actually in a "meeting" and they'll call you back" answers...

 

Guess what happened with the phone? "When the phone doesn't ring, you'll know it's me". Yes, I know it's them and frankly it su***.

 

Come on, I'm not Peter Eavis who try to publish an article about the coming Fairfax cash crunch...(!)

 

A very good businessman who've known them for years (more years than me) did suggested me, before I went to the AGM, to tell Prem that their "marketing" to investors was poor. I didn't tell that, but frankly when you call a public company with fair, honest and long term oriented questions in mind, the least they should do is to try to prick up the phone and try to answer them. That's even not marketing, that's just fairness.

 

I'm sorry if I don't own 10% of Fairfax, but that's my family money, we did put a significant part of it in Fairfax for years and I deeply care about them so I try to have my fair question answered and they should take 2 or 3 minutes of their life to answer them.

 

Sorry for the ranting, I do not rant about Fairfax often, but frankly I think it's a fair one. I'm very disapointed.

 

Cheers!

 

 

 

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"least they should do is to try to prick up the phone and try to answer them"

 

I think one should distinguish between minimum public reporting requirements and everything on top of that. Even though many companies do it, contrary to popular belief, a public company doesn't have to answer anything by anybody. In fact, having a Q&A at an annual meeting is in itself a bonus as even that isn't required. Once a company has sold its shares, shareholders' only recourse is in the secondary market. If anything, the people they REALLY have to talk to is their creditors, that's a different story entirely.

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Partner, I dont disagree with you at all.  I chalk it up to being good at many things but not being good at everything.  Their PR is weak to say the least.  I dont think the short attacks helped matters either.  Sort of your damned if you do and your damned if you dont. 

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Partner, I'm not quite sure I understand your gripe: are you saying investor relations at FFH should have to answer your questions b/c they're "fair, honest, and long term oriented" BUT it'd be ok to ignore other questions?  That feels a little bit like a slippery slope... who's to say what questions should and shouldn't be answered?  My guess is FFH is trying to side step this issue altogether and I'm not sure I can fault them for it. 

 

Also, I think this is just a reality of investing in FFH-like companies.  I've never tried this personally, but my guess is you'd get similar (lack of) responses from BRK, LUK, even SHLD.  Heck, I remember reading that Buffett, in his partnership years, kicked an investor out b/c the investor asked where his money was invested...

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Would you be satisfied if they simply called you back and said, "We appreciate your question but our policy is to report our investment results annually in our Annual Report with as much disclosure as we are comfortable with.  Anything beyond that will not be disclosed publicly as we feel it has the possibility to affect our investment performance which may negatively affect all shareholders. Please see our Annual Report for a full description of the disclosure that pertains to our investments." 

 

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I'll throw in my $0.02......

 

It may be true that most companies provide very little in the way of information outside that which is legally required and I agree that it would be a waste of everyone's time to be calling every time the share price moved $5. However when you tell me that you consider me a partner in the business, and when I have been a shareholder for an extended period, the very least you can do is return my call - even if it is to say "We can't really disclose that outside normal channels due to SEC regulations" or something. So I totally understand what Partner means and i do agree with him. If I am a partner treat me like one, otherwise you are just mouthing the words not walking the walk (hows that for mixing metaphors?). IMHO this is one of the many things that will help separate great companies from the average.  And for the record I have been a FFH shareholder and supporter of Prem et al for many years longer than Partner.....

 

cheers

Zorro

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I can understand Partner's frustration, especially since many shareholders feel a very close kinship with the company, not unlike Berkshire owners.  But at the same time, they are a public company and there is a very clear and ethical line that all information should be be provided to ALL shareholders in an equitable manner, thus taking phone calls and questions from a single shareholder is something they refrain from doing.  They are probably even more careful after all the crap that was in the papers during the short attack days. 

 

I think their PR is really in the interviews Prem is willing to do these days, and the Q&A period at the meetings.  I'm not sure we really should ask for more than that.  At the same time, Fairfax does listen to their shareholders, and they do try and incorporate questions they may have heard into their annual reports and letter.  We are not far from the annual report, thus if Partner wants clarification on a point, maybe he should just ask it here, and let's see if they clarify the matter for shareholders.  They've done that in the past, and there aren't too many companies that would be willing to do that.

 

On that point though, I'm not sure it would be a bad thing for Fairfax to incorporate an email such as info@fairfax.ca or something to that effect, where shareholders could refer questions.  I'm sure Paul Rivett doesn't have much to do these days at the company with all the hats he wears, so answering emails with a polite "Dear _____, thank you for your question, but unfortunately Fairfax only discloses such matters in their securities filings."  ;D  Thus they could avoid phone calls where a little more than they like could actually be said, and there is no record of their actual response.  This would protect them, as well as improve the feedback to shareholders.  Cheers!

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I had some information this morning. Thanks.

 

I think they should better explain the more complicated financial instruments. My first reaction was to read the files available instead of posting here or call Fairfax. They provide with reasonable facts, but I would provide more details about some financial instruments, because they are far from being simple to understand prima facie

 

My second reaction was to ask the question here, but I said to myself that it was not your responsibility to inform me and did not want to take your time for it. I had some information, but I'll post on a new topic to see if I understood them well for those who are kind enough to help.

 

So here are my personal general recommandations:

 

- First of all, it would be best explain furthemore the things that are complex to understand and financially significant in the filings.

 

Example: a 4,8 billions $ notional amount short position in equity related indexes I would suggest to better explain the nature of these financial instruments (what are they, limited cost or not (unlike credit default swaps) can they get out of them easily if they want to, etc.) and provide with some financial scenarios (example: a 30% upside , a 30% downside in the related indexes) to explain the impact it would have on the financial results.

 

- I'm confident that there is a way to answer the private questions effectively, legally and fairly if these questions are related to actual information provided (not the coming EPS estimate, reasons for the 4% decline today, some changes in the equity portfolio since the last filing, etc.). Expeditors have their way with 8-K, Markel answer the questions directly in a friendly way, some answers the questions via emails (and they provide with good answers with reference to the filings if needed)  

 

Thanks for all your comments guys.

 

Cheers!

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I sympathize with Partner, but who would screen the questions received as to what information could be properly released to to the public and what could not? There could be a fine line at times between what might effect share price. I'm not suggesting that the info should or should not be released, just that there would have to be a number of people involved in screening the information and that could be a problem. One of the reasons I am invested is that I trust these guys.  just 2 cents worth...

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I had some information this morning. Thanks.

 

Well, I'm glad that they contacted you.  As I've said before, if you've got questions, post them here and let the board work on them.  If the answer isn't correct or complete, I'm sure Fairfax will try and do their best to clarify it in their filings, reports or letters. 

 

I do not know of any other company that does as much as they do to try and answer your queries, and not prejudice the process of releasing information equitably to their shareholders.  That should be something to cheer, rather than jeer. 

 

As always, I encourage you to come to Toronto for the AGM, where everyone at the company is happy to assist shareholders with their queries and concerns.  Buffett isn't nearly as accessible to shareholders as Prem is at his AGM.  That may not last forever, just as it did not last at Berkshire.  Cheers!

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I had some information this morning. Thanks.

 

I think they should better explain the more complicated financial instruments. My first reaction was to read the files available instead of posting here or call Fairfax. They provide with reasonable facts, but I would provide more details about some financial instruments, because they are far from being simple to understand prima facie

 

My second reaction was to ask the question here, but I said to myself that it was not your responsibility to inform me and did not want to take your time for it. I had some information, but I'll post on a new topic to see if I understood them well for those who are kind enough to help.

 

So here are my personal general recommandations:

 

- First of all, it would be best explain furthemore the things that are complex to understand and financially significant in the filings.

 

Example: a 4,8 billions $ notional amount short position in equity related indexes I would suggest to better explain the nature of these financial instruments (what are they, limited cost or not (unlike credit default swaps) can they get out of them easily if they want to, etc.) and provide with some financial scenarios (example: a 30% upside , a 30% downside in the related indexes) to explain the impact it would have on the financial results.

 

- I'm confident that there is a way to answer the private questions effectively, legally and fairly if these questions are related to actual information provided (not the coming EPS estimate, reasons for the 4% decline today, some changes in the equity portfolio since the last filing, etc.). Expeditors have their way with 8-K, Markel answer the questions directly in a friendly way, some answers the questions via emails (and they provide with good answers with reference to the filings if needed)  

 

Thanks for all your comments guys.

 

Cheers!

 

Partner,

 

I can understand your frustration and agree that your question about swaps could have been answered without disclosing any sensitive information as the index swaps are very generic instruments.

 

On the other hand, I can understand FFH's reluctance to answer this question because then it can become difficult to draw the line if someone else asks about something more complicated (e.g. the deflation option or a particular type of insurance coverage). It's also possible they may have felt that the equity swaps are straightforward instruments for which information is readily obtainable from the internet or library.

 

Not sure how they finally responded to you but at the very least they should have explained why they could not entertain individual questions or made a commitment to better explain the instruments in the next report to shareholders (although I feel that FFH does a pretty good job already compared to many other companies - try reading MFC's reports, for e.g.!)

 

oec

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Not sure how they finally responded to you but at the very least they should have explained why they could not entertain individual questions or made a commitment to better explain the instruments in the next report to shareholders

 

If a question can't be answered, the company can answer it tactfully. 

 

According to "Of Permanent Value, the Story of Warren Buffett", an investor (Carret?) was asking for dividends. Buffett wrote him back with a box of Sees candies saying that the candies are his dividends. Instead of being hurt, the investor turned out to be a big fan of Buffett.

 

Buffett has a knack to writing and public speaking, I think the guy could have done stand up comedy as his alternate career. I am certain the sense of humor helps him enormously as a manager and in dealing with his partners.

 

 

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If you agree, let me close this thread.

 

I'v called Fairfax twice for this issue. First time at the mid december. The second one at the first week most of white and blue (maybe more blue?) collars worked since January.  Both times the assistand told me that "they are in a meeting" and "they will call you back".

 

So let me get this straight. I'm overall a very satisfied shareholder of Fairfax. I admire Prem and I guess that the team at Fairfax are hard workers that do their job for the benefit of long term shareholders.

 

I understand that they want to provide with the same information for all shareholders and I agree with that. No VIP for anyone it's a very ethical behavior for any company, but especially a public company. So my hat down for that.

 

That being said, when FOUNDAMENTAL (not the daily stock price...) are not clear enough, they should find a way to get their ear open without needing to have someone ranting. Best of all, when they have something complex to understand and, especially if it is significant, they should provide any information that is useful for every shareholders to use to get a better understanding of what they get for the  money they give.

 

Some of you might say that a lot of public companies don't do that so why Fairfax should do it? Because it's a great company! An average company is covered and owned by people who's always search fo the next flower. Fairfax atract people who search for a field to stay for years to come!

 

Cheers!

 

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I understand that they want to provide with the same information for all shareholders and I agree with that. No VIP for anyone it's a very ethical behavior for any company, but especially a public company. So my hat down for that.

 

 

If a company refuses to answer a question on those grounds it's fairly lame.  Never heard of a FAQ?

 

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Partner i wanted to say something earlier but wasn't sure if i should do so .  I dont understand why are you so upset when your question is not answered and other people's question not from fairfax but on this board is answered as this is the THATS THE WAY IT IS!

 

i been owner of fairfax and some other good companies since around 2000 and learned one thing is you dont find everything in one compnay and thats why you owe more than one.  Hey its not a wife or gf.  you are allowed to have more than one.

 

cheers

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