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Guest swf83
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Guest swf83

I find it very ironic that the market can be up over 2% (as I write this post), yet the stock price of FFH is down close to 2%, despite the book value per share of FFH increasing a few bucks when the markets are up like they are today. This is how opportunities are created- and I am taking advantage by adding some shares.

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Pretty frickin' irritating - I gotta say.

 

FFHs holdings trade up - FFH ughhh - Even since April 24th there must be up to $10/share in book value added just with increases in WFC, JNJ, GE, ICG... 

 

 

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The spreadsheet I previously posted which tracked the US equity portfolio from the Dec 31 filing shows that these holdings are up $134M today - more than 5% which is almost $8/share in one day. The portfolio is now in positive territory as well with only 6 of 21 stocks in the red against average cost. Given that this is just a slice of the portfolio and doesn't show additions since Dec 31 this bodes very well for us. Maybe $10/share today alone which means we should be north of $40/share ahead of reported book on March 31. Prem advised that as of April 24th we were more than $30 ahead of March 31 book. That puts us at the doorstep of $300/share book or about .9x book.

 

The weighing machine will kick in soon.

 

 

 

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But of course, all this assumes the market prices remain where they are.  So when some of us board members argue that the market increase since March 9 is not the real thing, that prices will come down... we also need to be consistent and accept that FFH's book "value" may come down again.

 

 

I don't think the market's level is completely sustainable; I don't like adjusting FFH's and BRK's book values based on day-to-day or even quarter-to-quarter stock price changes; and I don't want to mentally value FFH higher today than I would have 2 months ago.

 

 

UhuruPeak, massively long FFH, long BRK and long a POS in the utility industry that would benefit greatly from higher economic output and power prices.

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Guest swf83

Is the current stock price compared to the Book Value a big enough discrepancy to take advantage of by buying?

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"But of course, all this assumes the market prices remain where they are.  So when some of us board members argue that the market increase since March 9 is not the real thing, that prices will come down... we also need to be consistent and accept that FFH's book "value" may come down again."  

 

How is this any different from looking at the scoreboard above a roulette table seeing 4 reds in a row and absolutely knowing that it just can't be red the next time?

 

I'm not surprised to see that even some of the smarter players at the table don't realize that future events are dependent on actions and outcomes that haven't occurred and that the stock market is no better at predicting the future today than 2 years ago.

 

"I find it very ironic that the market can be up over 2% (as I write this post), yet the stock price of FFH is down close to 2%"

 

Whats ironic is that atheists imbue the "market" with omnipotence.  Which truthfully reflects of their own egos, any religious person should have no problem explaining why no earthly system can be!

 

 

 

 

 

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No one can say if gap between the trade value and the intrinsic value of FFH will end soon. It will happen one day, but I can't say precisely when.

 

What always has to remain the priority is to value the business and see if the margin of safety is attractive enough to buy. I've made that calculation and bought some common shares today. To me, FFH trade something like 6-8 X normalized earnings per share (my own math) and I think that it should trade at 10-12X if it was at full intrinsic value. Add to that that it could be able to compound it's intrinsic value per share at a 12-15% CAGR over the next decade, plus a little dividend, and the total return might be higher that what I expect from my portfolio.

 

Value price right now. Reasonable expected growth for a long period of time as a bonus.  Just the way I like it to be!  8)

 

 

 

 

 

 

 

 

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I have been taking profits a little here and there the last couple of weeks, from my Leaps positions.  I have been taking profits off the highest strike prices for AXP, WFC, SBUX, and SPY Leaps, and keeping the deeper in the money leaps.

 

One reaches a point were you can no longer safely buy more of one stock.  I have been that way with FFH since the fall of 2008.  So I would be happy to see the share price rise into the 400s US anytime about now. 

 

 

FFH is the worst performer in my entire portfolio in 2009 to this point.  Go figure. 

 

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FFH appears to be an animal that most are not able to understand. Two years ago when it was sitting on CDS and gov't bonds and the financial world began falling apart few were interested (but they got very interested at the end of last year). Now they have done a complete about face and they are sitting on muni and corp bonds and stocks, including some financial names like Wells Fargo and GE. Their positions make their investment portfolio much more volatile than most any other insurer. It appears to me that after 7 lean years they again 'have their groove back.'  Yes, I would like Mr. Market to attach a 1.2xbook (or 1.5!) value to the shares and keep it there, but this is not going to happen. Instead Mr. Market will continue to fall in and out of love with FFH and we will continue to get great entry points to purchase stock below BV. And at some point in the next year the stock price will run-up again... I am learning to enjoy the ride... I wonder what rabbit FFH mgmt will pull out of their hat next?

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That's exactly why it's so important that FFH develops a cost free float. Hamblin-Watsa can do a lot more with small asset-liability matching concerns than the average insurer.

 

Sorry to beat a dead horse, but I would rather that FFH stayed away from insurance acquisitions until A) they find that perfect combination of price and management quality or B) they have a Berkshire like balance sheet.

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Taking their BV, converting their equity accounted investments to FV, the BV as of 4/24 would have been approximately $300.  Add to this approximately $8/share of gains after minority interest and taxes since 4/24 and you have an estimated MTM BV of well over $300.  1.3x book would be $400/ share right now.

 

Just wondering why 1.3x book, is that an industry average?

 

Dan

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Guest swf83

For what it's worth, this is from an article by Whitney Tilson, a big investor in FFH:

 

"We believe a fair valuation for a solid insurance company growing per-share book value at 15% annually is closer to 1.5x book".

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How is this any different from looking at the scoreboard above a roulette table seeing 4 reds in a row and absolutely knowing that it just can't be red the next time?

 

 

The roulette table has absolutely no knowledge of the past.  If the chances of the outcome coming up red on the 1st spin are 50/50, then even if it comes up red 4 times in a row, the chances of it coming up red on the 5th spin are still 50/50. Because the roulette table has no knowledge of the past, the odds are the same on every spin regardless of what has happened in the past.  The results will only be a true 50/50 over the long term, no past knowledge can help you on any given spin of the wheel.

 

--Eric

 

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Guest swf83

Once again, the BV of FFH is surely increasing today, yet the stock is pulling back. These are the opportunities I am looking for.

 

Scott

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