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Book Value


Guest swf83
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Guest swf83

Quick question:

 

Since Fairfax doesn't explicitly announce what its book value is (at least I don't think), how can we venture to estimate what it is? Just based upon current equity holdings and their performance? I know that Prem tells us the increase/decrease in book value, but never the exact book value as of a certain date. Am I correct in saying this?

 

Thanks-

Scott

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Prem talks about BV all the time.  It is on the second line of his annual letter to shareholders (2008), so I would say he finds it quite critical. 

 

What reports were you reading that Fairfax wrote that didn't mention the specific BV? 

 

He mentions Book Value 10 times in the 12 page Annual Letter to Shareholders and 22 times in the 2008 Annual Report.  Kinda hard to miss.  ???

 

www.fairfax.ca

 

 

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Guest swf83

Specifically I was referring to the following comments in the last earnings release:

 

"Principally as a result of the lower market value of our investments at March 31, our book value declined by $23 per share during the first quarter. Yet if our investments were valued as of the end of last week (at April 24), then our book value, based on that factor alone, would have increased since March 31 in excess of $30 per share."

 

Notice that instead of saying exactly what the BV was, he simply stated what it declines/increased by. That was my point...

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Page 1 - 2008 Annual Letter to Shareholders (www.fairfax.ca)

...

While 2007 was a record year for us, 2008 was even better!We earned approximately $1.5 billion after tax or $79.53 per diluted share. Book value grew by 21.0% to $278.28 per share (excluding the $5.00 per share dividend paid in 2008) and we ended the year with over $1.5 billion in cash and marketable securities at the holding company level. We were net cash at the holding company level, as our cash and marketable securities exceeded holding company debt and other obligations....

 

$278 - 23 = $255 (March 31st)

$255 + 30 = $285 (April 30th)

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Guest swf83

You made me look stupid, but thanks...that was easy enough. And now I would venture to say that BV is closer to the $295-300 level.

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Yeah, sorry about that.

 

I try to focus as much as I can (difficult at times) on what Prem writes and talks about versus what I read in press releases, news articles, etc.  Everyone else has their own agenda, employers, biases, opinions, etc.  Prem just wants to make money for FFH...end of story.  Go straight to the source and read the reports listed on their website and on the SEC website.

 

www.fairfax.ca

 

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000915191&owner=include

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Interesting. 

That monthly change in BV is about the same as Prem paid for FFH back in 1985 which is also about the same as the previous years FFH dividend.  I wonder what the next 25 years will bring?  Same old, same old?  We should start a new thread.  "Daily change in FFH BV"

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"I wonder what the next 25 years will bring?  Same old, same old?"

 

Ahahah book value per share increase of more than 100 folds AND a higher price/book ratio? My not-yet-born-grandchildren aren't dreaming of that.  ;)

 

If we're able to grow our book value per share by 15% compounded over 25 years, that would mean a slightly more than 30 folds increase. Given the same amount of shares and the same price/book ratio multiple, that would mean a more than 150 billions CAN $ company! That's already a HUGE challenge.

 

Cheers!

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That would mean the Fairfax compounding machine would need to generate about 10-15 billion dollars a year in earnings,  about 600$/share every year...hey remember that million shares they bought back in 2008 well that would be effectively accruing about 600 million a year to shareholders! 

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