Fairfax down 8% this morning

[ECCO]

But, let’s say that FFH is worth 1,5BV (it is worth much more, especially if the ‘Kaboom’ moment Mr. Gundlach talked about is really in our future, but let’s keep it simple

 

As to whether it's worth more than 1.5BV if a 'Kaboom' moment is coming,  Mr. Gundlach's fund can be invested in without any premium to book value whatsoever.

 

The market is having trouble valuing FFH at a high premium to book value because the market itself is the one setting the value of the underlying portfolio investments -- it would be truly bizarre for it to say that JNJ is worth more in FFH's portfolio than outside of it. 

 

Thus it's down to the operating income and growth assumptions of the insurance operations for the market to use as it's input for setting a PB multiple on the stock.

 

ERICOPOLY,

I think the market is extremely allergic to those “lumpy results” Mr. Watsa is used to referring to. FFH has not meaningfully increased BV per share for some time now. That’s why, in my humble opinion, the market is completely mispricing FFH today. Because lumpy results in a secular bear for stocks are the only sustainable results possible. My best guess is the market sooner or later will recognize that Mr. Watsa & Company are right, and that will be the moment when BV per share starts to rise again very quickly. Until then the market might not have patience, but FFH shareholders must have it.

 

giofranchi

 

Yes, BV will no doubt rise quickly when their investments rise quickly.  But that isn't in itself in any way warranting a high book value multiple.  It merely results in very high rates of compounding over time, which is just dandy anyhow.

 

There are no investment funds compounding at a high rate that command a high multiple to their underlying portfolio investments.

 

FFH by definition should always trade below intrinsic value, otherwise it would be overvalued.  That's the nature of gaining much of your intrinsic value by making shrewed equity investments.

 

The place where they do command some kind of BV multiple would come from evaluating their insurance operations and their wholly owned non-insurance subs.  Figure out some sort of value of what the float+floatgrowth+underwriting results brings to the table, and then add that to the BV to get some sort of BV multiple.

 

But the lumpy capital gains... I don't see them worth anything more than portfolio mark-to-market value.

 

ERICOPOLY,

I am well aware of the fact that almost nobody wants to hear about discounted valuations on this board… And I agree that they are not very useful. But let’s just make a simple exercise, and calculate the discounted value of equity (VOE) of FFH 20 years from now.

To do it, I will use Professor Penman’s formula from his book “Accounting for Value”, page 68, Columbia Business School Publishing:

 

Present value of equity = B0 + [(ROE1 – r) * B0] / (1 + r) + [(ROE2 – r) * B1] / (1 + r)2 +[(ROE3 – r) * B2] / (1 + r)3 + … + [(ROE20 – r) * B19] / (1 + r)20.

 

Assumptions:

B0 = book value today = $360,

ROE1 = return on equity in year 1

ROE2 = return on equity in year 2

…

ROE20 = return on equity in year 20

r = interest rate

 

Let’s say our required minimum return is 9%, so r = 9%. Let’s assume that ROE in year 1 and 2 will be equal to their stated goal of 15%, and then, from year 3 to year 20, it falls to 10% (just above the minimum required return).

 

Under these assumptions we get to a present value of equity: VOE = $570.24, or 1.584 x B0.

 

If we assume that a ROE = 15% will be sustained for the next 20 years, we get to a present value of equity: VOE = $1,112.39, or 3.09 x B0.

 

If, instead of using our required minimum return, we choose to use FFH’s cost of capital as interest rate, so that r = 2,8% (until year end 2011 the weighted average cost of float for FFH since inception has been 2,8%), future ROEs just have to average 6,5% for the next 20 years, to get to a present value of equity that is 2 x B0.

 

My intention here is not to put a precise number on VOE, but simply to argue that the market always has a very hard time valuing properly a machine that can compound capital at high rates of return for a very long time. That’s why I think that, even if FFH might not look “statistically” very cheap, right now it is, like Sir John Templeton was used to saying, a “true bargain”.

 

Something that’s trading below book value is worth more dead than alive… Now, please read how Mr. Watsa answered to Mr. Shezad, when he asked if FFH shareholders had to expect other 7 lean years (Q3 2012 results conference call):

 

“Yes, that was -- Shezad, that's a good question. And so the first thing, just to say you is we've always focused on the long-term and when we went through our 7 lean years, Shezad, we were turning around our company. We were turning around Crum & Forster and the -- take reinsurance and all of that, and that took sometime to turn it around. Today, our companies are in excellent position, they're underwriting-focused, they are well reserved, they've cut back in the soft markets and they are well- positioned to expand significantly at the right time. And then as we are expanding today, you're seeing that in Zenith, and you're seeing it in Crum & Forster, you're seeing it on Odyssey. And the Canadian market's always lag -- have lagged in the past and you'll see it in time in Canada. So underwriting operations are very well-positioned, and our investment philosophy and position -- they're always long term. So when we had credit default swaps in the past, it took a few years for it to work out and as you know, we made a lot of money. And so right now, it's very important not to reach for yield because if you do reach for yield, if you put money into the stock market at these prices, you could suffer permanent losses. We'll take temporary losses but we don't like taking permanent losses. So I don't think we'll be at a position where our results will be poor for a long period of time but you're right for the last year and a half, it hasn't been good. But our results for year ending 2011, for the 5 years, is among the best in the business and of course, for the 26 years ending 2011, it's better than anyone else in our industry. So we're focused on the long-term and we continue, we've always been focused on the long-term, and continue to be focused on doing well for our shareholders always.”

 

It really doesn’t sound to me as something worth more dead than alive! :)

 

giofranchi

 

 

And so right now, it's very important not to reach for yield because if you do reach for yield, if you put money into the stock market at these prices, you could suffer permanent losses.

 

Sorry, it might sounds like a stupid question for some of you that follow Prem and Fairfax more than I am, but how does Prem does see the market expensive? I guess it is not base on PE ratio, has PE market is not that high. Is he expect earnings to go down?

 

[giofranchi]

Sorry, it might sounds like a stupid question for some of you that follow Prem and Fairfax more than I am, but how does Prem does see the market expensive? I guess it is not base on PE ratio, has PE market is not that high. Is he expect earnings to go down?

 

I attach a brief article I read some days ago on the subject.

Hope it helps!

 

giofranchi

reflections-on-complacency-valuations-bearmarkettroughs-patience.pdf

[ERICOPOLY]

But, let’s say that FFH is worth 1,5BV (it is worth much more, especially if the ‘Kaboom’ moment Mr. Gundlach talked about is really in our future, but let’s keep it simple

 

As to whether it's worth more than 1.5BV if a 'Kaboom' moment is coming,  Mr. Gundlach's fund can be invested in without any premium to book value whatsoever.

 

The market is having trouble valuing FFH at a high premium to book value because the market itself is the one setting the value of the underlying portfolio investments -- it would be truly bizarre for it to say that JNJ is worth more in FFH's portfolio than outside of it. 

 

Thus it's down to the operating income and growth assumptions of the insurance operations for the market to use as it's input for setting a PB multiple on the stock.

 

ERICOPOLY,

I think the market is extremely allergic to those “lumpy results” Mr. Watsa is used to referring to. FFH has not meaningfully increased BV per share for some time now. That’s why, in my humble opinion, the market is completely mispricing FFH today. Because lumpy results in a secular bear for stocks are the only sustainable results possible. My best guess is the market sooner or later will recognize that Mr. Watsa & Company are right, and that will be the moment when BV per share starts to rise again very quickly. Until then the market might not have patience, but FFH shareholders must have it.

 

giofranchi

 

Yes, BV will no doubt rise quickly when their investments rise quickly.  But that isn't in itself in any way warranting a high book value multiple.  It merely results in very high rates of compounding over time, which is just dandy anyhow.

 

There are no investment funds compounding at a high rate that command a high multiple to their underlying portfolio investments.

 

FFH by definition should always trade below intrinsic value, otherwise it would be overvalued.  That's the nature of gaining much of your intrinsic value by making shrewed equity investments.

 

The place where they do command some kind of BV multiple would come from evaluating their insurance operations and their wholly owned non-insurance subs.  Figure out some sort of value of what the float+floatgrowth+underwriting results brings to the table, and then add that to the BV to get some sort of BV multiple.

 

But the lumpy capital gains... I don't see them worth anything more than portfolio mark-to-market value.

 

ERICOPOLY,

I am well aware of the fact that almost nobody wants to hear about discounted valuations on this board… And I agree that they are not very useful. But let’s just make a simple exercise, and calculate the discounted value of equity (VOE) of FFH 20 years from now.

To do it, I will use Professor Penman’s formula from his book “Accounting for Value”, page 68, Columbia Business School Publishing:

 

Present value of equity = B0 + [(ROE1 – r) * B0] / (1 + r) + [(ROE2 – r) * B1] / (1 + r)2 +[(ROE3 – r) * B2] / (1 + r)3 + … + [(ROE20 – r) * B19] / (1 + r)20.

 

Assumptions:

B0 = book value today = $360,

ROE1 = return on equity in year 1

ROE2 = return on equity in year 2

…

ROE20 = return on equity in year 20

r = interest rate

 

Let’s say our required minimum return is 9%, so r = 9%. Let’s assume that ROE in year 1 and 2 will be equal to their stated goal of 15%, and then, from year 3 to year 20, it falls to 10% (just above the minimum required return).

 

Under these assumptions we get to a present value of equity: VOE = $570.24, or 1.584 x B0.

 

If we assume that a ROE = 15% will be sustained for the next 20 years, we get to a present value of equity: VOE = $1,112.39, or 3.09 x B0.

 

If, instead of using our required minimum return, we choose to use FFH’s cost of capital as interest rate, so that r = 2,8% (until year end 2011 the weighted average cost of float for FFH since inception has been 2,8%), future ROEs just have to average 6,5% for the next 20 years, to get to a present value of equity that is 2 x B0.

 

My intention here is not to put a precise number on VOE, but simply to argue that the market always has a very hard time valuing properly a machine that can compound capital at high rates of return for a very long time. That’s why I think that, even if FFH might not look “statistically” very cheap, right now it is, like Sir John Templeton was used to saying, a “true bargain”.

 

Something that’s trading below book value is worth more dead than alive… Now, please read how Mr. Watsa answered to Mr. Shezad, when he asked if FFH shareholders had to expect other 7 lean years (Q3 2012 results conference call):

 

“Yes, that was -- Shezad, that's a good question. And so the first thing, just to say you is we've always focused on the long-term and when we went through our 7 lean years, Shezad, we were turning around our company. We were turning around Crum & Forster and the -- take reinsurance and all of that, and that took sometime to turn it around. Today, our companies are in excellent position, they're underwriting-focused, they are well reserved, they've cut back in the soft markets and they are well- positioned to expand significantly at the right time. And then as we are expanding today, you're seeing that in Zenith, and you're seeing it in Crum & Forster, you're seeing it on Odyssey. And the Canadian market's always lag -- have lagged in the past and you'll see it in time in Canada. So underwriting operations are very well-positioned, and our investment philosophy and position -- they're always long term. So when we had credit default swaps in the past, it took a few years for it to work out and as you know, we made a lot of money. And so right now, it's very important not to reach for yield because if you do reach for yield, if you put money into the stock market at these prices, you could suffer permanent losses. We'll take temporary losses but we don't like taking permanent losses. So I don't think we'll be at a position where our results will be poor for a long period of time but you're right for the last year and a half, it hasn't been good. But our results for year ending 2011, for the 5 years, is among the best in the business and of course, for the 26 years ending 2011, it's better than anyone else in our industry. So we're focused on the long-term and we continue, we've always been focused on the long-term, and continue to be focused on doing well for our shareholders always.”

 

It really doesn’t sound to me as something worth more dead than alive! :)

 

giofranchi

 

 

It feels like you are talking past my point.  I was separating out the operating components and you are still fully valuing the investment returns as operations.

 

I haven't read their annual report for a couple of years, but I remember a few years ago they were putting up numbers of around 17% annualized compounding returns on their equity investments.

 

Let's say they shut everything down and put all of their capital into equities.  And further let's project that they make 15% compounding returns going forward.

 

You now have a 100% equities fund that has no operations.  Are you still going to discount it the way you are doing?

 

My answer right now is that the 100% equities fund is worth book value... even if we all project that it will keep compounding at 15%.  You could rightly argue that "it's worth just as much dead as alive".  True, but that's the nature of most funds I know of.

 

Ironically, if they were 100% an equities investment fund making 15% returns their results would be MORE LUMPY than they are.  They have a lot of leverage with lower yielding bonds and that helps them to achieve a smoother 15%. 

[ERICOPOLY]

There is also the "cart before the horse" analogy if that helps to see things clearer:

 

A large portion of the future 15% return will come from the future recognition of IV from the underlying portfolio investments when the market actually prices them at IV.

 

Your discounting method is asking the market to realize that appreciation right now -- before it is willing to do so!

 

Thus, you are putting that cart before the horse when you use discounting method that ignores the mechanics of how that 15% is achieved.

[giofranchi]

It feels like you are talking past my point.  I was separating out the operating components and you are still fully valuing the investment returns as operations.

 

I haven't read their annual report for a couple of years, but I remember a few years ago they were putting up numbers of around 17% annualized compounding returns on their equity investments.

 

Let's say they shut everything down and put all of their capital into equities.  And further let's project that they make 15% compounding returns going forward.

 

You now have a 100% equities fund that has no operations.  Are you still going to discount it the way you are doing?

 

My answer right now is that the 100% equities fund is worth book value... even if we all project that it will keep compounding at 15%.  You could rightly argue that "it's worth just as much dead as alive".  True, but that's the nature of most funds I know of.

 

Ironically, if they were 100% an equities investment fund making 15% returns their results would be MORE LUMPY than they are.  They have a lot of leverage with lower yielding bonds and that helps them to achieve a smoother 15%.

 

Understood (at least, I hope! :) ). You are saying that there are not many funds, which are selling for more than their NAV. Even among the best performing funds. Am I right? I agree and I can understand why: both the mutual and the hedge fund business models have weaknesses that the FFH business model doesn’t have (among them no permanent capital and a much higher cost of money). I consider them to be fundamentally riskier than FFH and I have never invested in a fund. That’s probably one of the reasons why no fund command a significant premium to NAV.

 

giofranchi

[ERICOPOLY]

It feels like you are talking past my point.  I was separating out the operating components and you are still fully valuing the investment returns as operations.

 

I haven't read their annual report for a couple of years, but I remember a few years ago they were putting up numbers of around 17% annualized compounding returns on their equity investments.

 

Let's say they shut everything down and put all of their capital into equities.  And further let's project that they make 15% compounding returns going forward.

 

You now have a 100% equities fund that has no operations.  Are you still going to discount it the way you are doing?

 

My answer right now is that the 100% equities fund is worth book value... even if we all project that it will keep compounding at 15%.  You could rightly argue that "it's worth just as much dead as alive".  True, but that's the nature of most funds I know of.

 

Ironically, if they were 100% an equities investment fund making 15% returns their results would be MORE LUMPY than they are.  They have a lot of leverage with lower yielding bonds and that helps them to achieve a smoother 15%.

 

Understood (at least, I hope! :) ). You are saying that there are not many funds, which are selling for more than their NAV. Even among the best performing funds. Am I right? I agree and I can understand why: both the mutual and the hedge fund business models have weaknesses that the FFH business model doesn’t have (among them no permanent capital and a much higher cost of money). I consider them to be fundamentally riskier than FFH and I have never invested in a fund. That’s probably one of the reasons why no fund command a significant premium to NAV.

 

giofranchi

 

You could look at how closed-end funds are priced if you want to see the premium (or more likely discount) to how captive capital is trading.

 

One of the great things about a mutual fund is when you ask for your pro-rate share of book value back, you are guaranteed to get it right away.  A closed-end fund this is not the case -- you can get back only what Mr. Market is willing to pay you, and often that can be less than what the book value is.  Now if you paid a big premium to book value and you sell it below book value -- double ouch!  So, I'm just saying that it's not all a dreamboat ride when you get into captive capital.

[mcliu]

A lot of conglomerates trade at a discount to NAV. I think the discount/premium is really a function of the value of the management team.

 

http://www.investopedia.com/terms/c/conglomeratediscount.asp#axzz2DzzFi45B

[LowIQinvestor]

And again I am averaging down in Fairfax.

Hope Prem is starting to buy back shares. Although maybe the discount to book isn't large enough yet...

 

"On September 24, 2012, the company renewed its normal course issuer bid which allows it to purchase up to 800,000 subordinate voting shares on the Toronto Stock Exchange."

 

Has anyone taken a stab at figuring out potential exposure to Sandy?

[LowIQinvestor]

http://www.fairfax.ca/news/press-releases/press-release-details/2012/Fairfax-Files-Universal-Shelf-Prospectus1132184/default.aspx

 

maybe this is why there was 4x the average volume today

 

[plato1976]

why should this increase volumn ?

This news seems not material at all

 

http://www.fairfax.ca/news/press-releases/press-release-details/2012/Fairfax-Files-Universal-Shelf-Prospectus1132184/default.aspx

 

maybe this is why there was 4x the average volume today

[Parsad]

http://www.fairfax.ca/news/press-releases/press-release-details/2012/Fairfax-Files-Universal-Shelf-Prospectus1132184/default.aspx

 

maybe this is why there was 4x the average volume today

 

No, that's just a normal shelf offering...nothing unusual.  Cheers!

[obtuse_investor]

I suspect the selling pressure could be one of more of the following:

 

- Tax loss selling (FFH has been down over the year)

- Window dressing (getting rid of the losers to make the portfolio look pretty for the muppets)

- Closet indexers (Removal of FFH from MSCI Canada)

- Low earnings, as FFH forgoes participating in this equity rally

  - 100% hedged position

- Mild rise in CPI over the year, further eroding the value of the CPI linked derivatives book

- Unknown damage from Sandy to the insurance business

 

Anyone else have more reasons?

[plato1976]

I think the reason is just indexer selling with 1&2 as minor additional selling pressure.

Other factors are old factors - should have been counted in the price long time ago.

but I am confused that today's volumn is still big - shouldn't the index selling finish by Nov 30 ?

No idea why - I didn't get ffh shares last week, and though I wouldn't get it at 34x , but happily got it today at this price.

Not bad XMAS gift

The next level for me to add is $300 - which is roughly 0.8 P/B

 

I suspect the selling pressure could be one of more of the following:

 

- Tax loss selling (FFH has been down over the year)

- Window dressing (getting rid of the losers to make the portfolio look pretty for the muppets)

- Closet indexers (Removal of FFH from MSCI Canada)

- Low earnings, as FFH forgoes participating in this equity rally

  - 100% hedged position

- Mild rise in CPI over the year, further eroding the value of the CPI linked derivatives book

- Unknown damage from Sandy to the insurance business

 

Anyone else have more reasons?

[rijk]

I suspect the selling pressure could be one of more of the following:

 

- Tax loss selling (FFH has been down over the year)

- Window dressing (getting rid of the losers to make the portfolio look pretty for the muppets)

- Closet indexers (Removal of FFH from MSCI Canada)

- Low earnings, as FFH forgoes participating in this equity rally

  - 100% hedged position

- Mild rise in CPI over the year, further eroding the value of the CPI linked derivatives book

- Unknown damage from Sandy to the insurance business

 

Anyone else have more reasons?

 

400 Million tax issue

 

regards

rijk

[FrankArabia]

the wierd thing about FFH for me is, i wouldn't mind putting 100% of my net worth with the company.....out of all the stocks I have, i feel there is the most downside protection.....on the other hand, i have a downbeat assessment of their near term returns on equity....strange....

[racemize]

the wierd thing about FFH for me is, i wouldn't mind putting 100% of my net worth with the company.....out of all the stocks I have, i feel there is the most downside protection.....on the other hand, i have a downbeat assessment of their near term returns on equity....strange....

 

You've come a long way on FFH in the last couple of months!

[giofranchi]

the wierd thing about FFH for me is, i wouldn't mind putting 100% of my net worth with the company.....out of all the stocks I have, i feel there is the most downside protection.....on the other hand, i have a downbeat assessment of their near term returns on equity....strange....

 

Frank,

I really think that your feelings about near term returns on equity are inevitable. In a secular bear market “lumpy results” are the only results possible. That’s what the market hates and that’s the cause of your near term feelings. But:

 

June 6, 1933

 

It is my conclusion that the successful investor must cultivate the habit of "patience". He must be able to hold his money and wait until it is really the time to buy. In this panic it meant waiting over 3 years until stocks were really at rock bottom and selling at less than 1/10 of their normal value. I suppose the real investor would then have the patience and courage to wait until normal times returned before selling. Patience to wait for the right moment - courage to buy or sell when the time arrives - and liquid capital - these are the 3 essentials as I see it now.

 

The Great Depression, A Diary - Benjamin Roth

 

Who has more patience, courage, and liquid capital than FFH? When the right moment comes, FFH equity will rise again very fast! And don’t ask me how much will it take: remember, we have to cultivate the habit of “patience”!! ;D

I bought more FFH today. :)

 

giofranchi

 

[FrankArabia]

Gio....definitely agree.....I'm going to try and get a job at FFH.....

[rjstc]

I suspect the selling pressure could be one of more of the following:

 

- Tax loss selling (FFH has been down over the year)

- Window dressing (getting rid of the losers to make the portfolio look pretty for the muppets)

- Closet indexers (Removal of FFH from MSCI Canada)

- Low earnings, as FFH forgoes participating in this equity rally

  - 100% hedged position

- Mild rise in CPI over the year, further eroding the value of the CPI linked derivatives book

- Unknown damage from Sandy to the insurance business

 

Anyone else have more reasons?

 

I've been thinking of buying for years. I FINALLY BOUGHT SOME TODAY. THAT'S THE REAL REASON THE STOCK PRICE HAS FALLEN!!!

[obtuse_investor]

I suspect the selling pressure could be one of more of the following:

 

- Tax loss selling (FFH has been down over the year)

- Window dressing (getting rid of the losers to make the portfolio look pretty for the muppets)

- Closet indexers (Removal of FFH from MSCI Canada)

- Low earnings, as FFH forgoes participating in this equity rally

  - 100% hedged position

- Mild rise in CPI over the year, further eroding the value of the CPI linked derivatives book

- Unknown damage from Sandy to the insurance business

 

Anyone else have more reasons?

 

I've been thinking of buying for years. I FINALLY BOUGHT SOME TODAY. THAT'S THE REAL REASON THE STOCK PRICE HAS FALLEN!!!

 

Haha! I hope you buy plenty more--

 

I have waited years, as well.

 

[rkbabang]

I've been thinking of buying for years. I FINALLY BOUGHT SOME TODAY. THAT'S THE REAL REASON THE STOCK PRICE HAS FALLEN!!!

 

Ohhh, so it was all just to give you the opportunity to get in?  Well good, now that you have made your purchase it is free to increase again.

 

[jay21]

How would people describe Prem's investment strategy?

 

This would typically be a situation I am interest in, but I read a few annual reports and couldn't get comfort over his investing style.  Two things that turned me off immediately were his hedging of his equity portfolio and his large position in RIMM.  I don't feel I have as much comfort over his methods compared to MKL's and BRK's, which have very simple investing rules imo. 

[LC]

I've been thinking of buying for years. I FINALLY BOUGHT SOME TODAY. THAT'S THE REAL REASON THE STOCK PRICE HAS FALLEN!!!

 

Ohhh, so it was all just to give you the opportunity to get in?  Well good, now that you have made your purchase it is free to increase again.

I think he was saying that his purchase caused the price fell, i.e. everything he touches turns to....coal? I think every investor has felt this way at some point! Just a little self-deprecating humor :)

[Aberhound]

I suspect the selling pressure could be one of more of the following:

 

- Tax loss selling (FFH has been down over the year)

- Window dressing (getting rid of the losers to make the portfolio look pretty for the muppets)

- Closet indexers (Removal of FFH from MSCI Canada)

- Low earnings, as FFH forgoes participating in this equity rally

  - 100% hedged position

- Mild rise in CPI over the year, further eroding the value of the CPI linked derivatives book

- Unknown damage from Sandy to the insurance business

 

Anyone else have more reasons?

 

My job is to worry so here are 3 more. Nonetheless the current price of FFH looks attractive to me.

 

- Worsening winter storms if Piers Corbyn is right about little ice age. Storms used to be brutal. If you haven't read it look for the weather history pdf found at breadandbutterscience.com. We have been living in a benign period which might change. We saw the same effect in May 2006 before the Hurricane season after the two savage hurricane years in 2004 and 2005.

- ECB looks like it will print more money ruining Prem's deflation bet

- negative interest rates are bad for insurers with large bond portfolios

- globalization creates more fat-tail risks which could be devastating to financial markets due to excessive leverage. I am glad Prem is 100% hedged in equities but what about bonds and will the hedges work?

- Insurers rely on rule of law which is declining. FFH may suffer from ad hoc decisions against rich foreigners.

[ShahKhezri]

How would people describe Prem's investment strategy?

 

This would typically be a situation I am interest in, but I read a few annual reports and couldn't get comfort over his investing style.  Two things that turned me off immediately were his hedging of his equity portfolio and his large position in RIMM.  I don't feel I have as much comfort over his methods compared to MKL's and BRK's, which have very simple investing rules imo.

 

That's a really good question and you have to be comfortable with the ebb and flow of FFH's investing style to invest.  I've been a shareholder since the low 200's, around 2008, there are other board members here that have held a position longer and know much more. 

 

Right now you hear a lot of talk about RIMM, DELL, the newspaper investments, that haven't done too well and that's fair.  However, this is their style and over time they have done remarkably well (there have been the ICO's, SD, the banks in early 2009, the CDS, the Muni's and a lot of others).  There are shareholders that sometimes piggyback on some of their investments, I try not to.  Prem is more of a Ben G. type and if I remember correctly he named his son Ben Graham. 

 

I also own MKL, but don't think that they don't receive their share of criticism.  Often, the criticism is on why Tom is conservative and why in 2009 he wasn't as aggressive.  I think that's fair as well, but personally I kind of like the fact he sticks to his circle, he's more of Berkshire circa (Coke, PG, quality). 

 

I owned Y until today, but they are different as well.  There's also WTM (which I haven't followed for a long time).