Fairfax Financial

[Buffett_Groupie]

Please cast your vote if you bought FFH or BRK in 2012!  The poll will end on 12/31.

[Guest longinvestor]

Buffet-Groupie,

 

You made my day with this poll/post. Never have I felt so good as adding during 2012. I tell myself (time will as well) that value investing doesn't get easier than this! Buying FFH&BRK at a meaningful discount and buttsit while the market gets it right.

[plato1976]

I built a position in Fairfax financial this year. But I do have some concern about Fairfax.

 

Prem and FFH are highly respected for their ethic standards. However, how they can support someone like Tom Ward at SD is a mystery to me; also, I don't feel good about their rejection of a higher takeover offer for Fibrek

 

To be clear, I am a newbie in finance, so I very possibly missed some important points. Someone here can probably educate me on the two issues I raised above. But these are red alerts for me at this time. However, FFH seems very shareholder friendly so far and their investment record is really superb  so that I feel comfortable to put 20% of my liquid investment assets into this position now.

 

 

Buffet-Groupie,

 

You made my day with this poll/post. Never have I felt so good as adding during 2012. I tell myself (time will as well) that value investing doesn't get easier than this! Buying FFH&BRK at a meaningful discount and buttsit while the market gets it right.

[cwericb]

"I don't feel good about their rejection of a higher takeover offer for Fibrek"

 

Ditto. As a former FBK shareholder I am quite unhappy with FFH. However as a FFH shareholder I have no complaints. So I guess the lesson here is that if Fairfax owns a significant position in a company stay away from it.

[plato1976]

Disclaimer: I was never an FBK shareholder, but as I said, I still feel very bad about that decision, at least I couldn't understand that, and maybe it's b/c of my lack of some financial knowledge.

 

I don't want to treat others in an unfair way even that it benefits myself in the SHORT run. I believe "fair" is part of FFH 's name so I don't understand why that happened

 

"I don't feel good about their rejection of a higher takeover offer for Fibrek"

 

Ditto. As a former FBK shareholder I am quite unhappy with FFH. However as a FFH shareholder I have no complaints. So I guess the lesson here is that if Fairfax owns a significant position in a company stay away from it.

[giofranchi]

Disclaimer: I was never an FBK shareholder, but as I said, I still feel very bad about that decision, at least I couldn't understand that, and maybe it's b/c of my lack of some financial knowledge.

 

I don't want to treat others in an unfair way even that it benefits myself in the SHORT run. I believe "fair" is part of FFH 's name so I don't understand why that happened

 

"I don't feel good about their rejection of a higher takeover offer for Fibrek"

 

Ditto. As a former FBK shareholder I am quite unhappy with FFH. However as a FFH shareholder I have no complaints. So I guess the lesson here is that if Fairfax owns a significant position in a company stay away from it.

 

plato1976,

thank you for your questions and the doubts you have raised!

Generally, I never follow or try to understand every movement the management of a company I invested in is making. I don’t think I can have all the facts to judge them properly. And I believe that partial or incomplete knowledge is more dangerous than no knowledge at all!  :) At least, it surely is misleading.

So, what I tend to do is first try to read everything I can about the management, understand what they have done in the past and what they will (probably) do in the future, and most of all get to know how they will operate and why. Second, if I really could get comfortable with how they will operate and why (it happens very rarely indeed!), I tend to let them do their job.

So, I am not familiar with what Tom Ward has done at SD, nor with the Fibrek takeover offer. And I would be grateful, if you could briefly summarize your objections regarding both Tom Ward and Fibrek.

Thank you,

 

giofranchi

 

[Uccmal]

"I don't feel good about their rejection of a higher takeover offer for Fibrek"

 

Ditto. As a former FBK shareholder I am quite unhappy with FFH. However as a FFH shareholder I have no complaints. So I guess the lesson here is that if Fairfax owns a significant position in a company stay away from it.

 

Where FFH has a controlling position I stay out.  That being said I made a killing off NB and ORH but they are probably exceptions because I knew FFh wanted them back one day.  KW is probably another exception, where FFh may buy it in one day, although it trades at 2x book. 

 

Put another way: I am going to let FFH do some of my investing for me. 

[cwericb]

"Put another way: I am going to let FFH do some of my investing for me."

Uccmal, you have said this before and You are probably right. After the FBK experience I will, for the most part at least, do the same. I'd rather be with them than against them.

 

As for the "Fair and Friendly" I really don't know how they could justify that in the FBK story. Perhaps it should be "Fair and friendly when convenient"

[SharperDingaan]

FFH is an institutional investor, & most of us - are not. The 4.9% double down to 9.9%, re-doubling to 20.0%, & further capitalization to 25%+ of the total share-count; is actually creeping control disguised as multiple mistakes. No premium was paid for the control, & FFH’s presence (at that level) actually destroys alternative value generation (as evidenced by the spiking of BOTH the FBK and the Mercer take over options). Value does eventually get generated, but it is on FFH’s terms & most of it accrues directly to FFH - not all shareholders.

 

FFH is good at their game – IF they are allowed to play it. We all know that a concentrated portfolio can boast a great compound return, but it comes with significant year-on-year volatility. We also know that P&C profitability is seasonal, & that FFH typically magnifies that risk by funding long term investment with short term float. No big deal as long as UW float does not decline rapidly (unlikely in normal circumstances), the investments are reasonably liquid (deep pocketed & friendly potential buyers), & FFH itself is well capitalized (big friends). But cast a big enough pall over reserving ...... & the business model hits a truck.

 

If you wish to apprentice - by all means invest alongside them. For most folks it will in all likelihood be a worth-while, & modestly profitable experience.  Just keep in mind that it is FFH first, & that it may well be more profitable to trade FFH itself – versus the companies it invests in.

 

Everyone eventually drinks the cool-aid when enough angels sing in your ear - for long enough.

 

[Green King]

FFH is an institutional investor, & most of us - are not. The 4.9% double down to 9.9%, re-doubling to 20.0%, & further capitalization to 25%+ of the total share-count; is actually creeping control disguised as multiple mistakes. No premium was paid for the control, & FFH’s presence (at that level) actually destroys alternative value generation (as evidenced by the spiking of BOTH the FBK and the Mercer take over options). Value does eventually get generated, but it is on FFH’s terms & most of it accrues directly to FFH - not all shareholders.

 

FFH is good at their game – IF they are allowed to play it. We all know that a concentrated portfolio can boast a great compound return, but it comes with significant year-on-year volatility. We also know that P&C profitability is seasonal, & that FFH typically magnifies that risk by funding long term investment with short term float. No big deal as long as UW float does not decline rapidly (unlikely in normal circumstances), the investments are reasonably liquid (deep pocketed & friendly potential buyers), & FFH itself is well capitalized (big friends). But cast a big enough pall over reserving ...... & the business model hits a truck.

 

If you wish to apprentice - by all means invest alongside them. For most folks it will in all likelihood be a worth-while, & modestly profitable experience.  Just keep in mind that it is FFH first, & that it may well be more profitable to trade FFH itself – versus the companies it invests in.

 

Everyone eventually drinks the cool-aid when enough angels sing in your ear - for long enough.

 

Great analysis thanks.

[Buffett_Groupie]

Thank you for all those who participated in the poll.  You're more responsive than my own staff!  All the best for the new year and see you all in 3 months! :-)

[cwericb]

FFH is an institutional investor, & most of us - are not. The 4.9% double down to 9.9%, re-doubling to 20.0%, & further capitalization to 25%+ of the total share-count; is actually creeping control disguised as multiple mistakes. No premium was paid for the control, & FFH’s presence (at that level) actually destroys alternative value generation (as evidenced by the spiking of BOTH the FBK and the Mercer take over options). Value does eventually get generated, but it is on FFH’s terms & most of it accrues directly to FFH - not all shareholders.

 

FFH is good at their game – IF they are allowed to play it. We all know that a concentrated portfolio can boast a great compound return, but it comes with significant year-on-year volatility. We also know that P&C profitability is seasonal, & that FFH typically magnifies that risk by funding long term investment with short term float. No big deal as long as UW float does not decline rapidly (unlikely in normal circumstances), the investments are reasonably liquid (deep pocketed & friendly potential buyers), & FFH itself is well capitalized (big friends). But cast a big enough pall over reserving ...... & the business model hits a truck.

 

If you wish to apprentice - by all means invest alongside them. For most folks it will in all likelihood be a worth-while, & modestly profitable experience.  Just keep in mind that it is FFH first, & that it may well be more profitable to trade FFH itself – versus the companies it invests in.

 

Everyone eventually drinks the cool-aid when enough angels sing in your ear - for long enough.

 

SD, I guess I'm mostly ticked off at myself for not dumping SFK/FBK when it was bouncing around $2.00, but that's what happens when one gets greedy.

I wonder if we are seeing anything something similar with RIM?

[Buffett_Groupie]

Please vote your action from Jan 1, 2013!

[Parsad]

Please vote your action from Jan 1, 2013!

 

Hi Buffett Groupie,

 

You'll have to set up another poll to do that.  Geez, you would think an IT guy would figure that out!  ;D  Cheers!