giofranchi

+1 Gio

Conference Call Transcript Gio fairfaxs-ceo-discusses-Q42013-results.pdf

SD, I take the exact opposite view: from the second half of 2010 until 2013 FFH couldn’t have been more wrong, yet they still managed a 2-3% growth. To be so much wrong, and yet to be able not to loose capital is imo an impressive risk-management feat. Think for a moment about the experience of Mr. Bruce Berkowitz in 2011: he was wrong for less then a year and lost almost half of his AUM… Now, compare that with FFH: 3.5 years of being totally wrong, and yet practically no damage to its capital… And you might start to see the resilience of FFH! ;) When they are right, and sooner or later they will, FFH will post spectacular results. :) This is not to say they have not made mistakes (and me too alongside with them!). They, WE, have most surely made mistakes! But that’s precisely what gives me confidence in the fact that, when they finally do things right, returns will abound and will be plentiful. Gio

This is the part I agree with... ;D ;D ;D Gio

Ah! These days it seem that every collaborator I have is trying to bother me and distract me from my reading pleasures… Of course, I keep reading the story of Mr. Baker, albeit at a much slower pace than you are doing! :) Gio

+1!! ;) Gio

Yes! Of course I have! And I agree. Cheers! Gio

Yes! Of course, I know what you meant, but I just wanted to clarify how I personally view my investment in Lancashire… Though, I wouldn’t define an investment in Lancashire an “OK investment”. Think of this for a moment: let’s suppose next year the price of iron ore plummets, and Altius share price follows suite, amid concerns Kami and Julienne Lake might be canned… Instead, Lancashire will resume a special dividend in line with 2012 ($1.95)… And I will be able to use all those new funds averaging down aggressively in Altius… It is difficult to put a precise value on such an opportunity, but at least qualitatively we all understand how important an investment in Lancashire could turn out to be. ;) Altius, of course, is only an example… Just another business in which we are partners! :) But the dynamic I have now described could happen many times, with many different investment opportunities. Gio

I don’t know how you guys look at these numbers, but to me $770 million are a lot of money! :) Gio

Of course, I must add that I consider the acquisition of Cathedral, and consequently a lower special dividend paid out for 2013, the right move to make the wish I expressed in my previous post ever more sustainable. :) Gio

original mungerville, of course you are right. Let me tell you, though, how I personally view LRE: it is not my Berkshire, instead it is my See’s Candy. The two kinds of business I love are: 1) Great compounding machines, that grow through cost cutting and acquisitions; 2) Great niche businesses, that throw off a lot of cash (and put that cash in my hands :) ). For me LRE is the second kind of business. And I am grateful for that! Because it is very difficult to possess such a business through a stock market exchange. Usually, businesses, which are very efficient cash machines from a fiscal point of view, are also privately held. Lancashire, instead, is clearly the exception to the rule. And I want it to go on posting ROEs around 19% and sending me its very low taxed earnings, on which my firm pays no further taxation, for a very long time. ;) Gio

I have just started reading [amazonsearch]Benjamin Franklin An American Life[/amazonsearch] Gio

Yeah… Right! My “7 lean years + 3 boom years” model for FFH is made of 7 years with no return whatsoever, followed by 3 years of 35% annual compounded. Like it or not, that’s what they are doing. In the end you would get a very satisfactory 10-year annual compounded return. And imo running a very low risk, so that you would be able to invest a significant amount of money in this single idea alone: very good return, especially if compared to the amount of work that is required. Of course, there is a caveat here: you must have almost “saintly” patience… As I have always said, not a strategy for everyone… As for me, I am well prepared for 3 more years of almost no returns! ;) Gio In that case, why not buy something like Fiat or Bac, hold for 3 years and thn sell to buy FFH after 3 years. Well, I simply don’t know when those 3 boom years will materialize… The lean years for FFH are the boom years for FIAT+BAC, the boom years for FFH will most probably be the lean years for FIAT+BAC… Given my very refined timing skills… I am almost sure that, if I jump from FIAT+BAC to FFH and vice versa, I will end up to be both in FFH and in FIAT+BAC at exactly the wrong time… That’s how good I am!! ;) Gio

Q4 2013 Conference Call Gio lancashires-ceo-discusses-Q42013results.pdf

Yeah… Right! My “7 lean years + 3 boom years” model for FFH is made of 7 years with no return whatsoever, followed by 3 years of 35% annual compounded. Like it or not, that’s what they are doing. In the end you would get a very satisfactory 10-year annual compounded return. And imo running a very low risk, so that you would be able to invest a significant amount of money in this single idea alone: very good return, especially if compared to the amount of work that is required. Of course, there is a caveat here: you must have almost “saintly” patience… As I have always said, not a strategy for everyone… As for me, I am well prepared for 3 more years of almost no returns! ;) Gio

Ah! Thank you, Ross, for that scary graph! Though sometimes ignorance is very much sweeter than knowledge… ;D ;D ;D Dazel, what’s your view on the probability Kami and Julien Lake are canned, because of a sudden and unexpected dive in the price of iron ore? If that were to happen, how quickly do you think management would be able to come up with new projects to replace Kami and Julien Lake? (The second question is silly, I understand… Because, how could you possibly know?? ::) ) Thank you, Gio

xtreeq, actually my bank asked me if I wanted to join the LRE DRIP program (so, just try and ask your brokerage firm...). And I answered: no, thank you! If a dividend or a special dividend is distributed, I assume that is the best way Mr. Brindle has come up with for the use of capital, always working with the best interest of all shareholders in mind. Then, it is my turn to use the capital I receive the best way I can. :) And I have very precise target prices at which I will add more LRE to my firm’s portfolio. I simply don’t see why I should add more LRE, irrespective of how its share price behaves. Gio

Oaktree Announces Fourth Quarter and Full-Year 2013 Financial Results http://www.sec.gov/Archives/edgar/data/1403528/000140352814000016/exhibit991q42013.htm

I have just bought more at 708 GBp. :) Gio

Hi Ross, your explanation makes a lot of sense! Though I am afraid I am not nimble enough to invest in Posco... When I invest, I require: a) a great owner / manager to partner with for the very long term, b) a good business to own for the very long term, c) a fair entry price. You may have noticed I have proceeded from a) to b) to c), and from “great” to “good” to “fair”, so you know the order in which I look at those three things, and the relevance I attach to each of them. Now, about Posco: - I know nothing of a), - I don’t like the steel business in general… and I think this is relevant to any investment decision and business analysis: of course, Posco can swim against the tide, and be the exception to the rule, but why should I be confident in my ability of truly recognizing the exception to the rule? I mean, what do I really know about the steel industry? Very little, I guess… And why should I presume to be able to identify the only very profitable business in a mediocre industry, that I know little about? While it is easy enough to recognize if a business is a good one in general, I find exceedingly hard to spot the single great company in an industry stuck with burdensome capital needs and low returns… - Finally, I am sure Posco’s share price today is very attractive. As you can see, the only thing I am sure about Posco is the one to which I attach the least relevance… Regarding ALS I don’t understand why you assume that, should iron ore price crash, both Julienne Lake and Kami are “canned”… Such long term project should not be so much price dependent, or should they? I mean, production would surely be slower than previously thought, and sales would consequently be less than projected… This is easily foreseeable… But completely postponed or cancelled?! It seems a bit pessimistic… ALS’s royalties might be much lower than expected, but imo it is hard to think they will amount to zero! And even with greatly reduced royalties from Julienne Lake and Kami, ALS’s management will enjoy a lot of free-cash to invest in new projects. It is difficult to see how ALS could be dead money for many years ahead… Gio

Q4 2013 and full year 2013 Results: Gio pr-2014-02-13.pdf

Well, but of course this is just short-term… In the long-term we will keep consuming more and more iron and its price should be sustained by the increasing demand. And in the short-term who really knows? Maybe also the price of steel could take a hit… so, lower costs, but also lower revenues. Who knows? Gio

Cass Freight Index Report January 2014 Gio Cass_Freight_Index_Report_-_Jan_2014.pdf

Thank you for posting the article, fareastwarriors. It seems a special dividend is excepted after all… though the share price continues to behave somewhat awkwardly… we will see! :) Gio

Planned Changes to the LHL Board http://www.lancashiregroup.com/media/releases/2014/11-02-2014.aspx Gio