giofranchi

loganc, I agree with your statement. Yet, I wonder: if there were a man on earth who has finally mastered the incredibly difficult craft of NOT talking about things he has not done sufficient work on, I thought that man would have been Munger… Don’t you? So, what have we got here? Even Munger is still subject to this kind of mistakes? Do you think the right explanation might be just this simple and straightforward? Gio

peridotcapital, Loews business results during the last 6 years simply have not been comparable to BH’s. And BH has traded far above BVPS many times during the last 6 years. When I say there shouldn’t be much downside below BVPS, even if business results at BH deteriorate significantly, it is because they have been excellent so far. Not so at Loews! Of course no one sees Biglari who keeps finding investment opportunities which double every 2-3 years and BH’s stock price which keeps trading below BVPS, right? Now tell me: do you see Biglari finding investment opportunities which double in 5-6 years and at the same time BH’s stock price selling well below the level it is selling today? Yet, twice the time in doubling is what I mean by significant deterioration of business results. Gio

Why the jump in share price yesterday and today? Any noteworthy piece of news that I have missed? ??? Gio

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That's just not true. It means the market is expecting BH to underperform, not to lose money. Well… It depends what you mean by “underperform”… If you mean it will do worse than the discount rate the market is applying to stocks today, you might be right. Then you have to guess what that discount rate is: many think the stock market is so high because the alternative, the bond market, yields almost nothing… To me that translates into a very low discount rate applied to stocks these days… Maybe not losing money… but expecting almost no earnings at all! Of course anything could happen! But of course I meant that even a dramatic deterioration of results, starting from what the business performance has been until now, wouldn’t justify the share price trading much below BVPS. And of course I don’t have to answer silly questions! Cheers, Gio

Reflect your belief that is attractively priced? Or are dollar-cost averaging? I think it is attractively priced… As a very long term investment and if a more difficult environment awaits us. In case something goes wrong with this global deleveraging, and we actually get to see deflation or a stock market that goes down and stays down for some time (or both), FFH imo might truly succeed in compounding at 15% annual. If FFH compounds at 15% annual, there is no reason why 10 years from now it won’t trade at the same multiple it is trading today. This of course would mean a 15% CAGR for my investment. Of course it won’t happen if central banks succeed in resolving our debt situation without any harmful consequences, and if the stock market keeps marching upward undisturbed. Gio

Well… To trade below BVPS means the market is expecting the business to lose money going forward… Shifting from business results that have been exceptional so far to losing money… That’s quite a change! And sincerely not a reasonable one to expect… Anyway, shares are already trading below BVPS… so, what’s the downside here? If instead, like I believe, fundamentals are improving, with the Maxim turnaround on its way to become profitable and the S n S franchise effort on its way to pay off, I much prefer a low stock price to an higher stock price. My businesses generate meaningful cash flow each month: a low stock price gives me the opportunity to put that cash flow to good use, an higher stock price doesn’t. Most of all because imo recent share price movements have nothing to do with business results. Want to know why Gabelli might be selling his shares? Simply because Biglari hasn’t answered his letters! ;) Cheers, Gio

I am buying FFH today, and I'll be buying BH in two weeks (if its price stays this low or is lower). Cheers, Gio

Well, I think also large investors like Gabelli might have sold some… Gabelli clearly wasn’t happy about the results of the AM, right? Gio

Hi Gary, I am actually! :) And I would say the Campus of the University of Waterloo is getting better and better, putting to shame many campuses of the most prestigious universities in Europe. I think it is something to be proud of! Cheers, Gio

BH is selling for less than BVPS. ;) Gio

Back at the office today, after a very pleasant trip first to Ottawa then to Kitchener-Waterloo, where I was born and where I remember spending many summers as a kid with my parents, while they were lecturing at the University of Waterloo. It has been very nice indeed to see those places again! :) The two most important takeaways from the FFH annual meeting imo follow: 1) FFH remains the only investment I know which will perform well, should something seriously go wrong with this global deleveraging we are living through. With “should something seriously go wrong” I mean: stock prices correct violently downward AND STAY DOWN FOR A PROTRACTED PERIOD OF TIME. 2) FIH is a vehicle that should be able to compound at high rates of return for a very long time to come. Cheers, Gio

Yes! Thank you very much, Sanjeev! Sorry I wasn’t able to attend your annual meeting after the FFH’s, but Laura was tired and I HAD to behave more like a tourist than like an investor… I hope you understand what I mean! ;) Cheers, Gio

--Prem Watsa at the 2015 FFH Annual Meeting Gio

Wow! Impressive! I certainly cannot get even close to your personal record, but I surely could run faster: 10 km in 50 minutes is just my basic training schedule. :) Cheers, Gio

+1! ;) Gio

Thank you for sharing, frugalchief! :) Cheers, Gio

Sincerely I am not worried about valuation for any investment of mine. I think they are still all undervalued. This being said, in an environment of elevated general stock market prices I look for businesses with lots of cash and a management with the reputation of aggressively deploying cash reserves, when great opportunities come their way. Gio

I think there are at least three features which could not be easily copied by a single investor, nor by another investment fund: 1) FIH’s proprietary research capabilities and broad network in India 2) FIH’s attractive structure for long-term investments (permanent capital) 3) FIH’s access to private equity type investments Gio

And that's exactly why I invest in FIH, while I don't invest in Senvest Capital (with all due respect for Senvest!). ;) Gio

It is not “my logic”… It is math. If Senvest Capital has the same CAGR I expect of FIH, and I am using here the number Packer has calculated 15.8%, an investor who bought at 1.2xNAV 15 years ago has enjoyed a CAGR for his/her investment of 14.4%, provided Senvest Capital trades at BV today. Would you call a 14.4% CAGR sustained for 15 years a bad investment? I don’t think so. Gio

This doesn’t bother me at all. I am used to very lumpy results and have come to accept by now that events which lead to market beating results don’t come often and materialize only once in a while… Still they make a very important difference over time! This also doesn’t bother me much: the Indian stock market is over $1 trillion, and on top of that there is the private market to which FIH will surely have access. Both the Indian stock market and the private market will grow with the economy. I think there will be plenty of opportunities for many years to come. 15.8% annual imo is nothing to complain about! ;) Moreover FIH will have access to private equity type of dealings, which probably were precluded to the HWIC Asia Fund. And it will operate in a more business friendly environment (also inflation is clearly trending down since 2012). Cheers, Gio

Moreover, why do you assume the HWIC Asia Fund results are all we should be looking at? Fairfax invested very successfully in Thomas Cook, in IKYA, and in Sterling Resorts too, which are not included in the performance of the HWIC Asia Fund. Gio

Packer, let me understand better, because I think I am missing something. If you are not willing to pay a premium to NAV, it means you think the 22% gross CAGR I hinted at is not achievable (not even a 20% gross CAGR for that matter! Which is lower than what the HWIC Asia Fund earned NET). Why? You are saying that performance of the HWIC Asia Fund is distorted by last year results which have been too high? Thank you, Gio

Ah! Of course it would be better to buy something and let it compound at 15%-20% for 30 years… Yet, though that’s the kind of business I am looking for, I know there is a difference between theory and practice! ;) Business results at BH have been excellent so far. How to be sure they will never deteriorate in the future? I don’t know... Neither I know how to answer that question for any other business I own. Gio