omagh

@Xerces...FFH has so much under their control, yet they put themselves into forced outs continuously. It's capital structure, portfolio structure, and lack of overall financial strength. Thanks for the catch -- it was WFC and not AXP that they held way back then. Those excerpts from the 2012 and 2013 letters exactly nail the problem at FFH where they incur portfolio risk that is obvious to outsiders. It's like someone driving a car without a seatbelt and having their mother claim to the press "Who could possibly have foreseen this tragic accident?" (!hand up!) The 2013 letter was a turning point for me personally as the investment team showed how they couldn't be trusted. I exited after the annual meeting run-up. The cash pulled is worth multiples more. The speculators hanging around today in FFH are looking for mean reversion to some premium to book value. Good luck to them.

@Parsad RFP is a cyclical, capital-intensive business, so it's ultimately a trade unless Fairfax round-trips on this investment like they just did with BB. Assume 35% goes to govt in capital gains taxes. It's hard to get excited about an investment that's still underwater and you get to keep 2/3's of the capital gain. Fairfax investment team has been really bad over the last ten years and really have only had 1 large winner in the last 20 years -- which they had to pay 1/3 cap gains on. Imagine that they had actually stuck to their pronouncements back in 2010 that they were going to be buy-and-hold investors in blue-chip franchises like JNJ and AXP -- no cap gains, multiples of original purchase, dividends. Imagine further if FFH cut their debt load and had the financial strength to execute when others need cash instead of having to sell assets to raise capital, often at inopportune times. I walked out on Fairfax long ago and made multiples more with the proceeds than remaining with Fairfax. https://seekingalpha.com/article/4429197-tracking-prem-watsas-fairfax-financial-holdings-portfolio-minus-minus-q1-2021-update Resolute Forest Products (RFP? The large (top three) RFP stake is now at ~12% of the portfolio. The position was first established in Q4 2010 when it was named Abitibi Bowater and the stake has since been more than doubled. Over the years, their net investment in RFP was $745M ($24.39 per share) and the current value is ~$455M ($14.89 per share) – in the books, the carrying value listed is ~$134M as they wrote down losses. Their ownership stake is just under 25% of the business.

Permanently out of the money ? How silly to round-trip on BB and be unable to sell. Who could have possibly foreseen this?!

https://www.sec.gov/Archives/edgar/data/1709323/000170932321000003/xslForm13F_X01/13fq12021.xml https://dataroma.com/m/holdings.php?m=HC FB - Reduce 40.37%

Who knows? The whole mining/metals aftermarket is littered with speculators who are very reactive as a group. They are Graham's Mr Market. A value-oriented approach ignores the daily fluctuations. The free cash flow story is still intact. The royalty coupon stream has increased. The long-term call option on their project generation portfolio is still intact. They spun out ARR. They repurchased shares.

Investor day presentation. https://altiusminerals.com/storage/webcasts/altius---investor-day-vpub2-1620911300.pdf

Interesting bit as well. It speaks to his involvement in analysis of deals and to his grounding in accounting. He'll work well with Ted and Todd given this background. Buffett is so smart in the selective quality of people with which he surrounds himself. Abel found his way to the company through one of its many acquisitions. After working as an accountant at PwC in San Francisco, in 1992 he went to work for one of the firm’s energy clients, a small business known as CalEnergy. “Anything I asked him to do he did 125 per cent and then looked at things around it to do better as well,” Sokol said, who was running CalEnergy. “Greg needed very little mentoring. What he required was just being given the opportunities.” CalEnergy under Sokol and Abel went on a dealmaking spree before Berkshire bought the company in 2000. Before he had turned 40, Abel had been elevated to president and chief operating officer of the energy unit, going on to own a valuable 1 per cent stake in it. It was there where he gained much of his dealmaking chops. The division has accounted for some of Berkshire’s biggest takeovers, a fact that has not been missed by shareholders who grumble about the mammoth $145.4bn cash pile the conglomerate has amassed.

Some decent AGM notes... https://www.moomoo.com/en/news/post/4908363/the-2021-berkshire-agm-meeting-notes

Calpers lacks insight. Proof is trivial to find.

Last time that I checked, baby boomers were no longer the largest generation. Household formation and a large number of citizens in the age 25-34 demographic continue to be strong from a housing and mortgage generation perspective. Prior to the pandemic, BAC was generating about 20% free cash. During the pandemic year, free cash generation slipped down to 14%. In the past 5 years, they've bought back almost 20% of shares outstanding and had capacity to do so during 2020, but were prevented from doing so by the regulator. The regulator has lifted that restriction and so share retirement should continue as long as share prices remain attractive. US banks are undervalued compared to Canadian banks and overall have less risk. US banks are modestly leveraged at ~10x and well-reserved for significant risks. Given the passage of time since the 2008 financial crisis, we may see some loosening of regulatory constraints and better methods of offloading risk. I added during March 2020 to my BAC holdings and sleep well. The original warrant trade was fantastic and there's no need to interrupt future compounding with Moynihan directing the ship.

13F is available. https://www.sec.gov/Archives/edgar/data/915191/000110465921021076/xslForm13F_X01/a21-5468_6informationtable.xml

Bragging about a short-term trade. Very nice, haha. I'm no good at trading, but I'm not disappointed to instead have been owning Constellation Software for many many years instead of ALS... Lovely -- a brag back. But, wait, it's a humble brag! Those are the best. You do realize that the risk / reward for CSU going forward isn't very strong. 49x equity for an EBIT that is compounding at 17% for the last 5 years isn't exactly compelling -- it's a 2% coupon if you value CSU as a pre-tax bond and a 1.1% as an after-tax bond. LOTS of things beat that 'everything is just a cash stream' valuation without the capital risk, so be sure you know what you're doing with your life's savings and take some profits to live another day. The business model is based on a roll-up which in most people's experience eventually hits an airpocket that blows a hole in the balance sheet. Oh, but the software business is sticky and our customers don't leave. http://financials.morningstar.com/income-statement/is.html?t=CSU&region=can&culture=en-US 17% annualized EBIT growth since 2015. For kicks, a 1.1% coupon compounding at 17% for the next 10 years gets up to a 5% coupon. That 49x equity would become a 10x equity without the market cap going up and that $380M in earnings would grow to $1.8B which fits nicely into its current $34B market cap at a future 18x earnings ten years from now down from 90x today. But wait, that sounds like 10 years of ALS. Maybe someone is expecting future investors to pay 90x earnings for a 17% grower? Maybe that CSU valuation is a bit of luck rather than skill on your part. But what do I know? I'm no Robinhood.

Another way to look at this -- they converted their long duration bond portfolio into a set of income producing real assets at BHE and BNSF. The yields are better and the risks are better than long duration bonds at this point in the bond market cycle. Further, based on Christopher Bloomstran's deep dive, they used the accelerated depreciation credits at BHE and BNSF as a secondary method of reducing tax payments and increasing cashflows. As well, based on Brooklyn Investor's charts, they have built up a large cash component in their portfolio to backstop insurance losses and to provide optionality for opportunistic acquisitions. This is not all black and white but the big asset allocation shift of the last ten years (see attached) has been the movement of funds from longer term fixed income to cash and equivalents. This movement raises two questions (the indirect one raised by wabuffo and a direct one). The indirect (and retrospective) one: Returns would have been better if the longer term fixed income portion would have grown proportionally to float. The direct one: Does the current (and growing) allocation offer potentially significant optionality value? (my answer is yes) Part of the decision in shifting from bonds to other assets (cash, owned income producing assets) is about expected future returns. The move seems correct, but the unexpected happened during the recent COVID panic -- government became a lender of first resort where normally Berkshire would have had its pick of distressed assets. A similar crossroads is appearing now for Berkshire. AAPL is starting to flatline in terms of its EBIT growth and topline sales growth, but it's priced for some large expectations out of the business. Does Berkshire exit, partially exit or hold due to the expected tax hit? In 1998, Berkshire was facing a similar question with very sizable paper gains in Coca Cola, Gillette and American Express in particular. Berkshire had an out where they turned a ~3x BV share price into General Re with a merger where they acquired a substantial amount of float and a bond-heavy portfolio that they turned into cash. So, giving up a bit of equity to acquire a cashable asset was enough to de-risk an overvalued portfolio without incurring a very sizable capital gains hit from selling KO, G or AXP. Do they interrupt compounding at lower rates going forward and take the sizable capital gains tax hit? History says no, but the new answer may be something creative just like the last time.

bizaro...Would a SPAC build a shareholder base? It depends on what the goal is for raising capital -- it's party about funding, but it's also about building a set of shareholders that will stick with you for the primary raise and for possible secondary raises. Raising at inflated values via SPAC is one way to raise funds, but it could be a short-term gain that blunts the business' momentum. - O

Thrifty, I think you're making some key points. Indeed, the company has changed substantially from Dazel's initial post. It has turned into a cashflow story. Further, it has taken the royalty model into other business lines where Dalton has been able to extend into new markets, To make a profit over time on a growing cashflow business, entry points are important for short-term margin of safety, but over time, the long-term compounding will greatly outstrip the initial margin of safety gain. The reinvestment runway is long. - O

Another way to look at this -- they converted their long duration bond portfolio into a set of income producing real assets at BHE and BNSF. The yields are better and the risks are better than long duration bonds at this point in the bond market cycle. Further, based on Christopher Bloomstran's deep dive, they used the accelerated depreciation credits at BHE and BNSF as a secondary method of reducing tax payments and increasing cashflows. As well, based on Brooklyn Investor's charts, they have built up a large cash component in their portfolio to backstop insurance losses and to provide optionality for opportunistic acquisitions.

There's always an excuse. Meanwhile, the opportunity cost keeps growing, because you could've been owning something else that was up 2-3x in the meantime. Weren't members of the company's exec team talking about how happy they were about the blood in the streets and time to buy and create lots of value in recent years? Isn't the model supposed to be that commodity cycles don't matter too much because they don't have the capex and have these magical royalties? I don't know, I tend to think that stuff I said earlier in this thread applies and that they aren't getting a very high ROIC on overall capital employed, and because of this lack of value creation, the market is keeping the stock flat (which is losing value vs your opportunity cost, which should at least be the SP500, since you can trivially own that at almost no cost and be incredibly diversified across the whole world (US listed, but mostly global companies)). Entry point: $6.65 (March 2020) Current price: $14.50 Return: 155% annualized in 10 months That seems to be better than such things as the SP500 and Consellation Software, but what do I know. Some of us are doing just fine.

Happy New Year all Cheers nwoodman Slide 32 shows that P&C M&A transactions (2016-2020) have been done at P/B multiples from 1.2 to 2.0 (throwing out that 6.0). So, Fairfax at 0.8 P/B is well below a private buyer's transaction level.

Seems about right. Share buybacks at a 5-10% of float along with 8-10% toplline growth will be just fine; should push share prices north at a 15% annual clip. They have ~$2B / month coming in along with the current cash on the balance sheet. As well, the utilities will add generation capacity which creates accelerated depreciation credits. There is a long reinvestment runway and lots of optionality. The negative Buffett / Berkshire pieces are good for selling online ads, but often precede a decent run-up in the stock price.

I haven't watched BNN in years. Didn't know it was still a thing. Cutting out crap is satisfying.

That's not what I meant because it doesn't raise the issue that I mentioned of the shareholder not knowing how to allocate the cash. I had my head stuck in the past when I remember he had addressed the topic back when dividends were asked for. But yes, beginning the sentence the way I did was prone to confusion. My point is that the shareholders similarly wouldn't know what to do with the shares distributed. Fair point. Shares distributed would encounter the same issue of the shareholder doing a worse job of cash allocation than BRK. Spin-off shares could easily get flipped where retention is probably the better option. On distribution of cash vs buyvacks, Buffett has always leaned to repurchases. Chris Bloomstran laid out the hierarchy of decisions using DIS as the example: https://threadreaderapp.com/thread/1322554127298240515.html

They are distributing cash now through buybacks. Sopping up some of the undervaluation will gin up the price which is what most folks are really complaining about. Berkshire is a growth company, but priced like a BV multiple play.

, and basically all others ending by : ? August 31st on that press release. So Marc Hamburg was likely on vacation and a general number was provided. I wouldn't read too much into it.

Take a free cash flow view. The growth in FCF is the forward view and shows what Dalton's re-orientation of the company into a royalty holder has done. It's an investment company with small capital requirements. All of the operating cash flows are being reinvested. For some of their investments, they act as the GP and then do capital raises to do the build and to operate. For others, they are just a royalty holder. They have opened up new markets (metals, minerals, power) to what is in effect a high-rent capital with long durations. They have been able to gather a set of partners who are capital providers. They have a steady pipeline of reinvestment opportunities. In March 2020, ALS was down below 10x normalized 2020 FCF which made for a decent entry point. FCF has grown from -$21M in 2015 to $30M (TTM) on a fairly steady path. Altius has also been returning capital to shareholders via share repurchases and a modest dividend. Today, Altius is at 15x normalized FCF. On the negative side, Altius is in a business which has some speculative investments that occasionally need to be written down. Conversely, Altius takes a value-based approach, maintains decent capital levels and expects to buy assets and future cashflows at significant discounts. Past history shows in cyclical industries that commodity prices fluctuate wildly based on supply and demand which gives them the opportunity to buy at a discount and sell at a premium depending on the market cycle point. Many on this board have bought looking at the potential cyclical commidity premium story, where a compounding cashflow story is more realistic. YMMV.

Importantly, Berkshire's reputation is still intact. With 400,000 employees, the odds of 1 of them doing something shady get pretty high to the point of certainty in any given year. Find it, stamp it out immediately and move on. Wells Fargo learned the hard way about letting shady practices fester.