Liberty

Great post, mountboney!

Mostly likely, yes. But there's always the possibility that they'll enter another long-term contract for it the next time prices are at a level that they like. Could it be that they didn't include it in the long-term contracts because they kept a margin of safety on the mill's DP production? Once it's up and running, confirming that they have 200mt/y, maybe they'll take a second look. Just a guess, though.

You are indeed right. I was talking about their CPI derivatives, but they also have (had?) market hedges. Because of insurance float, FFH is inherently leveraged, and they have more equity exposure than most other insurers, so they have to be careful about the kind of volatility we've been experiencing lately. I think they make more sense when looked at this way -- as a defence mechanism rather than as a pure macro bet.

One thing to consider is that Fairfax's macro bets have traditionally been very asymmetric, so that if they are wrong, they haven't lost that much. When you evaluate Fairfax's investments, make sure to keep the proper perspective on those bets. They aren't betting the farm...

I also have trouble coming with a valuation of less than 60 with just the current divisions, unless there's a huge fire-sale at the worst possible time, but I doubt that would happen as their balance sheet is solid. But I also have a fairly high degree of confidence that they can pull off 1, maybe 2, other highly accretive DP acquisitions in the next year. That could bring things to the next level and we're definitely not paying for it at these prices. Based on comments by the Mayor of LSQ, we might have some news about an acquisition there this month. But then again, we were supposed to have news last summer, so who knows... Even if it doesn't pan out, I expect the 4 divisions to be profitable and Chad's capital allocations skills to stay intact; once cashflow from Thurso comes, if he can't make acquisitions and the stock price remains depressed, I would expect significant buybacks. There are many levers that can be pulled.

I'd be really curious to know how they get that number.

Oddballstocks, it is true that for people who aren't ready to commit all the way and aren't confident in their skills, settling for average returns is the best thing to do; they can probably lose more money trying to outperform than by doing anything else. But something you've written doesn't make much sense to me. You write: If these areas are outside of your circle of competence or if you think they are too efficiently priced to gain an edge, why even own anything in those areas? Isn't it diworsification? Why not concentrate where you think you have an edge? If someone put a gun to my head and said that I had to own something in some industry or country that is outside of my circle of competence, I'd buy an index. But I don't have to own anything I don't really want... So I'm just wondering why you feel you need to own something in those areas? Thanks.

Mr Market sure is acting strange today. The company announces that they're done with the conversion of a plant that's worth more than the market cap of the whole company, and the stock's down 10%. Oh well, I bought more.. We'll see where it is in a few years. I was expecting some people to sell for tax loss reasons (I bet a bunch bought it when it was 50-60), but this whole company having a market cap of 360m makes no sense.

From the rumor mill: http://www.appleinsider.com/articles/11/12/05/apple_television_rumored_to_come_in_3_sizes_including_32_and_55.html

Here's a theory on the writedown: http://www.mondaynote.com/2011/12/05/behind-rim%E2%80%99s-485m-write-off/

Hi AZ, The collar for the biggest chunk of production is set between 1200 and 1600, and there's also a smaller fraction of the production that has been sold at viscose spot prices less 1000, which usually ends up being about 200 more than the DP spot price (this is from memory, so double-check anything I say). I'm not aware of any public record other than what has been disclosed by the company. If they exist, they are probably somewhere in China... On a conference call, someone asked Chad about these contracts and wondered how confident he was that they would be honored. Chad said that when looking for partners, it was a priority for him to make sure that whoever he made a deal with was a solid and trustworthy player. This is all from memory, but I remember getting the impression that he was very aware of that danger and that he might have left some money on the table just to make sure his deals with Chinese parties would be as dependable as possible. It does fit with his pattern of covering the downside before looking at the upside. Let me know if any of this isn't clear. As I said, it's from memory, but with more time I could dig up the exact details in my notes.

Looks like production at Thurso has started: http://www.marketwatch.com/story/fortress-paper-commences-dissolving-pulp-production-and-provides-corporate-update-2011-12-05-1631130

I certainly didn't see that one coming ???

I'm guessing those annual reports aren't available anywhere except for investors in your fund(s)..? :'( That's a gift I'd like to get this xmas :)

Here you go: http://www.megaupload.com/?d=Q08YE2ZO That's everything I have from the screenshot that I posted above. Doesn't include the new archive that he posts as far as I know, but there might be a couple duplicates...

Great post, once again, and it just reinforces my point... I don't think a good book on value investing has to have much that is new to be good. I don't know about others, but personally I've reached the 'diminishing returns' point of new information acquired through reading books about value investing a while ago (the core principles are fairly simple), but I keep reading because it helps keep me on the right track, makes maintaining discipline easier and gives motivation when times are tough. There aren't that many truly great books on value investing, but a lot of times when I read your posts I get the same feeling that I do when reading those; it helps me stay on the right paths, keeps things in perspective (what's really important and what isn't) and refreshes my memory as to what the truly important core principles are. That's why I'd love to have a Parsad on Investing book (even if it's just a PDF e-book) :) I'm sure you've had an interesting investing life with lots of insightful anecdotes and learning events.. In any case, just a suggestion. It's easier to ask someone to write a book than to actually write one!

Parsad, have you ever thought about writing a book? Your take on 'Margin of Safety', more or less. I'd read that! :)

Most people here probably already know it, but this is another great compilation of quotes, mostly from annual meetings: http://buffettfaq.com/

He's a gentleman and a scholar! Me, I'm just a individual investor who would love to someday live off my capital gains and dividends...

Via SH, from a Canacord report:

Fair enough, no pressure :)

I'd actually be raising my eyebrow if they weren't taking any write downs given what's happening with the PB. In my opinion they're just discontinuing and liquidating something they shouldn't even have started, at least until they get their phones issues straight. Personally, I'd be more interested in seeing actual numbers for those PB left in the channel. That would tell us how hard it is proving to get rid of those tablets even at a bargain $200 price, and also exactly how confident they were, or cocky some might say, in manufacturing so much of a product that no one enventually wanted. That's what I'm saying. There's a proper writedown, but it gives the opportunity of writing down more than what is necessary to see a bounce in the next quarter. Say you estimate that something is now worth X, but instead you write it down to 1/2 of X, during the next quarter if you see it for X you have this 'bonus' 1/2 X coming into operating profits. I'm not saying that's what they're doing, just that it's something to watch out for, because the temptation to have a better Q4 will be high since consumer electronics makers are always watched more closely during the holiday shopping season.

Let's take EBIX, which I know has been buying back tons of stock from the secondary market in the past few quarters. If I look them up on the SEC's site, I see all kinds of filings but nothing about those buybacks. Is it possible to see individual buybacks there in the same way that on CanadianInsider.com I can see that ALS* bought back 5,000 shares on a specific day? And if so, where is that information? Thanks. *If you go here: http://canadianinsider.com/node/7?menu_tickersearch=als You can see day by day how much stock the company has been buying back. That's what I'd love to be able to see for US companies -- company buybacks, not management purchases.

I see it gives you insider transactions, but I don't see anything about buybacks by the company. Am I missing something?

I totally agree there's a justified GAAP writedown there, but I'd be curious to look closer at it to see if they wrote it down more than they had to - management has a lot of discretion there. But I'm not saying I know that something wrong is going on -- just pointing out that there's the potential for it. We'd have to dig much deeper to be sure..