Dazel Posted February 16, 2018 Share Posted February 16, 2018 Because it is a hell of lot easier to be negative...join the club! If the crowd was not negative than the price would be much much higher and we would not even be having any conversation. Link to comment Share on other sites More sharing options...
StubbleJumper Posted February 16, 2018 Share Posted February 16, 2018 Because it is a hell of lot easier to be negative...join the club! If the crowd was not negative than the price would be much much higher and we would not even be having any conversation. I'm not sure that it's a simple question of being negative. The adverse development is definitely a concern. Does it end in Q4 or do we see more in the future? Was it caused by bad luck, or is it a symptom of bad underwriting (under pricing and poor adjustment practices)? Is it something that fixes itself, or can FFH find somebody to go in and fix it? Those are legitimate questions. Allied might be a decent deal, but the first few quarters are harkening back to the massive reserve adjustments of TIG and C&F. But, this time FFH doesn't have the SwissRe cover, right? The good news is that TIG and C&F were long-tail which is where the worst adverse development tends to appear. But, I'd say the jury is still out (this is true of all acquisitions -- it takes a bit of time to determine whether you bought a lemon or a turd). SJ Link to comment Share on other sites More sharing options...
Txvestor Posted February 16, 2018 Share Posted February 16, 2018 Because it is a hell of lot easier to be negative...join the club! If the crowd was not negative than the price would be much much higher and we would not even be having any conversation. Well said and absolutely true. I would be skeptical about anyone stating that they know AWH book inside out 100%. Its not possible. The Cat losses were higher than at other fairfax insurance subsidiaries and Prem hinted at some modifications to underwriting. The part that concerns me is the $50M adverse development from a claim(s) they took this Q. That is over and above the Cat losses. Based on the worse than Fairfax Cat losses and this additional adverse development, if anyome can cleerly categorically why it would be wront to question AWH I would be interested. The jury is out as far as I am concerned. This is a sizable and dilutive acquisition mind you. I think barring wacky investments by Prem(which he appears intent on tempering) and things going terribly wrong at AWH, the path to $2B a year in BV gains is not terribly difficult to envisage. At 8% equity gains, an average 3.5-4% bonds return, and 95% CR on 15B in written premiums gets you there. And as Prem pointed out thats $70/share/yr. on that basis in the current market Fairfax should be a stock closer to $1000 than to $500, but to my mind the unknowns stand in the way, which is why it teades where it currently does. The good part is fixing that is within grasp. I'm not sure that it's a simple question of being negative. The adverse development is definitely a concern. Does it end in Q4 or do we see more in the future? Was it caused by bad luck, or is it a symptom of bad underwriting (under pricing and poor adjustment practices)? Is it something that fixes itself, or can FFH find somebody to go in and fix it? Those are legitimate questions. Allied might be a decent deal, but the first few quarters are harkening back to the massive reserve adjustments of TIG and C&F. But, this time FFH doesn't have the SwissRe cover, right? The good news is that TIG and C&F were long-tail which is where the worst adverse development tends to appear. But, I'd say the jury is still out (this is true of all acquisitions -- it takes a bit of time to determine whether you bought a lemon or a turd). SJ Link to comment Share on other sites More sharing options...
racemize Posted February 16, 2018 Share Posted February 16, 2018 On the call, they said that adverse development was from one casualty claim (it must have been a whopper). Otherwise they are happy with underwriting and that standards are similar to FFH. Link to comment Share on other sites More sharing options...
Dazel Posted February 17, 2018 Share Posted February 17, 2018 The insurance business they have will create a Markel and Berkshire type outcome. But you get the shares now at the level where there is the doubt of that outcome. Link to comment Share on other sites More sharing options...
Spekulatius Posted February 17, 2018 Share Posted February 17, 2018 The insurance business they have will create a Markel and Berkshire type outcome. But you get the shares now at the level where there is the doubt of that outcome. They need to generate consistent results for a few years to get rerated. There are quite a few insurers trading around book value and some have even decent results, and more consistent than FFH. That said, I am an opportunistic buyer of FFH, but I don’t think, it deserves to trade much higher than it does right now. Link to comment Share on other sites More sharing options...
Dazel Posted February 28, 2018 Share Posted February 28, 2018 This is a great environment to build value for Fairfax...volatility, rising rates will bring many corporate convertible opportunities and bond prices have dropped a fair amount. What an opportunity to keep buying shares as they have dropped on the open about 12 of the last 14 days (LOL). I have rethought the tender offer as I don’t think they would get the amount of shares they want tendered and it would drive the price up....This works out a lot better over the long term. Looking forward to Prem’s annual letter....I would bet he will write about what he thinks of intrinsic value and why share buy backs make sense here. He should be clear with share holders on this in my opinion Longleaf talk about the Fairfax buyback plan in their letter it should be talked about in detail from Prem. Usually we would worry about Prem’s explanation driving up the price of the shares which would hinder the buy back...but I think we all could likely agree that NO one is listening right now. Long term shareholders do deserve the heads up...as it looks like Mason Hawkins has gotten it. Link to comment Share on other sites More sharing options...
petec Posted February 28, 2018 Share Posted February 28, 2018 Longleaf talk about the Fairfax buyback plan in their letter. Which letter? I can't find this in the 4a17 one... I think the buyback plan is a long term change of strategy (from issuing to acquire to buying back) rather than an imminent promise. Link to comment Share on other sites More sharing options...
Dazel Posted February 28, 2018 Share Posted February 28, 2018 Longleaf letter quarter 3 I believe they refer to the fact the ICICI Lombard sale and the First Capital sale will greatly aid Fairfax’s buy back plan. Quarter 1 I believe they describe Fairfax how I see them... Link to comment Share on other sites More sharing options...
Dazel Posted February 28, 2018 Share Posted February 28, 2018 I went to look and I see quarter 3 is not there...not sure how you get it. There was not a lot of detail just the fact that these large capital gains would give Fairfax the firepower for the buyback plan...despite the hurricane season that was going on. Link to comment Share on other sites More sharing options...
petec Posted February 28, 2018 Share Posted February 28, 2018 OK, thanks. I read at least one of those...can't remember which! Link to comment Share on other sites More sharing options...
Dazel Posted February 28, 2018 Share Posted February 28, 2018 I would have to assume Lonf Leaf is thinking the same way I am (no idea whether they have talked directly with Prem but they have historically ingaged with managements of the company’s they own very successfully I might add) about Fairfax. It’s cheap and the holding company has $2.4b in cash for buy backs and the earnings power is being hidden by the large cash position. These prices are excellent for long term holders that will benefit from buy backs. Link to comment Share on other sites More sharing options...
ourkid8 Posted February 28, 2018 Share Posted February 28, 2018 Agreed and it took Teledyne 15 years... "Our hero, Henry Singleton, whom I have mentioned before in our Annual Reports, built Teledyne by taking shares outstanding from seven million in 1960 to 88 million in 1972 and then down to 12 million in 1987 – an 87% drop in shares outstanding. Our long term focus is clear." I think the buyback plan is a long term change of strategy (from issuing to acquire to buying back) rather than an imminent promise. Link to comment Share on other sites More sharing options...
StubbleJumper Posted February 28, 2018 Share Posted February 28, 2018 On days like today when it traded below adjusted book, I think wistfully about the past when we were able to buy leaps on FFH shares. I don't see how this doesn't trade for ~US$650 at some point in 2019. SJ Link to comment Share on other sites More sharing options...
Dazel Posted February 28, 2018 Share Posted February 28, 2018 I am kinda giddy with how things are going...on script. Link to comment Share on other sites More sharing options...
FairFacts Posted February 28, 2018 Share Posted February 28, 2018 'scuse my Ignorance, why are there no Leaps or even options trading in Fairfax? Link to comment Share on other sites More sharing options...
gfp Posted February 28, 2018 Share Posted February 28, 2018 When Fairfax chose to delist from the NYSE the options and LEAPS on the NYSE shares went away. As far as I know there have never been listed options on the TSX shares, so that was the end of that. There may be some big guys that can get an investment bank to make them an option on FFH but most of us don't qualify for that kind of service 'scuse my Ignorance, why are there no Leaps or even options trading in Fairfax? Link to comment Share on other sites More sharing options...
StubbleJumper Posted February 28, 2018 Share Posted February 28, 2018 When Fairfax chose to delist from the NYSE the options and LEAPS on the NYSE shares went away. As far as I know there have never been listed options on the TSX shares, so that was the end of that. There may be some big guys that can get an investment bank to make them an option on FFH but most of us don't qualify for that kind of service 'scuse my Ignorance, why are there no Leaps or even options trading in Fairfax? Yep, about now it would be nice to buy a US$600 leap expiring in Jan 2020. Link to comment Share on other sites More sharing options...
Dazel Posted March 1, 2018 Share Posted March 1, 2018 https://www.wsj.com/articles/indias-quarterly-gdp-increases-7-2-1519821904 http://money.cnn.com/2018/02/28/news/economy/india-economy-gdp-7-2-growth/index.html Would it not be nice to intenched in India already? Fairfax will look very intelligent over the next few years. Link to comment Share on other sites More sharing options...
obtuse_investor Posted March 1, 2018 Share Posted March 1, 2018 Agreed and it took Teledyne 15 years... "Our hero, Henry Singleton, whom I have mentioned before in our Annual Reports, built Teledyne by taking shares outstanding from seven million in 1960 to 88 million in 1972 and then down to 12 million in 1987 – an 87% drop in shares outstanding. Our long term focus is clear." I think the buyback plan is a long term change of strategy (from issuing to acquire to buying back) rather than an imminent promise. Agreed- I like the talk about the long term buyback stance. I'd like to see it in action though. Much like the persistent underwriting profit, it will take me a few years to believe that consistent buyback stance actually exists. I just wish Prem would cut down on the marketing and boasting about the company in all his statements / appearances. I fully understand that one of the primary roles of a CEO is salesmanship, but if he really wants the buyback program to work in the long term, FFH needs to be selling at meaningful discount to intrinsic value. More discount the better. He needs to take a few firm steps: 1) Reduce the analyst calls to just one a year, or maybe even zero. 2) Open the Annual meeting to shareholders only. If journalists / analysts wants to come, they should represent at least one share. Link to comment Share on other sites More sharing options...
obtuse_investor Posted March 1, 2018 Share Posted March 1, 2018 Dazel: I have been lurking and reading your thoughts on FFH over the last year or so. I appreciate the enthusiasm and the research you have done. I happen to agree with almost all your have said. If you don't mind sharing, what percentage of your liquid net worth is directly associated to FFH? I'll offer mine: It is 19.0% Link to comment Share on other sites More sharing options...
petec Posted March 1, 2018 Share Posted March 1, 2018 Agreed and it took Teledyne 15 years... If they're going to reduce the share count by 87% I'll happily wait 15 years! Link to comment Share on other sites More sharing options...
petec Posted March 1, 2018 Share Posted March 1, 2018 Dazel: I have been lurking and reading your thoughts on FFH over the last year or so. I appreciate the enthusiasm and the research you have done. I happen to agree with almost all your have said. If you don't mind sharing, what percentage of your liquid net worth is directly associated to FFH? I'll offer mine: It is 19.0% 13% and rising. For the family - higher for me personally. Link to comment Share on other sites More sharing options...
Dazel Posted March 1, 2018 Share Posted March 1, 2018 Obtuse, I have been warned in the past about getting personal on this board...but I will say it is a heavy position that will grow at these levels...pretty sure I mentioned it was my only equity holding about a month ago... Dazel Link to comment Share on other sites More sharing options...
Dazel Posted March 1, 2018 Share Posted March 1, 2018 For those holding the FFH shares...USD and the Euro have risen about 5% in FEb...I am not certain of Fairfax hedges but I believe they are unhedged other than most liabilities? All numbers and most importantly book value are stated in USD as we know...it is a trend to watch and another reason for Prem to be picking off FFH shares. 5% is a lot to Fairfax these days as it has become very large. Link to comment Share on other sites More sharing options...
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