petec Posted January 14, 2018 Share Posted January 14, 2018 I was surprised (and encouraged) by Prem's comments after the election. It sounded like and I think most would agree, that FFH was ready to play offense. I don't know the exact numbers but it seems like FFH have added almost NO significant equity long positions to their portfolio's. Portfolio is still mostly cash well over a year later. What gives? Valuation? Basically yes. Prem was actually very clear that "offense" didn't mean they were suddenly bullish on the market. It just meant they were cutting their losses on the hedges and would wait in cash for great opportunities. They have done quite a bit since, but more in the pref/warrant+convertible portfolio rather than equities. Link to comment Share on other sites More sharing options...
Dazel Posted January 15, 2018 Share Posted January 15, 2018 Petec I disagree. Prem said I am bullish on global markets and growth especially in India and developing markets because the U.S growth is going to pick up and animal spirits will return. -They made the biggest acquisition by far in their history completed in July..taking the investment portfolio to $40b -They sold the majority of their long term bonds and said interest rates will rise...in other words we will wait to buy bonds -They started Fairfax Africa -they added to Fairfax India raised debt and bought more investments They added another $250m in Greece -had record investment returns for 2017 from two big sales -started an Insurance company on their own in India -invested about another billion in convertible preferred shares They have been very busy they just are not buying U.S common stocks at 20x earnings....but have shown bullish moves on global growth which they have been right about so far. To me again the bullishness has kept them away from the bond market which will move the needle more than anything else when they re enter....when others head for the exit....that’s not far away. The 43% of the portfolio in cash will be headed for bonds at the right price. Link to comment Share on other sites More sharing options...
dutchman Posted January 15, 2018 Share Posted January 15, 2018 Near-term earnings will be well below the company’s long run earnings power, for sure. I think this plays out over 5+ years though. Good one for the patient, but who's patient? :) Link to comment Share on other sites More sharing options...
Dazel Posted January 15, 2018 Share Posted January 15, 2018 I once again disagree. Dutchman. Can you tell me how Markel got to a $1000 a share? What investment genius decisions did they make? They have very good insurance operations and a decent investment return on the investment portfolio. New Fairfax is an operating company that do not need spectacular macro calls... they do not need a lot to go right to perform well. Will they have a great investment in the next 5 years that will standout and pop the shares probably...5% return and underwriting profits will take pretax earnings to around $3b. That’s this year...not the next 5. The math works. Link to comment Share on other sites More sharing options...
shalab Posted January 15, 2018 Share Posted January 15, 2018 FRFHF still has CPI derivatives on which it is losing money. Furthermore, FRFHF is a family business in the mould of Indian business houses. If you look at Tata, the family has owned it since 1800's. SD has done some good analysis on how these are setup so the next generation will benefit. I once again disagree. Dutchman. Can you tell me how Markel got to a $1000 a share? What investment genius decisions did they make? They have very good insurance operations and a decent investment return on the investment portfolio. New Fairfax is an operating company that do not need spectacular macro calls... they do not need a lot to go right to perform well. Will they have a great investment in the next 5 years that will standout and pop the shares probably...5% return and underwriting profits will take pretax earnings to around $3b. That’s this year...not the next 5. The math works. Link to comment Share on other sites More sharing options...
Dazel Posted January 15, 2018 Share Posted January 15, 2018 Shaleb, Tell the board what the mark to market value of the he CPI derivatives are carried in the book value is please and how much possible downside there is to a value of zero please. Link to comment Share on other sites More sharing options...
Dazel Posted January 15, 2018 Share Posted January 15, 2018 Page 14 of the third quarter report Shalab. The hit has been taken as for that Tata family? Really? Link to comment Share on other sites More sharing options...
Dazel Posted January 15, 2018 Share Posted January 15, 2018 Waiting Shalab let’s us know what that downside is on the CPI derivatives and please explain your bizarre Tata reference. Link to comment Share on other sites More sharing options...
dutchman Posted January 15, 2018 Share Posted January 15, 2018 i think he's saying it deserves a big discount because it will be handed over to watsa's son who may not be the best steward? thanks for your posts Dazel, I'm learning a lot. Link to comment Share on other sites More sharing options...
shalab Posted January 15, 2018 Share Posted January 15, 2018 In Indian business houses, control is passed from one generation to the next - shareholder is a lower priority - that is all. CPI derivatives - let us see how things look like in Q4. I still own some FRFHF but the number is significantly lower than it was a few years back. It has been a good decision. I haven't bought back yet. i think he's saying it deserves a big discount because it will be handed over to watsa's son who may not be the best steward? thanks for your posts Dazel, I'm learning a lot. Link to comment Share on other sites More sharing options...
Dazel Posted January 15, 2018 Share Posted January 15, 2018 http://www.fairfax.ca/news/press-releases/press-release-details/2015/Fairfax-Announces-Modifications-to-Multiple-Voting-Share-Proposal-and-Postponement-of-Special-Meeting--of-Shareholders-to-August-24-2015/default.aspx .2 from the amendment If Prem is no longer the CEO or the Chairman of Fairfax there has to be a vote among “minority shareholders” to approve the amendments for the multiple voting shares to remain. He has signed on to remain in his positions until 2025 and kept his salary frozen at $600,000 which he has done since 2000. So why would you worry about his son stewarding the ship? He would have to win a minority vote to have the controlling vote if Prem were to leave for “any” reason. Shalab does that sound like an Indian business house from 1800’s? Link to comment Share on other sites More sharing options...
Dazel Posted January 15, 2018 Share Posted January 15, 2018 $59m fair value on CPI contracts. They have written off almost $600m. Link to comment Share on other sites More sharing options...
petec Posted January 15, 2018 Share Posted January 15, 2018 Petec I disagree. Prem said I am bullish on global markets and growth especially in India and developing markets because the U.S growth is going to pick up and animal spirits will return. -They made the biggest acquisition by far in their history completed in July..taking the investment portfolio to $40b -They sold the majority of their long term bonds and said interest rates will rise...in other words we will wait to buy bonds -They started Fairfax Africa -they added to Fairfax India raised debt and bought more investments They added another $250m in Greece -had record investment returns for 2017 from two big sales -started an Insurance company on their own in India -invested about another billion in convertible preferred shares They have been very busy they just are not buying U.S common stocks at 20x earnings....but have shown bullish moves on global growth which they have been right about so far. To me again the bullishness has kept them away from the bond market which will move the needle more than anything else when they re enter....when others head for the exit....that’s not far away. The 43% of the portfolio in cash will be headed for bonds at the right price. Apologies - I wasn't very clear. My comment related to the US stock market - the removal of the hedges (which were predominantly US) and the "playing offense" comments did not mean he was bullish on the US market. This was made clear. You are right about the rest although much of it happened before the hedges came off - the buildup in India, the move to short duration. The sales of Lombard and First aren't really relevant to FFWatcher's question that I was trying to answer. What is relevant, and I hadn't thought through fully, is your point that much of the cash is waiting to be reinvested in bonds not equities. That's a big part of why they have so much cash despite "playing offense". Link to comment Share on other sites More sharing options...
petec Posted January 15, 2018 Share Posted January 15, 2018 http://www.fairfax.ca/news/press-releases/press-release-details/2015/Fairfax-Announces-Modifications-to-Multiple-Voting-Share-Proposal-and-Postponement-of-Special-Meeting--of-Shareholders-to-August-24-2015/default.aspx .2 from the amendment If Prem is no longer the CEO or the Chairman of Fairfax there has to be a vote among “minority shareholders” to approve the amendments for the multiple voting shares to remain. He has signed on to remain in his positions until 2025 and kept his salary frozen at $600,000 which he has done since 2000. So why would you worry about his son stewarding the ship? He would have to win a minority vote to have the controlling vote if Prem were to leave for “any” reason. Shalab does that sound like an Indian business house from 1800’s? I'm not sure you've read that right, Dazel. The way I read it, the minorities get a vote on whether the multiple voting shares continue to be protected from dilution by share issuances after the vote. They don't get to vote on whether the multiple voting shares should continue to have their existing number of votes. And they don't get to vote for 5 years. If my reading is correct then Prem could hand over to his son, who could issue shares at will for 5 years and then stop, and still have 41.8% of the votes forever. Which isn't to say that he would do that, but we have to have our eyes open. I think the biggest safeguard against that is Prem's knowledge that both insurance and investment are fundamentally people businesses. If you don't protect the culture the people will leave and all the value you have created will go. I doubt that's Prem's long term plan. We also have a fair idea who Prem's successor is at the top and it's not his son. Link to comment Share on other sites More sharing options...
Dazel Posted January 15, 2018 Share Posted January 15, 2018 Petec, your point is well taken on the amendment...we know the shares have already been diluted from the Allied acquisition so I am not sure how it works exactly. But I most certainly do not think it is the issue that has been brought up. I see a shareholder group that was very dissatisfied with Prem’s performance in 2015-2016 and they saw it as an undeserved power grab. They of course are entiltled to this opinion and many voted with their feet. They sold most of their shares...the corner of Berkshire Fairfax dinner is likely over...these are all signs of capitulation.The fact is Fairfax is second behind Berkshire for their treatment of shareholders over the last 30 years. To think that Prem set up a family coup like the Tata of the 1800’s is laughable. However, it is important to note there is great disappointment in Fairfax being wrong for awhile. To be fair I am pretty sure that I have stressed how bad the hedges were and what a disaster they were to performance when I said they may be the worst hedges I have ever seen! This rear view look is why we are trading where we are and actually why I am posting. When other Fairfax threads broached the topic of hatred of Fairfax they were real. Biggest bull market in history and Fairfax not only did not profit they lost likely $6b in hedge losses and equities fell apart!!!? Shareholders “deserve” to be pissed. But be pissed for the right reason. Performance sucked! So the shares are in show me mode.... and rightfully so...my point is only to stop thinking about the rear view mirrror and look at what carrried Fairfax through the hedge losses. When they get the investing side right and I think they will....all will be sorry they held a grudge! Petec we understand you are stronger than most and will do better in the long run...you don’t know when Fairfax will have a 50% run in share price. Dutchman, Idont think it will be 5 years! But your point is well taken speculation has taken over and 5 years is an eternity to most! Since everyone is in speculation mode...I will speculate that Longleaf will keep adding here and they will double their money in Fairfax in a couple of years. Link to comment Share on other sites More sharing options...
petec Posted January 15, 2018 Share Posted January 15, 2018 Agreed Dazel - and FWIW, my reason for continuing to debate the history is because it gives an insight into the culture and decision-making/learning process, rather than because I think recent history is a guide to the near future! Link to comment Share on other sites More sharing options...
Dazel Posted January 15, 2018 Share Posted January 15, 2018 Fairfax has paid around $100 a share out and dividends as well for long term holders these become significant portion of their returns when growth starts to compound again. It would add around 20% to returns over the last decade. While most do not care...big smart money does. Link to comment Share on other sites More sharing options...
dutchman Posted January 15, 2018 Share Posted January 15, 2018 has anyone examined Allied and Brit recently. Are you satisfied there wont be too many big surprises? Link to comment Share on other sites More sharing options...
StubbleJumper Posted January 15, 2018 Share Posted January 15, 2018 has anyone examined Allied and Brit recently. Are you satisfied there wont be too many big surprises? By surprises, do you mean catastrophe losses, or do you mean adverse development? If it's the latter, it's pretty tough to know in advance. If the previous management was not disciplined in its underwriting, it can take a few years to find all of the skeletons in the closet. SJ Link to comment Share on other sites More sharing options...
Dazel Posted January 16, 2018 Share Posted January 16, 2018 For all the bull market enthusiasts...Blackberry may be on the cusp of joining the frenzy. I would not hold a big position directly at these levels but happy to have Fairfax possibly make billions on the frenzy. https://www.reuters.com/article/us-blackberry-software/blackberry-launches-cybersecurity-software-for-self-driving-cars-idUSKBN1F42LX The article missed the Nvidia partnership. Nvidia was the hottest stock in the tech sector last year...stay tuned. Link to comment Share on other sites More sharing options...
StubbleJumper Posted January 18, 2018 Share Posted January 18, 2018 http://www.fairfax.ca/news/press-releases/press-release-details/2015/Fairfax-Announces-Modifications-to-Multiple-Voting-Share-Proposal-and-Postponement-of-Special-Meeting--of-Shareholders-to-August-24-2015/default.aspx .2 from the amendment If Prem is no longer the CEO or the Chairman of Fairfax there has to be a vote among “minority shareholders” to approve the amendments for the multiple voting shares to remain. He has signed on to remain in his positions until 2025 and kept his salary frozen at $600,000 which he has done since 2000. So why would you worry about his son stewarding the ship? He would have to win a minority vote to have the controlling vote if Prem were to leave for “any” reason. Shalab does that sound like an Indian business house from 1800’s? What do you make of the contract between FFH and the Lissom investment management company that employs Ben Watsa? Looks like Ben is managing $50m of FFH's assets through that company. I wonder how much FFH is paying in investments fees and why that $50m isn't just taken care of by Hamblin Watsa like the rest of the portfolio? What does Ben make out of this? Is this a 1 and 20 compensation scheme or something like that? Fifteen years ago, Sanjeev would have given his left nut to have a contract to invest $50m. SJ Link to comment Share on other sites More sharing options...
Dazel Posted January 18, 2018 Share Posted January 18, 2018 Maybe Ben Watsa is like Chris Davis and it runs in the family and he has $50m of financials! I see Chou funds kicked ass in the last couple months he has $500m of Fairfax money I think....but his performance has been dreadful too! Maybe Ben is a the smartest of the bunch....if he isn’t and his performance is sub par he will be replaced...not sure how he could not beat Prem and his team over their dry spell! Lol. My money is on Bradstreet...always has been...he has consistently outperformed his bench marks by a wide and incredible margin. The fact of the matter is Prem will take heat about structure, Ben, his recent performance until he rights the ship. That is the way it should be..... Link to comment Share on other sites More sharing options...
Txvestor Posted January 18, 2018 Share Posted January 18, 2018 https://www.prnewswire.com/news-releases/seaspan-enters-into-definitive-agreements-for-250-million-unsecured-550-debenture-and-warrant-investment-with-fairfax-financial-holdings-limited-669830003.html Is this the same David Sokol of Berkshire Hathaway fame, that was unceremoniously booted out soon after the Lubrizol acquisition for front running his money while aware of Berkshire's plans to takeover? A little hard to stomach after Watsa's blind faith in Tom Ward that lost Fairfax hundreds of millions of dollars. If you listen to the likes of Walter Schloss one of the attributes of Warren Buffett they are amazed by is his uncanny ability to judge character, and as close as Sokol was to the top, I doubt he was acting with less than full knowledge. Certainly a concern for me. Any thoughts? Link to comment Share on other sites More sharing options...
petec Posted January 18, 2018 Share Posted January 18, 2018 https://www.prnewswire.com/news-releases/seaspan-enters-into-definitive-agreements-for-250-million-unsecured-550-debenture-and-warrant-investment-with-fairfax-financial-holdings-limited-669830003.html Is this the same David Sokol of Berkshire Hathaway fame, that was unceremoniously booted out soon after the Lubrizol acquisition for front running his money while aware of Berkshire's plans to takeover? A little hard to stomach after Watsa's blind faith in Tom Ward that lost Fairfax hundreds of millions of dollars. If you listen to the likes of Walter Schloss one of the attributes of Warren Buffett they are amazed by is his uncanny ability to judge character, and as close as Sokol was to the top, I doubt he was acting with less than full knowledge. Certainly a concern for me. Any thoughts? It is. They also have a joint investment with him in Davos Brands. Buffett always praised him as an exceptional executive. He made - so far as we know - one lapse of judgement. He has either learned his lesson or has not. Fairfax is investing alongside him in marketable securities. That's very different to promoting him CEO of a subsidiary or even the whole company, which people thought might happen at BRK. Am I totally comfortable? No. Do I see it as a massive risk for Fairfax? No. Buffett clearly made a mistake in his judgement of Sokol's character. What we don't know is whether he made it when he praised him or when he fired him. Link to comment Share on other sites More sharing options...
petec Posted January 18, 2018 Share Posted January 18, 2018 For all the bull market enthusiasts...Blackberry may be on the cusp of joining the frenzy. I would not hold a big position directly at these levels but happy to have Fairfax possibly make billions on the frenzy. https://www.reuters.com/article/us-blackberry-software/blackberry-launches-cybersecurity-software-for-self-driving-cars-idUSKBN1F42LX The article missed the Nvidia partnership. Nvidia was the hottest stock in the tech sector last year...stay tuned. I think Blackberry has already joined the frenzy! I was also amazed to see that Grivalia is virtually debt free. Enormous opportunity there as the Greek banks ramp their efforts to auction mortgage NPLs to meet their 2018/9 targets. And FFH could win on both sides of that deal - Grivalia and Eurobank, which still trades at 0.33x tbv despite having been profitable since 2016 (I have not done a deep dive). Link to comment Share on other sites More sharing options...
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