Author Topic: Fairfax2019  (Read 20810 times)

Dazel

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Fairfax2019
« on: January 18, 2019, 06:00:41 AM »

This year’s catalysts

-Fairfax followers are as bearish as I have seen since 2003.

-I expect the best bond manager (Brian Bradstreet) in the world to have filled Fairfax Xmas stockings with corporate and other bonds that got trounced in December. We have seen him move very quickly in the past... 2008 he bought $7b in tax free muni’s yielding 7% in less than a month and sold almost the entire US treasury holding that was larger than that at a massive profit during the same time. In the first half of the 2000’s he did very well in corporate bonds where he needed to be nimble before 2007. I am betting on a much higher yield on Fairfax large portfolio which will take operating earnings higher. This and a likely higher shift into higher yielding short term treasuries in the fall will show more of the earnings power of Fairfax as opposed to holding 50% cash holdings.

-India’s growth remains the highest in the world and Fairfax is a way to play that

-share buyback will accelerate at these levels albeit not as big as I would like!

- insurance companies will continue to improve

-equity positions are at rock bottom with little downside risk

-as previously discussed I am unhappy with share based awards...these will be disclosed in detail by Prem.

Most importantly this is a solid business with loads of potential that is selling dirt cheap for all of the reasons discussed here. Is it a redemption year for Prem and his team at Fairfax? We will see.

-


Dazel

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Re: Fairfax2019
« Reply #1 on: January 18, 2019, 07:06:21 AM »

Disclosure: I have put my money where my mouth is and been buying FFH

StubbleJumper

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Re: Fairfax2019
« Reply #2 on: January 18, 2019, 07:18:51 AM »

Disclosure: I have put my money where my mouth is and been buying FFH


Were you able to buy some for less than US$450?  Seems like a no-brainer at that price.


SJ

petec

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Re: Fairfax2019
« Reply #3 on: January 18, 2019, 09:39:16 AM »
Dazel, how do you value Fairfax?

Cardboard

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Re: Fairfax2019
« Reply #4 on: January 18, 2019, 02:15:13 PM »
"-Fairfax followers are as bearish as I have seen since 2003."

Seriously?

Back then it traded well well below book value and it is not the case these days. Now they need to generate earnings at a reasonable ROE to justify trading above book and to move up.

Cardboard

Dazel

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Re: Fairfax2019
« Reply #5 on: January 18, 2019, 03:49:05 PM »


Petec,

They are under earning...50% cash and very poor equity performance....I expect that to change. I expect Hamblin Watsa too come through mostly Bradstreet and the bond side and higher yields. Insurance companies are world class and the other income line has quietly risen materially.

Cardboard,
You sound negative....lol. You and everyone else are entitled to your opinion. I have given you mine...

I am not saying I am right I am telling you what I think....and definitely will not be arguing and debating it until the earnings present themselves....which will prove me right or wrong.

2019 is all about earnings....good or bad. It is time for Fairfax to perform...if they do not I will accept it and move on. If it sounds like a broken record I appreciate the skepticism from all “You have not been wrong”!!!

Prem needs to once again prove himself through his team or the market is right.


shalab

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Re: Fairfax2019
« Reply #6 on: January 19, 2019, 07:49:43 AM »
Dazel, hope FRFHF works out for you.

US is a 20.5 trillion economy. India is at 2.7 trillion. Canada is at 1.7 trillion or so. FRFHF market cap is 13 billion. There are many opportunities in the market some of which will undoubtedly be better than FRFHF.

One can simply buy ThomasCook India and bypass the overhead of owning FRFHF. Even better, one can buy businesses with better prospects in India. Note that ThomasCook India has been flat since 2015 in Rupee terms and doesnt pay much of a dividend. The indian rupee has declined against USD at the same time.


"-Fairfax followers are as bearish as I have seen since 2003."

Seriously?

Back then it traded well well below book value and it is not the case these days. Now they need to generate earnings at a reasonable ROE to justify trading above book and to move up.

Cardboard

Dazel

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Re: Fairfax2019
« Reply #7 on: January 19, 2019, 09:28:57 AM »
Shalab,

Totally agree....Fairfax India and others  are a better bet for sure if you are India focused. $20trillion @2% vs $2.7t that will double likely every 6 or 7 years....is the place to be. Many better opportunities in India and those with feet on the ground would blow away Fairfax or any other investment vehicle.

Fairfax gives you exposure to India and particular in the private market they are integrated in the financial system there and will get a lot more opportunities than others because of the trust they have earned there. But as you say being able to play in all of the other world economies is very important ...No one else really gives you that optionality that I see with direct exposure to India of “some” scale. If there is someone I would be very interested in them as an investment.

Ironically, Thomas Cook India has been a home run that Hamblin Watsa do not get much credit for...in the equities poor performance hit they are taking publically. What have you done for me lately prevails and that is fair after some of the big stumbles.

Ie Apple and Amazon are growing massively in India but will not even move the needle to their world incomes.


« Last Edit: January 19, 2019, 09:36:49 AM by Dazel »

Dazel

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Re: Fairfax2019
« Reply #8 on: January 19, 2019, 10:07:24 AM »

Just a follow up....there is lots of opportunity out there Shalab I agree...Fairfax’s advantage is they went into this sell off period with $28 billion of bonds and cash....of  note is that interest rates dropped substantially creating appreciation in their large treasury portion of those holdings and allowing them the opportunity to buy into a frozen bond market. In the past this has been their strength.

There was a window that if Fairfax acted that they would have seized large near term and long term profits in the investment portfolio....which has been the drag on Fairfax. So when you say there are many opportunities now which there are....many have had to wait for their holdings to appreciate to buy other things because they had little dry powder to buy into the worst December in almost 90 years.

Fairfax got a fast ball right down the middle of the plate ....

Did they hit that fast ball? Only they know that right now...but I don’t have to pay for that probability right now because the stock is cheap enough that they will do fine if they did not hit that fast ball out of the park.



shalab

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Re: Fairfax2019
« Reply #9 on: January 19, 2019, 10:18:35 AM »
Dazel - my estimate is that FRFHF has ~10% exposure to India. It is definitely huge compared to FAANGM's exposure to India. However, even old economy companies like BTI, CL, PG, UN have more exposure to India than FAANGM.

One can open a brokerage account in India (it is quite a hassle, time consuming but can be done), it will allow one to buy public companies in India. I expect Indian economy to grow to 5.5 trillion USD by 2030. At the same time US economy should be around 30-35 trillion USD. Canada would probably be at 2.5 trillion While India will do very well, the USA will also do well.

Shalab,

Totally agree....Fairfax India and others  are a better bet for sure if you are India focused. $20trillion @2% vs $2.7t that will double likely every 6 or 7 years....is the place to be. Many better opportunities in India and those with feet on the ground would blow away Fairfax or any other investment vehicle.

Fairfax gives you exposure to India and particular in the private market they are integrated in the financial system there and will get a lot more opportunities than others because of the trust they have earned there. But as you say being able to play in all of the other world economies is very important ...No one else really gives you that optionality that I see with direct exposure to India of “some” scale. If there is someone I would be very interested in them as an investment.

Ironically, Thomas Cook India has been a home run that Hamblin Watsa do not get much credit for...in the equities poor performance hit they are taking publically. What have you done for me lately prevails and that is fair after some of the big stumbles.

Ie Apple and Amazon are growing massively in India but will not even move the needle to their world incomes.
« Last Edit: January 19, 2019, 12:46:51 PM by shalab »