Author Topic: Value of FFH culture  (Read 8733 times)

wondering

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Value of FFH culture
« on: February 17, 2018, 12:37:04 PM »
At AGMs and on conference calls, Prem really stresses the value of the Fairfax fair and friendly corporate culture.  He mentions that companies want to have FFH as a shareholder etc..

I noticed that this does not get mentioned on the board that much.  A few questions come to mind.

What are your thoughts/opinion of this culture?
Does it really have value?
Can a price be put on this culture?

Any thoughts?


StubbleJumper

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Re: Value of FFH culture
« Reply #1 on: February 17, 2018, 12:53:03 PM »
Value of the culture?  Zero.

What's the value of a culture that screws minority owners of ORH?  Seriously, Prem screwed us on taking it private.

What's the value of a culture that usurps minority owners' voting rights?  It took two votes to make it happen, presumably with some serious arm twisting of institutional holders.

What's the value of a culture where the chairman uses his multiple voting shares to appoint his son, who is still wet behind the ears, to the board of directors?  What a joke.

What's the value of a culture where the chairman channels $50m of shareholders' money to a firm that employs his son so that his son has a portfolio to manage?  Seriously?  I'd be embarrassed if I needed daddy to do that to ensure my success.

The culture is worth ZERO.  The collective brains are the only thing that has worth, but beware that those collective brains are not always focused on the interests of minority holders.


SJ

Value^2

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Re: Value of FFH culture
« Reply #2 on: February 18, 2018, 01:13:23 AM »
Value of the culture?  Zero.

What's the value of a culture that screws minority owners of ORH?  Seriously, Prem screwed us on taking it private.

What's the value of a culture that usurps minority owners' voting rights?  It took two votes to make it happen, presumably with some serious arm twisting of institutional holders.

What's the value of a culture where the chairman uses his multiple voting shares to appoint his son, who is still wet behind the ears, to the board of directors?  What a joke.

What's the value of a culture where the chairman channels $50m of shareholders' money to a firm that employs his son so that his son has a portfolio to manage?  Seriously?  I'd be embarrassed if I needed daddy to do that to ensure my success.

The culture is worth ZERO.  The collective brains are the only thing that has worth, but beware that those collective brains are not always focused on the interests of minority holders.
+1 Finally some common sense! 

Spekulatius

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Re: Value of FFH culture
« Reply #3 on: February 18, 2018, 06:41:19 AM »
i didn’t now that Prem employed his failed hedge fund manager son at FFH. May be immaterial from an investment perspective for now,  it certainly is not a sign of a transparent culture.
« Last Edit: February 19, 2018, 04:57:29 AM by Spekulatius »
To be a realist, one has to believe in miracles.

Daphne

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Re: Value of FFH culture
« Reply #4 on: February 18, 2018, 07:00:29 AM »
Misinformation about Ben Watson make this board sound like an outpost of FOX news.  Irresponsible claptrap should have no place here.  Be responsible and do your research.

Benjamin P. Watsa, 38, is a member of Fairfax Board of Directors. Mr. Watsa is a Partner and Portfolio Manager at Lissom Investment Management Inc., a private investment counselor that provides wealth management services for high net worth clients through the Owners Family of Funds, where he manages the Owners Opportunities Fund, a small and mid-cap focused equity fund. Prior to joining Lissom in 2006, Mr. Watsa worked in New York in investment banking as an Analyst in the Financial Institutions Group at Banc of America Securities from 2001 to 2003 and as an Associate at Cochran Caronia Waller from 2003 to 2006. Mr. Watsa is a member of the Finance Committee of the Rideau Hall Foundation, and is a resident of Toronto, Ontario, Canada

StubbleJumper

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Re: Value of FFH culture
« Reply #5 on: February 18, 2018, 07:02:27 AM »
i didnít now that Prem employed his failed hedge fund manager son at FFH. May be immaterial from an investment perspective for now,  it certainly does not a sign of a transparent culture.


To be clear, Ben Watsa does not appear to actually work at FFH or in any of the subs.

Rather, Prem was on the board of directors of a large Canadian charity for a number of years.  One other fellow who was also on that board of directors happens to run an investment firm in Toronto.  Coincidentally, a few years later, it appears as if Ben Watsa was hired by that fellow's investment firm.  Now, that's not that unusual, in and of itself; most of the jobs we get are due to relationships that we've built over the years, so if Ben impressed the boss of that investment firm when he and Prem encountered the fellow socially, that would not at all be unusual.

What is unusual is that the Q3 report discloses that FFH has now shifted $50m to this fellow's investment firm, and the specific person managing that $50m is Ben Watsa.  So, why was that done?  You've already got plenty of internal investment management capacity at Hamblin-Watsa.  You've already got Brian Bradstreet in-house.  Why do you suddenly need to out-source the management of $50m?  And, if you do need to outsource the management of $50m, why specifically does it go to Ben Watsa's firm?  After all, there's 100s of investment firms in Toronto that have a far longer track record than Ben Watsa, to say nothing of FFH's long standing relationship with Mason Hawkins and Francis Chou (it's pretty obvious to me that Mason Hawkins has forgotten more about investments than most of us will ever know).

So, it doesn't look good.  The related-party transaction was disclosed in the filings, but the disclosure was paltry.  How much are shareholders paying Ben Watsa to manage our money?  Is it 100 bps, 200 bps, some other amount?  Is this a real transaction done for the demonstrable benefit of shareholders, or is this a case where Prem is having shareholders pay 200 bps on $50m to ensure that his son will have a well-paid job?  Who the hell knows?  The one thing that I do know is that it erodes Prem's reputation when he does wacky things like this.


SJ
« Last Edit: February 18, 2018, 07:14:33 AM by StubbleJumper »

StubbleJumper

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Re: Value of FFH culture
« Reply #6 on: February 18, 2018, 07:05:57 AM »
Misinformation about Ben Watson make this board sound like an outpost of FOX news.  Irresponsible claptrap should have no place here.  Be responsible and do your research.

Benjamin P. Watsa, 38, is a member of Fairfax Board of Directors. Mr. Watsa is a Partner and Portfolio Manager at Lissom Investment Management Inc., a private investment counselor that provides wealth management services for high net worth clients through the Owners Family of Funds, where he manages the Owners Opportunities Fund, a small and mid-cap focused equity fund. Prior to joining Lissom in 2006, Mr. Watsa worked in New York in investment banking as an Analyst in the Financial Institutions Group at Banc of America Securities from 2001 to 2003 and as an Associate at Cochran Caronia Waller from 2003 to 2006. Mr. Watsa is a member of the Finance Committee of the Rideau Hall Foundation, and is a resident of Toronto, Ontario, Canada


Yes, Daphne, we should try to be responsible.  How do you feel about FFH's decision to suddenly invest $50m of shareholders' money with Lissom and specifically under Ben's management?  As a shareholder, does this give you comfort?  Or would you be more comforted by having it invested by Hamblin-Watsa like all of the rest of the portfolio? 


SJ

no_free_lunch

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Re: Value of FFH culture
« Reply #7 on: February 18, 2018, 08:50:16 AM »
It should show up eventually in shareholder equity per share, more or less.  How has that performed?  Higher than S&P over past 10 years, lower over past 5 years.  That's my rough gauge of their culture value.

wondering

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Re: Value of FFH culture
« Reply #8 on: February 18, 2018, 09:55:24 AM »
A few thoughts,

If I heard correctly in a recent AGM, I thought Prem mentioned Ben's investment performance was better than his (over what time period - I have no idea).  I am speculating, but perhaps Ben's investment style is different than his father's (i.e., less dog stocks, more quality).  In this case, it would make sense to diversify to other investment managers. Again, pure speculation.

I understand the arguments against the FFH culture (re: voting shares etc..).  Viewed from a certain position, the arguments have merit. 

I am also interested in what other companies think of the FFH fair and friendly culture.  For example, if ABC company is going to be taken over by Onex, KKR, or FFH, do they have a preference?  Do they care, as long as the price is right?

dutchman

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Re: Value of FFH culture
« Reply #9 on: February 18, 2018, 10:03:13 AM »
Has anyone asked about Ben's situation at the shareholders meetings? Or would that person get booed out of the room? never been to a meeting.