Author Topic: 2030-35 --- Fairfax 10-15 years from now  (Read 7964 times)

Xerxes

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Re: 2030-35 --- Fairfax 10-15 years from now
« Reply #20 on: September 26, 2020, 06:59:22 PM »
Ultimately, while the team at FFH corporate office has been clever in the last few years in some of its restructuring and non-cash book-value-driven asset swaps, these were all plan Bs, because their original investment thesis (plan A) didn't go through either by bad luck or plain bad judgement. At least FFH corporate office is good at being in the underdog position and are adapting.

Some good news perhaps:
Looks like Longleaf Partners Fund which had been steadily selling FFH every quarter from 2018 through Q4 2019, is buying back FFH. They know FFH well. But the ultimate long term test toward re-rating would be bringing new institutional investors, though most of those are not comfortable with lumpy return. In its report the fund state, Prem Watsa putting his own money in was a factor.

From the report =>
Ref: Longleaf-Semi-annual-Report-6.30.20.pdf

"Additionally, Fairfax Financial (FFH), which was a star in the global financial crisis (GFC)
downturn, has so far disappointed from a stock price perspective in the current downturn. From a relative perspective, FFH
also suffered as a cloud hangs over many insurers due to the ongoing business interruption insurance debate over COVID-19.
FFH was also grouped with emerging market stocks after a decade of value-accretive investments outside of North America
amidst an environment where US large cap companies have continued to dominate global markets. We took our time to
reassess our FFH case and ultimately decided to buy more, a decision which was bolstered further when CEO/Founder Prem
Watsa stepped up with a personal investment of over $100 million. We have filtered through the tough reality of the “new
normal” environment into our appraisals for each business and made changes in our portfolio positioning where appropriate
to reflect our new outlook.
"

Portfolio Holdings at June 30, 2020
Net Assets Investments
EXOR N.V.               8.7
CenturyLink, Inc.     7.4
FedEx Corporation   6.5
Melco International  5.4
Fairfax Financial      5.1
Prosus N.V.            5.0

About Exor, referencing FFH ==> "The COVID impact on top of an already firming price environment is translating to the hardest (most positive) reinsurance pricing environment in years. We believe this is a good time to be allocating capital to the space. That is also part of the calculus in investing in Fairfax and its Odyssey reinsurance subsidiary, with whom our long history also informs our current bullish view. We are disappointednot to receive deal liquidity at what would have been an opportune time, but we were happy to see CEO John Elkann’s discipline in refusing to negotiate a lower, fire sale price in the face of a dramatically improving business environment.
PartnerRe is well positioned to thrive over the next f
"

« Last Edit: September 26, 2020, 07:02:03 PM by Xerxes »


Pedro

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Re: 2030-35 --- Fairfax 10-15 years from now
« Reply #21 on: September 27, 2020, 10:06:58 AM »
Liking the thread and glad we have something to look back on to learn from.   Lots of bull cases  inverting below. Searching for the known unknowns to see both sides. Any other ideas?
 
-cats rise at greater frequency/severity which makes the hardening market neeeding to keep  up with increased costs.
-history repeats itself and another poor directional long term bet hurts BV
-succession in the bond area doesn't live up to bradstreets returns
-equity investments remain Achilles heel
-virus lawsuits become the new asbestos and drag on for decades increasing non cat claims costs
-market doesn't like the lumpyness and continues to value  at multiples below competition
-insurance industry undergoes fast disruption from AI companies - although the Brit/Ki/Google seem like we are leading that game



Xerxes

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Re: 2030-35 --- Fairfax 10-15 years from now
« Reply #22 on: November 03, 2020, 08:36:30 AM »
Don't want to suppress the jolly mood in the "FFH 2020" thread. So I'll post this here in this thread, just as a data point to be aware of. I took me only 5 minutes. Just went through the annual release for every year, and only copied the "realized gain/loss" through shorts/hedges and the likes. I ignored all the unrealized stuff, given that it would be captured when they are realized if not reversed.

End of 2016, is when FFH management made the pivot away from hedges/shorts and took its losses. Unless, i made a mistake, i am counting about a $1 billion of realized losses in shorts since the pivot to move away from shorts was made. That sum is 3x the size of current FFH investment value in Blackberry common shares. Yes, in the grand scheme of things, that comes to 2% of a $40 billion portfolio and maybe shorts are for FFH, what bitcoin is for some. Small position big potential upside.

But it is almost as if they cannot help themselves to not short technology growth companies. Betting against the central bank printing press has never been a profitable trade. Anyways ...

2011:  zero
2012:  $6.3 million
2013:  ($1.350) billion
2014:  $13 million
2015:  $126 million
2016:  ($2.634) billion
2017:  ($553) million  (almost all of it in Q4 2017!)
2018:  ($248) million
2019:  ($20.7) million
2020 (through Q3): ($327) million

bearprowler6

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Re: 2030-35 --- Fairfax 10-15 years from now
« Reply #23 on: November 03, 2020, 09:09:18 AM »
Don't want to suppress the jolly mood in the "FFH 2020" thread. So I'll post this here in this thread, just as a data point to be aware of. I took me only 5 minutes. Just went through the annual release for every year, and only copied the "realized gain/loss" through shorts/hedges and the likes. I ignored all the unrealized stuff, given that it would be captured when they are realized if not reversed.

End of 2016, is when FFH management made the pivot away from hedges/shorts and took its losses. Unless, i made a mistake, i am counting about a $1 billion of realized losses in shorts since the pivot to move away from shorts was made. That sum is 3x the size of current FFH investment value in Blackberry common shares. Yes, in the grand scheme of things, that comes to 2% of a $40 billion portfolio and maybe shorts are for FFH, what bitcoin is for some. Small position big potential upside.

But it is almost as if they cannot help themselves to not short technology growth companies. Betting against the central bank printing press has never been a profitable trade. Anyways ...

2011:  zero
2012:  $6.3 million
2013:  ($1.350) billion
2014:  $13 million
2015:  $126 million
2016:  ($2.634) billion
2017:  ($553) million  (almost all of it in Q4 2017!)
2018:  ($248) million
2019:  ($20.7) million
2020 (through Q3): ($327) million

Xerxes---thank-you for doing this work. Although I agree with the consensus view that Fairfax looks cheap on a BV basis I cannot justify adding to my investment because of issues such as this one. I do continue to hold a very small legacy position in the company -- more out of habit than for any good fundamental reason. So the company is tight for cash and we can look at $1 billion that was basically flushed down the drain? Until this behavior stops (it was supposed to stop at the end of 2016) and until the company deals with its many long time underperforming equity (both public and private) investments it is not a very attractive long term investment. I sincerely applaud those that bought late last Friday or at the open on Monday. A nice short term profit for sure. But nothing has fundamentally changed with this company and that is what keeps me away.

Xerxes

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Re: 2030-35 --- Fairfax 10-15 years from now
« Reply #24 on: November 06, 2020, 12:03:48 PM »
Hopefully i didn't screw up the numbers as I jumped from one year to next:
Below is the "realized" investment gains/losses that FFH booked against its equity at the end of each year.

The purpose is to ignore the unrealized gain/losses as those are either reversed or realized at a later date. So no double counting.
Also I ignored the shorts and equity hedges. I am just isolating the historical return on equity/bond investment over the past ten years.

2011:  $703 million (equity) + $424 million (bond)
2012:  $470 million (equity) + $566 million (bond)
2013:  $1,324 million (equity) + $65 million (bond)
2014:  $596 million (equity) + $103 million (bond)
2015:  $818 million (equity) + $26 million (bond)
2016:  ($184) million (equity) + $648 million (bond)
2017:  $200 million (equity) + $419 million (bond)
2018:  $1,326 million (equity) + $106 million (bond)
2019:  $792 million (equity) + ($55) million (bond)
2020 (through Q3): $371 million

From 2011-2019, net investment return through equity investment was about $6 billion.
In the same period, net investment return from fixed-income was about $2.3 billion.

Either i screwed up the number and that i missed a big negative somewhere, or FFH, when you look pass noises about its equity choices that make big headlines, doest seem to be that bad, if you do not take into consideration of the hedges and unrealized gain/loss.

Maybe i ll double check, to be sure
« Last Edit: November 06, 2020, 12:06:49 PM by Xerxes »