Fairfax 2020

[chrispy]

Not disagreeing with any of the points made by petec or Xerxes but when have their holdings not looked 'cheap'?  I feel like they have been 'cheap' since they were bought

[petec]

Not disagreeing with any of the points made by petec or Xerxes but when have their holdings not looked 'cheap'?  I feel like they have been 'cheap' since they were bought

I agree.

[petec]

Actually I don’t quite agree. There was a point when Quess looked actively expensive!

[Bryggen]

Thanks guys for your great input. Hope my question and the answers received have nothing to do with the 8+% pop we got today

[KFS]

All that, and the fact that if you look at the last 10 years FFH can't invest for sh1t, so one of the key value drivers is broken. That impacts the p/bv the market will pay.

On the positive side:
1) We are likely in a hard market, which drives better CR's and investment leverage.
2) Several of FFH's big holdings (especially ATCO and EUROB in my view) look very cheap.
3) FFH are working to improve investment decisions, although it's a leap of faith to assume this will work.

Wade Burton has had a 19.5% compound return over 10 years.  Just imagine how different FFH would look today if Wade had been the leader of the FFH investment team during this entire period. 

[Viking]

Not disagreeing with any of the points made by petec or Xerxes but when have their holdings not looked 'cheap'?  I feel like they have been 'cheap' since they were bought

To add to what Petec mentions, look at pretty much all the Indian companies held the past 3-5 years. There was what looks to be a bubble in Indian stocks a couple pf years ago. The ride that Fairfax has been on with these holding has been absolutely amazing.

Moving forward Fairfax had better hope that Hoisington’s macro call is wrong (that we are moving towards mild deflation). Emerging markets (India) could be challenged moving forward. Some of the individual holding like Recipe (Canadian restaurant stocks - many full serve) will also struggle mightily in the near term.

Is is staggering how the outlook for Fairfax has changed in 12 weeks. 12 weeks ago my view was Fairfax was ideally positioned to benefit from hardening insurance market and risk on in stocks (including emerging markets). They had made a number of moves to lock in some investment gains and get other investments positioned to succeed.

The virus has completely submarined them. Completely unexpected. Resulting in more pot holes that will now need to be filled in (testing shareholders patience).

My focus right now is quality. Recently bought CB and WRB. Cheap; well managed; easy to understand; well positioned. I feel good when i listen to their conference calls (although i much prefer listening to the old Berkely to the son :-).

[Xerxes]

Viking, my non-scientific but philosophical view is that the pendulum always swings back …

It may be rough for FFH, but I think both BRK and FFH had about the same peak-to-trough drop. FFH a bit more.
Just like FFH got a few large businesses impacted, BRK has a whole host of entities impacted as well (Coka Cola, Airlines, etc.).

They are both not investing heavily in equities in the dip it seems (from what we know); FFH b/c it cannot (perhaps), BRK because it doesn't want to.
I think as long as both names remain diversified within your own personal portfolio, that ought to do it.

I personally greatly admire the collection of old economy assets Fairfax India has.
EM will always be a challenge, … until it isn't a challenge anymore. Then people will flock back to India, they would call it "like investing in China in 2001" and that theme will go on, until pendulum swings back and it is no longer "like investing in China in 2001" etc. it is like investing in Chili in 2019. Unfortunately the pendulum swing happens over many years and it doesn't swing back in a way we can forecast.

I work in the aerospace industry for more than a decade; we have been doing well... our industry has been growing by this much X CAGR, i.e. Airbus pumping out +50 A.320 per month (I don't work for Airbus, but just an example), and that was baseline of all forecast … all was well, life was good …. well until suddenly it isn't (i.e. Covid).

[Viking]

Viking, my non-scientific but philosophical view is that the pendulum always swings back …

It may be rough for FFH, but I think both BRK and FFH had about the same peak-to-trough drop. FFH a bit more.
Just like FFH got a few large businesses impacted, BRK has a whole host of entities impacted as well (Coka Cola, Airlines, etc.).

They are both not investing heavily in equities in the dip it seems (from what we know); FFH b/c it cannot (perhaps), BRK because it doesn't want to.
I think as long as both names remain diversified within your own personal portfolio, that ought to do it.

I personally greatly admire the collection of old economy assets Fairfax India has.
EM will always be a challenge, … until it isn't a challenge anymore. Then people will flock back to India, they would call it "like investing in China in 2001" and that theme will go on, until pendulum swings back and it is no longer "like investing in China in 2001" etc. it is like investing in Chili in 2019. Unfortunately the pendulum swing happens over many years and it doesn't swing back in a way we can forecast.

I work in the aerospace industry for more than a decade; we have been doing well... our industry has been growing by this much X CAGR, i.e. Airbus pumping out +50 A.320 per month (I don't work for Airbus, but just an example), and that was baseline of all forecast … all was well, life was good …. well until suddenly it isn't (i.e. Covid).

Xerxes, you seem to have it all well thought out :-) i do own BRK. In all honesty, probably mostly just because i like Buffett. And the fact they have so much cash (ideal in the current environment). It is likely just a short term hold... i will be happy to sell for a quick 3-4% gain. Done it a couple of time already :-)

Fairfax India looks interesting. I do like some of the assets (but not CSB). But until i get some clarity regarding the path of virus i am going to get very selective (which means FIH will just stay on my watch list :-)

[petec]

Viking

If we get deflation a) FFH has the deflation swaps and b) I think I’d rather be in EM than DM. EM has the demographic advantage, plus it has higher inflation levels and therefore is more likely to have disinflation than deflation. Only the strong dollar would be an issue but EM is less exposed to the dollar than it used to be.

Why don’t you like CSB? Funnily enough I was thinking yesterday that FFH has widespread EM bank exposure (CIB, UBN, CSB, plus some smalls and arguably Eurobank) and I suspect there’s a lot of knowledge that can be shared across them. EM banking is a great business and the opportunity technology offers to bank the previously unbanked is huge. I think we will see Fairfax’s banks create huge value over the next couple of decades.

Pete

[Spekulatius]

Not disagreeing with any of the points made by petec or Xerxes but when have their holdings not looked 'cheap'?  I feel like they have been 'cheap' since they were bought

To add to what Petec mentions, look at pretty much all the Indian companies held the past 3-5 years. There was what looks to be a bubble in Indian stocks a couple pf years ago. The ride that Fairfax has been on with these holding has been absolutely amazing.

Moving forward Fairfax had better hope that Hoisington’s macro call is wrong (that we are moving towards mild deflation). Emerging markets (India) could be challenged moving forward. Some of the individual holding like Recipe (Canadian restaurant stocks - many full serve) will also struggle mightily in the near term.

Is is staggering how the outlook for Fairfax has changed in 12 weeks. 12 weeks ago my view was Fairfax was ideally positioned to benefit from hardening insurance market and risk on in stocks (including emerging markets). They had made a number of moves to lock in some investment gains and get other investments positioned to succeed.

The virus has completely submarined them. Completely unexpected. Resulting in more pot holes that will now need to be filled in (testing shareholders patience).

My focus right now is quality. Recently bought CB and WRB. Cheap; well managed; easy to understand; well positioned. I feel good when i listen to their conference calls (although i much prefer listening to the old Berkely to the son :-).

I agree with you. FFH looks like trash. It had a stub left that I should have sold at $450 when I sold the bulk of my position and ended up selling into the decline at $315 and I am not looking back.

Drawing down the revolver should raise some eyebrows as it clearly shows that they walk on thin ice. Cigarbutt also made the same point basically looking at how heavily their are into equities relative to their equity base.