Author Topic: Fairfax 2020  (Read 196331 times)

petec

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Re: Fairfax 2020
« Reply #350 on: May 27, 2020, 07:49:17 AM »
None of us here has a better insight into the value of Torstar than Paul Rivett. If Torstar is such a dud, why would Rivett want to have anything to do with it at the risk of his personal funds?
 
On the other hand if he has a plan to reinvent Torstar, why didn’t he put it in place while Fairfax was still paying him for his expertise?

None of us does, but plenty of people at Fairfax do. It is quite possible that they simply disagree (which in turn would make agreeing a path forward impossible).
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petec

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Re: Fairfax 2020
« Reply #351 on: May 27, 2020, 07:55:45 AM »

Back to the other bidders.....why not Fairfax itself.

 ;D

Dear lord can you imagine the reaction on this board if Fairfax took Torstar private?! Prem can't admit mistakes! Declining industries! Good money after bad! Liquidity! Leverage! AAAAAAAAAARRRRRRGGGGGHHHHH.

Couple of (serious!) points:
1) What makes you believe Torstar did not test the market before agreeing this deal?
2) If there was a better deal to be had, why would Fairfax not have taken it?
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Xerxes

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Re: Fairfax 2020
« Reply #352 on: May 27, 2020, 07:58:17 AM »
Did Prem got the best return for his shareholder (I.e fiduciary duty) under the present condition for Tor Star.

The optics looks weird with Paul but if the answer to the above is Yes, than we are all good.
At least in my simple mind. 

StubbleJumper

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Re: Fairfax 2020
« Reply #353 on: May 27, 2020, 08:04:32 AM »

Back to the other bidders.....why not Fairfax itself.

 ;D

Dear lord can you imagine the reaction on this board if Fairfax took Torstar private?! Prem can't admit mistakes! Declining industries! Good money after bad! Liquidity! Leverage! AAAAAAAAAARRRRRRGGGGGHHHHH.

Couple of (serious!) points:
1) What makes you believe Torstar did not test the market before agreeing this deal?
2) If there was a better deal to be had, why would Fairfax not have taken it?

3) Anyone can still make a bid.  The break-fee seems to be only $2+1.5m on a deal that is currently valued at $52m.  If somebody figures that this is a bargain and comes in and offers, say, $75m later this week Torstar BoD wouldn't have much choice but to recommend that the offer be accepted and simply pay the break-fee.  Any offer above $55.5m ($52+3.5) would be a no-brainer for shareholders, right?  Probably not going to happen...

Daphne

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Re: Fairfax 2020
« Reply #354 on: May 27, 2020, 08:28:54 AM »
Hang on....no need to ratchet up the conspiracy theories.  I’ve worked on a number of deals, at the most senior levels in the insurance sector, in the retail sector, in media etc.  One in the insurance sector was a multi country deal concluded in ten days start to finish.

So, if we’re going to speculate here, try this plausible scenario (plausible because I’ve seen it happen).  Buyer starts talking to Prem and co about their desire to buy out Torstar and take it private.  Prem says, who’s going to run it?  They say we have a few people in mind.  Prem says, what about Paul, he knows the business, is brilliant at what he does and is looking for a position that keeps him closer to home. Could be a terrific fit.  The rest is history.

McLuhan said it best....if I hadn’t believed it I wouldn’t have seen it.

Parsad

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Re: Fairfax 2020
« Reply #355 on: May 27, 2020, 02:02:34 PM »
Agree with Daphne!

You guys need to think about the long-game when it comes to Fairfax...not the short-term.  I have no idea exactly what the reasons were behind Paul making this deal and Fairfax supporting it, but I can think of something that would be in the interest of Fairfax shareholders long-term.  And Prem would not do a deal if it hurts Fairfax shareholders in the slightest...he just doesn't operate that way, and he has no vested interest to do so.  Do you really think Paul would pull the wool over Prem's eyes?  Paul would never put himself ahead of Prem either!

Here's my view:

Paul wanted to slow things down.  He semi-retires from Fairfax, but still sits on Recipe's board.  He then acquires Torstar with Jordan Bitove, through their wholly-owned LP.  Torstar has not worked out for Fairfax.  Now Paul and Jordan have to turn it around or play with the underlying assets and gain some value.  While presently Nordstar is wholly-owned by the Bitove and Rivett families, does anyone in their right mind here believe that they will never raise outside capital for Nordstar once Paul decides...ok, I've played enough golf and I'm done with family time after 3 months of quarantine...I need to exercise my brain again!

Prem is getting older...the Hamblin Watsa old guard is getting older...Buffett made this mistake with the double-T's...good, but not Buffett and not Lou Simpson.  Who is going to carry the investment load...most likely Wade Burton and Lawrence Chin.  But you could allocate capital to other's you trust over time...Nordstar...Francis via Chou Funds or Stonetrust...Atlas Corp...Vito Maida and Patient Capital...etc.

For now, Prem gets rid of Torstar, as they weren't going to spend their time turning it around, plus tax losses to offset gains.  Paul turns it around with Jordan, and they have their vehicle.  Prem can always consider injecting capital into Nordstar or a turned around Torstar later.  You really think Paul or Jordan would reject capital from Prem at some point?  Cheers!
« Last Edit: May 27, 2020, 02:04:20 PM by Parsad »
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petec

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Re: Fairfax 2020
« Reply #356 on: May 27, 2020, 02:48:38 PM »
Is Rivett any good at investing? He’s a lawyer by background. IIRC he was in charge of Fairfax’s private investments and that didn’t go well.
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Parsad

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Re: Fairfax 2020
« Reply #357 on: May 27, 2020, 07:57:13 PM »
Is Rivett any good at investing? He’s a lawyer by background. IIRC he was in charge of Fairfax’s private investments and that didn’t go well.

I'm constantly confused by this comment about how Fairfax's "private" investments have not done well.  Before, the criticisms used to be how their insurance businesses were awful...but since they are all writing below a 100% CR, now everybody says how awful their private investments are.  Are they great...no...but if you look at the entirety of Fairfax's private investments (including insurance and non-insurance businesses), they have done perfectly fine over time based on the target they are trying to hit on annualized investment return.  Cheers!
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petec

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Re: Fairfax 2020
« Reply #358 on: May 28, 2020, 12:13:07 AM »
Is Rivett any good at investing? He’s a lawyer by background. IIRC he was in charge of Fairfax’s private investments and that didn’t go well.

I'm constantly confused by this comment about how Fairfax's "private" investments have not done well.  Before, the criticisms used to be how their insurance businesses were awful...but since they are all writing below a 100% CR, now everybody says how awful their private investments are.  Are they great...no...but if you look at the entirety of Fairfax's private investments (including insurance and non-insurance businesses), they have done perfectly fine over time based on the target they are trying to hit on annualized investment return.  Cheers!

Lumping insurance and non-insurance together merely obscures what Fairfax is good at, and what they're not.

Their record on the insurance side is outstanding. They have done wonderfully in Lombard, First Capital, Gulf, probably Digit, and others. This is why I disagree with SJ on the "shithole countries" investments. Brazil in particular may grow to be another home run. In fact if I have any criticism it's that they don't do more - for example I would think Digit's model could be exported to Africa, Latin America, and the rest of Asia, and Fairfax has the footprint to do this.

However, their record on the non-insurance side appears to be dire. There is basically no reporting, so it is hard to tell. But in aggregate the private businesses that are consolidated appear to be lossmaking (IIRC they report ebitda and interest costs and they sum to a negative). Past realisations have shown a couple of wins (Arbor, Ridley), but I don't recall anything that really moved the needle. The only big one (APR) was done at carrying value, which I think had been written down a little. I have (faint) hopes for Quantum, Boat Rocker, Praktiker, and maybe a couple of other little things, but I don't see any evidence of progress overall and there may be some real duds. As far as I can tell Fairfax have conspicuously failed to build a third (insurance, float, private) source of cash flows at a reasonable cost, as Markel and Berkshire have done. I would be delighted by evidence to the contrary, but without it I interpret the monetisation plan as an admission of failure. While I like the admission, the failure needs to be acknowledged.
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Parsad

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Re: Fairfax 2020
« Reply #359 on: May 28, 2020, 12:36:37 AM »
Is Rivett any good at investing? He’s a lawyer by background. IIRC he was in charge of Fairfax’s private investments and that didn’t go well.

I'm constantly confused by this comment about how Fairfax's "private" investments have not done well.  Before, the criticisms used to be how their insurance businesses were awful...but since they are all writing below a 100% CR, now everybody says how awful their private investments are.  Are they great...no...but if you look at the entirety of Fairfax's private investments (including insurance and non-insurance businesses), they have done perfectly fine over time based on the target they are trying to hit on annualized investment return.  Cheers!

Lumping insurance and non-insurance together merely obscures what Fairfax is good at, and what they're not.

Their record on the insurance side is outstanding. They have done wonderfully in Lombard, First Capital, Gulf, probably Digit, and others. This is why I disagree with SJ on the "shithole countries" investments. Brazil in particular may grow to be another home run. In fact if I have any criticism it's that they don't do more - for example I would think Digit's model could be exported to Africa, Latin America, and the rest of Asia, and Fairfax has the footprint to do this.

However, their record on the non-insurance side appears to be dire. There is basically no reporting, so it is hard to tell. But in aggregate the private businesses that are consolidated appear to be lossmaking (IIRC they report ebitda and interest costs and they sum to a negative). Past realisations have shown a couple of wins (Arbor, Ridley), but I don't recall anything that really moved the needle. The only big one (APR) was done at carrying value, which I think had been written down a little. I have (faint) hopes for Quantum, Boat Rocker, Praktiker, and maybe a couple of other little things, but I don't see any evidence of progress overall and there may be some real duds. As far as I can tell Fairfax have conspicuously failed to build a third (insurance, float, private) source of cash flows at a reasonable cost, as Markel and Berkshire have done. I would be delighted by evidence to the contrary, but without it I interpret the monetisation plan as an admission of failure. While I like the admission, the failure needs to be acknowledged.

Their investment results since inception...from the 2019 Letter:

                         Compound
                          Growth in                    Average               Average Total
                             Book                      Combined                Return on
                      Value per Share                Ratio                  Investments

1986-1990              57.7%                    106.7%                    10.4%
1991-1995              21.2%                    104.2%                      9.7%
1996-2000              30.7%                    114.4%                      8.8%
2001-2005              (0.7)%                   105.4%                      8.6%
2006-2010               24.0%                    99.9%                     11.0%
2011-2016                 2.1%                    96.0%                      2.3%
2017-2019               12.0%                    99.8%                      5.6%

Ok, fine...I'll compare both insurance and investments.  As you can see, in the earlier years, Fairfax was getting great investment returns but insurance was not profitable.  Insurance increased book value and float, but the quality of the insurance businesses needed improvement.  Later, as investments didn't do as well, Fairfax had improved their insurance businesses dramatically. 

So overall, Fairfax's investments have actually done very well...lackluster in the last decade, but really quite good overall.  Whereas their insurance business has improved massively and is writing consistent business during that last decade plus.  If they keep insurance underwriting where it is and modestly improve their investment results compared to the last decade, they are going to have tremendous growth in book value per share.  Cheers!
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