Author Topic: Q1 2020 Results  (Read 10238 times)

petec

  • Hero Member
  • *****
  • Posts: 2416
Re: Q1 2020 Results
« Reply #10 on: May 01, 2020, 02:29:59 PM »
Mind you that leaves a gap for an insurance overseer. Scott Carmilani?
FFH MSFT BRK BAM ATCO LNG IHG TFG CGT DC/A


bearprowler6

  • Full Member
  • ***
  • Posts: 159
Re: Q1 2020 Results
« Reply #11 on: May 01, 2020, 02:36:53 PM »
There is no evidence that Sanjeev's "theory" concerning Fairfax and Atlas longer term has even been considered. Furthermore, if it has been consider than Sanjeev should not have any knowledge of those discussions. Until than, the best that can be said is that Atlas is yet another oversized under performing investment made by the existing investment team at Fairfax.

Prem's stated reason for investing in Atlas was to back and benefit from the investment prowess of David Sokol.  Ridiculous reason for investing $1.5 billion but those are Prem's words. Sort of like taking the equity hedges off because of Trump's election win, investing big time into India because Modi's election win would be transformative and buying into Exxon because of the 10% common stock dividend yield it offered at the time of investment.

Xerxes

  • Sr. Member
  • ****
  • Posts: 286
Re: Q1 2020 Results
« Reply #12 on: May 01, 2020, 03:35:05 PM »


6) Piling more money into Seaspan? - During Q1, FFH piled another $100m into Atlas (page 16 of Q1).  Seaspan has been one of FFH's few success stories in recent years, but returning to my traditional rants and raves about position-sizing, is this really wise?  Seaspan seems to be in good shape with much of their capacity under medium term contracts, but what residual risks remain (ie, counterparty risk, events eligible for declaration of force majeur, etc)?  FFH has now piled a total of $1.5B of its capital into Atlas.  Is this a reasonable risk from a position-sizing perspective?  Returning to point #3, a write-down of ~$500m would be inconvenient.


SJ

Hi SJ, I don't have answers for all of your questions, but I do have a response for #6:

I'm comfortable with them piling into Atlas.  I think Atlas will be a wholly-owned Fairfax Company one day like Mid-American became under Berkshire.  With Paul Rivett showing signs of moving into semi-retirement and spending more time with family, Prem and the old guard aging, Andy Barnard not being much younger than Prem, I like the idea of Bing Chen and Wade Burton sharing future duties at Fairfax in terms of a succession plan.  One handles operations and one handles investments.  That may change depending on what happens, what acquisitions are brought in, what leaders emerge, but I think shareholders could be comfortable in that pairing.  Cheers!

Parsad
Hypothetically speaking, why would the Washington family would want to let go of Atlas, if it is a great bet? FFH would be better off in having a controlling position but probably no more as that type of business in not in their circle of competence.

Going to mid-American comparison, if a potential intent is the get the whole of Atlas, and if that bet is a function of David Sokol ability to stay and continue the good work, shouldn't Sokol have a Atlas-only stake, like Greg Abdel does with BRK Energy.

For the record, I personally believe in Sokol and his work and Atlas.

Parsad

  • Administrator
  • Hero Member
  • *****
  • Posts: 8988
Re: Q1 2020 Results
« Reply #13 on: May 01, 2020, 03:39:16 PM »
There is no evidence that Sanjeev's "theory" concerning Fairfax and Atlas longer term has even been considered. Furthermore, if it has been consider than Sanjeev should not have any knowledge of those discussions. Until than, the best that can be said is that Atlas is yet another oversized under performing investment made by the existing investment team at Fairfax.

Prem's stated reason for investing in Atlas was to back and benefit from the investment prowess of David Sokol.  Ridiculous reason for investing $1.5 billion but those are Prem's words. Sort of like taking the equity hedges off because of Trump's election win, investing big time into India because Modi's election win would be transformative and buying into Exxon because of the 10% common stock dividend yield it offered at the time of investment.

I have never heard anything related to this.  I'm just going by what I see...the amount of mutual respect between David Sokol, Bing Chen and Prem, and the fact that Paul has said that he wants to step back.  It was pretty clear that Paul and Andy Barnard would have led Fairfax previously if something happened to Prem.

Now with Paul stepping back and Andy getting older...I think they've probably put some recent thought into succession.  From this year's letter, it seems clear that Wade is being pushed as head of Hamblin-Watsa, and Bing would be a natural choice to take over in terms of operations.  The bench is deep enough where it could be possibly someone else, but the fact that David is at Atlas, he understands insurance as well as anyone. 

To me, after watching Fairfax for 20 years, it seems that if something happened to Prem, David would be a natural choice for Chairman, Wade overseeing Hamblin-Watsa and Bing overseeing operations.  Cheers!
No man is a failure who has friends!

Parsad

  • Administrator
  • Hero Member
  • *****
  • Posts: 8988
Re: Q1 2020 Results
« Reply #14 on: May 01, 2020, 03:45:43 PM »


6) Piling more money into Seaspan? - During Q1, FFH piled another $100m into Atlas (page 16 of Q1).  Seaspan has been one of FFH's few success stories in recent years, but returning to my traditional rants and raves about position-sizing, is this really wise?  Seaspan seems to be in good shape with much of their capacity under medium term contracts, but what residual risks remain (ie, counterparty risk, events eligible for declaration of force majeur, etc)?  FFH has now piled a total of $1.5B of its capital into Atlas.  Is this a reasonable risk from a position-sizing perspective?  Returning to point #3, a write-down of ~$500m would be inconvenient.


SJ

Hi SJ, I don't have answers for all of your questions, but I do have a response for #6:

I'm comfortable with them piling into Atlas.  I think Atlas will be a wholly-owned Fairfax Company one day like Mid-American became under Berkshire.  With Paul Rivett showing signs of moving into semi-retirement and spending more time with family, Prem and the old guard aging, Andy Barnard not being much younger than Prem, I like the idea of Bing Chen and Wade Burton sharing future duties at Fairfax in terms of a succession plan.  One handles operations and one handles investments.  That may change depending on what happens, what acquisitions are brought in, what leaders emerge, but I think shareholders could be comfortable in that pairing.  Cheers!

Parsad
Hypothetically speaking, why would the Washington family would want to let go of Atlas, if it is a great bet? FFH would be better off in having a controlling position but probably no more as that type of business in not in their circle of competence.

Going to mid-American comparison, if a potential intent is the get the whole of Atlas, and if that bet is a function of David Sokol ability to stay and continue the good work, shouldn't Sokol have a Atlas-only stake, like Greg Abdel does with BRK Energy.

For the record, I personally believe in Sokol and his work and Atlas.

Do you really see Kyle Washington running and overseeing all of the Washington family's holdings?  If you live in Vancouver, you know that would be a bad idea!  Dennis Washington is like 86!

Over time, their stake will shrink to 20% like it did with Mid-American when Berkshire first bought...eventually they will sell out completely or take Fairfax shares to minimize tax and retain interest.  Kyle will oversee the family trust like most wealthy families do with someone managing all of the assets.  Cheers! 
No man is a failure who has friends!

Bryggen

  • Jr. Member
  • **
  • Posts: 52
Re: Q1 2020 Results
« Reply #15 on: May 01, 2020, 04:22:49 PM »
I think I should stop listening to the conference calls.  :)

Every time I listen, I get encouraged and buy more shares. Purchased more at CAD$360 today. I don't think I've ever seen this kind of discount to book.

I have to admit it is very cheap at this level, about a 9-10 year low. Will they ever be back at 660ish again (52w high) in the short or mid-term? I have nothing less than the expectation it does within 12-18 months. Irrealistic ?

Parsad

  • Administrator
  • Hero Member
  • *****
  • Posts: 8988
Re: Q1 2020 Results
« Reply #16 on: May 01, 2020, 04:34:56 PM »
I think I should stop listening to the conference calls.  :)

Every time I listen, I get encouraged and buy more shares. Purchased more at CAD$360 today. I don't think I've ever seen this kind of discount to book.

I have to admit it is very cheap at this level, about a 9-10 year low. Will they ever be back at 660ish again (52w high) in the short or mid-term? I have nothing less than the expectation it does within 12-18 months. Irrealistic ?

I think it depends on whether we have rounds of the Pandemic hit us as things start to open up.  If we have a V-shaped recovery, I can see Fairfax stock and the market in general, back up around where it was.  If the Pandemic leads to a more wider recovery over say 2 years, then it might take longer.  Regardless, buying Fairfax at 60% of book value historically has never been anything but a good thing!  Cheers!
No man is a failure who has friends!

Xerxes

  • Sr. Member
  • ****
  • Posts: 286
Re: Q1 2020 Results
« Reply #17 on: May 01, 2020, 05:33:22 PM »
Listened to the call. My comments:

- Main focus seem to be to make it clear that the hold co liquidity is there.

- Looks the feeling is that the window of getting that widening spread on fixed-income is largely a March event. (if i understood correctly)
- No question on position sizing of Exxon, Google etc. At this point i am guessing minor until 13F comes out.
- Looks like they bought (i think) bonds issues from Berkshire Hathway Energy and Walt Disney (although DIS was mentioned in the AGM)
- Half of the question seem to be from individual investors
- COVID seem to be minimal impact for now (naturally covid related question mostly seem to come from analyst who know better)
- Poor Prem, he has to keep telling people that buybacks are not priority. Probably his fault as he made big deal in talking about Teledyne some years back.
- Pretty funny when he asked if anyone on the phone has investment ideas they should let FFH know

Good call, but i think it is for each to figure out if 60% discount to BV equals 60% discount to intrinsic value.
Or there has been major impairment like Recipe and such, which was on a secular decline to begin with.


TwoCitiesCapital

  • Hero Member
  • *****
  • Posts: 2655
Re: Q1 2020 Results
« Reply #18 on: May 01, 2020, 07:15:38 PM »
Listened to the call. My comments:

- Main focus seem to be to make it clear that the hold co liquidity is there.

- Looks the feeling is that the window of getting that widening spread on fixed-income is largely a March event. (if i understood correctly)
- No question on position sizing of Exxon, Google etc. At this point i am guessing minor until 13F comes out.
- Looks like they bought (i think) bonds issues from Berkshire Hathway Energy and Walt Disney (although DIS was mentioned in the AGM)
- Half of the question seem to be from individual investors
- COVID seem to be minimal impact for now (naturally covid related question mostly seem to come from analyst who know better)
- Poor Prem, he has to keep telling people that buybacks are not priority. Probably his fault as he made big deal in talking about Teledyne some years back.
- Pretty funny when he asked if anyone on the phone has investment ideas they should let FFH know

Good call, but i think it is for each to figure out if 60% discount to BV equals 60% discount to intrinsic value.
Or there has been major impairment like Recipe and such, which was on a secular decline to begin with.

Well, not sure 60% of either necessarily matters. I made the point in the other thread that, at these prices, Fairfax need only generate 2.5% annualized on their float, debt, and equity to achieve 15% compounded returns from here.

No worrying about the accuracy of BV or IV or any of that necessary. No wondering if permanent impossible or a return to prior values. All of that is basically in the past. Do you think they can do 2.5% per year? If so, you get 15+% return on your capital.

Bryggen

  • Jr. Member
  • **
  • Posts: 52
Re: Q1 2020 Results
« Reply #19 on: May 01, 2020, 08:13:26 PM »
https://www.bnnbloomberg.ca/video/the-markets-are-picking-winners-and-losers-coming-out-of-this-crisis-mccreath~1950578

FFH not his cup of tea...hummm

Although a very short term view, I kinda agree on the poor investment results comment.