Corner of Berkshire & Fairfax Message Board

General Category => Fairfax Financial => Topic started by: Parsad on August 01, 2020, 02:40:47 AM

Title: Remember This Quote!
Post by: Parsad on August 01, 2020, 02:40:47 AM
I've pounded the table in the past, and I've been pounding it for the last 3 months, even before Prem made his $150M purchase...but here it is from the horse's mouth, which most won't pay attention to anyways:

Prem Watsa

So, Christopher -- so I understand what is your question. Let me just say as I have said that our share price has been ridiculously cheap. I said that at the annual meeting. I said that in the first quarter. Saying it again and of course and I disclose that I have taken advantage of it and bought as many shares as I could to let everyone know it's ridiculous cheap. In 35 years, we never know when the stock price is going up or down. We just know that's cheap. Is it going to go up in the next six months? Or, is it -- I have bought it so that in the next five years I think it will be terrific return. And, Fairfax as a company, when we retire stock we are going to retire ton of stock if it's available. But we have to be careful when we retire it in relationship to the potential we have in the insurance business in terms of our financial position, in terms of the uncertainty in the marketplace. So, we have to take all of that into account. Our stock price is dirt cheap, and I can tell and I don't know if it'll be six months or a year or when it will go up, but it's going to go up very significantly, and that's been my experience over 35 years. And to our shareholders, I would say take advantage of it if you got to opportunity to, but otherwise, we just have to focus on the long-term.

So, next question, Ella?

Title: Re: Remember This Quote!
Post by: Xerxes on August 01, 2020, 07:28:03 AM
I guess, it make sense he is putting priority on the investing in the insurance business. FFH can always buy back the shares tomorrow (and i doubt shareprice will move that much), and financial engineering should never be at the expense of creating intrinsic value. You don't want to be like Boeing or GE, hollowing out the balance sheet through massive buybacks for the sake of exiting shareholders and Wall Street, instead of taking a hard look at the pillars of the business and see where you can invest first to maintain one's competitiveness in the market place. And I would also say that if Mr. Watsa had an ownership of 1%, he may have preferred hollowing out the balance sheet through buybacks to keep the numbers up. So despite his weird gymnastics when it comes to common stock investment, I can safely state that I feel that he has an incentive to build the business for the long term shareholders and not to hollow it out. And I understand the counter points about mismatch between voting shares and involvement of his family etc. and agree with those as well.

That said, while Prem' is probably doing the right thing balancing capital allocation, the pill would have been easier to swallow, if this hasn't been coming after the long list of disappointments and mistakes, all well documented in this forum. Personally, i don't care too much stock prices not going up for the short term, as i can extremely patient, but what I CANNOT stand is his stubbornness when it comes to technology names, parading the names in the annual shareholder letters, with the most elementary valuation metric (p/e) to make a case. I am sorry, if after 20 years you have not understood that the Big Tech are not the Nortel et al. of 1999-2000, I will classify that as stubbornness.

The Economist had an article few weeks ago, where it was saying that how the 2000 stock market crash created a bias for deep value investors. Perhaps that is true, that 1999-2000 bias messes up their framework, as they all eagerly await for the Judgment Day, when Prophecy shall be fulfilled and the technology name halved again.

But the point is that even if the Prophecy is fulfilled, why take a short position against the mother of all secular trends, only to lose money in a massive rally and then break-even on the shorts when its goes back down. Short the easy stuff. Short the airlines, the restaurants, short Cara Operations ! ... wait in fact, you had said in past AGMs you will not short anymore, why are we even seeing short positions popping out on the quarterly results.

Thankfully, while, his weird equity investment, grabs the headlines and captures not our imagination but our frustration, we can be glad to know that the bulk of the $40 portfolio is not made up equity investments.
Title: Re: Remember This Quote!
Post by: investmd on August 05, 2020, 05:49:53 AM
I would echo comment above about stubbornness: Watsa has been steadfast in saying that his LONG TERM shareholders have done very well.
However 10 year  return is flat- zero. Both 15 year return and 20 year returns are under < 5%/year before dividends.
His defn of Longterm seems to be only since inception. I wish he would give credit to shareholders who have stayed with him for 10-15 years, bought regularly and underperformed the market. They too are long term shareholders and the company has underperformed in the long term. If he accepted the mistakes, acknowledged, learned and moved forward situation would be more palatable. 

Any return from here is a win for short term investors. Those who have held long term have lost compounding power.