No. of Recommendations: 17
Prem Watsa's shareholder letter covering 2023 results is dated March 8, about three weeks after Q4 and full year results were reported. It runs 34 pages and represents a thorough discussion of the company's business, including a detailed section on Fairfax India.
https://www.fairfax.ca/wp-content/uploads/FFH_Fair...Berkshire holders fond of Warren Buffett's self-deprecations might enjoy Mr. Watsa's discussion of his Blackberry investments, which begins, "
That brings me to a major mea culpa!" (Mr. Watsa's bold-facing), and concludes with this:
Another horrendous investment by your Chairman. To make matters worse, imagine if we had invested it in
the FAANG stocks! The opportunity cost to you our shareholder was huge! Please don’t do the calculation! No
technology investment for me! (Page 11)
He offers a chart similar to the one Mr. Buffett publishes each year listing book value and share price changes over the years. It reflects generally unremarkable results through the 20-teens and more robust results since 2021:
Year % change bv/share (USD) % change share price (CD)
2010 +2 –
2011 −3 +7
2012 +4 −18
2013 −10 +18
2014 +16 +44
2015 +2 +8
2016 −9 −1
2017 +22 +3
2018 −4 −10
2019 +12 +1
2020 −2 −29
2021 +33 +43
2022 +20 +29
2023 +23 +52
(Page 22)
Fairfax trails the S&P 500 over the past 15-year period, narrowly beats it (by 2% or less) over five-, 10- and 20-year periods, and beats it quite handily since inception (in 1985) owing mainly to three triple-digit stock price increases in the early years (292% its first year, 145% in 1993 and 196% in 1996).
Results over the past three years seem quite promising in view of Mr. Watsa's qualified prediction that "our adjusted operating income (undiscounted
underwriting profit, interest and dividends plus income from associates) of $3.9 billion may continue at these levels for the next four years."
These results are magnified on a per-share basis because shares outstanding have decreased from 27.8 million at the end of 2017 to 23 million at the end of 2023, a reduction of 17%. On a per-share basis, gross premiums are up 152% over that period, float is up 85%, the investment portfolio is up 99% and common shareholders' equity is up 109%. (Page 7)
Berkshire holders thinking Fairfax's $25.5 billion (U.S.) market cap might make a nice tuck-in acquisition will be disappointed to learn it will not be taken out under Mr. Watsa's leadership:
We continue to focus on how Fairfax can survive for the next 100 years, long after I have gone! Our outstanding
culture and my effective voting control will certainly help. As I have mentioned many times in the last 38 years,
you, our shareholders, suffer a major negative as our company is not for sale at any price. So there will be no
takeover bonanza. Of course, we have to perform for you over time and we plan to do exactly that in the long term. (Page 33)
