Portfolio holding Fairfax Financial (FFH/NYSE) gets looked over by Gretchen Morgensen in The New York Times. Morgensen is a well-respected financial journalist, and deservedly so.
She suggests that whereas Berkshire Hathaway combines careful insurance underwriting with "perspicacious" (her word) investing, Fairfax's underwriting may not be as sound. And that may be painful should Prem Watsa's "hot hand" (her term) turn cold.
Any of that could prove to be true. But I'll add that Prem Watsa has never struck me as a "hot hand" investor -- his recent masterstroke with credit defaults aside. In fact, Watsa could accurately be described as an overly conservative investor, especially with his insistence on being ready for a 100-year event, as he calls it.
Still, if you're considering Fairfax for your own portfolio, read Morgensen's piece in its entirety. It is balanced and offers up some food for thought.
Who knows? It may prove to be a cautionary tale.
And let me remind regular readers of Controlled Greed, and especially any newer ones, that Fairfax has become a free ride for me. With its share price up nicely since I first mentioned it on this blog in 2005, I've sold enough of my position to have retrieved my original capital. I am a huge admirer of Prem Watsa -- but Fairfax doesn't seem to be the bargain it was. At least to me.
She suggests that whereas Berkshire Hathaway combines careful insurance underwriting with "perspicacious" (her word) investing, Fairfax's underwriting may not be as sound. And that may be painful should Prem Watsa's "hot hand" (her term) turn cold.
Any of that could prove to be true. But I'll add that Prem Watsa has never struck me as a "hot hand" investor -- his recent masterstroke with credit defaults aside. In fact, Watsa could accurately be described as an overly conservative investor, especially with his insistence on being ready for a 100-year event, as he calls it.
Still, if you're considering Fairfax for your own portfolio, read Morgensen's piece in its entirety. It is balanced and offers up some food for thought.
Who knows? It may prove to be a cautionary tale.
And let me remind regular readers of Controlled Greed, and especially any newer ones, that Fairfax has become a free ride for me. With its share price up nicely since I first mentioned it on this blog in 2005, I've sold enough of my position to have retrieved my original capital. I am a huge admirer of Prem Watsa -- but Fairfax doesn't seem to be the bargain it was. At least to me.
Thought people may enjoy this response to Gretchen's article by Whitney Tilson:
http://seekingalpha.com/article/80311-fairfax-financial-anatomy-of-a-hatchet-job?source=yahoo
Posted by: Dan | June 08, 2008 at 03:42 PM
Dan: Thanks for the link. I hadn't seen Tilson's piece and I confess that, as a huge fan of Prem Watsa, the NYT article didn't get me nearly as steamed. Perhaps that's because I've been in FFH for a long time and have become immune to the company being getting less than good press. ;-)
Posted by: John | June 08, 2008 at 10:12 PM