Highlights from Fairfax Lollapalooza 2015

It’s the biggest event of the year for Canadian value investors



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May 25 2007 Toronto: Prem Watsa, chairman of Fairfax Financial holdings Ltd. speaking at a Toronto Board of Trade luncheon Friday at Noon hour. (Photo by David Cooper/Toronto Star via Getty Images)

Prem Watsa, chairman of Fairfax Financial holdings Ltd. (David Cooper/Getty Images)

Investors are looking forward to the Berkshire Hathaway annual meeting this weekend when tens of thousands will flock to Omaha to hear what Warren Buffett and Charlie Munger have to say. The weekend’s festivities have become known as the the carnival of capitalism.

But you might not know that Toronto is blessed with, perhaps, the second largest lollapalooza for value investors, which revolves around the Fairfax Financial annual meeting. It was held two weeks ago and, in an effort to encourage you to attend next year, I’m going to tell you a little bit about what this year’s meeting had to offer.

Day 1: The Early Birds

The lollapalooza started two full days before the Fairfax annual meeting when three teams of students gathered for the finals of the Ben Graham Centre’s International Stock Picking Competition. The event was run by Dr. George Athanassakos and my take on it can be found here. If you’re an MBA student, be sure to sign up for next year’s competition for a chance to win the grand prize of $10,000.

The competition wrapped up near mid-day and I was joined by a few young value investors, including blogger Glenn Chan, for a frugal lunch between events.

We then headed over to the Deep Value Happy Hour, which attracted a score of early birds who flew in from as far away as Germany and India for the conference the following day. Over drinks we talked about stocks at Marché in Brookfield Place.

To get a very small taste of the personalities involved, money manger James East and valuation specialist Keith Smith joined us.

After working up an appetite, the group headed over to the Ben Graham Dinner, which was held that evening at Joe Badali’s Ristorante Italiano & Bar. At this point attendance swelled to roughly 60 participants including Dr. George and some of the students from the morning’s contest. The relaxed dinner provided a much needed opportunity to catch up with friends from out of town. I staggered out of the restaurant just after 10 p.m. but more than few investors stayed on late into the night.

Day 2: The Rock Stars

The second day of the lollapalooza was dominated by the Ben Graham Centre’s 2015 Value Investing Conference, which was run by Dr. George and the Ivey Business School. Peruse the program to get a sense of what was on offer and check out the slides the speakers used. Even better, the keynote speeches of Russel Napier and Frank Martin can be seen on YouTube. You can also read Ian McGugan’s thoughts about the conference in an article called Take heart, value investors: You’re not alone (even if it feels that way).

After lunch, I headed to an executive meeting room at the top of the hotel to prepare for the Pre-Dinner Happy Hour. As expected, the room was soon flooded by people from the conference and others who were just getting into town.

This year we were joined by Francis Chou, Sam Mitchell (a key member of Fairfax’s investment team), and Guy Spier who recently published The Education of a Value Investor. All three took questions from the crowd with Mr. Chou touching on high yield bonds, Mr. Mitchell adding valuable insights on managing an oil and gas business, and Mr. Spier highlighting some of the philosophical and behavioural lessons found in his book. A big thanks to all three for taking the time to chat with fans.

Afterwards, the festivities moved to the 10th Annual Fairfax Financial Shareholder’s Dinner. It was a highlight of the week thanks to the tireless efforts of money manager Sanjeev Parsad and his team of helpers.

The dinner got its start a decade ago with only a handful of people. But this year it attracted 180 people and was held in the Imperial Room of the Fairmont Royal York with dinner tickets going for $200 a pop.

Aide from being served a fine dinner, attendees were treated to many interesting speakers. For instance, Nate Tobik of the OddballStocks blog talked about bank stocks and his presentation can be found on YouTube. In addition, Benj Gallander, who runs the Contra The Heard newsletter with his partner Ben Stadelmann, talked about their methods and subjected the audience to his unique “head-and-shoulders” dance.

The dinner was dedicated to the memory of JoAnn Butler, who was Prem Watsa’s executive assistant for many years, and it helped to raise money for the The Crohn’s & Colitis Foundation of Canada.  A charity auction was also held and a lucky hockey fan secured an autographed Wayne Gretzky jersey. Even better, the hockey great himself made an appearance to congratulate the winner. Overall, $25,000 was raised for the cause this year.

But that’s not all. Fairfax Financial’s CEO Prem Wasta briefly introduced the main panel of guests for the evening. The panel included Fairfax luminaries like president Paul Rivett, the presidents of many of the companies Fairfax has a stake in–including Greece’s Eurobank and Grivalia–and other stars like Francis Chou and Russel Napier. The panel took questions from the audience for over an hour and some lingered even longer to take questions from fans. They were still talking to throngs of admirers when I departed a little after 11 p.m.

Day 3: The Main Event

The third day started bright and early with the Fairfax Financial annual general meeting. Attendance was so large this year that Roy Thomson Hall’s balconies had to be opened up to accommodate the crowd.

CEO Prem Watsa took centre stage and quickly dealt with the firm’s official business before moving on to introduce the firm’s leadings lights. He then reviewed Fairfax’s results and opined on the market more generally. (His slides can be found over here.) After concluding his remarks, the audience lined up to ask questions for several hours until the meeting adjourned at about noon for conversation and a few nibbles.

During the meeting attendees were able to visit a variety of booths devoted to the companies in the Fairfax family. They were also treated to food from restaurants it has a stake in including the Keg and divisions of Cara Operations.  I chatted up the Pethealth people (they don’t insure goldfish), obtained a book from Templeton Press, and nabbed a variety of restaurant coupons along the way.

Afterwards a couple dozen souls made their way to the Corner Market Capital meeting to hear what Sanjeev Parsad had to say about his hedge fund, new venture with Premier Diversified Holdings, and the markets more generally.

While chatting over drinks at the end of the day, James East suggested this year’s lollapalooza was a little too short for his taste. (That came as a surprise to my aching feet.) But a few more events will likely be added next year.

If you’re interested in joining the fun, bookmark Fairfax Lollapalooza 2016 where you can learn about the details of next year’s festivities when they become available.

Safer Canadian Dogs

Investors following the Dogs of the Dow strategy want to buy the 10 highest yielding stocks in the Dow Jones Industrial Average (DJIA), hold them for a year, and then move into the new list of top yielders.

The Dogs of the TSX works the same way but swaps the DJIA for the S&P/TSX 60, which contains 60 of the largest stocks in Canada.

My safer variant of the Dogs of the TSX tracks the 10 stocks in the index with the highest dividend yields provided they also pass a series of safety tests, such as having positive earnings. The idea is to weed out companies that might cut their dividends in the near term. Just be warned, it’s a task that’s easier said than done.

Here’s the updated Safer Dogs of the TSX, representing the top yielders as of April 28. The list is a good starting point for those who want to put some money to work this week.  Just keep in mind, the idea is to hold the stocks for at least a year after purchase–barring some calamity.

Name Price P/B P/E Earnings Yield Dividend Yield
BCE (BCE) $54.37 4.18 18.24 5.48% 4.78%
Potash Corp (POT) $39.82 3.24 19.69 5.08% 4.61%
Rogers (RCI.B) $43.95 4.16 17.51 5.71% 4.37%
CIBC (CM) $97.63 2.12 13.45 7.44% 4.34%
Shaw (SJR.B) $27.71 2.74 16.59 6.03% 4.28%
National Bank (NA) $48.99 1.86 11.21 8.92% 4.08%
Bank of Nova Scotia (BNS) $67.34 1.74 11.77 8.49% 4.04%
Bank of Montreal (BMO) $80.60 1.52 12.73 7.85% 3.97%
Royal Bank of Canada (RY) $80.90 2.27 12.86 7.78% 3.81%
TELUS (T) $42.66 3.49 18.39 5.44% 3.75%


Source: Bloomberg, April 28, 2015

Price: Closing price per share

P/B: Price to Book Value Ratio

P/E: Price to Earnings Ratio

Earnings Yield: Earnings divided by Price, expressed as a percentage

Dividend Yield: Expected-Annual-Dividend divided by Price, expressed as a percentage

As always, do your due diligence before buying any stock, including those featured here. Make sure its situation hasn’t changed in some important way, read the latest press releases and regulatory filings and take special care with stocks that trade infrequently. Remember, stocks can be risky. So, be careful out there. (Norm may own shares of some, or all, of the stocks mentioned here.)

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One comment on “Highlights from Fairfax Lollapalooza 2015

  1. Benjamin Graham – also known as The Dean of Wall Street and The Father of Value Investing – was a scholar and financial analyst who mentored legendary investors such as Warren Buffett, William J. Ruane, Irving Kahn and Walter J. Schloss.

    Buffett describes Graham’s book – The Intelligent Investor – as “by far the best book about investing ever written” (in its preface).

    Graham’s first recommended strategy – for casual investors – was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks – Defensive, Enterprising and NCAV – and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various “special situations”.

    The first requires almost no analysis, and is easily accomplished today with a good S&P500 Index fund.
    The last requires more than the average level of ability and experience. Such stocks are also not amenable to impartial algorithmic analysis, and require a case-specific approach.

    But Defensive, Enterprising and NCAV stocks can be reliably detected by today’s data-mining software, and offer a great avenue for accurate automated analysis and profitable investment.

    Warren Buffett once wrote a detailed article explaining how Graham’s record of creating exceptional investors (such as Buffett himself) is unquestionable, and how Graham’s principles are everlasting. The article is called “The Superinvestors of Graham-and-Doddsville”.


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