If you do not know Canadian Warren Buffet, it's time to familiarize yourself with it. Prem Watsa has been running Fairfax Financial Holdings Ltd. (TSX: FFH) for over 25 years. During this time, he increased the company's book value by around 20% per annum – a phrase that closely matches Berkshire Hathaway Inc. Warren Buffett. A big component of this long-term better performance was its ability to stick to the principles of thinking, methodology made famous by Tesla Inc CEO Elon Musk. About 2,000 years ago Aristotle introduced the idea of the first principles, describing them as "the first foundation from which something is known." Basically, you do not think about the world by …
If you do not know Canadian Warren Buffet, it's time to familiarize yourself with it. Prem Watsa escaped Fairfax Financial Holdings Ltd. (TSX: FFH) for over 25 years. During that time, the company's book value increased by about 20% per annum – a phrase that closely matches Warren Buffett Berkshire Hathaway Inc.
The big ingredient of this long-term better performance is its ability to stick to the principles of thought priority, the methodology recently made famous by Tesla Inc CEO Elon Musk. About 2,000 years ago Aristotle introduced the idea of the first principles, describing them as "the first foundation from which something is known." Basically, you do not think about the world through the perspectives of others; you think about the world as it really is.
Prem Watsa is an expert on the first principles of thinking
Although the first principles may seem like a simple approach, it is very difficult to do them in real time. As the markets rush up, even the most experienced investors have been burned, making bets at the wrong time.
In general, Warren Buffet bought shares ConocoPhillips at the worst possible time in over 30 years. "Without persuading Charlie [Munger] or anyone else, I bought a large amount of ConocoPhillips stock when oil and gas prices were nearing the peak, "Buffett wrote in his 2008 letter to the shareholders." I did not predict the dramatic fall in energy prices in the last six months. "He lost billions on this plant, although then the market thought it was a sensible decision.
However, in the long run, Warren Buffet was able to avoid moving around with the crowd, often choosing unfair investments in sunken industries. Prem Watsa showed the same skill, and in some cases actually showed higher acumen.
Since 2006, Fairfax shares have exceeded TSX by over 300%. How? Avoiding risky bets when the market optimism is highest. For example, when global markets were in turmoil in 2008 and 2009, and some exchanges fell by 40% or more, Fairfax shares actually recorded a positive return from both years.
Fairfax can be your safe haven during a storm
Investors often think that results are achieved in recent years, but avoiding capital losses when markets are falling provides a gigantic advantage. This has always been the specialty of Prema Watsy, which is interesting, considering that Fairfax shares have been lagging behind in the market for many years in the past few years.
Since the end of 2014, Fairfax shares are roughly flat, which is rare. But over the past few years Fairfax has developed several promising positions. First of all, he took off Fairfax India Holdings Corp (TSX: FIH.U) and Fairfax Africa Holdings Corp (FAH.U). These vehicles, of which Fairfax Financial owns large shares, are unique ways of profiting from long-term opportunities in both India and Africa, in both regions that were difficult for investors to obtain exposure.
Prem Watsa has a deep network of entrepreneurs and partners in both regions and uses them to attract attractive offers. Many of these transactions are private, which means that very few external investors can participate. For example, Prem Watsa decided to start Fairfax Africa after he realized that Fairfax Financial is gaining more and more attractive investment opportunities across the continent. The creation of a dedicated vehicle allows the company to take targeted, well-informed decisions.
Fairfax Financial is the best of both worlds
The investment at Fairfax Financial provides the investment capability of Prem Wats and exceptional development opportunities in Africa and India. Markets are becoming more and more shaken, so it is difficult to find such a combination of protection against decline and long-term growth. And since shares have fallen by more than 20% since June, new investors have a rare opportunity to buy at a reduced price.
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Deceive Co-founder Ryan Vanzo has no position in the aforementioned actions. Fairfax Financial is a recommendation Stock Advisor Canada.