The opportunity in crisis-mauled stocks
Fairfax Financial chairman and CEO Prem Watsa. While the shares of many companies mauled during the financial crisis are showing some zip, they remain dream stocks for deep value investors because they are still bargain-priced. Investment greats who've selectively been taking positions in some of these unloved companies include Canada's Mr.
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#1 May 26, 2013
I would short this stock, as it had a nice run up as of late...Well maybe I would wait until the end of September 2013 before I short it.
Why I would short Fairfax?
1) Fairfax Market Hedges will be a drag over the next couple of years. I am not saying Management is wrong for using this strategy, I just believe they were to early when they started it in 2010 and I personally believe there will be no big correction in the Market until after 2015-2016, assuming there is no unexpected or drastic event.
2) Given Fairfax's past Underwriting performance, I am not convinced they will consistently make money from underwriting, especially if we have a bad hurricane season in 2013. I believe they are on there way to this goal, I just do not believe management is there yet. I would need to see at least two consecutive years of underwriting profits before I believe what they have claimed in their last conference call.
3) To many articles in the NYTimes indicating they have some IRS Problems, relating back to 2003, that could be considered criminal. Tax issues are one thing, but criminal tax issues, if true, will be a problem and could have some cascading legal consequences with previous and future lawsuits that are sure to follow.
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