Investing in India - Fairfax India Holdings Corp (FIH.U)

In recent weeks, it would appear that the market is awakening to the potential of this investment.  It's all about the quality of management and the potential of India.  I established a position in December 2015.  I chose this vehicle over ETFs and mutual funds as I considered that Prem Watsa and his team had a competitive advantage: a record of success, strong connections with India, an embedded knowledge of the country with "boots on the ground" and direct ownership of a variety of enterprises.

The recent annual report is worth reading in its entirety.  It it well written and outlines clearly, the strategy which has been adopted by Watsa el al.
http://s1.q4cdn.com/293822657/files/doc_financials/annual_reports/Final-2015-Annual-Report.pdf

My interest in investing in India is premised on its potential for growth:

• a favourable demographic – population structure, size, 
• a sense that its political culture is recognizing the need to support more favourable policies in the business sector
• a growing presence in some sectors: steel, knowledge-based industries such as IT
• some very strong universities which can recruit the “best of the best” drawn from a large population (I believe that national averages for level of achievement in higher education are not really good measures of a nation's intellectual capacity as it is the 5 percent which account for more than 60 percent of intellectual advances.)
• a growing belief in the country that India has the capacity to compete globally and strong connections with other parts of the world due to extensive migration

India has some major challenges such as barriers to full participation in social and economic life due to the legacy of the caste system, and a poorly developed infrastructure, etc.

Despite this, I believe that India will be a more attractive investment over the long term than China for a variety of reasons:

• It has a more effective way of accommodating differing viewpoints, interests and grievances.  China's one party system and the culture in its governing class of “having its way” with a high sense of impunity will ultimately be problematic.  (In meeting with Chinese officials on a few occasions, I noted this when the discussion moved to the role of government in the process of economic development.  They were mystified why things took so long in Canada.)  When controls are imposed from the centre or where decisions are controlled in an hierarchical system, political and economic systems can rupture suddenly.  
• Its demographic structure is more attractive. 
• Its geographical position vis a vis trade routes appears to be more favourable.  

I addressed the thesis at greater length in an earlier posting. In the course of my on-going reading, I encountered some very interesting articles.  The following article presents some interesting comparators:

Why India is Still Playing Catch-up to China

After reading the article, I explored some of its references and found this wonderful site: Trading Economics:

Trading Economics provides more than 300.000 indicators for 196 countries, including economic data, exchange rates, bonds, stocks and commodities. During the last five years, we had more than 100 million page views from more than 200 countries. Interestingly, we rank second to none in many economic terms in Google or other search engines which make us a valuable asset for firms interested in saving in advertisement and generating more attention-grabbing leads. In addition, unlike many startup companies, our net profit has been positive since the first month we were open for business. Our fixed costs are low and our revenues are very solid and trending higher. Nearly 80 percent of our revenues come from recurring subscriptions and 20 percent comes from advertisement on the site.

This is a great site.  It is a wonderful way to “take the pulse” of a country.  OK, I admit that I'm a bit of a wonk for this stuff provided that I dive into the statistical pool with a perspective to guide my wanderings.  I use the stats to test my theories/impressions; otherwise, it would be time wasted.

And speaking about statistics, one of the first things the federal Liberal government did following the recent election in Canada was to restore the long form census.  This reversal of a ignorant, ideologically-driven decision by the Harper government is welcome.  Some readers may know that the voluntary census invoked by the Harper government was inferior in its coverage and reliability and cost $ 30 million more than the previous long form census ... shameful.  The grisly tale is recounted here:
Canada has lost its census anchor

Statistics Canada is one of the most highly regarded agencies of its type in the world.  It has a culture of the "neutral view" - a tradition of providing reliable information without imparting a political interpretation.  In my view, one of our national treasures.