Fairfax India Holdings Corp.

Fairfax India Holdings Corp. (FIH.U)

Fairfax India Holdings Corporation (“the company” or “Fairfax India”) is an investment holding company whose objective is to achieve long term capital appreciation, while preserving capital, by investing in public and private equity securities and debt instruments in India and Indian businesses or other businesses with customers, suppliers or business primarily conducted in, or dependent on, India (“Indian Investments”). The company makes all or substantially all of its investments either directly or through one of its wholly-owned subsidiaries, FIH Mauritius Investments Ltd (“FIH Mauritius”) and FIH Private Investments Ltd (“FIH Private”).

Fairfax Financial Holdings Limited ("Fairfax") is Fairfax India's ultimate parent and acts as its administrator. Fairfax is a holding company which, through its subsidiaries, is principally engaged in property and casualty insurance and reinsurance and the associated investment management. Hamblin Watsa Investment Counsel Ltd. (the “Portfolio Advisor”), a wholly-owned subsidiary of Fairfax and registered portfolio manager in the province of Ontario, is the portfolio advisor of the company and its consolidated subsidiaries, responsible to source and advise with respect to all investments.

At September 30, 2018 Fairfax, through its subsidiaries, owned 30,000,000 multiple voting shares and 21,558,422 subordinate voting shares of Fairfax India. Fairfax India’s subordinate voting shares trade on the Toronto Stock Exchange ("TSX") under the symbol FIH.U. The multiple voting shares of the company are not traded. At September 30, 2018 Fairfax's holdings of multiple and subordinate voting share represented 93.7% of the voting rights
and 33.5% of the equity interest in Fairfax India (December 31, 2017 - 93.6% and 30.2% respectively). See note 12 for additional details on the increase in Fairfax's equity interest in the company.
https://s1.q4cdn.com/293822657/files/doc_financials/quarterly_reports/2018/2018-Q3-Interim-Report-(FIH)-(Final).pdf

The company's financial documents are written clearly and without hyperbole.  In light of this, I will not provide a synopsis as the process of reading through them does a far better job of giving potential investors an appreciation of the company's operations.

The Investment Thesis

India has a vibrant and growing economy which should outperform most other countries on a sustained basis.

The management at Fairfax has a great understanding of the intricacies of navigating through the complexities of Indian society and has deep roots cultivated through many years of investing in the country.

Management is honest (this through years of conversations with a trusted friend in the investment business who has long-established social connections with the crew at Fairfax).

Management has "skin in the game" (see above) and as a result, will be inclined to work in the interest of share owners.

The investment model is akin to that used with great success by Berkshire Hathaway.

Commentary

1. While the price of the shares will fluctuate due to factors such as the inevitable fluctuations in Indian stock markets and currency exchange rates, I feel that the long-term prospects for sustained gains over time are excellent.
2. There are few other vehicles for North American investors to invest in India with the potential to outperform index funds and mutual funds.  
3. The recent dip in the share price represents a buying opportunity.  
4. Fairfax India will be a core holding in the Financial Log Book.  (It was a former crew member but I sold it figuring that I could time the market.  As it turned out, I got lucky ... but maybe this time I'll hang on for longer ... the eternal debate between "buy and hold" and Mastering the Market Cycle a la Howard Marks.) 

Closing Note

1. In recent years, my perspective has changed slightly.  I am biased in favour of nascent companies with innovative business models and technologies which give them a market advantage, preferably by great strategic positioning and technologies/services that confer real benefits to clients. 
2. My portfolios are concentrated:  a few well positioned companies with great management, sound financials and good strategic positioning (competitive products/services to meet the demands of an expanding market).
3. A defensive posture is being taken in light of the potential for major economic dislocation, hence investments in precious metals and what I hope will be recession resistant companies such as CO2 GRO.   
4. A list of potential investments has been assembled with the thought that I'll pull the trigger when the time is right.  In some cases, I'll ease gradually into the market and increase my stake as companies achieve various milestones.  The recent establishment of a position with Rocky Mountain Equipment is an example. 
5. A substantial cash reserve is being maintained.  It's not often that a compelling investment proposition comes into view and in today's uncertain climate it makes sense to be very selective.  
6. The writings of Howard Marks and his approach to market cycles have influenced me greatly.  In my view, it is particularly applicable to individual investors who have the capacity to develop an independent view and the agility to implement it - this as opposed to the constraints which burden the efforts of most institutional investors.

Readers will note that the portfolio has undergone a substantial change over the past 18 months with the adoption of this approach.