Norman Rothery is the value investor for Globe Investor's Strategy Lab. Follow his contributions here and view his model portfolio here.
Travel to downtown Toronto and you'll notice a forest of new condo towers along the way. Their numbers are a testament to the city's real estate boom that has drawn in speculators from around the world.
The towers will also be spotted by a band of bargain hunters who are due to arrive in town this week. But they're not coming to buy homes.
Quite to the contrary, these investors would probably be more interested in picking up a villa in Greece because they're making the trip to hear noted value investor Prem Watsa speak at the Fairfax Financial Holdings Ltd. annual meeting.
They want to learn what Fairfax's CEO has to say about the markets and the firm's Greek investments, which might be causing them a little heartburn these days. Last year, Mr. Watsa pumped money into Eurobank along with a group of other savvy investors, including Wilbur Ross.
After the crash of 2008, they scored big by rescuing the Bank of Ireland and are trying to repeat their performance in Greece. Unfortunately, the changing political tides in the country conspired to push Eurobank back toward rocky shoals.
As a shareholder, I don't want to see Fairfax lose money on Eurobank.
But I'd be very disappointed indeed if they stopped looking for bargains in the dark corners of the market. Value investors have to expect the occasional failure, and Eurobank isn't done for yet. In addition, Fairfax's non-financial investments in Greece could payoff in a big way over the long term because the country's market is very depressed at the moment.
But before Mr. Watsa steps to the microphone, shareholders can indulge in the many events surrounding the meeting, which represent a value-investing Lollapalooza.
The week kicks off in a dramatic fashion with the finals of a stock-picking competition organized by Dr. George Athanassakos and the Ivey Business School. Three teams of MBA students will vie for $17,500 in cash prizes where only the best ideas will survive.
The winners will be announced the next day at the Ben Graham Centre's Value Investing Conference, which is also organized by Dr. Athanassakos.
It features several notable speakers, including Russell Napier, Frank Martin, William Browne, Guy Spier, Richard Oldfield, Ole Nielsen and Francis Chou.
Fans of local value-investing legend Mr. Chou, a Fairfax alumnus, should take some time to read his recent annual letter to investors. In it, he touches on some important themes.
For instance, he is less than enthusiastic about the prospects for North American stocks. He observes that back in 1981 economic conditions set up investors for a very successful run. But he warns they are likely to encounter heartbreaking disappointment these days.
It's one reason why he's thinking about buying relatively inexpensive protection from a market collapse in the credit default swap market. As it happens, Mr. Chou is an old hand when it comes to these derivatives because he helped Fairfax pick up this sort of protection before the 2008 decline. It eventually led to outsized profits for the firm when the financial world teetered on the brink of oblivion.
But, despite his bearish leanings, Mr. Chou's fund picked up shares of Chicago Bridge & Iron Co., Dundee Corp., and Reitmans (Canada) Ltd. in 2014. All are worth a second look by value investors.
When Mr. Watsa takes centre stage on Thursday to opine about his company and the markets more generally, it will be interesting to get a measure of his bearishness. His big bet on deflation will likely feature prominently.
If deflation takes hold, as Mr. Watsa expects, real estate speculators should get out while the getting is good. If they don't, they might have to rely on a helping hand from a bargain hunter after the market crashes.
Norman Rothery