petec

Hi all I am looking to move away from Bloomberg and would appreciate pointers on the best alternative sources of information. What do you use to: Track news on companies/sectors? Source earnings call transcripts? See consensus estimates/what other people are thinking? Populate Excel with share prices that automatically update? Do anything else that you find useful?! Also, and research services you think are/are not worth paying for? Thanks in advance! P

Bloomberg shows a share price for Exco under the ticker EXCE, but I am not sure exactly how this works - I can't find any of the filings you'd normally need for a publicly traded security and I can't find it on the platforms I use to trade. However it is there and FWIW the share price has gone from $1 a year ago to $5 now.

Interestingly Apollo, Blackstone, KKR, Brookfield et al would seem to disagree and are moving into insurance fast. I know it is not exactly the same model, but there are strong similarities, and I think two things stand out: 1) The model doesn't work with bonds any more, so you need to be able to manufacture investments, especially on the fixed income side. That's where I think the PE houses have an advantage over the traditional players, and I think FFH could have done a better job of getting into private credit etc. I think that's what the Westaim deal was meant to be about but Arena never seemed to take off. The $2bn recently given to Kennedy Wilson is another move in this direction. 2) BAM et al clearly believe interest rates are more likely to rise than fall in the long run, which does lovely things to both float income and the value of long tail liabilities.

I think it's simpler. Fairfax just isn't on many radar screens given the decade it has had. And while Digit might be, few people will buy FFH to own Digit because Digit isn't a big enough part of FFH and the rest of FFH is highly complex with a dodgy 10y track record. So The only people who are really aware of the value gap at this point are the diehard FFH watchers. That will start to change if/when: 1) FFH posts several quarters/years of strong BVPS growth that appears on screens. 2) The P/BV gap widens further until it screens so cheap that people just have to do the work. (One ancillary issue here is that part of what makes FFH so cheap is the gap between fair value and carrying, and that doesn't appear on screens either, until assets are monetised.) Meantime, we get an opportunity.

I just remembered this: https://www.fairfax.ca/news/press-releases/press-release-details/2020/Fairfax-Announces-Entering-Into-Swap-Contracts-in-Respect-of-Common-Shares-of-Ensign/default.aspx Ensign is highly levered, so if higher oil and gas prices lead to higher rig utilisation and higher day rates, which I regard as a virtual certainty regardless of ESG, there is considerable equity upside. Between Ensign and Exco, Fairfax has nearly $300 of book value exposure and potential upside in the hundreds of millions if they can monetize.

Back to BlackBerry, and specifically Ivy, my first impressions are that Palantir/Wejo have a considerable head start: Wejo | A Global Leader in Connected Vehicle Data.

To double in 5 years, which is my kind of baseline for big positions, Fairfax needs to hit $840 in 2026. I think adjusted BV (i.e., including the excess of fair over carrying value) is probably around $620 at the moment. So to hit $840, book value has to compound at 6.3%. Serious question: who would bet against that happening, and why? The other necessary input is a valuation of 1x adjusted BV. I can see multiple potential reasons why that might happen - excitement over Digit, slightly higher interest rates, the market slowly coming to believe that the days of shorting and big acquisitions are over (please, God), or just luck (the stock regularly trades at or above BV every few years). Conclusion: I think Fairfax has a very good chance of doubling in 5 years.

Personally I think the whole "keeping it Canadian" angle is nonsense. I think Prem's comments along those lines are aimed at an audience other than shareholders. This may be wishful thinking but I do not for one second believe that he would turn down a good offer for the company. National security might be an issue - the Chinese are not going to be allowed to buy this - but I don't think it would stop an American buyer. Could be wrong. The obvious way to please all parties here is to sell the equity and keep the convert. This reduces downside risk, keeps substantial upside exposure, and puts a limit on the time Blackberry has to start to show results. But I don't think this will happen. I think Prem is playing for the big win here and as the performance of other holdings reduces Blackberry's impact on the overall portfolio, that's increasingly fine by me.

I’m 99% sure that it’s Prem. But he has gone back to basics and is more focussed than he was.

Ha ha! Just listened to the Blackberry call and came away with two thoughts. The first is that with Blackberry deep in negs on the sale of the patent portfolio (price agreed, DD complete, some details to be hammered out, 80% chance it closes in the next quarter) is it possible that Prem as a board member is inside and can’t sell? Second, while it might well have been sensible to sell BB at many points in the last, I’m not sure it is now. The company think they have closed the product gap in cybersecurity and they plan to use some of the cash from the sale of the patent portfolio to accelerate growth in that business. QNX is getting design wins almost by the day and revenues will ramp when the chip shortage is solved and auto manufacturers can produce. And there’s an intriguing option being built in the form of Ivy. Given Fairfax’s average cost is the lowest it’s ever been (assuming they convert the debt), my view is they should give BB another 18 months to see if any of these shots land on goal. I am now going to pour a glass of wine and brace myself for the inevitable torrent of abuse

Agreed. I own a fat slug of it and think it is very cheap on 6x 2024 contracted eps with the possibility of more to come and a superb management team allocating capital. I tip my hat to Prem - it’s going to be a superb investment.

Good find & good to see. $545 plus $46 to come from Digit plus ?$20+ in excess of fair over carrying - we are probably over $600 per share in q3, even allowing for some hurricane losses. And that's not including Fairfax's share of the excess of fair over carrying at Fairfax India.

Yes!

Rather more than 20%! 2024 EPS guide is about $2.50 based on already contracted business. 2020 EPS was $1.06. Edit: I just realised you might have meant 20% per annum, not total. Sorry!

Depends on your time horizon. I suspect the long term outlook for high-performing managers is good.

They could, but their prices experience has been that premium growth captured the n a hard market is sticky, and so once every ten or fifteen years you get a chance to make a step change in the size of the company. Whether that’s a better opportunity than a bigger buyback is obviously down to how cheap the shares are. Perhaps they’re now cheap enough that Prem will switch priorities, but I wouldn’t bet on it. More importantly, if premium growth is sticky then he’s got two good options, and we shouldn’t mind which he chooses. We financial analysts tend to have a bit of a knee-jerk preference for buybacks, but growing the business at good rates of return is just as attractive.

I would include the Riverstone shares. They have the option to buy them at YE19 prices, and they if I understood the q2 correctly they mark that option to market. A superb, and superbly structured, investment by Prem and the team.

That’s a very good point. Exco could be printing cash if they’re not over-hedged.

They’re putting 43.6% of BIAL into Anchorage and then selling 11% of Anchorage to OMERS. Their economic ownership therefore goes from 54% to 49%. I think the wording about actual ownership is confusing but might refer to what they consolidate?

No, because they’re selling 11% of Anchorage to OMERS. But also I can’t remember what % of FIH is economically owned by FFH.

Does either of you know offhand what FFH’s look-through % ownership of BIAL is, after the Anchorage deal closes?

Well, they’re talking about 10% roe from 2022/23. That implies 14-15c in operating eps. Cash generation is better than that because of the tax asset. And then there’s potential capital upside in the RE portfolio (rising rents as the economy reflates, and falling cap rates). So it all depends on the payout ratio - how much they want to retain and how much they are forced to retain. But the potential is there for a high yield.

I agree with both and would add that Greece is just about the issue not country on earth that has been in a depression - a proper, 1930s style depression - for the last decade. It’s coming out of that, and that’s a great environment for a bank. I actually think that at this price, Eurobank will be able to pay close to a 15% *dividend*. It will probably retain more earnings to grow, but it’s a pretty incredible thought. Capital generation given the tax assets, real estate uplift, and dead loans coming alive again is going to be spectacular.

I think Eurobank and Atlas have a great shot at doing 15% compound returns for a few years now. That’s $3bn performing at the target level, which isn’t a bad start. Let’s see what the rest can do!

I think this has been a deliberate policy in the last few years to show the value in the portfolio. But they haven’t taken every opportunity - for example not fully marking Digit to the latest new money valuation.