bearprowler6

More on Farmers Edge: https://farmersedge.ca/farmers-edge-announces-c75-million-loan-from-fairfax-financial-holdings-limited/ https://farmersedge.ca/farmers-edge-announces-increase-in-credit-facility/ Not sure about you but I would not have increased the credit line to Farmers Edge; instead I would have looked at all the possible ways of reducing it.

Crip, Yes my comments were somewhat of an overstatement however I made them for a reason. Has Fairfax really changed? Yes they have locked in higher interest and dividends for the next 3-4 years. That is as much a function of the higher interest rate environment we are in as it is a statement on Fairfax's prowess. Bradstreet has always been great so really no change. Better underwriting resulting in a very good combined ratio. Insurance underwriting has been very solid for several years now so in my view they are simply benefiting from the recent hard market without any real change on their part. The concern has been and still is on the equity side of things. Some good signs for sure but then we wake up to the news of Farmers Edge buyout and an additional purchase of Blackberry shares. Its not the fact that both are small amounts---yes the additional Blackberry purchase was less than $500K. its the fact that these purchases are still being made at all that justifies my statement "nothing has changed----same old Fairfax". Let me ask you....as you manage your own portfolio....have you not attempted over time to eliminate any mistakes by selling them off and improving the overall quality of your portfolio by doing so? I know that's what I have strived to do. Everyone makes mistakes....some big some small. Admitting those mistakes and moving on from them after a sufficient time period is the key. Fairfax/Prem struggle to do this? Several members of this board express their anger at the analysts who don't seem to understand the "new" Fairfax. Maybe those analysts see something those of us to have been around Fairfax for decades do not or at least are unwilling to admit? BP6

Just when you thought that a buyout of Farmer's Edge represents a new low; this gets reported: https://finance.yahoo.com/news/prem-watsa-bolsters-stake-blackberry-200329382.html Nothing has changed----same old Fairfax..... Seriously, Farmers Edge and more Blackberry??

More news...this time concerning Recipe Unlimited: https://www.newswire.ca/news-releases/recipe-unlimited-enters-into-letter-of-intent-with-fairfax-887927427.html

Well said @cwericb! The attached article should be helpful for those wanting a quick refresher on the Fibrek/Watsa saga: https://financialpost.com/news/fp-street/watsas-mindboggling-reasoning-in-takeover-prompts-court-award I lost faith in Prem's approach to business a long time ago and reduced my investment in Fairfax accordingly. I have been much better for it! We all have our breaking points. Mine just came sooner then others however I firmly believe that everyone will get there eventually. It just takes a little longer for some. For those investors still trusting in Fairfax/Prem it may be worthwhile remembering the old saying.....when someone shows you who they are....believe them the first time.

I could not agree more SJ. Sadly however I sense that ATCO is just the beginning as I believe that FFH/Prem will be taking the same approach with Stelco. Simply replace Sokol with Kestenbaum wash, rinse and repeat.

A few updates on Farmers Edge: https://www.farmersedge.ca/farmers-edge-reports-fourth-quarter-2021-results/ https://www.farmersedge.ca/wade-barnes-stepping-down-as-farmers-edge-ceo/ https://www.farmersedge.ca/farmers-edge-announces-c75-million-loan-from-fairfax-financial-holdings-limited/ All the talk about how the team at Fairfax has learned its lessons and is new and improved and then they throw more good money after bad towards Farmers Edge. More of the same if you ask me. Very disappointing.

This question needs to be put to Prem at the upcoming annual meeting and we should insist on a clear/detailed response. Good luck with that. One answer provided on here that made some sense is that the comments about the subs having adequate capital was made when interest rates were trending upwards and before the equity markets collapsed at the beginning of covid. This may explain things but it is a classic example of how Prem communicates. He says/writes something definitively and is taken as such by certain investors yet situations exist which could potentially derail what he has said. I have come to label this as "Prem speak". He either does this purposely or is blind to the risks of saying something with such certainty that could be proven to be inaccurate. Either scenario is not good!

I am glad we can agree there is a cost. Until SJ raised this issue it had not been discussed and I for one am pleased that we are now doing so. Bad on me for using the words "accrued interest". The preferential dividend payments are a cash outflow that would have otherwise accrued to Fairfax and now must be paid to OMERS/AIMCO/CPPIB. Essentially, Fairfax gets the "use" of the funds up front (to assist with the closing of the Allied World acquisition or to buy back its own shares in the case of the Brit/Odyssey transactions) but loses out on preferential dividends paid out over time. You raise another concern with these transactions---we truly do not know whether Fairfax is able to buy them back at "fair value" or not? For example, the hard market had not yet started when the Allied World acquisition was undertaken. Presumably Allied World is much more valuable now given the impact on the hard market than at the time of acquisition. Who gets the benefit of this additional value? We simply do not know because of the lack of transparency surrounding this deal. It is amazing to me that with all the eyes on Fairfax on this board that no one truly knows how these "OMERS/AIMCO/CPPIB" financing deals work. We are simply to trust that it will all work out best for Fairfax and its shareholders. While this is good enough for many on this board it is not for me. I simply do not buy the traditional value investor view that all one needs to do is buy under book value and everything will work out in time. The long time under performance of Fairfax's share price suggests that many investors share my views and concerns.

SJ, Do you look at the financing provided by OMERS, AIMCO to close the Allied World (AW) acquisition in the same way? I believe they provided $1.5 billion at the closing 5 years ago and continue hold 29% of the AW shares. With accrued "interest" the cash cost to purchase the OMERS & AIMCO stakes in AW would now exceed $2 billion and counting. Adding the AW $2 billion to the $1.275 billion you noted above we have a situation where Fairfax would need to set aside almost $3.3 billion and counting to repay its funding partners (OMERS, AIMCO, CPPIB) over the next several years. If Fairfax never intends to acquire the minority stakes in AW, Brit and Odyssey then this discussion is moot however I suspect they want to own 100% of these entities at some point in the future. If this is correct then the cash cost to do so needs to tracked and factored into any assessment of Fairfax's future potential value. BTW---before the Fairfax fanboys over react---I am not suggesting that it was not prudent for Fairfax to work with their partners (OMERS etc) on the AW, Brit and Odyssey transactions. In particular the recent raising of funds by selling off small portions of Brit and Odyssey provided the capital needed to repurchase Fairfax shares well under book value. A very good move! I am however suggesting that it comes at a cost and I do not believe that the cost has been adequately factored into the very optimistic future valuations for Fairfax being discussed on this site. BP6

What about Allied World? This was purchased 5 years ago with the help of our "friends" at OMERS, AIMCO et el. Now 5 years later and Fairfax continues to own only 71% of the shares of AW. I would assume that Fairfax would also want to own 100% of AW at some point? At the time of purchase, OMERS provided $1 billion and AIMCO $500 million of the cash needed to close the deal. Assuming Fairfax wants to buy out its minority partners than it will need to come up with an additional $1.5 billion plus the cost of financing which at 9% would represent $135 million per year or a further $675 million and counting.

I agree totally.....as a result I continue to own NTR (Nutrien) and also staying long SU (Suncor).....

That kind of negativity won't be tolerated on here @nwoodman! Despite how accurate the statement is! CPPIB even wanted in on this deal...in fact it was the CPPIB Credit Investment unit within CPPIB that funded their portion of the deal. "Credit Investment Unit" not the equity investment unit! That should say it all! Prem was clearly feeling the heat for the underperformance of the stock and finally capitulated! Sure today's news will move the stock up in the short term but at what cost to the remaining shareholders? Once again the lack of details around the OMERS and CPPIB provided funding is noteworthy! Having said that, I for one wish Prem would "sell off" whatever portion of Odyssey or whatever asset he chooses to once and for all clean up the balance sheet --- eliminate all the outstanding debt and expensive preferred share financings, buy out the minority shareholders of Allied World, Brit etc. The stock price seems to be catching a bid in the pre-market! Should be a fun day. Do the long suffering shareholders sell or continue to hold out for the long term?

Well that (Fairfax's own stock decline plus BB's decline) accounts for $200 million of the $442 million. Another $242 million to go.....

Here you go: https://finance.yahoo.com/news/fairfax-financial-holdings-limited-financial-210200147.html Not surprising Brit continues its ways however more disturbing it seems Odyssey is now following Brit's lead Unrealized losses on the Long Equity Exposures of $442 million? How is this possible?

Wait.....I think I am starting to get this stock....let me try to respond to the concern raised......Prem playing 4D chess anticipated the market's disappointment with Brit's exposure to the German floods and quickly arranged to sell off a piece of Brit to OMERS. So what seemed like another expensive short term financing to us mere mortals turns out to be a brilliant risk mitigation trade brilliantly executed by Prem? How did I do? As a side note....I couldn't help notice the market's response to the news announced after the market close yesterday from CN Rail on the "retirement" (a real retirement...not a Rivett / Torstar type of retirement) of the CEO! CNR/CNI up $8/share or 5%+ today!

I believe its you that needs to "Get your facts straight"! My original post clearly referred to the sale of the UK run off business to CVC which was announced by way of a press release issued on Dec 2/20; which is clearly "well after the pandemic"! The original sale of a 40% interest in Riverstone UK to OMERS (surprise surprise) which was announced on Dec 12/19; closed on March 31/20 (a date also after the start of the pandemic). This sale transaction to OMERS was not the subject of my original post. Bottom line----Fairfax raised new debt at the holdco level and also sold off the remainder of its UK run-off business and a portion of Brit. These steps were needed in order to inject the capital into its insurance subsidiaries and also to maintain the necessary holdco cash level.

And lets not forget that Prem on numerous occasions indicated that the insurance subsidiaries were very well capitalized and waiting for the hard market to show up. Then the hard market shows up and we find out the insurance subs are starving for capital requiring capital injections from parent company Fairfax. The only problem, Fairfax didn't exactly have excess cash to invest into the insurance subs so it had to draw on its line of credit. Then in order to pay down the line of credit (likely due to pressure from the bankers although I don't know this for certain) Fairfax had to sell off its UK run off business to CVC and a portion of Brit to OMERS!

+1 ...well said Xerxes! Sure die hard deep value guys/gals can outsource the decision making to someone like Prem but no one else would or should. It has been discussed on here before, Prem is not a great communicator and Fairfax is in desperate need of a proper functioning Investor Relations department. Taking a play book from BAM....perhaps an annual investor day where Fairfax's 5 year strategy for its insurance and investment operations are clearly outlined and put on the record for everyone to see. Argue all you want with this view but the results (and I mean here the share price) speaks for themselves. Of course those that disagree with this view will reference Berkshire and Buffett. Well first point on this, Prem ain't Buffett. Second point, it is highly unlikely that Buffett would be allowed to operate like that with the investment community if he was starting out today.

I was wondering how long before you waded into the discussion Sanjeev! thanks for not disappointing! What I wrote is not a "fallacy". Bottom line is this....Prem and Fairfax by association are in the penalty box. Rightfully so! The company's stock performance for a better part of 10 years has been atrocious. 10 years! Sitting around and waiting for the market to stumble across all the good happening at Fairfax (e.g., Digit etc) is foolhardy. The market is aware of Digit, the hard market and Blackberry's positioning in the driverless car market. The market is also aware of low interest rates, the disaster that are Farmers Edge and Boat Rocker as well as a board of directors stacked with Prem's friends. A major restructuring is needed starting with a change at the top! Its time for Prem to move on much like Gates and Ballmer did at Microsoft. The long suffering Fairfax shareholders deserve this and will not rewarded by the market until such a catalyst occurs.

It took a change in the CEO at Microsoft (from Ballmer to Nadella) to get the stock price moving! If that's what you are suggesting for Fairfax then I am in full agreement!

glider3834....once again....I don't disagree with your analysis. Sadly however this analysis DOES NOT tell the whole story! The market simply does not care or more likely takes other items into consideration that detract from the otherwise positive picture you have painted. In other words, your analysis is good but (and I mean no disrespect by saying this) it is simply not complete. Furthermore, the items missing from your analysis are more qualitative in nature which I know must be frustrating for someone who does such complete and thorough analysis numerical analysis. I believe that the market does not place any value on the premium growth in these markets because "it" believes that Fairfax should focus on other matters first. For example, share buybacks, buying out the minority interests in Allied World and Brit and buying out/cancelling the numerous classes of expensive preferred shares outstanding. Read what Gregmal is writing. He has it right about Fairfax.

glider3834 and Viking....let me start this post by sincerely thanking you both for your contributions to this board and in particular for your work on trying to figure out Fairfax and where its stock price will go. Believe it or not, I read both of your very thoughtful and numerous high quality posts with great interest each and every time. Now back to Fairfax. I will try to be more succinct in my comments so that my view on Fairfax and the reason behind it are more clear. I do not expect anyone to agree with my view on Fairfax nor care if anyone does or does not. I have my own reasons for posting on Fairfax (I have shared this privately with a few of you). In a nutshell here our my views. Fairfax has been operation for almost 40 years. Prem and his team have built a large international insurance conglomerate they should be proud of. I do not however believe that the current collection of assets (insurance and otherwise) combined with the company's capital structure, current executive management team and board composition will result in the company's share price (which is all I care about) increasing at a reasonable compound rate over the medium and/ or long term. In other words, although the potential is there I do not believe a sustainable long term solid compounding of its share price is possible given the Fairfax that sits in front of us today. Can an investor who follows the company realize a 30%+ rate of return if you buy in on one of the dips and hold for a 12-18 month period. Sure this can happen! I am not talking about this. I am addressing a consistent long term build in the company's share price. Despite the potential and for reasons that are inexplicable at least to me; Fairfax has not and in my view will not be a long term compounder of wealth at any exceptional rate of growth. Why is this? I honestly don't know however several years ago I gave up trying to figure of the "why" and simply came to see Fairfax for what I believe it is. Nothing I have seen since then has changed my view. Do I believe that Mr Market exists and occasionally offers up a short term opportunity on Fairfax and a number of other stocks. For sure however I believe Fairfax is well known and well followed and except for the short term trading opportunity offered up every so often (e.g., in March/April 2020 due to the outbreak of the pandemic) I believe that the market has its valuation about right (give or take $100 per share to the upside). Unless and until Prem changes his ways ; which is not something I would bet on, then I believe that Fairfax at current levels offers up reasonable prospects of a 8-10% gain over the next 6 months or so along with its Jan/22 dividend payment. Not a bad return from these levels! After this I believe the share price will continue bounce around current levels more or less for the foreseeable future. In other words, I do not however believe that Fairfax currently offers a chance at a sustained 12-15% rate of return over the long or medium term from its current share price. My many reasons for this view have been stated on here many times so no need to repeat all my thoughts on this subject again at this time. I believe however that the "market" is simply fed up with all of the issues that continually arise at Fairfax and as a result detract from the valuation that it is willing to place on the shares despite the many very well thought out BV and P/E calculations that members of this board and elsewhere continue to offer up that suggest a much higher share price is on the horizon.

As always Speculatius you make great points! Despite the attempts by all the Fairfax fanboys on here to talk up the stock price the stock remains on a downward trajectory and is trading well below where it was before the pandemic broke out. Apparently it is still well below intrinsic value---whatever that mythical number is for Fairfax? You need to focus on the long term the fanboys will say....I guess 10 years is not long enough? In addition to the points raised by Speculatius--- I would add the following in no particular order: 1) OMERS role to basically offer financing to Fairfax for an extended/permanent period of time (with only the form of collateral changing) at approx 9% shows that Fairfax cannot fund its own growth. The ongoing rate paid to OMERS for this service is ridiculous. 2) The eastern European and South American insurance operations along with those in the middle east and South Africa are too small to be meaningful. They are basically cast offs from AIG and we all know why AIG was selling! 3) Executive transition plan----Prem had basically stepped down from the CEO role when Paul Rivett was appointed President. Prem even stopped appearing on the quarterly conference calls. Well Rivett has been gone almost 2 years and no replacement has been named and the last time I checked Prem is not getting any younger. 4) How will Fairfax unwind the TRS on its own stock. The minute it does it will signal a market top in the stock price which the market will not react well too. Not to mention the exposure that the company faces if Fairfax stock price has a large downward movement. It is ridiculous to place this kind of risk onto the company. 5) As for the stock portfolio---a few winners over the large 12-18 months for sure but who on this board hasn't seen a huge increase in the value of their portfolios over that same period of time? Being honest---nothing really remarkable from the Fairfax team here! 6) I remain unconvinced we will experience higher interest rates anytime soon. Stagflation is more my bet which will not be good for Fairfax. 7) It is ridiculous to suggest that "Mr Market" is unaware of all the great things (e.g., digit) that Fairfax has done recently. The market is aware of Digit, Atlas Corp however when balanced with all the negatives (listed above and elsewhere on this board) the result is the current stock price---stubbornly below so called "intrinsic value" and most notably below the pre-pandemic price despite the huge move up in global stock prices in the last 18 months. So there you have it. I await the onslaught of criticism from those who still believe. The opportunity cost of holding Fairfax over the last 1, 3, 5 and 10 years could make a growing man weep however keep in mind it is not to late to sell out of Fairfax and redeploy the funds elsewhere!

I have a policy not to invest in Chinese based companies so despite the compelling opportunity that BABA appears to offer at the present time; I simply stay away. I put this hard policy into place since I do not trust the business environment in China given the lack of respect for western rule of law. BTW----I have visited China numerous times over the last 15+ years and traveled extensively throughout the country on numerous occasions. My wife is Chinese and we regularly speak with and get updates on the business and political environment from her friends and family (as recently as Saturday night). The comments that I have received from them especially over the last few years have only reinforced the "no China" investment policy that I already had in place. So given the choice you offered to me I would have to select Fairfax over BABA however even just thinking that is nearly killing me.