Hoodlum
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Posts posted by Hoodlum
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18 hours ago, Viking said:
I remember when everyone thought the 10 year US Treasury yield would peak at 3%. The fact the fixed income team did not meaningfully extend duration earlier and at much lower yields is amazing.
I remember these discussions as well. Fortunately, the bond team recognized that the rate increase had a ways to go at that time.
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Congrats to Prem. Well deserved.
NEW YORK--(BUSINESS WIRE)--The International Insurance Society (IIS) has named Prem Watsa, the Founder, Chairman and CEO of Toronto-based Fairfax Financial Holdings Limited, the 2024 Insurance Hall of Fame Laureate. Mr. Watsa will be formally honored at an awards ceremony on Nov. 17, 2024 at the Hyatt Regency Miami. The awards ceremony kicks off the Global Insurance Forum, running from Nov. 17-19, 2024.
“As the 2024 Insurance Hall of Fame Laureate, Mr. Prem Watsa's legacy of excellence, ingenuity and integrity continues to inspire future generations in the insurance industry and beyond,” says Josh Landau, President of the International Insurance Society. “Mr. Watsa is a visionary leader whose wisdom and foresight have left an indelible mark on the financial landscape in Canada and across the globe.”
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Private Equity firm Birch Hill Equity is going to sell CCM and expects to sell it for a significant multiple of the $110M they paid for it in in 2017. This is interesting as CCM own 40% of the hockey equipment market and Fairfax through Bauer at Peak Achievement also own 40% of the hockey equipment market. This could provide an interesting valuation for the 43% of Peak Achievement that Fairfax has on their books for $129M ($226 Market value according to shareholder letter). Peak investment is also a minority shareholder of Rawlings that was valued at $395M in 2018, but I cannot determine the percentage of their ownership in Rawlings.
https://www.theglobeandmail.com/business/article-hockey-gear-ccm-sale-private-equity/
QuoteOn the eve of the NHL playoffs, private equity fund manager Birch Hill Equity Partners has placed CCM Hockey on the auction block. CCM, one of two dominant hockey-gear companies, is expected to fetch a price that is a significant multiple to the $110-million Birch Hill paid for the business seven years ago.
Toronto-based Birch Hill recently hired U.S. investment bank Robert W. Baird & Co. Inc. to run the potential sale, according to two sources involved in the process. The Globe and Mail is not naming the sources because they are not permitted to speak for the companies.
Birch Hill decided to shop Montreal-based CCM after receiving several unsolicited offers for the gear maker from private equity funds, the sources said. They said there is no guarantee the process will result in a sale. Spokespersons for Birch Hill, CCM and Baird declined to comment.
CCM’s potential buyers include sports equipment manufacturers and large private equity funds, according to the sources. One said Birch Hill expects to conclude the process, with or without a sale, by the summer, to avoid a prolonged period of uncertainty around ownership. According to a recent press release, CCM has 500 employees.
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It looks like the loan to IIFL is for 3 years @ 9.5%
https://economictimes.indiatimes.com/industry/banking/finance/fairfax-arm-infuses-rs-500-crore-into-iifl-finance/articleshow/109323304.cms -
38 minutes ago, ValueMaven said:
Very odd - FRFHF opened down nearly -4% today in the US Market. Was able to add more in size around the ~$1055 level USD. Just very odd opening action in the first 10-15mins of trading. Has since normalized a bit.
FFH was also down 2.5% at the open. The CAD to US exchange rate had a large drop with CAD dollar dropping almost 2% over past 2 days. So there was likely an exchange rate adjustment on the stock this morning as well.
I picked up some more as well after the open.
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31 minutes ago, SafetyinNumbers said:
Can you see how much he changed his earnings estimates?I cannot as I don't have access.
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Our friend Brett has raised his target from $970 to 1180 cdn. I don’t know how he can reconcile the stock being overvalued at $970, yet increase the target by $210. He will need to do it again before long.
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14 minutes ago, Thrifty3000 said:
From Jamie Dimon's annual letter...
"we are prepared for a very broad range of interest rates, from 2% to 8% or even more"
Notice he didn't say from 0% to 8% or even more.
I believe recency bias accounts for much of Fairfax's discount to intrinsic value. Lot's of people heavily weight a return to zirp scenario in their longer term Fairfax model. Dimon lays out why he thinks 0% is off the table and why a higher rate environment is the more likely scenario.
If Dimon is on the right track about rates then it seems baseline EPS estimates for FFH will be shifting closer to $200 as more investors/analysts' take zirp off the table and increase their expected portfolio yield by a couple hundred basis points.
I am also in alignment with Jamie's comments here as it related to inflation and interest rates. It will take time for the market to completely grasp this and what it will mean for investments. Long term we will see the Fed revisit the 2% inflation target but that will take more than 5 years and by then it won't be a surprise. I could see them go back to an inflation target range.
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5 minutes ago, giulio said:
Will he give up when Digit goes public? The COBF should make a bet with him wrt Digit value/valuation.
This is just a rehash of their February report, so I guess they couldn't find anything else. Digit represented $1.1b of their suggest $4.5b book adjustment, so yes an IPO at a good value would effectively squash their thesis and kill any credibility that people may still have in them.
https://www.muddywatersresearch.com/wp-content/uploads/2024/02/Fairfax-Financial_FFH_MW_20240208.pdf
QuoteMuddy Waters is short Fairfax Financial Holdings Limited (FFH:CN) because we find that Fairfax has consistently manipulated asset values and income by engaging in often value destructive transactions to produce accounting gains. We believe a conservative adjustment to book value should be ~-$4.5 billion or ~-18% lower than reported. We see Fairfax as far more akin to GE than to Berkshire Hathaway.
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44 minutes ago, Viking said:
@Hamburg Investor i don’t have a lot of insight as to why P/C insurers trade at the multiples they do compared to other industries and the market as a whole.
P/C insurance is a pretty small sector and i don’t think it is followed all that closely by most investors.
But i think i can spot cheap. Fairfax is trading at about 1.1 x BV (est March 31, 2024) or at a PE of 6.5 x (est 2024 earnings).
Of all the valuation measures, P/BV appears to be the most important. Multiple expansion has been happening for Fairfax over the past couple of years - investors are warming to the Fairfax story. If Fairfax continues to deliver solid results in 2024 and 2025 my guess is we will see multiple expansion continue.
I think PE has become a more useful measure of the valuation for Fairfax once they locked in the treasuries for the next 4 years. Also, their equity investment side of the business should provide fewer gyrations to the BV going forward. This all provides some stability to the earnings. I think there are still a couple of historical factors that have held back the valuation of Fairfax.
Most investors don't spend the time needed to properly evaluate a P&C company and so a lot of their valuation is based on historical context (ie. Blackberry investment, book value not being stable, poor running Insurance businesses). In some ways we may need a bad hurricane season for investors to recognize just how well our insurance businesses are operating in comparison to other P&C companies. The PE will eventually be reflected in the stock price and while I have no idea as to when that will occur, it will likely happen quickly once it gets started.
Higher inflation and interest rates is another area where many investors/analysts are still looking a more recent (past 15+ years) for historical precedence and are expecting both to come back down to some degree. It will take some time but eventually the market will realize that the Supply Chain issues and the US printing money are not going away and this will help drive the higher inflation/interest rates. This will then get reflected in higher valuations for Fairfax and other P&C companies as they will benefit from this. -
25 minutes ago, glider3834 said:
it looks like Fairfax invested a total of $24M US in 2018/19 for their 50% ownership of Onlia. I have not found any other mention of this investment since then so I have no idea of its current value. -
27 minutes ago, MMM20 said:
Why does higher volume imply shorts adding?
While it doesn’t necessarily equate, but shorts need to sell borrowed share to add to their position. It could also be some large blocks trading for another reason.
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Today’s trading volume in the US and CA was double the average and much higher than last week. I wonder if more shorts are getting added.
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32 minutes ago, ValueMaven said:
Micron up 15% in AH trading
Someone needs to ask Prem at the AGM about Micron as an AI play.
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Fairfax is offering $1B in 30yr notes at 6.35%. Is this replacing existing debt or do they have other plans for this?
https://www.fairfax.ca/press-releases/fairfax-announces-pricing-of-senior-notes-offering-03-19-2024/
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Farmers Edge deal will close on Thursday.
QuoteWINNIPEG, MB, March 19, 2024 /CNW/ - Farmers Edge Inc. ("Farmers Edge" or the "Company") (TSX: FDGE) today announced that it has obtained a final order of the Court of King's Bench of Manitoba approving the previously announced statutory plan of arrangement (the "Arrangement") pursuant to which 15635594 Canada Inc., a subsidiary of Fairfax Financial Holdings Limited ("FFHL") will, among other things, acquire all of the outstanding common shares of the Company (each, a "Common Share"), except for: (i) 25,718,393 Common Shares (representing approximately 61.2% of the outstanding Common Shares) held by FFHL, and its affiliates; and (ii) those Common Shares held by the Company's Chief Executive Officer; for a price of $0.35 in cash per Common Share.
Completion of the Arrangement remains subject to the satisfaction of certain customary closing conditions. The Arrangement is expected to be completed on or about March 21, 2024, following which Farmers Edge will no longer be publicly held and the Common Shares will be delisted from the Toronto Stock Exchange.
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Fairfax sweetens the deal for IDBI Bank
QuoteCanadian billionaire Prem Watsa’s Fairfax is back in the fray bidding for IDBI Bank with a sweetened deal.
According to highly placed sources aware of the matter Fairfax seems to have agreed for an all-cash compensation structure to acquire IDBI Bank. In addition, Watsa is said to have committed to ensure that the identity of IDBI Bank will be preserved after divestment.
The revised offer from Fairfax is believed to have been communicated to the government officials about two weeks ago.
“Until now, the bidders including Fairfax were hesitant to offer cash compensation and that was a contentious issue because the government usually doesn’t entertain share swap structures. If this is taken care of, the deal may tilt in favour of Fairfax,” said a senior executive aware of the matter. The improved offer comes amidst political tension between India and Canada and the sweetener extended by Fairfax could once again make it a top contender for IDBI Bank.Revised terms
According to the revised offer, Fairfax India Holding, the Indian entity of the PE major, would bid for IDBI Bank. Since Fairfax is also the promoter of CSB Bank, the former may be merged into IDBI Bank once the deal is sealed, because Indian banking regulations mandate that an investor cannot be a promoter of two banks at the same time. With the market cap of IDBI Bank at ₹90,438 crore multiple times higher than CSB Bank’s ₹5,980 crore market capitalisation, sources say the revised structure would be beneficial for IDBI Bank.
This is a departure from the earlier proposals where Fairfax intended to hold IDBI Bank as a separate entity for a few years post the acquisition and subsequently merge it with CSB Bank. “The Reserve Bank is not keen to allow parallel structures for a common promoter and with IDBI Bank being a very established entity, the government wasn’t not comfortable with the bank losing its identity,” said another senior executive aware of the transaction. Bid from Fairfax India Holding would effectively address concerns raised by the RBI and the government.
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2 hours ago, Viking said:
@Maverick47 I agree. I think underwriting profit at Fairfax is about 20% of its various income streams. I think most P/C insurance companies are closer to 40% or more. So moving forward, a really bad year for catastrophes will affect Fairfax much less than peers. In fact - counterintuitively - long term Fairfax investors should probably be hoping for a really bad cat year. It would likely extend the hard market and Fairfax would likely be a big net winner over time. This is a big difference from 'old Fairfax' and 'new Fairfax.' New Fairfax looks like it is becoming a much more financially resilient company.
In terms of financial stability, Fairfax is getting to a very good place. The different earnings streams are growing meaningfully in size and new streams are getting built out. I think Fairfax has been executing a strategic plan that we are just now starting to fully grasp.
But wouldn’t Fairfax’s larger float at least somewhat negate this advantage during a really bad cat year. -
Trading over $1500 cdn for the first time. Next stop is $2000cdn/$1500US, maybe both of these Cdn/US milestones will occur on the same day.
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Some interesting comments from Eurobank on how they plan to use Hellenic Bank for India and Middle East business, once they acquire the Majority stake.
Quote“Under the strategy we are designing and wish to implement, we believe that Cyprus can become the base for developing our operations and cooperation, as a group, with the dynamic economies of the Middle East and India,” said Karavias. “These are economies that in the next few years, the next decades, are expected to have very strong growth rates,” he said, adding that the aim was to turn Cyprus into the gateway for companies from the two countries to Europe.
Rep office opening in Bombay
As part of these plans, Eurobank is currently in the process of opening a rep office in Bombay, which will be headed by Eurobank Cyprus’ CEO Michalis Louis and will promote the group’s strategy.
To this end, Louis and Eurobank’s COO Stavros Ioannou visited Saudi Arabia and the United Arab Emirates recently, where they held significant contacts.
The MoU with NPCI International
Meanwhile, Karavias recently accompanied Greek PM Kyriakos Mitsotakis on a recent visit to India, during which important agreements were signed and new opportunities were identified to further enrich the two countries’ bilateral ties.
Regarding Eurobank specifically, an MoU was signed with NPCI International aimed at creating a strategic alliance in the field of international incoming remittances
According to Karavias, the cooperation with NPCI International is fully aligned with Eurobank’s commitment to become the bank of choice for Indian businesses seeking to establish offices in Greece or Cyprus, and launch operations in Europe.
As he said, it is extremely important that the effort is being backed by the Greek and Cypriot governments, while Brexit has also helped as Indian and Middle Eastern companies are now seeking out other locations for their headquarters so as to continue their European operations.
“We have the advantage that our main shareholder, Prem Watsa, who is the founder and CEO of Fairfax Financial Holdings, is Indian,” Karavias pointed out. “Fairfax has created a subsidiary, Fairfax India, with many billions in investments in India. Hence, this gives us the ability to have a certain access through our main shareholder.”
He added, “This is not an easy effort, but importantly, what’s pushing us to proceed is that there is a will on the level of governments to develop this cooperation. Therefore, it is something that we will invest in in the coming years and we are very optimistic about the outcome”.
Cyprus’ role and its advantages
Referring to Cyprus’ advantages in terms of attracting businesses from India and the Middle East, Karavias highlighted the island’s geographical proximity to them. Also, he said, Indian and Middle Eastern businesses use the English business language. Another factor is that India and Cyprus are both Commonwealth Countries.
He emphasised the fact that Cyprus’ corporate law is essentially the same as that of India, which he said was a very important advantage, while there is also a double taxation avoidance agreement in place.
“Cyprus has very significant infrastructure of professional services, it has the expertise on how to host foreign businesses, while the country now has a strong banking system that is supervised directly by the European Central Bank – which is very important in the eyes of foreigners – that can meet and serve the needs of foreign companies,” said Karavias. “Even if we manage to bring a small percentage of these companies to Cyprus, it will be hugely beneficial for the country’s economy.”
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This was in interesting write up on Fairfax’s Astarta-Kyiv business that they own 30% of.
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I was just discussing this further with my son. He actually purchased 1/2 a share once his broker started offering fractional ownership. He believes that it doesn’t make much of a difference, now that fractional ownership is available. Surprisingly, he mentioned he likes the idea of owning a fraction of a high priced stock rather than seeing the stock being split. So maybe there is some psychological benefit to not splitting. LOL
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I will agree with cwericb on this. My son is in university and had a little bit of spare funds available from his interest free student loan that he wanted to start investing in stocks. He spread it around with just 200-300 in each of 10 different investments.
Initially, he decided not to invest in Fairfax as he didn’t want so much tied up in one company. After about a year he did buy his first share after he saw the growth from my investment but by then it was around $1k cdn per share
While I would agree a lower price would attract more investors that don’t understand Fairfax, it would bring in some younger investors earlier who would gain a better understanding over time. Over the long run this would provide a deeper pool of longterm Fairfax investors.
Fairfax will only get more challenging over time for younger investors to start investing in. Fairfax could become a $5000cdn/share in 5 years just based on current growth a a 1.5x book value. At some point they will need to review this .
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Is there any black out period before the release of the Annual Report?
Digit
in Fairfax Financial
Posted
That is interesting. So a 2% market share in just 9 months.