lessthaniv
-
Posts
861 -
Joined
-
Last visited
-
Days Won
1
Content Type
Profiles
Forums
Events
Posts posted by lessthaniv
-
-
-
I'm interested as to understanding the terms of the TRS contract they've initiated. In praticular, when/how it can be terminated.
Taking into account the comment about price ~ $443cdn and the following quote; "Throughout much of last year, I made public statements that Fairfax shares were trading at a ridiculously cheap price. Since the latter part of 2020 we have purchased total return swaps of 1,407,864 shares of Fairfax" (5.4% of shares)"
The stock hit ~$443cdn in later Nov, so I'd guess the contract is only a couple of months old. Hopefully it can only be closed on the termination date so they can book the rest of their gains first!
Doesn’t matter when it closes. The point is (I think) they’ve locked in that price for a future buyback of 1.4m shares.
Edit: what I mean is that when it closes doesn’t affect the profitability of the eventual buyback.
If the TRS contract allows the parties to close out quarterly for example, FFH may be limited to a short term window where they can accrue gains on the reference asset (1.4m shares) less the cost paid (LIBOR + spread) for the period. On the other hand, if the counter party can't close out until a specific termination date set in the future, say 1 year from initiation, then FFH has more time to capture upside on the reference asset which is exciting knowing all the tailwinds occurring at the moment (Farm Edg, BB etc, CR's etc ). Paying LIBOR + spread vs. getting upside on 1.4M shares from $443cdn for a few more quarters is a pretty attractive risk/reward with all these tailwinds in mind.
I'm by no means a SWAP expert - but that's how I'm understanding this at the moment. Correct me if I'm missing something.
If it’s just a financial bet then you’re right.
I don’t think it’s a financial bet. I think it’s a buyback.
I think once they have the cash to pay 1.4m * USD344, they close out the TRS and buy 1.4m shares, using gains on the TRS to pay for any amount by which the share price exceeds USD344.
Thought about that way, it doesn’t matter whether the transaction happens tomorrow or in a decade.
I could easily be wrong!
Actually, the way it works is that Fairfax pays a fee...usually Libor plus a negotiated rate. As Fairfax trades higher, the counterparty pays the difference between the strike price and market price. At the end of the swap time period, Fairfax gets the counterparty payments minus the Libor plus negotiated rate. It's not a buyback, but they benefit from it as if they bought those shares, paid a fee and reaped the gains. If Fairfax stock falls, then Fairfax pays the difference between the strike price and market price into the swap. Cheers!
Yes I realise this.
I think the debate we are having is over whether the benefit is:
1) locking in a profit on the appreciation of their own shares, in which case the longer the TRS lasts the better, and
2) locking in a price at which to buy back shares, in which case it doesn't matter how long the TRS lasts so long as it lasts long enough for them to collect $344*1.4m = $480m of cash to complete the buyback.
Confirmed on CC this morning that the TRS was bought for investment purposes as I expected and they were a 1 year agreements from initiation. Felt FFH valuation was among the best they could see. Also mentioned historically they have been able to extend these as long as they’d like.
-
Am I the first to say that the insurance subs shot lights out? Holy smokes! Net Written growth is not just double-digits for most of those subs (Brit and Zenith excepted), but well into the double digits (WTF, Odyssey gross written up by like 25%!!!). The combined ratios were outstanding. Capital still looks a bit tight at Crum, despite the holdco pumping an enormous amount into the subs. Just as an observation completely separate from Q4 results, does anybody have a good explanation for why Allied cedes so much premium?
The FFH total return swaps are very likely to work out fabulously during 2021. Is anyone else surprised that the regulators even allow companies to buy TRS in themselves? Not a criticism of FFH, but it's just that I don't ever recall seeing that technique disclosed by other companies.
Not a word about "subsequent to quarter's end?" How is that possible?
Best quarter that I can recall in quite some time.
SJ
Not only were they able to do it, but they apparently didn't have to disclose the swap in the same way they have to disclose market purchases.
Which makes me think that a TRS on Blackberry was also possible without disclosure. Time will tell.
We can live in hope!
SJ
Very great quarter. Laughed when I saw the TRS on themselves. Have been speculating they would do that for the BB position - never imagined they would use it for repurchase purposes and as away around leverage ratios. Prem always surprises!
A little disappointed with the Brit sale - it was established yesterday... If they needed cash, they could've gotten that from selling some of the BB shares. The sale of Brit suggests that they probably didn't sell/trim BB for that cash. We'll see what they say tomorrow, but I'm not optimistic that BB was hedged/sold anymore.
Could you please walk us through the TRS situation? So, they entered into TRS equivalent to 1.4m shares at US$344. Today FFH closed at US$399. Would I be correct to understand that FFH is therefore ahead by about US$77m on that transaction?
Yes, the leverage ratios are high and look like they are a constraint. The gains in Q4 and Q1 help immensely, as would a ridiculous Farmers Edge valuation, but holdco will need more cash during 2021, and now is not the time to take dividends from the insurance subs. IMO, they'll need to float some debt this year, and it might be time to have a conversation with the banker about amending the covenants on that revolver.
SJ
SJ
Could you please walk us through the TRS situation? So, they entered into TRS equivalent to 1.4m shares at US$344. Today FFH closed at US$399. Would I be correct to understand that FFH is therefore ahead by about US$77m on that transaction?
Yes, I agree with this statement but they have to pay some cost on the reference asset which will reduce this a bit ( likely = LIBOR+spread)
-
I'm interested as to understanding the terms of the TRS contract they've initiated. In praticular, when/how it can be terminated.
Taking into account the comment about price ~ $443cdn and the following quote; "Throughout much of last year, I made public statements that Fairfax shares were trading at a ridiculously cheap price. Since the latter part of 2020 we have purchased total return swaps of 1,407,864 shares of Fairfax" (5.4% of shares)"
The stock hit ~$443cdn in later Nov, so I'd guess the contract is only a couple of months old. Hopefully it can only be closed on the termination date so they can book the rest of their gains first!
Doesn’t matter when it closes. The point is (I think) they’ve locked in that price for a future buyback of 1.4m shares.
Edit: what I mean is that when it closes doesn’t affect the profitability of the eventual buyback.
If the TRS contract allows the parties to close out quarterly for example, FFH may be limited to a short term window where they can accrue gains on the reference asset (1.4m shares) less the cost paid (LIBOR + spread) for the period. On the other hand, if the counter party can't close out until a specific termination date set in the future, say 1 year from initiation, then FFH has more time to capture upside on the reference asset which is exciting knowing all the tailwinds occurring at the moment (Farm Edg, BB etc, CR's etc ). Paying LIBOR + spread vs. getting upside on 1.4M shares from $443cdn for a few more quarters is a pretty attractive risk/reward with all these tailwinds in mind.
I'm by no means a SWAP expert - but that's how I'm understanding this at the moment. Correct me if I'm missing something.
-
I'm interested as to understanding the terms of the TRS contract they've initiated. In praticular, when/how it can be terminated.
Taking into account the comment about price ~ $443cdn and the following quote; "Throughout much of last year, I made public statements that Fairfax shares were trading at a ridiculously cheap price. Since the latter part of 2020 we have purchased total return swaps of 1,407,864 shares of Fairfax"
The stock hit ~$443cdn in later Nov, so I'd guess the contract is only a couple of months old. Hopefully it can only be closed on the termination date so they can book the rest of their gains first!
Edit: Corrected actual quote
-
Removal of trading restrictions by Robin Hood and BB is moving higher again. It has been trading at elevated levels now (over US $10) for 3 weeks. Today it is back over $13. This is giving Fairfax lots of time to figure out and execute if they want to do anything.
As a reminder, BB closed at:
Sept 30 = $4.59
Dec 31 = $6.63
Today = $13.25
With 102 million shares (incl debs) Fairfax’s position is up about $670 million ($25/share) since Dec 31. The longer BB shares elevated (and go even higher) the greater the chances that Fairfax will do something.
My guess is Fairfax shares, trading at $363, are pricing in BB shares trading at $6.63 (or lower). Mr Market also appears to be missing the big move in the last 5 weeks in many of Fairfax’s large equity holdings like Fairfax India, Quess, IIFL Finance, Resolute, Atlas...
My math says Fairfax equity holdings are up US$2.65 billion (= $100/share) since Sept 30 ($1.45 billion Sept 30-Dec31 and another $1.2 billion Jan 1-Feb 5). At some point Mr Market will connect the dots :-)
Fairfax is up about $70 since Sept 30th so Mr. Market might not be all that asleep at the switch.
True, but BV @ Sept 30,2020 was @ US$442. The move you cite lifted the share price to today's close of US$365 which is still US$77 below Sept 30,2020 book value. I'm with Viking. I see a disconnect and expect the dots will soon be connected.
-
According to Shortdata, FFH shorts were busy through the end of January.
https://shortdata.ca/top-covered-shorts/
-
The sub is invite-only now. I should've joined while I was scanning earlier!
There must have been a karma requirement or something because it kicked me and everyone I know out.
It's back up and running
-
The USD denominated shares are only down 0.77 so a big discrepancy.
FFH is down over 4% today. I don't see other insurers down. Is anyone aware of any news that may be driving this?
Xerxes noted that it is trading X-D today, so shave US$10/sh off the price for that alone.
SJ
Yes, you are right. Perhaps that problem occurred yesterday? The current USDCAD=1.2646 and the FRFHF/FFH=1.2679, so the prices are at least consistent with today's exchange rate.
SJ
Yesterday, FRFHF closed at US $381.74. Currently at US$369 after opening up at US$372.16. So, at the moment its off about US$13 from yesterday's close.
-
Bitwise Crypto Trust Jumps 72% Since Debut While Market Sags
Firm says trust is first publicly traded index fund in U.S.
Bitcoin accounts for about 75% of Bitwise index trust
The market-cap-weighted fund is 75% Bitcoin and 13% Ethereum, with the remaining 12% allocations across XRP, Litecoin, Chainlink, Tezos and other cryptocurrencies.
This manager is gonna earn some nice AUM fees.
Nav today = $18.86
Close today = $139
Now that's some enthusiasm!
-
If you didn't know when you bought, you might want to figure it out. Cheers!
I decided to sell most of my position. I still have Fairfax India and willing to give that more time. Seems like they have a little more preference for quality assets in that portfolio, and I like India's 5-15 year growth potential.
The irony is that Fairfax owns a good chunk of Fairfax India, and more importantly, generates really nice management fees and performance bonuses from Fairfax India. If Fairfax India does exceedingly well, Fairfax will benefit handsomely. If Fairfax India does average, Fairfax will still benefit from the fees. I would rather own the asset manager! Cheers!
I think the upside on both is good. I give the nod to FIH.U as a deeper valuation opportunity but I own both! ;D
-
ORIGINAL: Prem Watsa Acquires Additional Shares of Fairfax
2020-06-15 17:05 ET - News Release
TORONTO, June 15, 2020 (GLOBE NEWSWIRE) -- Fairfax Financial Holdings Limited (TSX: FFH and FFH.U) announces that Prem Watsa, its Chair and CEO, has advised that over the last few days he has purchased in the market 482,600 subordinate voting shares of Fairfax for an aggregate purchase cost of approximately US$148.95 million.
Mr. Watsa commented as follows in connection with this purchase: “At our AGM and on our first quarter earnings release call, I said that our shares are ‘ridiculously cheap’. That statement reflected my recognition that in the 35 years since Fairfax began, I have never seen Fairfax shares sell at a bigger discount to their intrinsic value than they have recently. I have now backed up my strong words by purchasing close to US$150 million of Fairfax shares in the market over the last few days, as I believe that this will be an excellent long term investment.”
Fairfax is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and the associated investment management.
For further information contact: John Varnell, Vice President, Corporate Development
at (416) 367-4941
-
Crazy that this transaction has resulted in the massive pop over the last two days.
Same BIAL that it's always been, but the accounting change allows them to bump up the book value and start charging fees now that book value is above high water mark. If anything, shareholders are WORSE off after the transaction with regard to fees, but that didn't stop the price from ripping 10%.
if you compare BIAL with other publiclty traded airports around the world , it still seems quite a bit undervalued even more so with a second terminal coming up soon.
Absolutely agree. That is, in part, why I was a buyer at $13, and $12, and $11. All I'm saying is this transaction is just an accounting entry - it's the same BIAL it was 2-days ago, but the shares are 10% higher and Fairfax can now charge fees again as this pushes NAV substantially higher.
I get why Fairfax did it. I just don't understand why this would pop the stock or why the people buying it today weren't aware of the value of BIAL two days ago.
For me, a better question is why investors sold the stock so low. At September 30, 2019 common shareholders' equity was $2,064.7 million, or book value per share of $13.53 (us). Add to that the $3.30 (us) for the current revaluation and we have book value $16.83 (us). So, if it's the same BIAL as it's always been, then the low was ~ 65% of book. With clarity on the financials coming, I think a retracement towards book value is in the cards. I'm not scratching my head as the stock recovers back up, I was scratching my head on the way down.
-
Nice bump to book value today.
—-
Fairfax India Holdings Corp
Symbol FIH
Shares Issued 122,631,481
Close 2019-12-13 U$ 11.97
Recent Sedar Documents
View Original Document
Fairfax India to sell 11.5% of Anchorage for $134M
2019-12-16 09:11 ET - News Release
Mr. John Varnell reports
FAIRFAX INDIA SELLS MINORITY POSITION OF ANCHORAGE INFRASTRUCTURE
Fairfax India Holdings Corp. has entered into an agreement to sell an interest in Anchorage Infrastructure Investments Holdings Ltd. of approximately 11.5 per cent on a fully diluted basis for gross proceeds of approximately 9.5 billion Indian rupees (approximately $134-million at current exchange rates). The interest in Anchorage will be sold by way of a private investment agreement. (Note: All dollar amounts in this news release are expressed in U.S. dollars, except as otherwise noted).
Anchorage is a subsidiary of Fairfax India and will be its flagship company for investing in companies, businesses and opportunities in the airport sector in India. Anchorage is also Fairfax India's platform for bidding on airport privatization projects in India. Currently, Fairfax India, through its wholly-owned subsidiary, FIH Mauritius Investments Ltd, owns a 54.0% interest in Bangalore International Airport ("BIAL"). As part of the transaction, Fairfax India will restructure its interest in BIAL such that a portion of such interest will be held through Anchorage and, following closing of the transaction, Fairfax India's effective ownership interest in BIAL will decrease to approximately 49.0% on a fully-diluted basis.
The transaction is subject to customary closing conditions, including various third-party consents, and is expected to close in the first half of 2020.
As a result of the transaction, Fairfax India will record investment gains of approximately $506 million (approximately INR 35.6 billion at current exchange rates) implying an increase in book value per share of approximately $3.30 per share. The investment gains are supported by positive operational developments at BIAL. For the 12-month period ending October 2019, total traffic at BIAL was approximately 33.7 million passengers. The second runway commenced operations in December 2019, making BIAL the first airport in India to operate independent parallel runways that enable aircraft to land or take-off simultaneously on both runways. In addition, the expansion project for a second terminal at BIAL is expected to be completed in 2021.
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.
-
Making progress.
Thanks for the update sculpin
-
Not an expert in trusts but likely the change of ownership would trigger a deemed disposition tax wise. It would be strategic to do that along the lows in the stock.
-
Good article and worth it to note the change in value of DPM since the article was written.
-
DPM moving higher...
Beacon
Dundee Precious Metals (DPM-T, Buy) – Announced Q4/2018 production results this morning… On a consolidated basis, Chelopech achieved another record year of gold production in 2018 and exceeded the Company’s guidance while copper production was in line with guidance. Payable gold production came in at 164k payable oz’s, Cooper production came in at 34M lbs and processed 232k tonnes of concentrate at its smelter, no costs disclosed look for that to be disclosed with year-end financial results. Analyst Jacob Willougbhy has a $6.25 target price, which is the highest on the street.
CIBC
Dundee Precious Metals
Incorporated
2019 A Transformative Year; Upgrading To
Outperformer
Our Conclusion
We see DPM shares re-rating in 2019 with the start-up of
Krumovgrad, while the company continues to build on a strong
operational year in 2018 at Chelopech and Tsumeb. Gold production
for Q4/2018 was 45.8koz, exceeding our expectations of 44.5koz. For
2019, we expect DPM to produce 240,000 ounces at AISC of $742/oz,
representing production growth of 20% Y/Y at comparable costs. As
of Jan. 9, we are upgrading DPM to Outperformer (from Neutral) and
increasing our price target to C$6 (from C$4).
Our price target is calculated using the average of short-term and
longer-term valuation metrics. The short-term valuation is calculated
at 6x the average 2019E-2020E CFPS of $0.92, while the long-term
valuation is calculated at 1x the $4.23/share in NAV (at a 5% discount
rate), both calculated using the CIBC price deck with a long-term
gold price of $1,300/oz. Target multiples for DPM have now been
recalibrated to be more in line with the trading multiples for the
intermediate group.
Implications
Krumovgrad is a high-grade, low-strip, open-pit gold mine, with a
reserve grade of 4.04 g/t and a 2.6:1 strip ratio. In the most recent
update, the start-up remains on time, with the introduction of ore to
the Krumovgrad process plant expected by mid-Q1/2019, and
production of first concentrate by the second half of Q1/2019.
Elsewhere, significant improvements were made at the Tsumeb
smelter in 2018, with 232,000 tonnes of complex concentrate
smelted in the year, meeting its improved guidance and representing
an increase of 6% Y/Y. We expect these positive operational
improvements to continue.
Valuation
For 2019, we expect DPM to generate >$100 million in FCF. At our
CIBC price deck, DPM shares currently trade at 0.7x P/NAV and 3.5x
2019 P/CF, at a discount to the group at 1.1x P/NAV and 7x P/CF.
DPM continues it’s nice push up touching $4.44/sh
-
I recently posted this in another thread but since it directly relates to this thread I will put my two cents in here.
This thread started with Garth Turner’s statement ... “The big real estate bubble about to burst in Canada”. Many board members agreed and believed the collapse was imminent.
However, that statement and this thread originated in February of 2012 - SEVEN years ago.
Certainly nothing has collapsed since then. At this point, even if it does collapse, will property prices drop to pre-2012 levels? I am glad I haven’t been sitting waiting for the collapse to purchase a new home.
Why hasn’t the Canadian market collapsed?
This might have something to do with it:
10 Most Liveable Cities in 2018
1. Vienna, Austria
2. Melbourne, Australia
3. Osaka, Japan
4. Calgary, Canada (average home price $431,000 CAD - $328,000 U$)
5. Sydney, Australia
6. Vancouver, Canada (average home price $1,092,000 - $832,000 U$)
7. Tokyo, Japan
8. Toronto, Canada (average home price $766,000 - $584,000 U$)
9. Copenhagen, Denmark
10. Adelaide, Australia
The first U.S. city on the list is Honolulu. But you won’t find it until you get to number 26 with an average home price of $800,000 U$. And in Hawaii you don’t have the expense of building for well below zero temperatures, nor do you have to battle winter conditions during construction. In other words - it ain't cheap to build in Canada.
As Canada is relatively welcoming to immigration, the laws of supply and demand kick in. Remember housing prices are only expensive in relation to one’s personal wealth. What may be expensive to me may well be cheap to an immigrant with a few hundred million in their back pocket.
I am involved in the construction industry and most people have no idea of the extent of the wealth some of these people immigrating into our country have. Most of the people I encounter are looking for real estate as a relatively safe haven for their money.
Had a older lady newly arrived from Iran come in recently doing some home renos. She asked if I knew of anyone who might have an apartment for sale.
“Are you thinking of selling your house and looking for an apartment?”, I asked.
“No, no I want to buy building.”
“Well, I know of an 18 unit starting shortly.”
“That’s exactly what I want. I want to buy a few of those.”
But that pales in comparison to some of the Asian money we see. And we are a relatively small place.
It also seems that many investors from outside Canada don’t understand that, unlike the US a decade ago, a lot of our mortgages are in effect government guaranteed through CMHC, others require a substantial down payment and in general our mortgages are not non-recourse loans. You can’t throw your keys on the banker’s desk and just walk away. So a correction in housing prices certainly would effect the economy, but not likely to the extent we saw in the U.S. meltdown of a decade ago.
While our economy certainly has its problems, this is still not a bad place to live - and you don’t have to look far to make a comparison.
We also have an upcoming election that may show an improved change in direction should a new government realize that there is more to Canada than the two central provinces.
Could housing prices collapse. Certainly anything can happen. But I would think twice about putting off buying a house for that reason because the bottom line is that unlike your stock portfolio, you can live in your house.
Just my humble opinion.
The geographic footprint of the lower mainland in BC features an ocean to the West, a border to the South, and mountains in the North and East which all limit expansion. New construction features high rises these days in an effort to house more people on the same amount of land. It’s land values therefore that have become valuable.
And while there is lots of talk in the press about the new speculation tax there is less discussion on things like Strata legislation changes. Changes in strata legislation now means winding up a condo building no longer requires a 100 per cent vote from owners and the City of Vancouver has seen a flurry redevelopment applications.
High demand for the land and relatively fixed supply.
-
Did they break even on those lawsuit yet?
BeerBaron
Just make sure when you do your math to factor in the cost of doing nothing.
-
I’m a buyer for the long term here..
I think some volatility, in addition to the financial firms as previously mentioned, is being caused by the upcoming election next April...
-
A 50% allocation of investment dollars between the commons and the preffered seems to make sense to me. Net dividends of 5.75%. The pref is acquired at <50% of par which hedges the capital invested into the common if you believe in the safety of the prefs. Limits the downsize exposure immensely but still gives significant exposure to the undervalued common. A textbook asymmetric bet.
Value here is visible. Hence, I’ve joined the party.
-
Some fantastic numbers out of Fairfax Africa today:
Book value growth of 7.9% in Q1 to $11.02/sh as at March 31/2018.
Q1 net earnings of $40.9M ($.80/diluted share) on some significant increases in investment value as marked to market.
https://s21.q4cdn.com/604175076/files/doc_financials/2018/2018-Q1-Interim-Report-(FAH)-(final).pdf
-
Any thoughts on WELL?
Seniors housing is sure to grow with aging boomers.
Fairfax Annual Letter
in Fairfax Financial
Posted
Better when paired with the footnote.
* Amounts in this letter are in U.S. dollars unless specified otherwise. Numbers in the tables in this letter are in U.S. dollars and $ millions except as otherwise indicated.
:D