SafetyinNumbers

I meant vs the value of Eurobank. If each ADR is half a share that’s about $2.40 vs the $2.03 redeemed.

That’s a big haircut isn’t it?

Because it’s a balance sheet based financial and the earnings streams are variable.

As the great George Costanza once said: “It’s all pipes!” i.e. it’s all connected. i use three ways to triangulate intrinsic value. P/E, P/B and float + BVPS.

What do you consider OK returns? They are using capital to buyback stock and buy in minority interests on the insurance companies. These likely have returns north of 15%. Is that OK or is that good?

I think book value is as important as ever but it needs to be used in conjunction with ROE to come up with a P/B that reflects intrinsic value.

So what’s a fair valuation?

Do you think about what returns are on incremental capital?

I agree with you that Fairfax recycles assets which recognizes value in the portfolio but the way you wrote it suggests this is an active decision to get recognition for value creation. Fairfax seems to collaborate with their jockey to make sell at a great price. One of the highest risk moments for an organization is change in management. Deciding to sell with management makes a ton of sense to avoid losses but also because their partner gets rich and leaves on the best terms potentially ready to business again. I think Berkshire is a different situation. I’m sure there are marks that could be taken up but there must also be marks that can be taken down. Otherwise, wouldn’t BRK have a higher ROE? Maybe all the businesses are reinvesting like Amazon but I don’t think that’s the case. With FFH, they only started taking significant stakes in companies what 15 years ago? The duds take losses immediately reducing book value even if they ultimately recover. They are likely to own winners for a long time. We have only recently started to see these realizations which makes sense given how much time has passed. The accounting defers all of the gains and juices all of the returns. We don’t see the multiple expansion until it’s sold. In a best case scenario where ROE is 20%+ /yr, this becomes a reliable source of ROE. I think understanding the accounting and what that means for forward returns is at the crux of understanding how much of an opportunity Fairfax is at these prices. The sell off this week was created by an analyst that is a reflection of his clients and therefore well respected. Clients decided to ignore the equity portfolio a long time ago because it wasn’t predictable but enjoyed it as it translated to book value during the heard market and rising interest rates period. As Viking has pointed out the FV/CV is big and growing. Fairfax is generating an incredible amount of capital from its investments and is reinvesting it north of 15% with high certainty either at the portfolio company level, at the insurance portfolio level or at the holding company level. I use a 90% confidence interval which is entirely based on my assessment of probable outcomes. Since most people don’t think probabilistically its judgement based and it’s possible to be wrong which makes most investors uncomfortable.But of course, that’s what makes a market. The BMO analyst, by ignoring the equity portfolio and the power of compounding has made a market where the odds seem out of hand. Even BMO’s price target tells us that return expectations are incredibly high. This analyst uses 9.5x EPS and 1.45x BV. That’s a 10.5% earnings yield. That’s a very high return expectation over the long term on conservative estimates. It’s hard for me to imagine a world where he’s right in the way that he expects but we’ll just have to find out.

And the FTM PE is overstated because it’s based on adjusted EPS not IFRS EPS.

Nice find. I was just thinking about EXCO today. That is a nice boost to ROE if it reports strong earnings as its equity accounted.

Given how conservative they are, if they booked a gain it was probably a success.

I think it may be useful to come up with a range for expectations using the RBC ROE model. What’s the low vs high end for combined ratio? What is a range of investment returns? If fixed income is 2/3rds of the portfolio and it’s earning 5%, what’s a reasonable range for equities? What possible gains could make their way into BV over the next few years between Eurobank, BIAL, Poseidon, Ki (not in the equity portfolio) etc..

Bessent is a hedge fund manager. They borrow at the short end while buying long dated treasuries when they get high enough. It’s a pretty nice spread trade when they control the short end. It almost seems things like Greenland are designed to force this outcome.

I’m focused on the current set up. Not the past.

It’s hard not to like Fairfax under almost any macro set up. They are pretty creative when it comes to making money.

I think it they are better set up for it than most. Losses on bonds will be relatively low and short lived given the short duration. It might mean the market hardens a bit so premium growth could also pick up. Long term a positive for ROE for sure.

I haven’t taken the time to analyze it closely but from what I can tell, the levered it up to 4x EBITDA on purchase and managed to pay the debt down over that period before relevering it up to buy in the family’s interest and the royalty company. My guess is the return on invested capital exceeds their 15% hurdle rate even if it’s not there on an accounting basis yet (it might be).

That cross was from Questrade. I’m not sure what it means to be honest. My guess is an international broker using them for direct market access.

They likely buy in Allied World and Odyssey minority interests before buying another large insurance acquisition.

I’m guessing that there was a mandate change on a portfolio. There were some other big moves in other TSX stocks that didn’t have any news flow from what I can tell. Pure speculation but it makes the most sense to me.

I think the expense runs through in the period when the shares are provided to the employees. They buy the shares ahead of time so that the cost doesn’t end up being higher when they vest presumably. It’s one of the more unique and shareholder friendly SBC plans I have seen.

It doesn’t trade at 5x earnings it’s a holding company like FIH. The family and the company itself controlled 3m out of 4m shares at the end of 2019 when they started and now it’s 300m out of 345m shares. They don’t want to take it private much like FFH doesn’t want to take FIH private. In ELF’s case there are no real benefits from being private and likely gives them less tools the next time there is a market dislocation. If you don’t think stock prices are based on supply and demand then there isn’t much to talk about. Fwiw, the stock has done pretty well despite the discount not changing much.

Should also have a float cap to get in the S&P/TSX Composite in March so another reason to buy besides commissioning the mine and copper prices moving higher.

I think we already know they didn’t.