SafetyinNumbers

I rather FFH owns ATCO forever and earn a 10-15% CAGR rather than having to find something else that does the same thing. I imagine, ATCO wouldn't be a favored counterparty for other shippers if ONE owned all of it.

Great points as always, Viking. A lot of investors bought in at high valuations and Prem used that paper to build/buy an extraordinary collection of float generating insurance businesses. He also didn't reach for yield which hurt ROE and operating earnings. I think those same investors are dumping their shares now as the stock tries to get back to all time highs. Maybe it takes buybacks for the shares to go up but as it's been highlighted before on this thread, the earnings power means there is a good chance, the company earns it share price in the next 5 years. Buybacks should help book value / share grow even faster.

To be fair, there isn't any deal to vote on yet. The consortium made an opening proposal that might be too low for most shareholders. Let's see what the special committee bankers comes back with and if they are able to negotiate a price that they feel comfortable recommending to shareholders.

Letter to Special Committee from ATCO shareholder, Charlie Frischer, asking for a bump to at least $16.50. It’s a good read for any Fairfax shareholders as well. Since Fairfax isn’t putting any new equity into the deal, a bump has no impact on Fairfax except to highlight ATCO’s value to FFH. https://www.newswire.com/news/lf-partners-charles-frischer-sends-letter-to-atlas-corporation-special-21796411

I think your view makes sense and explains the spread that has developed. It’s not surprising there is more supply than demand given the competition for capital. The risk adjusted return still seems worthwhile though depending on the odds of the various outcomes. Risk arb spreads in general are quite wide and there are more deals than capital available to invest in the strategy. Clearly not for everyone.

It’s all about the odds on the various outcomes isn’t it? What odds do you place on the consortium walking away with no deal, the proposed deal closing or the deal closing post the special committee extracting a bump?

Prem isn’t putting any new money up. Presumably he’s indifferent.

I do but I don’t understand the relevance to ATCO except Fairfax is a common shareholder.

Seems like a lot of ATCO sellers! I’m curious on your rationale. I have been buying some to play the arb and there seems to be endless supply.

Thanks for the link! I hadn’t seen it. Looks like it’s a mix of what we thought. New issuance with a dividend up to Fairfax. ”The proceeds from the Odyssey Transaction will be paid by Odyssey to Fairfax by way of a dividend which will then be used by Fairfax to fund the purchase of Shares pursuant to the Offer. See Section 15 of this Circular, “Source of Funds”.”

Joining this thread late but most of the responses seem to assume that Fairfax sold some Odyssey. I don't think that's what happened. I think Odyssey issued new securities worth up to ~10% of the equity. The distinction is important because this is new equity. That frees up Fairfax holdco that was likely holding excess capital to fund Odyssey growth to use it for the SIB. I think the high valuation can be explained as a conversion option. FFH peers trade at 1.4x book so this transaction seemingly priced at 1.8x book likely reflects a conversion premium. It makes sense that the pension funds would want liquidation preference over Fairfax. Perhaps there is an interest component as well which would be tax effective for Odyssey. I think a mandatory convertible bond is probably the type of security that was issued. It probably would be treated as equity by regulators. Is the general consensus that FFH will get a full fill on the SIB and if so, is there a consensus on price?

Added some more to ACD.TO and to IOU.V. IOU Financial is a fast growing fintech asset light small business lender. Historically and unsurprisingly, loans growth is high and loans perform well coming out of a recession. I don’t think people are paying attention to the illiquid names because they are illiquid. Seems like a source of alpha to me.

Added to ACD.TO Accord Financial Its not a very liquid stock so the risk is if you buy it, it might go up. Reported $0.65 in H121, should be stronger in H222 and even stronger next year as they grow the balance sheet and pick up operating leverage. Management is targeting a 15% ROE vs 13.3% last quarter. Book value is $10.70 vs the stock price of $8.17.

I would have thought a lot of the bears who have been disappointed with perceived poor stock picking in the past would be pacified somewhat when an investment like Digit is in the stable. It's growing pretty fast. It seems like the stake in Digit could overtake the current market cap of FFH at some point.

Congrats. Really impressive execution. I have been looking to speculate on options more as I come across stocks that seem unreasonably cheap but also have liquidity. I normally trade in illiquid securities like ELF.TO and ATTO so I am perhaps out of my depth. I purchased RCII call spreads Dec 70-80 for a net debit of 75-90 cents. I think I am unusually bullish on the economy than most investors in consumer finance / retail but the stock seems unusually cheap. At $55 it trades at 8.5x 2022E consensus. They are paying down debt faster than expected from a large acquisition they did in February meaning they could announce share buybacks in August or November. I figure the December calls give good coverage. Breakeven would be about 11x 2022E estimates which is a far cry from 8.3x now but I think there is a view that the economy is rolling over which might be true but it's not in the numbers yet and doesn't fit my narrative. Management has a history of beating numbers and analysts have decent growth built in but they are hedging with their targets. The average target is is $70 or 12.4x 2021E EPS. Presumably, that will roll forward to 2022E EPS of $6.47 (which might be too low) by December and result in a target above $80. Will anyone care, I don't know for sure but buybacks would be real demand for the shares and systematic quants usually like price target and estimate increases. This is a good tweet thread: https://twitter.com/BreachInletCap/status/1409960007077175299?s=20 I'm only risking 0.1% of capital on this trade. A full investment position for me would be 2% so this strategy if it reaches it's maximum profit would provide a return equivalent to the shares going to $85 by December expiry. I haven't done these sorts of trades before but I'm short on capital and I'm trying to be creative! In all likelihood I will lose all of my premium but I like my odds.

ELF.TO is a better choice for exposure to a mostly quality stock portfolio vs FFH. Plus it trades at over a 50% discount to intrinsic value so very high margin of safety vs buying the S&P 500 (although ELF does own a bunch of VOO too). I own both but I only bought FFH recently (February 2021) because I like the pro-cyclical portfolio.

I added more ATTO on the post earnings sell off. I think intrinsic value ($80+) is higher post these results off of the strong sales but the market is selling ATTO off based on a perceived disappointment in margins in Q1. Full year EBITDA margin guidance is unchanged and with stronger sales, should end up higher than previously anticipated.

I added to MKO.V and FISH.V last week. Mako is a gold miner in Nicaragua and Sailfish has a royalty on Mako's mine along with some other assets. I also went on a podcast and talked about them along with ATTO and ELF.TO. Mako stuff starts at 34:30 https://twitter.com/BrownMarubozu/status/1378157840049782784?s=20

More ATTO. Peers CNXC, TTEC and SYKE are all rallying which makes sense because the sector is attractive. Revenue growth/margin expansion across the entire industry and its consolidating. Atento trades so far from intrinsic value heading into a likely auction as it’s largest shareholders (GIC, HPS & Farallon) have a lock up expiring May 2022.

What expected return over the next 5 or 10 years would make you consider FFH? What are some of these better opportunities and what are their expected returns?

What are your examples where they disclosed a trade that wasn't a sale or a purchase of shares of a company but didn't have to? You seem to have a longer history with the company than I do. I took Prem at face value from the conference call.

They don't disclose it because they have a policy. If they didn't have a policy they would have to decide on each portfolio transaction if they should disclose it or not. It just sounds like you don't like the corporate culture or the long term orientation. Not every stock is for everybody, that's what makes a market.

Maybe they did an inverse total return swap on BB. Would be really easy for them to do since they can lend their own stock to the counterparty. We probably just need to see the Q1 report in less than two months and you might have your answer. How big a number in investment gains in Q1 will make you happy even if you don't know BB gains are part of it? Do you have an estimate with BB marked to market? Some of the big names have moved up a lot so far in 2021. I am just speculating of course. FFH did a long total return swap on its own stock and didn't have to file anything on SEDI. It would follow, it's the same if they entered into an inverse total return swap on BB. Why would he ever say anything if that's the case? Better to be the supportive long term shareholder for BB's sake which is of course in our best interest too.

Buffett would never report anything like that... I used to like him but he has become a tool... There is an alternative theory. I want to point out he has a BEng and not a BMath

Added more ATTO. The stock should be up today but markets are weak and ATTO is in no one's benchmark.