Viking

@newtovalue i have not done a Q2 estimate yet. I will put something together before they report. The problem i am having is understanding the impact of much higher interest rates and IRFS 17. Any insight other posters have on interest rate changes and impact on IFRS 17 would be appreciated

@Munger_Disciple i agree. That is why i look at both BV and ROE together. IFRS popped BV for Fairfax but it also depressed ROE. Looking at the two together provides a more accurate picture. If we used old GAAP for Fairfax then P/BV would be a little higher for Fairfax’s (probably a little over 1 x BV) but ROE would be approaching 20% (much higher than peers). It would lead to the same conclusion - Fairfax’s stock is too cheap compared to peers. That is also why i like looking at PE. What other large stock is trading at a 5.4PE today? And the earning are real. And not abnormally high, driven by some one time event - my current mildly conservative estimate is Fairfax will earn an average of $135/year in 2023, 2024 and 2025. There are lots of catalysts am not including that could drive earnings higher (like a Digit IPO, more asset sales etc). And i am still learning about IFRS 17. It will take me 6-12 more months to get more comfortable with all the puts and takes (i am slow to grasp some stuff… but i do get it eventually). So my estimates could be off due to IFRS 17 impacts i do not yet understand.

Fairfax’s stock price has a history of selling off around 15% in June-Oct. This makes sense as this is hurricane season, and losses from catastrophes in recent years have been elevated. Last year the stock was trading around $550 in April and $450 in Oct; this decline happened AFTER announcing the pet insurance sale which delivered an after tax gain of $990 million. In 2021, the stock traded at $470 in May and bottomed around $410 in October. Where will the stock trade the rest of this year? No idea. Sometimes history repeats; sometimes it doesn’t. I like to look at it to understand potential outcomes… so i do not get caught by surprise when something happens. If we do get a sell off it makes sense to me that Fairfax would get more aggressive on the share buyback front, but perhaps not until we are on the other side of hurricane season.

Is the stock priced properly? Efficient market hypothesis: “The efficient market hypothesis (EMH) is a hypothesis that states that share prices reflect all information and consistent alpha generation is impossible. According to the EMH, stocks always trade at their fair value on exchanges, making it impossible for investors to purchase undervalued stocks or sell stocks for inflated prices…” Investopedia A lot has happened at Fairfax over the past 30 months. Let’s do a quick review and see what we can learn. Most importantly, is the stock priced correctly, as the EMH would suggest? How has Fairfax’s stock performed over the past 30 months? First, let’s get some context. Fairfax has been one of the best performing stocks over the past 30 months both in absolute and relative terms. The outperformance has been remarkably consistent each year. Fairfax’s stock has outperformed the S&P500 by 95% over the past 30 months. That outperformance must make Fairfax one of the top performing large cap (in Canada) stocks over the past 30 months. Does this mean the stock is now expensive? The proverbial ‘big fish that got away’ from investors? Let’s find out. Let’s try and keep an open mind. What do the numbers tell us? And what about management? And future prospects? Let’s start by looking at the traditional valuation tools: Price to earnings ratio (PE) My current estimate has Fairfax earning about $145/share in 2023 and $135 in both 2024 and 2025. I view this as a mildly conservative estimate for the next three years. I’ll provide more details in my 3-year earnings forecast for Fairfax - coming in the next week or so. Importantly, the quality of the earnings being delivered by Fairfax are the highest in the company’s history; it is primarily being delivered by record operating earnings (underwriting profit + interest and dividend income + share of profit of associates). All three individually are at record levels. We learn in the chart above that Fairfax is trading today at a forward PE multiple of 5.4 times. That is crazy cheap, especially given the quality and durability of earnings. What is the PE multiple of the overall market? The forward PE multiple of the S&P500 is 20. Fairfax’s stock is trading at a SIGNIFICANT discount to the S&P500. Fairfax’s stock price could double from here and it would still be trading at a 50% discount to the S&P500 multiple. How about compared to some P&C insurance peers? Looking at PE, Fairfax is trading at 48% (Chubb) to 70% (Markel) below peers. Fairfax’s stock looks dirt cheap. But let’s keep digging. Price to book value multiple (P/BV) and return on equity (ROE) Let’s now look at the price-to-book value (P/BV) and return-on-equity (ROE). These two are the preferred metrics used to value insurance companies. Let’s start with P/BV. How does Fairfax stack up compared to peers? Looking at P/BV, Fairfax is trading 36% (Markel) to 61% (WR Berkley) below peers. How about ROE? Looking at ROE, Fairfax is poised to deliver an exceptional 16.8%, at the high end compared to peers. What can we conclude after looking at the valuation metrics? Looking at PE and P/BV, Fairfax’s stock is exceptionally cheap compared to the market and peers. At the same time Fairfax is delivering best-in-class ROE. This makes no sense. Let’s keep digging. What about management? I recently did a long-form post where I reviewed capital allocation at Fairfax over the past 5 years. Bottom line, it can be argued that Fairfax currently has a best-in-class management team (compared to peers). The mystery deepens. What about the future prospects of Fairfax? Fairfax has three engines driving its business: Insurance: Fairfax has grown net premiums written by 400% over the last 9 years. At a 95CR, underwriting profit is on track to be a record $1 billion in 2023. Investments - fixed income: Fairfax has navigated the spike in interest rates masterfully in their $40 billion fixed income portfolio, moving to 1.2 years average duration in Dec 2021 and then pivoting and moving to 2.5 years average duration in Q1 2023, locking in higher yields. As a result interest and dividend income is expected to be a record +$1.5 billion for each of 2023, 2024 and 2025. Investments - equities: Fairfax’s $16 billion equity holdings have been performing very well, lead by Eurobank and total return swaps on 1.96 million FFH shares. Most importantly, all engines are performing very well at the same time, perhaps for the first time in the company’s history. Significant asset sales over the past 12 months have been icing on the cake: pet insurance ($1.4 billion), Resolute ($626 million+$183 million CVR), Ambridge Partners ($400 million). In short, Fairfax’s prospects have never looked better. What are external groups saying? AM Best, the credit ratings agency who specializes in insurance companies, just upgraded Fairfax’s ratings (including those of its two largest subs - Odyssey and Allied) because of its much improved financial profile. Most sell-side analysts have been warming to Fairfax over the past year, repeatedly increasing their estimates and target prices. Most have Fairfax as ‘outperform’ and a few have it as a ‘top pick’. Conclusion What did we learn about Fairfax? The stock price is unambiguously cheap in absolute terms and when compared to peers. The quality of the earnings are high and durable. The management team is best-in-class. Future prospects have never been better. Ratings agencies are drinking the Kool-Aid, with upgrades. Sell side analysts are drinking the Kool-Aid, with upgrades. The cheap stock price stands out like a sore thumb. How do we explain it? The answer is simple: Mr. Market is wrong. Now I know, according to EMT, this is not supposed to happen. What we have today is a real life example of where the efficient market hypothesis is bullshit. At least in the short run. We have situation where Mr. Market is grossly mis-pricing a stock. Now I do think the EMT is generally accurate over the medium to long term… the mis-pricing usually does not last for long. The disconnect with Mr. Market is fundamentals. The fundamentals have been improving at Fairfax for the past couple of years but are just now showing up in earnings. It’s like Mr. Market has been standing on the beach the last couple of years wondering why the water is running out to sea. The answer is we have a tsunami of earnings coming from Fairfax in the coming quarters and years. Mr. Market will figure it out. But in usual fashion, only when the wall of water comes crashing in (wiping out all the wrong-headed thinking on the company in the process). "What a shocker!" everyone will say. "Who could have known?" A similar thing happened to Fairfax in the 2006-2009 period. The coming spike in earnings is not a surprise to those who follow the company closely. So we are in this surreal environment where the future is kind of knowable (a spike in earnings leading to a spike in the share price). What to do? Trust the analysis (be right). Get the correct position size. Have patience (sit tight). ————— “And right here let me say one thing: after spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: it never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets . I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine - that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.” Reminiscences of a Stock Operator

@Thrifty3000 can you please tell me what the ‘problematic pattern’ is? We have know for years that runoff is a drag of $150 to $200 million per year. I don’t consider known events that are baked into historical results (and future estimates) to be ‘problems’. Is there something new here that is now emerging that is making this a bigger issue? Not speculation but something concrete? With interest rates spiking, my guess is the runoff fixed income portfolio will be earning much higher interest income. This tells me runoff portfolio will likely be less of a drag on earnings for Fairfax in 2023 and future years than in recent years when interest rates were zero. But as i constantly say… i am not an insurance guy and so I remain open minded.

@Luca Have you watched the video below? The liberal democracies of the West and the CCP are completely different animals. When i watch this video it makes the hair on the back of my neck stand up. It provides a great real life example of how the CCP operates - basically it does whatever it needs to do to stay in power… WITH ZERO CHECKS AND BALANCES. Yes, all liberal democracies are flawed. But the CCP is a frightening form of government (putting it politely).

@glider3834 thanks for sharing. Great to see the ratings agencies recognizing the significant improvements being made under the hood at Fairfax and its largest subsidiary. Its funny because it looks to me like AM Best might be further along in this regard than the equity analysts; probably because they are more specialized? Who is AM Best? AM Best is the largest credit agency in the world specializing in the insurance industry. It is the gold standard for insurance companies (please correct me if i am wrong). What did we learn from this news release? The financial strength rating of Odyssey has been upgraded to A+ (Superior). This is the same rating that AM Best currently has for both WR Berkley and Markel. As far as AM Best is concerned, Fairfax’s largest insurance subsidiary, Odyssey, belongs in that group. Why the upgrade? balance sheet strength, which AM Best assesses as strongest strong operating performance favorable business profile appropriate enterprise risk management I am not an insurance expert. AM Best is. For those board members who are worried about ‘reserving’ or ‘risk management’, at least at Odyssey, things look very good. We also learn a little about Fairfax in the news release: “The rating upgrades recognize the removal of ratings drag from Odyssey Group’s parent company, Fairfax Financial Holdings Limited (Fairfax), which has demonstrated sustained improvement in its overall credit profile in recent years. Fairfax has reduced its debt leverage materially and improved its overall operating performance, while maintaining consistently sound balance sheet strength and financial flexibility. As a result, debt servicing metrics have improved sustainably, reducing the burden imposed on Fairfax subsidiaries and supporting the removal of ratings drag on Odyssey Group.” We also learn a little more about Odyssey in the news release: Odyssey has been slowly building out is specialty insurance business (the business everyone is trying to grow because it is higher margin and has more of a moat) in the US and this positive development gets a shout-out from AM Best. “Odyssey Group otherwise continues to produce consistently strong underwriting results, despite elevated global catastrophe losses and is well-positioned to take advantage of continued rate improvement in many of its key business lines. Odyssey Group’s risk-adjusted capitalization remains strongly supportive of its strongest overall balance sheet strength assessment, and the group continues to benefit from its position as a global reinsurer with a well-diversified portfolio that also includes a significant position in the specialty primary market in the United States.”

We are told that the 10 year US treasury is the security that all other investments are priced off of. The yield on the 10 year is now 4.04%. If it takes out the March high of 4.08% and keeps going this could get interesting. The current yield takes us all the way back to 2007. Brave new world. What does it all mean for asset classes? I am not really sure. There are simply too many cross currents today to have a strong opinion about how it all plays out. My guess is we will see elevated volatility. The bond market has been on a 6 Flags roller coaster ride with yields spiking in early March, plummeting in April and once again spiking in June/July. Stocks? Straight up. Hymmmm…

@Munger_Disciple I do not spend a great deal of time looking far into the past. It is interesting/fun to do. What I really care about is the future. My guess is Fairfax should easily outperform Berkshire moving forward. And by a lot. There are a couple of reasons for this: 1.) Fairfax is way underpriced - probably 30% or more. Berkshire no where near as cheap. So Fairfax's starting point is much better. 2.) Fairfax earnings are spiking for all the reasons we have discussed on this board. This will drive the stock price higher. 3.) Active management is working right now. And Fairfax has been on a hot streak. The management team at Fairfax has been executing exceptionally well in recent years. That is not to suggest that there isn't a place for Berkshire in an investors portfolio. It is a well run, rock solid company. With a pretty good guy in charge.

@UK i will give you a portfolio update as of today. But please note, i am ok with concentrated positions. This strategy has worked well for me for +20 years but it is not for everyone. Please note, I might decide to change my position tomorrow and i will not provide an update. I have no desire to provide daily, weekly or monthly portfolio updates. Because it messes with my head too much (i start to feel responsible for everyone else). People need to do their own research. And come to their own conclusions. And not get overly influenced by what some anonymous blogger is posting. Having got that out of the way, Fairfax has been may largest position since late 2020. ‘The story’ at the company continues to improve every quarter. As a result, despite the incredible run-up, i think the stock is still dirt cheap. So i continue to hold a concentrated position. I consider 30% to be a minimum position for me today (given what i know today). Currently i am at a 45% weighting. And I move around quite a bit (around the edges). I am also 35% cash today. The remainder is split pretty evenly between 3 other buckets: oil, banks and Canadian high yielding dividend stocks. I move around i these holdings quite a bit. ————— If you look at most successful investors most of their outperformance was the result of only a couple of holdings that performed spectacularly well over 5 or 10 years. My view is these turbocharged opportunities only come along every couple of years (something you understand very well that is dirt cheap with catalysts). So when you find one you have to be patient and ride it for as long as possible. Because the next one might be years away. My fear right now with Fairfax isn’t holding too much… it is holding too little. My fear is lightening up (locking in big gains) and then having the stock take off higher on me. My biggest mistake investing is selling my big winners too early. Selling because they went up a lot. And then they kept going higher… My mistake was selling using price as my guide. So i am trying to be more patient in situations where the fundamentals continue to improve - like the situation with Fairfax today. ————— My average return over the past 20 years is 19% per year. Over that 20 year span i have had two down years (of -4% each year). So my strategy works for me. I also spend LOTS of time on investing… because i really enjoy it. People need to figure out their own strategy. Something that fits their knowledge, emotional make-up, situation, interest, time etc. There are no short cuts.

Of all of the many positive developments at Fairfax over the past 18 months, the spike in interest rates (and subsequent increase in interest income) is the most exciting for shareholders. That is because the interest and dividend bucket is now the biggest driver of earnings for Fairfax. Fairfax has done a masterful job over the past 2 years of navigating the extreme volatility we have seen in interest rates. In Q4 2021, Fairfax did two things: they moved their average duration to 1.2 years and shifted their fixed income portfolio to high quality government securities. In 2022, as interest rates spiked higher, they began extending duration - in Q4, 2022 the average duration had been increased to 1.6 years. The positioning in late 2021 protected Fairfax’s balance sheet when interest rates spiked in 2022 (saving them billions in unrealized losses). It also allowed them to quickly take advantage of much higher interest rates. As a result, Fairfax earned record interest and dividend income in 2022. And 2023 is going to blow 2022 out of the water. What did we learn when Fairfax reported Q1 results? The big news was they had pushed the average duration of their fixed income portfolio out to 2.5 years. This is a significant development. Because it means the record interest and dividend income will continue for 2023, 2024 and into 2025 - this earnings stream is now predictable and durable. Investors and analysts like this. What did we learn in Q2? We learned four very important things in Q2: 1.) Central banks are not done raising interest rates. This is because inflation (especially core readings) is still too high. And parts of the economy are starting to grow again (like housing) and employment remains tight. So, some central banks who had paused rate hikes in early 2023, like Canada and UK, have been forced to start hiking rates again. And despite the recent pause, Powell has telegraphed the Fed will be hiking the US rates at least one more time (and likely two) in the coming months. In addition to the US, Fairfax has significant fixed income holdings in Canada, the UK and Europe. The average duration of their fixed income portfolio is still quite low at 2.5 years (especially when compared to peers, who are closer to 4 years). A higher for longer interest rate regime means Fairfax will be able to roll their maturing bonds into higher yielding securities - which should deliver even higher interest income. 2.) Interest rates are rising again. It looked like treasury yields peaked out March 8 in the US. At the end of March yields had plummeted. Fast forward three months to the end of June and treasury yields have spiked higher, with durations of 3 years and less setting new highs. Fairfax is being given another opportunity to increase the average duration of their fixed income portfolio if they want to. Doing so would lock in meaningful interest income beyond 2025. This will be something to monitor when they report Q2 results. 3.) Higher interest rates are causing parts of the financial market to crack, with the meltdown in US regional banks in April the most recent example. Some regional banks have been forced to sell loans at a heavy discount to raise liquidity. In partnership with Fairfax, Kennedy Wilson purchased $2.3 billion (face value) in loans from PacWest Bank. Fairfax will earn 10% on its $2 billion investment, which will generate about $200 million annually in interest income (mostly) and investment gains. I think we can assume Fairfax is likely earning an incremental 5% on this investment (if we assume they were earning 5% on their old investment) so this should result in about $100 million in incremental interest income per year beginning in July (+$25 million per quarter). 4.) Dividend income is headed higher. Extending its close partnership with Kennedy Wilson, Fairfax also invested $200 million in preferred shares with a 6% dividend. This will deliver an incremental $12 million in dividend income to Fairfax each year. (As part of the deal, Fairfax also received warrants for 12.3 million shares of KW with a strike price of $16.21.) Fairfax has most of its fixed income portfolio in government bonds. One of the big advantages of this positioning in the current environment is it allows Fairfax to be very opportunistic to quickly take advantage of temporary market dislocations, like we have just seen with the KW/PacWest transaction. Smart. As central banks continue to increase interest rates it is possible the US could enter a recession later in 2023 or 2024. If this happens it is normal for credit spreads to dramatically widen. Fairfax has stated they are ready to shift a chunk of their fixed income portfolio from government into corporate bonds should yields on the latter pop higher. The cat is ready to pounce. Over the past 20 months we have been getting a master-class from Fairfax on the benefits of active management of a fixed income portfolio. What does all this mean for Fairfax? Record interest and dividend income is going even higher. The already good ‘fundamentals’ of Fairfax continue to get better. What do the actual numbers look like? Interest and Dividend Income: 2021 = $641 million ($27/share). 2022 = $962 million ($41/share) = 54% increase YOY. 2023E = $1.674 billion ($73/share) = 76% increase YOY. Fairfax’s share price is $753. The company is trading today for 10 x 2023E interest and dividend income. Compare that to any other insurer… that is NUTS. Especially given the durability of this earnings stream and the quality of the bond portfolio. ————— Interest & dividend income = interest income + dividend income - investment expenses. Interest income: Fairfax has a fixed income portfolio of about $40 billion. Interest income will come in around $1.59 billion in 2023 = yield of 3.98%. This is up from 2.25% in 2022 and 1.54% in 2021. Dividend income: Fairfax currently earns about $135 to $140 million per year in dividends from its equity holdings. Investment expenses: Fairfax incurred investment expenses of $52 million in 2022, up from $36 million in 2021. My estimate for 2023 is $52 million. FYI, Fairfax did not break out interest, dividends and investment expenses when they reported Q1 earnings (they just reported the total number). So some guesswork as to the split will be needed moving forward. Check out the unbelievable move in Treasury yields over the past 18 months from Jan 1, 2022 to June 30, 2023.

I don’t understand all the hate for strategies people don’t use. At the end of the day there is no ‘right’ strategy. It comes down to fit. Find a strategy that works for you. Yes, it would be stupid to use a strategy that you did not understand or believe in. The fact other people use a strategy you do not use does not make them stupid. And of course, calling them stupid for doing so is… well, obviously thats just plain dumb (putting it politely). i love all the different ways people chose to invest. I hope they all get filthy rich in the process - or achieve whatever their investment/life goals are. Best of luck to all…

Fairfax's equity holdings (that I track) finished Q2 up $766 million or about $33/share. mark to market = +$275 million associates = +$364 million consolidated = +$127 million This does not include the $260 million pre-tax gain from the sale of Ambridge which closed in Q2. Including Ambridge, that puts it over $1 billion in gains for the quarter from equities and realized gains. I do not track lots of Fairfax's holdings so the gain in equities is likely a little higher. The rub, of course, will be the bond portfolio. Interest rates spiked in Q2. And we have IFRS 17. So my guess is these two items will result in a sizeable unrealized loss. How much? Not sure; I need to give it more thought. Do others have an estimate? Bottom line, I love that interest rates are motoring higher. Fairfax still has a very short 2.5 year average duration with their fixed income portfolio. I wonder if they are using the current spike in bond yields to move the average duration even further out. ---------- Back to the equity holdings. Below were the biggest movers in Q2: Eurobank +$378 million FFH TRS +$165 million Thomas Cook India +$84 million Stelco -$78 million ---------- I have attached my Excel spreadsheet if board members want a closer look. Fairfax Equity Holdings June 30 2023.xlsx

@petec I agree with point 1.). There was more to the purchase than just Sokol and the Washington Family. I am not sure about point 2.). Interest expense doubled year over year in Q1 from $40 to $80 million. Much higher borrowing costs are eating into earnings. My guess is this gets worse before it gets better. Not sure. But a watchout.

Poseidon - Atlas - Seaspan Poseidon is the entity formed by Fairfax, the Washington Family, David Sokol and Ocean Network Express (ONE) that took Atlas private in March, 2023. To keep things simple, for now I am going to refer to Atlas as Atlas (and not Poseidon). Atlas is one of Fairfax’s largest equity holdings with a fair value of $2.04 billion and carrying value of $1.64 billion at March 31, 2023. At fair value, it is about 12.7% of Fairfax’s total equity portfolio of $15.7 billion. It is a significant holding. Who is Atlas? Atlas is a global asset management company. Their business is deploying capital to create long term value for owners. Today, Atlas owns two businesses: Seaspan (91% of EBITDA): the largest independent owner and operator of shipping containers in the world APR Energy (9% of EBITDA): the largest owner and operator of gas turbines in the world. Atlas Feb 2023 Presentation: - https://filecache.investorroom.com/mr5ircnw_seaspan/1280/download/Atlas Investor Presentation February 2023 - v02.pdf A Brief History: Seaspan to Atlas to Poseidon 1.) Seaspan (2005) Seaspan was founded by the Washington Family in 1999. In 2005, Seaspan Corporation was taken public and listed on the NYSE. Today, Seaspan is the largest independent owner and operator of containerships in the world with 13% market share. As of March 31, 2023, Seaspan’s operating fleet consists of more than 140 containerships with a total capacity of over 1.1M TEU. With 67 vessels under construction, the total capacity increases to over 1.95M TEU on a fully delivered basis. 2.) APR Energy From 2015-2017, Fairfax invested about $460 million to purchase 67.8% interest in APR. In November of 2019, Fairfax sold APR to Atlas for $254 million in Atlas shares (22.9 million x $11.10/share). Fairfax unloaded a problem child, so it was a great deal for Fairfax. Sokol got ownership of a second company - this time an energy company. Atlas is still in the process of turning APR around. New CEO. New strategy: exit Argentina and shift to long term contracts. 3.) Atlas Corp (Nov 2019) Concurrent with the APR purchase, Atlas was created. It is now ‘an asset management company’ and its focus is ‘deploying capital to create long term value for owners’. It was interesting listening to the management team try and explain what they were doing to a bunch of container shipping analysts. The analyst community was never able to fully grasp the vision of what Sokol and team were trying to accomplish. It was the case initially with Seaspan when they tried to make the company a less cyclical business (more akin to a leasing company). The pivot to an asset management company (with the purchase of APR) was even more baffling for analysts. 4.) Poseidon (March 2023) Taking Atlas private now allows Sokol and the management team the ability to take Poseidon in whatever direction they want. Trying to appease a small group of minority shareholders (and analysts) is like herding cats. Sokol is a bright guy. He is ambitious. And he has a lot to prove. This probably makes good sense for everyone. Especially given the current weakness (putting it politely) in the container shipping market. The majority of the funding for the buyout of minority shareholders was provided by ONE, Seaspan's largest customer (at 24%). Fairfax did not provide any additional funds. Who owns Atlas? Fairfax (45%) Washington Family (22% plus $175 million more?) Ocean Network Express ONE (30% ish? up to $1.4 billion?) Management: Sokol, Chen etc (? plus $30 million extra?) Poseidon has what looks to be a pretty rock solid ownership group: Understand the industry. Deep pocketed investors. Patient. Supportive. Long term focus. Sokol and the management team must be SO HAPPY that the take private transaction is completed. Washington Family founded Seaspan in 1999. Seaspan was listed on NYSE in 2005. They have been a large shareholder of Seaspan ever since. https://www.washingtoncompanies.com/about-us/#our-history Ocean Network Express (ONE) was established in 2017 with the merger of 3 Japanese container shippers ('K' Line, MOL and NYK). With a fleet size of 1,505,181 TEU, ONE is the 7th largest container shipper in the world. It is part of ‘THE Alliance’. It is Seaspan’s largest customer (at 24%). https://www.one-line.com/en/standard-page/ocean-network-express Why did Fairfax decide to invest in Seaspan/Atlas? It was a bet on the jockey: David Sokol, and his impressive long term track record. It was also an opportunity to partner with the Washington Family. From Fairfax’s 2017AR, Prem’s letter: “Late in 2017, we had the good fortune to be a partner with David Sokol and Dennis Washington, two outstanding businessmen with great track records, by investing in Seaspan. Dennis is the largest shareholder of Seaspan while David became its Executive Chairman in July 2017. David has one of the most outstanding records I have come across, as he built Mid American Energy from revenue of $116 million in 1991 to revenue of $11 billion in 2010, while net income increased from $27 million to $1.2 billion over the same period, representing a compound growth rate of 22.4% per year.” How much has Fairfax invested in Atlas? Common shares: Fairfax owns 130.8 million shares of Atlas = 45.4% of shares outstanding. On Feb 1, 2023, Atlas had 287.8 million shares outstanding. Below is a summary of how Fairfax accumulated its shares, beginning in July 2018. Other investments in Atlas: In June 2021, Fairfax converted $600 million in secured debt to $300 million in unsecured debt (5.5%) and $300 million in preferred shares (7%) and 1 million warrants ($13.71 strike, which have since been exercised. How has the equity part of the investment performed? Common shares: Based on the take private price of $15.50/share, Fairfax made a fair market gain of $9.225/share or $1.2 billion or +117% on its common stock investment in Atlas since 2018. Fairfax also has $300 million in debt that is paying $16.5 million in interest (5.5%). And they have $300 million in preferred shares that pay $21 million in dividends (7%). Future prospects for Atlas/Poseidon? Recent developments: Seaspan is in the middle of a dramatic increase in capacity. They have 67 new container ships coming in 2023 and 2024 that will increase capacity from 1.1 to 1.95 million TEU. This will make them larger than ONE (1.5 million TEU). At the same time: weak macroeconomic background rising cost of capital - spiking interest rates charter rates for container ship rates have fallen dramatically the 3 ocean alliances look like they are in the process of disintegrating So it would be an understatement to say that there is a lot going on right now in Seaspan’s business. They have long term charters on all new ships coming on line. And they have the financing lined up for the new-builds. As discussed earlier, APR is still in turnaround mode. My guess is 2023 and 2024 will be quiet years as Atlas focusses on execution at Seaspan and APR. I wonder if the headwinds (softness is the shipping container market and higher cost of capital) mutes the expected earnings growth at Atlas. Probably. Having a very strong private ownership group is a real benefit given the current environment. Conclusion Fairfax has done exceptionally well so far with its investment in Atlas. It will be interesting to see how the next two years play out. Does the new build strategy deliver the expected growth in earnings? Do they further diversify the platform and create a third earnings stream? What does Sokol and the management team accomplish over the next 5 years? ————— Davis Sokol joined Seaspan in 2017. His claim to fame was as Chairman and CEO of MidAmerican Energy, a company he sold to Berkshire Hathaway in 2000. He remained at Berkshire Hathaway until 2011, when he retired. CNBC TRANSCRIPT: David Sokol Defends His Controversial Lubrizol Stock Purchases https://www.cnbc.com/2011/04/01/cnbc-transcript-david-sokol-defends-his-controversial-lubrizol-stock-purchases.html —————- Harpex Index: reflects the worldwide prices on the charter market for container ships https://www.harperpetersen.com/harpex —————- What are the ocean shipping alliances? https://www.flexport.com/blog/ocean-alliances-everything-you-need-to-know/ https://www.container-xchange.com/blog/shipping-alliances/ Alphaliner TOP 100 / 28 Jun 2023 https://alphaliner.axsmarine.com/PublicTop100/

I don’t think India is the ‘solution to everything’. Rather, it is well positioned right now. Lots of tail winds. So this should lead to above trend economic growth in the coming years. India is a developing economy… so yes, lots of issues need to be sorted out. Just like every other country at a similar stage of development. Pakistan is a sovereign country so i am not sure how it compares to Taiwan. Bottom line, i hope India figures it out. Prosperity is a good thing.

@Spekulatius you certainly have been correct with your scepticism over the last year of how sustainable higher prices were. Note taken. Looks like demand from China is lower than expected. And supply from Russia and rest of world is higher than expected. We will see if demand picks up 2H. Energy is still a core holding for me, although a smaller position than it was a few months ago. Suncor continues to be my largest position. I was adding Baytex (small amount) the last couple of days… lots of selling last week by US holders after Ranger close… stock got killed. I do like listening to Arjun Murti (depth to what he has to say, with focus on return on capital); Eric Nuttall can be fast forwarded, especially if you have heard him talk before. Bottom line, lots of oil companies are still very profitable even at $70 oil. Arjun actually likes low oil prices… he thinks that could extend the high margins/returns for longer. We will see.

@John Hjorth thanks for posting. I do not find it depressing. And that is because Russia is providing the Western world with a real-time teachable moment. Sometimes knowing what you want is as simple as knowing what you don’t want. Russia is quickly devolving into a hellhole. Totalitarian political culture can be a bitch. Blows me away that there are still apologists out there for that regime.

@SafetyinNumbers here are some approximate numbers: - Eurobank $1.9 billion - Grivalia Hospitality $400 million - Mytilineous $300 (including exchangable bonds) - Pratkiter? (Paid $29 million in 2014 - Home Depot type business) - Eurolife? (Paid about $360 million for 80%; Eurobank owns 20%) Fairfax’s equity holdings total around $15.7 billion, so their Greek equity holdings of $2.6 billion are about 17% of the total... a significant number.

As expected. 4 more years. This should allow conservatives/New Democracy to make significant further progress in reforming the Greek economy. Very good news for Fairfax’s significant Greek holdings (Eurobank, Mytilineous, Grivalia Hospitality, Praktiker and Eurolife). ————— Greek conservatives storm to victory in repeat election - https://www.reuters.com/world/europe/greeks-vote-repeat-election-likely-return-conservatives-office-2023-06-24/ ATHENS, June 25 (Reuters) - Greece's conservative New Democracy party stormed to victory in a parliamentary election on Sunday with voters giving reformist Kyriakos Mitsotakis another four-year term as prime minister. With most votes counted, centre-right New Democracy was leading with 40.5% of the vote and 158 seats in the 300-seat parliament, interior ministry figures showed. It was more than 20 points clear of Syriza, a radical leftist party that won elections in 2015 at the peak of a debilitating debt crisis and ran the country until 2019, when it lost to New Democracy.

You might want to ask a European if Russia’s invasion was a big deal (game changer) or not. My guess is many would disagree with your take. Energy supply to Europe has been changed forever. Cheap and abundant energy is the core building block of every society. Europe having the warmest winter on record was an important factor - an awesome development. The UK is an inflation shit show right now. High energy prices are now bleeding though to wage spiral. Finland is not part of NATO. The Ukraine war is not over. And we just learned how fragile (and messed up) Russia is. I’m not sure if your aware, but they have a few nuclear weapons… that is a fat tail risk (getting fatter). Not an issue until it is - i’m not sure but i have heard that nuclear weapons can really be a bitch when they are used. Now we can pretend that this risk does not exist… but this isn’t a Disney movie. Russia invading Ukraine has also ‘informed’ the rest of the world on China (multinational companies understand what is coming) and this is accelerating de-globalization. Totalitarian governments and liberal democracies are like dogs and cats… I think the US (and everyone else in the West) is looking to on-shore important stuff - like chip production (FYI, not the potato kind). Remember, prices cycle up. And down. And then back up… Perhaps we never see $100 oil again. Possible. I could go on. But Russia’s invasion of Ukraine did change the world - economically, politically and militarily. And it is still early days. It will take years (a decade or more?) to fully understand how much. Now i will agree that someone living in rural America or Canada is not being impacted all that much. To them it is probably looking like a big nothing burger. Please note, this is not a doom and gloom summary. I continue to be very optimistic. Change is inevitable and usually a good thing (over time). The West will continue to improve the standard of living for its people. That’s why so many people desperately want in.

Really? You might want to look at any news service in the world right now… China, middle east etc… their lead story? Shit show in Russia. Nothing to do with the American media. Bit you can believe that if it makes you feel better Impotent? Describes what Russia is being reduced to…

So is the threat from Wagner sufficient to force Russia to pull troops from Ukraine? Wagner exiting from Ukraine must be a significant development… they claim to have 25,000 troops. If the Wagner threat is real it makes sense to me Russia would prioritize putting down Wagner over empire building in Ukraine. Hopefully there is a way for Ukraine to exploit the current turmoil in Russia. I am already thinking ahead to Monday and how financial markets will open; especially oil. Yes, lots will likely change over the next 48 hours. Crazy times. ————— We have yet another example of just how badly Putin miscalculated when he decided to invade Ukraine. It is looking more and more like one of the great blunders / catastrophes of the post WWII era. And it might end up costing him his job.

How do they all coordinate reporting not just the what (event) but also the message? All at the same time? Australia, Canada, Denmark, New Zealand, USA, France, Japan, Germany… and 20 or 30 more counties? Are they really that smart? You lump them all together (‘our media’) and that i do not understand.

@changegonnacome Sorry, i am as dumb as a stump. Who is ‘our media’ you are referencing? Can you please list exactly who it is you are talking about? And how, exactly, do they coordinate their news stories, especially breaking news? Do they all go to some school where they are taught to do what you suggest? Or is there some secret book that lays everything out?