nwoodman

Metlen announced a €600m buyback https://www.investegate.co.uk/announcement/rns/metlen-energy-metals-plc--mtln/commencement-of-share-buyback-programme/9630761

Fair point on querying the 15%, I was recalling this from the Q4 25 CC: Bart Dziarski Analyst Maybe a question for Wade on the investment book. So we're seeing quite a dislocation in markets today. And so are you thinking about maybe shifting some of the positions, taking advantage and being opportunistic in this environment? I'd love to get some color on that. Wade Burton Executive I guess I would say we have a very robust skilled investment team, and we're constantly looking at all securities. We underwrite for 15%. And as you say, I mean, you're talking about the software and AI, but we're working very hard. And anytime we uncover any opportunities, we will act. So that's what I'd say. We're watching it all very closely, as you can imagine. Fairfax’s group objective is long-term 15% BVPS compounding, but I believe Wade’s “we underwrite for 15%” comment was made in the context of the investment book and “looking at all securities,” so I read that as a security-level / equity-capital underwriting hurdle, not as “we can accept 8–9% on the investment because Fairfax float leverage will do the rest.” The simple maths does show why the ambiguity exists. With common equity around $26bn, a 15% book-value target requires about $3.9bn of after-tax annual value creation. Fairfax has talked about roughly $2.5bn of interest and dividends, $1.5bn of underwriting profit and $1bn from associates/non-insurance businesses, or about $5bn of pre-tax operating income before market gains/losses. In that snapshot, the equity-style book (~$27bn of exposure) may only need to be in the high single digits to make the group maths work. But I agree that would be a slippery slope, which your observation above calls out. If Fairfax starts underwriting equity-style investments to 8–9% because the current balance sheet can carry the group target, they are effectively spending the margin of safety created by today’s bond yield and underwriting cycle. So my view is: the group can achieve 15% BVPS through a combination of float, fixed income, underwriting profit, and capital allocation, but individual equity/security investments should still be underwritten to around 15% before relying on Fairfax-level float leverage.

Spot on from the MD&A: “On June 15, 2026, the Company entered into a definitive arrangement agreement with 18013632 Canada Inc., a newly- formed and wholly-owned subsidiary of Fairfax Financial Holdings Limited, and Fairfax Financial Holdings Limited, in respect of a transaction whereby all of the issued and outstanding Class A Non-Voting shares and Class B Voting shares of the Company will be acquired by 18013632 Canada Inc. pursuant to a plan of arrangement under the Canada Business Corporations Act (the “Arrangement”). Completion of the Arrangement is subject to customary conditions, including, among others, court approval, regulatory approvals, and the requisite shareholder approvals.” A first pass I had a brief look at this and I am still not sure how this deal clears a 15% IRR hurdle on the stand-alone numbers. At roughly 8x FY2026 EBITA and a mid-single-digit earnings yield on the equity value, it does not scream “fat pitch”. The base case still feels more like a mature Canadian consumer business than a “classic” Fairfax opportunity. But the deal starts to look more interesting if Port Moody is monetized well ($20-$30m?), margins continue to rebase higher, and Peller becomes a platform for smaller wine, craft beverage, import-agency and succession-driven family assets. I was bracketing around the following crude return estimates and the benefits of Fairfax Ownership Case Return feel before credit benefit Credit-rating benefit/Balance Sheet No real estate monetization 9-10% Minor Port Moody monetized well 10-12% Helpful but secondary Port Moody + margin expansion 13-14% Adds some bridge Port Moody + platform roll-up 15% possible Most valuable here Arguably the more important signal is that John Peller is rolling over rather than just selling out. He knows the assets better than anyone, has already stepped back from operating leadership, and could presumably have taken cash. Instead, he appears to be choosing Fairfax as a long-term home for the family legacy and a partner with patient capital, better credit support, and a willingness to let the business compound outside the public market. That says something. In fact it made me think about Buffett’s old pitch to appeal to family businesses: Berkshire as a permanent gallery rather than a trader of assets. Fairfax may be offering a Canadian version of that bargain, liquidity for public shareholders, continuity for the family name, and a permanent-capital owner that can back the next phase. I would not call it obviously great yet, but I think I can see how it moves from “single-digit winery deal” toward “asset-backed platform with a credible path to low-teens, maybe 15% if execution is good.” My concern is always “are they lowering the bar”? So hopefully there is more to it than a superficial first pass reveals. In this regard I would definitely give Fairfax the benefit of the doubt.

Great post, and I think you are broadly right, but I would be slightly careful with the “$415m / 5x / sub-4x” framing. The $415m is the disclosed cash purchase price. It is not necessarily the full economic cost to Sleep Country. Through the Chapter 11 sale, Sleep Country is buying all of the operating assets, but it will also assume certain operating liabilities and selected contracts/leases. So the real economic cost is probably higher than $415m, although still materially lower than the old enterprise value, because the funded debt and unwanted liabilities should largely be left behind. That aside, I appreciated your post because it piqued my interest enough to put a few tokens in the jukebox, so to speak. File note and workbook attached. Where I landed (after crunching various LLMs etc) Disclosed cash purchase price - $415m Analyst-estimated effective cost - $500–600m Stress-case effective cost - $650–700m The $500–600m range is not a disclosed number. It is my attempt to account for selected operating liabilities, working-capital leakage, customer obligations, cure costs and initial integration / restructuring. The $650–700m range is more of a stress case if the leakage, assumed lease burden, or cure costs are worse than expected. Where I agree with you is that this looks potentially very attractive if Sleep Country can restore buyer-owned EBITDA to something like $110m+. Sleep Number did about $78m adjusted EBITDA in FY2025, down from about $120m in FY2024, and Q1 2026 was ugly. But Q1 was distorted by weak demand, product transition, liquidity stress and operating deleverage. I do not think annualising Q1 tells you the normalised value of the asset. The more useful question, and the thing I really care about, is whether Fairfax / Sleep Country are maintaining capital allocation discipline. To that end, I tried to answer: What EBITDA does Sleep Country need for this to clear Fairfax’s 15% hurdle? At around $550m effective cost, assuming roughly 55% FCF conversion and a 6x year-five value, I get required buyer-owned EBITDA of roughly $114m to clear a 15% mark-to-market IRR. That is not the same as saying the business immediately earns a 15% cash yield. The strict no-growth cash-yield test is tougher and requires EBITDA closer to $150m at the same cost / FCF conversion assumptions. But on a five-year mark-to-market basis, $114m looks like the key hurdle number. That is important because it does not require a heroic demand recovery. It mostly requires cost-side execution: public-company cost removal; duplicated overhead reduction; store / lease optimisation; procurement and logistics efficiencies; some marketing efficiency. So can Sleep Country take a distressed $78m EBITDA platform and create roughly $35–40m of buyer-specific EBITDA improvement? That seems plausible to me, especially because this deal likely only makes sense under Sleep Country. A generic PE buyer probably does not get the same strategic benefits. Sleep Country already has category knowledge, vendor relationships, retail operating experience, digital sleep-brand experience and Fairfax permanent capital behind it. Sleep Number is also not just a mattress-store chain. It has a recognised U.S. brand, installed customer base, smart-bed IP, SleepIQ software/data, app engagement, patents and a large U.S. footprint. I would not value that at some fantasy health-tech multiple, but I would not ignore it either. Inside Sleep Country, those assets may be worth more than they were inside an overlevered public company. On the buybacks, I wholeheartedly agree. The historic capital allocation looks terrible in hindsight. Buying hundreds of millions of stock at very high prices while the balance sheet later collapses is exactly the sort of thing that transfers value from old equity to future distressed buyers. Painful for SNBR shareholders, but potentially attractive for Fairfax / Sleep Country. Is this a game-changer for Fairfax? No. But it is another useful data point that Fairfax-owned subsidiaries are doing the kind of acquisitions one would hope for at this stage of the market: buying real assets from forced sellers, using industry knowledge, avoiding the obvious crowded trades, and still appearing to underwrite against a reasonable return hurdle. There is also a management/culture option here. Stewart Schaefer has already shown he can build Sleep Country beyond a plain mattress retailer through Endy, Hush, Silk & Snow and Casper Canada. And the broader Sleep Country culture traces back to Christine Magee and the founding team, who built one of Canada’s best-known specialty retail brands. If that operating culture can now be applied to Sleep Number’s U.S. brand, IP, customer base and footprint under a cleaner balance sheet, Fairfax may have bought more than a cheap distressed asset, it may have bought an option on a much larger North American sleep platform. So my read is: Bad outcome for old Sleep Number equity. Probably an acceptable outcome for creditors versus liquidation. Potentially good bolt-on for Sleep Country if effective cost is around $500–600m and buyer-owned EBITDA gets back above ~$110m. Very good deal if EBITDA gets to $140m+. Much more marginal if EBITDA stalls around $80–100m or if assumed lease/cure costs are worse than expected. The bigger Fairfax point is that this may actually make the original Sleep Country acquisition look better. Sleep Country is not just a mature Canadian mattress retailer; it can become a platform for distressed North American sleep-sector consolidation. This is exactly the kind of sub-level capital allocation that matters over time. Ultimately, my takeaway is that the deal only really makes sense under the Sleep Country umbrella. That is not a weakness. That may be the whole point. There are far shinier things at the moment than mattresses, but the GMs on a humble mattress I still find quite staggering Sleep Number Analysis.xlsx Sleep Number Analysis.pdf

This is the right way to look at it. They’ve made it clear that Fairfax is a capital allocation machine, with per-share value creation as the primary objective. Float is an important source of leverage, and the fact that its cost has turned significantly negative is a real bonus (and credit to Andy), but it is secondary to where that capital is deployed, and it is far from their only source of capital. Give it time and it will work because, when capital is allocated rationally, the economics are difficult to escape. For a company like Fairfax, particularly in the current environment, short-term share price signalling is a very poor indicator of future returns. I would go a step further and say I am arguably more bullish on the next generation than many others. One of Fairfax’s greatest strengths is that its mistakes have been visible, painful and well documented. The scars from the hedging years, overconfidence in macro calls and periods of excessive complexity are not hidden away, they are worn almost like war medals. In a good sense, they have become institutional knowledge. That leaves me more confident that the next generation will focus on disciplined underwriting, rational capital allocation and per-share value creation rather than trying to prove how clever they are. Anyone who has had the pleasure of cornering Peter Clarke after an exhaustive AGM session, only to find him still willing to engage thoughtfully and answer candid questions, will know what I mean. The same applies to Brian Bradstreet and Kleven Sava, who seem perfectly happy to keep discussing fixed income long after most shareholders have left Roy Thomson Hall. In my experience, that attitude extends across all of the leadership team. It’s a tough gig, insurance is brutal and capital allocation is unforgiving, but they genuinely love their work! What stands out is not that they always have the right answers. It is that they appear genuinely curious, intellectually honest and deeply engaged in the craft of capital allocation. They will make mistakes, every allocator does. Ultimately, each investor has to decide for themselves whether management deserves their trust. I have come to the conclusion that I would rather own a company run by rational people playing a long game than one that simply provides comforting answers in the short term. Everyone’s mileage differs, that’s what makes a market

Is there a cheaper, higher quality float per share option than FFH itself? I think at the current share price they achieve both options you are considering.

Just a friendly reminder that you may want to reacquaint yourself with the T&Cs of attending that dinner

@petec, Great write up. Full disclosure: I am not an Ackman fan, so take the following with that bias noted. That said, I always appreciate your clarity of thought. Pershing committed $900 million at $100 a share, so the capital at risk is real and I do not dismiss it. But the fee architecture tells a different story. Pershing's advisory fee starts participating above a reference price of roughly $66, with a quarterly base fee on top. So while Ackman's equity may be underwater below $100, the manager can still be paid well before minorities fully benefit from a re-rating toward HHH's own internal NAV estimate of $118. The services agreement also includes a change-of-control make-whole provision approximating the present value of future fees, which speaks to how durable the arrangement is. For me, governance is not a line item in a SOTP. It is the discount rate applied to every other line item. The Berkshire comparison is where the thesis breaks for me. Buffett built the insurance operation first, proved underwriting discipline over multiple hard and soft cycles, and only then did the float become a compounding engine. HHH is attempting to invert that sequence. Vantage was founded in 2020 and the acquisition comes at the tail end of a hard market heading into a softer cycle. That is a young platform, acquired at a late point in the pricing environment, being positioned as the foundation of a compounding model. Pershing managing the Vantage portfolio without an incremental fee at the portfolio level is fair to acknowledge. But they are already being compensated under the broader services agreement, so the term "fee-free" deserves some scrutiny. Insurance compounding is not a structural outcome; it is a behavioural one. It requires patience in soft markets, a willingness to shrink, and the discipline to sit on cash. But you need the balance sheet to play that game. Everyone entering insurance believes they will underwrite with discipline, but the balance sheet is what allows you to actually maintain it through a full cycle. When the holdco above you is carrying close to $3 billion in debt and prefs, and the manager is compensated through a fee arrangement tied to market cap, the pressure to keep writing volume at inadequate prices can overwhelm intent. At Fairfax, underwriting discipline was proven over time and across cycles, and only then did float become a durable compounding engine. The stock did not re-rate because it was positioned as a compounder; it re-rated because the discipline was earned. HHH is explicitly modelling itself on what Berkshire and Fairfax built. That sets a high bar. The question is not whether the structure resembles a compounder, but whether the underlying behaviours, underwriting discipline, capital allocation patience, and governance , are actually present. The MPC assets are genuinely good. But the vehicle around them leaves me uneasy. The longer I watch this game, the wider the gap becomes between a well-designed balance sheet and what is actually defensible in insurance: underwriting culture, institutional memory, and discipline earned across cycles. That is something Ackman can aim to build over time, but it cannot be assumed or engineered upfront. As always appreciate the opportunity to think this through, and no doubt have missed some sitters in this reply

Great post. While I try to identify and handicap the tails, knowing what you own and margin of safety are key. I'd add one more layer: buy companies with plenty of scar tissue and management that acts rationally. Then sit tight, and make sure you still have a seat during the inevitable 50% drawdown. If you find yourself getting excited about volatility and downturns rather than fearful, that's a decent test that you own the right things.

That would make sense, and it lines up well with @Haryana’s post identifying the new players. Jumping around a bit, this approach also looks consistent with what we’ve seen with Foran and Eldorado. Paraphrasing @Viking here, it still amazes me that many of us can join the dots on the capital recycling/allocation portion of Fairfax’s business, yet analysts continue to treat these as discrete, almost accidental, events that surely aren’t repeatable. If this investment book sat inside a private equity wrapper, I suspect the market would value it very differently (or at least would have 12 months ago ). Its arguably even more valuable now

Cheers, when one of the greats declares this, you have to take notice: “With the valuations of our peers implying an approximately $50 Strathcona share price, we are reminded of legendary oilman T. Boone Pickens’ line that sometimes it is “cheaper to drill for oil on the floor of the New York Stock Exchange than in the ground.” Setting aside relative valuation and focusing on absolute value, buying more of a business we know and understand well (our own) at a large discount to a reserves value predicated on WTI prices in the mid US$60s appears attractive to us. While in the past we have been unable to take advantage of the relative discount we have traded at due to our small float and low average daily trading volumes – which both limited the size of the opportunity and made a buyback self- defeating – this has improved in recent months, with Strathcona’s daily trading volumes recently averaging more than $30 million per day (up from a meager $1 to $2 million per day when we first went public). With volumes up, our shackles are now off and we have a new tool in our capital allocation tool kit. We intend to initiate our first normal course issuer bid (NCIB) in coming weeks, for up to 5% of shares outstanding. In allocating capital to the NCIB, our intent is to do so sporadically and opportunistically, rather than following a formula as a percent of free cash flow like has become popular (the best time to buy our shares will be when we have no free cash flow…). In all cases, we will seek to make repurchases when we view our stock as discounted to our intrinsic value, conservatively determined and then applying a margin of safety.” Wonderful news for SCR and FFH shareholders. The returns here if SCR can retire 5% per year at current prices or lower will bump this up FFH’s investment already impressive IRR league table. I hope Adam can make it to Toronto next month.

Interesting take. It strikes me ONE was the exit strategy from the start. Seaspan sits right inside the liner ecosystem and ONE was already one of the major counterparties. The consortium structure when Atlas Corp was taken private always looked like strategic operator + capital partners. FFH provides the balance sheet and stability to get the deal done, lets the business compound privately, and eventually the strategic owner consolidates. That doesn’t look like flipping assets to me, it looks more like brokering the asset into its natural long-term home while earning an appropriate return on capital along the way. The fact that many of their private positions appear to have pre-wired exit liquidity is one aspect of the Fairfax model the market seems to completely miss. A similar logic could eventually apply to Sleep Country Canada, although my sense is that if management continues to meet Fairfax’s hurdle rate they will simply keep backing them. So I think in the case of Poseidon, allowing a gradual buyout by the natural owner, only reinforces their reputation as patient capital.

The no sacred cows, is worth a lot IMHO

A quick follow-up. It has been reported overnight in multiple Turkish mainstream outlets, including Sözcü, Cumhuriyet, Yeni Akit and Medyascope, that Tom Barrack, Trump’s US Ambassador to Turkey, Special Envoy for Syria, Special Envoy for Iraq and one of the most geopolitically connected individuals in the current US administration, served as the personal reference behind Hafize Gaye Erkan’s appointment as President of Fairfax Banking & FinTech. The reporting traces a relationship that began at First Republic Bank, where Barrack is said to have championed Erkan’s advancement against internal board resistance, continued with a personal visit to her in Ankara during her tenure at the central bank, and culminated in the Fairfax introduction. On first read, that looks like a personnel footnote. It may be considerably more than that. The attached note explains why the Barrack thread may materially change the analytical frame on the Erkan appointment and what it suggests about what Fairfax is actually building. These things are easy to over-read, but ignoring them risks missing the moment entirely. Either way, it is fascinating to watch unfold and worth a few tokens to pull together a narrative that can be weighted even at 0.1%. Edit: I am sure we all love an analogy even if its on the hyperbolic side: “By hiring Hafize Gaye Erkan with the reported sponsorship of Tom Barrack, the firm has effectively installed a “geopolitical router” inside its corporate headquarters. This router connects Fairfax’s capital to: 1. The US Administration’s Inner Circle: Direct, relational access to the architects of US policy in Turkey and the Middle East. 2. Sovereign Wealth Networks: A four-decade link to the capital of the Gulf, where Fairfax already has a significant insurance footprint. 3. Regulated Banking Transitions: A peer-level relationship with sovereign banking regulators, and the institutional credibility that comes with it, at the precise moment Fairfax is attempting to close an $8 billion privatisation with the Government of India and the RBI.” Erkan - Barrack Supplementary March 2026.pdf

Thanks for this, burnt a few tokens with the usual vendors to generate some background notes. Pros and cons but this is where Prem and team shines, the look thru. Erkan Appointment Analysis.pdf