nwoodman

+1, greatly appreciated @gfp

An inconsequential position in KMX

Trimmed BRK.B, FRFHF, USAP, ATCO, AAPL. Exited DIS, BAM, BABA. all very small positions. Mainly tax matching and reducing the risk of sleep walking into a potential margin call if this really gets a head of steam up. We shall see. I can’t think of a better inflation pass thru entity than Berkshire but the market is thinking the same and has bid it accordingly, as much as I hate to say it I don’t want to get caught out on a mortality trade. The 50-60% drawdown test is all too real.

Excellent news. Thanks for the link

Sure is. I think it is going to catch a lot of investors by surprise, in a good way. https://indianexpress.com/article/cities/bangalore/international-departures-increase-25-each-day-bengaluru-airport-7846332/

Was trying to triangulate it with other sources too, but first read about it here https://www.zerohedge.com/energy/gazprom-halts-gas-shipments-europe-critical-pipeline

Spot on. I think the price/IV has only closed marginally. I was always a little gun shy about some of their marks, what is becoming apparent to me is that there are plenty of unrecognised gems too. As Munger said “Sit on your ass. You’re paying less to brokers, you’re listening to less nonsense, and if it works, the tax system gives you an extra one, two, or three percentage points per annum.” I don’t think it is falling in love with companies per se it is more I hate paying tax. I will be more than happy if this closes the IV gap over 3-5 years and then performs at inflation + 7% over rolling 5 year periods. Happy with lumpy as long as they are not blowing up capital as per the past 10 years. This then makes it margin-able and as an investment it’s utility improves greatly for my purposes. Everything that I am seeing at the moment seems to suggest this will prove to be the case. A small amount of margin and large unrealised tax liabilities seems to work out OK over the long run as long as the underlying investments keep on keeping on.

The following article suggests India’s position may be improved by the current crisis but they can’t overplay their hand. India’s value as a democracy and capacity as the only other military power able to push back against Chinese aggression in Asia is not lost on the Quad. But a lot will depend on how well India — more nimble under Modi — articulates its position on Ukraine. “India is today in an enviable position because of years of careful diplomacy, and fortuitous geo-politics,” Aparna Pande, a South Asia expert at the Hudson Institute, a Washington DC think tank, told CNBC. “The US and its partners — in Europe and Asia — need India on their side in the long-term peer competition with China. They are, therefore, more understanding of India’s predicament.” But Pande cautioned that India’s reluctance, as a democracy and as a key member of the Indo-Pacific to support the liberal international order will be remembered. India faces a stark choice, said Bruce Bennett from the Rand Corporation, a think tank headquartered in Santa Monica, California. “The key question is whether India will want to be known as a principled country or a nationalistic country. A principled country stands up against any violation of national boundaries, whether it is Russia invading the Ukraine or China invading parts of India,” he said. “If India decides to ‘sit on the fence’ to maximize its national leverage and influence, I think many people around the world will lose sympathy for India’s concerns about its own territorial integrity.” https://www.cnbc.com/2022/03/24/india-is-in-a-sweet-spot-courted-by-the-quad-china-and-russia.html

It won't be material but it will be interesting to see if they increased their stake in BABA significantly during the recent sell off

Morningstar’s Greg Warren on the Alleghany deal “We expect to increase our fair value estimate for Berkshire Hathaway (BRK.B) by 3%-5% following news that the wide-moat firm has agreed to acquire the outstanding equity of Alleghany, a property/casualty insurer with reinsurance and specialty insurance lines, for $11.6 billion. While the deal seems pricey at first glance, with Berkshire offering $848.02 per share in cash for Alleghany--a 29% premium to Alleghany's average stock price over the last 30 days (and a 16% premium to the firm's 52-week high closing price)-the acquisition price works out to a multiple of 1.26 times Alleghany's book value per share at the end of 2021. Berkshire has been buying back its own common stock for an average of 1.37 times prior quarter book value per share the past year, so a premium that lifts the deal price for Alleghany up to 1.26 times book seems reasonable to us from a price perspective. That said, we'll have to see how much value Berkshire can extract from Alleghany's insurance operations, noting that insurance deals can be tricky as the acquirer is assuming potential future claims established by the acquired firm's past underwriting. While Alleghany's inability to generate excess returns on a consistent basis could be a sign of underwriting weakness, we'd note that the firm's reinsurance arm (which can be hit with large catastrophe losses at any given time) have had a greater influence on overall results the past decade. We'll also have to see how Berkshire handles the investment portfolio at Alleghany, which has been dedicated more to bonds (80%-85% of holdings the past two years) than equities (15%-20%), the complete opposite of Berkshire's insurance operations (which has had 80%-85% invested in equities). Should Berkshire avoid unforeseen underwriting issues and reallocate the acquired investment portfolio to more lucrative options, this could end up being a good deal (something Berkshire has struggled to find for much of the past decade).”

+1, @wabuffobrilliant

I enjoyed this exchange on the recent Altius CC (10 March) Carey MacRury Hey, Brian. Just had a couple of follow ups here. First, just on the Fairfax warrants, obviously, in the money here. Can you just remind us what the trends around those warrants are? Is that something that they would exercise or what the expiry date et cetera? Brian Dalton They can exercise that anytime quite frankly. The way the original agreement, so that would have been back in ‘17. We -- the strike price on the warrants is 15. I think we did stock was just under that. And yeah, so it's a $15 exercise price. I think the way it was meant to be it would expire, they would expire in April of this year, except in the event that the share price is $24 or higher, in which case they would naturally extend for two years. Carey MacRury Okay, so you're currently seeing about $24. So -- Brian Dalton Exactly. We shall see. But look-- Carey MacRury And then I guess -- Brian Dalton But from a perspective of that. I'm just obviously tickled pink that it's worked out so well for Fairfax and remind everyone that the main part of that deal was $100 million preferred investments that Fairfax made, which ultimately resulted in buying our position in Labrador, half of the potash and seed funding and renewables business. So if ever there was a win win deal in the world, this was starting to feel like. And I would also say that it Fairfax were to exercise towards at least every indication I've had in the past that the goal there ultimately would be just to slide into the position of long-term shareholder. Edit: A reminder of the terms Fairfax has agreed to purchase, on a private placement basis, 5% preferred securities in an aggregate amount of up to $100 million, issuable in tranches of not less than $25 million. Altius has closed today an initial purchase of preferred securities for $25 million, and has sole discretion until December 31, 2017 to require additional purchases by Fairfax for the remaining $75 million. The preferred securities are subordinate secured securities that may be repaid by Altius at any time after April 26, 2022 and at any time after April 26, 2020 if the volume-weighted average trading price of its common shares for any 10 day period after April 26, 2020 is at least $24 per share. Altius has also issued today 6,670,000 common share purchase warrants, exercisable at $15 per share, which will vest proportionately based on the aggregate amount of preferred securities purchased by the Fairfax entities under the private placement. Each vested warrant will be exercisable on or prior to April 26, 2022, but the expiry date will be extended to April 26, 2024 if the closing price of Altius' common shares is less than $24 per share on April 26, 2022. Altius can also elect to require early exercise of the warrants if the volume-weighted average trading price of Altius' common shares for any 10 day period reaches $24 per share at any time after April 26, 2020. So when they convert they will own 6.67/(6.67+41.2)=13.9% Altius holds royalty interests in 12 producing assets throughout the Americas. In Canada these assets include a 4% NSR royalty on Hudbay's 777 copper-zinc mine in Manitoba, 6 potash mines and 1 coal mine located in western Canada, and a royalty on the Voisey's Bay nickel-copper-cobalt mine in Labrador. In Brazil, we have a 3.7% stream interest on Lundin Mining's Chapada Mine. The Company also receives regular dividend income from its equity ownership in Labrador Iron Ore Royalty Company, which is treated as iron ore royalty revenue, being a pass-through vehicle. Altius holds ~59% of Altius Renewable Royalties (ARR-TSX) which at December 31, 2021 was valued as approximately $193.5 million (Altius position in shares plus in-the-money warrants).

My first thoughts were it only reinforced what a discount Fairfax is still trading at. We are all forward looking. But man it must be quite depressing if you had sat on Fairfax for the last decade as “your best idea” waiting for it to be “understood’. FWIW Berkshire is now at the upper end of my valuation range while Fairfax is at the lower end. Probably irrational but I won’t be rolling one into the other

Awesome

9988.hk (Alibaba)

Thanks @glider3834

Fairfax Financial Holdings Ltd., the Canadian investment firm run by Prem Watsa, is exploring the sale of its stake in Indian financial firm IIFL Wealth Management Ltd., according to people familiar with the matter. The Toronto-based firm is in early-stage talks with potential bidders for the stakes, said the people, who asked not to be identified as the information is private. Other major shareholders including General Atlantic could also consider joining Fairfax in selling their own stakes, the people said. IIFL Wealth shares fell 1.2% on Monday, giving the company a market value of around $1.7 billion. A vehicle controlled by Fairfax holds about 13.6% of the firm’s shares, while General Atlantic has a 21% stake, according to data compiled by Bloomberg. https://wap.business-standard.com/article-amp/companies/fairfax-financial-holdings-weighs-selling-stake-in-iifl-wealth-management-122030701546_1.html

An amazingly clear and coherent letter. The presentation of data and metrics is certainly a big improvement IMHO Fairfax is in the best position I have seen in following the company for 10 years or so. They will cop it on the chin this quarter with declines in Eurobank but the general mix of investments means they will do well in other areas. Not exactly fortress Berkshire but moving in the right direction. Underwriting will be key, if they can sustain those CRs then it should be game on. It’s been said before but the insurance business turn around is truly remarkable, an amazing job. It was interesting to see that Blackberry only got three lines…

Perhaps you are right. However, I think this sort of set up with the Fed unlikely to step in and the potential for unintended consequences from the Russia sanctions suits his playbook better than a global pandemic. Don’t disagree with your view on the current valuation though, I am not a buyer at these levels. However I do live in hope that he gets a crack at a decent sized opportunity or two.

But what value do you place on Buffett being on the end of the phone when it inevitably starts to ring. No crystal ball but this could morph into a liquidity event in a heart beat. https://www.zerohedge.com/markets/traders-brace-chaotic-fx-market-open-ruble-set-collapse

Float growth has been quite spectacular. I am expecting a few words to be spilled about in Prem's letter later this week. I am eager to learn more about where the growth is coming from=> pricing power, market share, combination of both?. If its market share is it becasue other insurers are stepping back. I have no reason to believe that they are walking head long into a climate change mispricing catastrophe but it does temper my optimism which is probably not a bad thing.

There were a few questions from analysts on the recent Kennedy Wilson conference call regarding the investment by Fairfax. Always interesting to see the deal from the investees perspective. Operator The next question comes from Jamie Feldman with Bank of America. Please go ahead. Jamie Feldman Great. Thank you. I just want to go back to Matt's comment that, the Fairfax warrant and preferred deal was one of several investments you considered. Can you talk more about what else you did -- if I am assuming, I heard you right, can you talk more about what else you did consider, why you felt like you even needed to do a deal like this right now? And then, how should we think about the pricing on the warrant versus your view of NAV? Matt Windisch Yeah. So we -- like I said, we did look at a number of options. So perpetual preferred would have come in 300 basis points or more higher above the dividend rate that we're paying. So that was an option we looked at a straight equity, transaction comes in obviously the discounts to the stock price anywhere from 4% to 6%, 7% discount to the stock price where in this case the warrants were struck at a premium to the current stock price and a 23% premium to where we've been buying back the stock. So for us, I mean, we're really looking at this over the long run, how do we, grow the NAV per share. And by having this accretive capital we can deploy it into our various platforms where we're earning 15% to 20% returns on capital. And at the rate we've been growing the business we just feel this is prudent to be putting more permanent capital into the company to allow us to grow the business in a prudent way. Mary Ricks In addition to the $3 billion of fresh powder for the debt platform … Jamie Feldman Yeah. Mary Ricks … which we obviously will earn fees on.

Agree (1) It is more yield than duration, but potentially the beginning of the move out of “cash” . (2) I was thinking about your observation today too. High probability that FFH keeps chipping away and ends up, at the very least, with a position size that leads to equity accounting. If KW keeps buying back shares FFH might get their without any additional purchases after converting the warrants. A possibility that is seven years out but consider it another placeholder.

It is a sizeable jump in the debt platform too. They must be liking what they are seeing. Looks like the move from short duration is starting. Gotta put all that new float somewhere “Along with the equity investment, Fairfax has increased its first mortgage target within Kennedy Wilson’s debt investment platform by $3 billion to $5 billion. Kennedy Wilson expects to have an approximate 5% interest in future debt investments within the platform while earning customary fees in its role as asset manager. In addition to the $2 billion already invested across Kennedy Wilson’s global debt platform, there is now approximately $4 billion in additional investment capacity with a strong pipeline of future opportunities.”

At first pass seems pretty sweet. Paid to wait and option on the upside https://ir.kennedywilson.com/news-events-and-presentations/press-releases/2022/02-23-2022-211613501