valuecfa

My first week as a research assistant for a buy side firm (many years ago) my boss asked me to get a feel for a company that was in the electric motor business, way before "green" had anything to do with the environment. He said after researching the company to call the CEO and ask him any questions I might have, and then present my case to him. It was a great first week to learn that as a kid I could call the CEO of a decent size company and chat with him for 20 minutes about anything I wanted. So, my recommendation is just to pick up the phone and give the CEO or CFO, or corporate finance dept, or whomever, a call and voice your concerns. I think you would be surprised at some of the frank responses you will get. One other tip I learned when i got my next job at an associate at a smaller less reputable buy side firm, was that you could be anybody on the phone. To get a good bit of a CEO's time at a larger company, you can be anybody on the other line, if you think it will help to get him to call you back, which can be annoying. While this may be frowned upon, it is done quite frequently by the smaller shops looking to get information from larger companies, where the phone calls only tend to be returned from the CEO if he "has the time". I've even had a colleague pretend he worked for the WSJ just to get a phone call returned from Bob Nardelli, back when he was at the Depot.

I'd rather purchase $2100 in call options in...anything. Unless that amount of money is somewhat immaterial, or you want to go for potential contacts, then I think it would be better invested or spent on something you will enjoy more. Besides, the companies that are referenced at the gathering by the more well known investors always turn up on the Internet and other media. Personally, i think a more entertaining and informative conference might be the Berkshire annual meeting. I've always wanted to go but never have for some reason or another.

Somewhat along the same line of thought, I am recently a new investor in both JNJ and Kraft. The weak dollar will help earnings, especially on a YOY basis in the coming quarters. Both are always on investors' top 10 list of the most stable, respectable, and steady companies. The dividend yields on both are great. And as investors begin to ponder the sustainability in the massive run up in the more risky names, they may decide to move to quality names such as the two mentioned. The fed is begging investors to purchase equities by flooding the system with liquidity, which will eventually scare fixed income investors out of those lower yielding treasury markets (in real terms once inflation presents itself). Eventually investors will be forced to invest in appreciable assets in an inflationary environment, and be forced to move along the risk curve away from bonds. Yet those bond investors will want the steady income of an equity-like bond in a quality name like JNJ, especially given the recent large moves of higher risk equities, which may be overvalued. Quality is on sale in a big way right now. JNJ, KFT, PG are all quality names with nice yields trading at large discounts to the S&P, although historically they have traded at a premium to the S&P. Long JNJ equity, and 2011 & 2012 JNJ LEAPS $60 strike Long KFT equity Long PG

Well, AFAIK if there are exchange listed preferreds, ORH must continue to regularly file documents at the SEC. Just rambling here, but i don't think they do have to continue to file ORH SEC filings, as the preferreds are now under the full faith and credit of FFH.

It is a yield investment, which is stil a pretty nice yield. I believe it has nothing to do with being called.

Well, someone has to not be telling the truth. Either he is a shareholder or he is not. Your reply (Matt) suggest they are good managers. I assume that you believe the shareholder is misrepresenting himself? If he truly is a shareholder, than i would say that there may be some dire corporate governance issues. ~I have no familiarity with the company or the situation other than from the links/replies on this thread.

Sorry, my humor can be quite dry sometimes I believe the kid (whom is really annoying) made a small fortune in the markets through sheer luck, and then lost it all shortly thereafter. I think CNBC even once touted him as the next so and so one day, back when he was on his lucky streak. Ahh, the media. As for Calistri...I second John's remarks. Let's keep her picks under wraps. :D

http://sec.gov/Archives/edgar/data/915191/000095012309041716/o56955sctovc.htm Let's get that deal closed at $60! (Now that most of us have sold our ORH shares)

Tim Sykes -Up 474% since Nov. 2007. -Provides a great introduction on how to short sell penny stocks.

I've sold out of ORH as well. Though I think a higher price is very likely it is not worth the risk for a chance for an extra 5 - 8% above current market price. Congrats to those that participated. :D

Prem does. Otherwise you should hit him with a 2x4 for not selling. lol, that was funny. It's also pretty funny how the market is laying out the odds as 100% the deal closes higher, and significantly higher based on the current premium in the market. I would have figured the Arb funds (that might not follow the 2 companies too closely) would have closed this gap.

This is just an opinion, but I believe Fairfax being the good capital allocators that they are, will not use a dilutive equity offering to the tune of $1 Billion and just sit on it, or use it to retire debt. That would be a very poor use of capital, for a financially strong & smart firm (that is also undervalued) to issue all that expensive equity to pay cheap debt. I think more likely Fairfax will try to negotiate the best price possible with minority ORH shareholders, and there will be some back and forth price talk, not dissimilar to the way northbridge was negotiated. (I believe Fairfax, at one point in the negotiation, said their price was final and then subsequently raised their price). It just makes much better financial sense to get the deal done at a fair price than, than to dilute shareholders and sit on the cash and pay down debt. I think Fairfax shareholders would be MUCH more upset if they diluted shareholders for nothing (or for poor reasons that don't make sense). Better to pay a fair price for a good business than issue all that equity and sit on it. But that is just my opinion.

Farifax plays game of chicken: Fairfax Financial Holdings Ltd. (FFH) announced plans to sell $1 billion in stock as it bulks up financing for its proposed $965 million acquisition of the rest of rival insurer Odyssey Re Holdings Corp. (ORH). Fairfax plans to sell 2.9 million shares at $347, its closing price Friday on the New York Stock Exchange. The shares also trade in Toronto, where the insurance holding company is based. Fairfax, which currently holds 73% of Odyssey, late Friday announced it was offering $60 a share for the remaining stake. Odyssey on Tuesday said it was reviewing the bid. Its shares jumped 25% premarket to $62.50. If the acquisition isn't completed, Fairfax plans to use the proceeds to boost its cash position, increase short-term investments, retire debt and other corporate purposes. Fairfax's businesses include property and casualty insurance, reinsurance and investment management. Like Fairfax is going to issue $1 billion in undervalued shares just to retire some debt, make short-term investments, and boost cash position. A little bit of posturing here if you ask me. I think they are realizing ORH shareholders aren't that happy with the offer price. Even at a current share price of $62.50 (above offering price) there is not much selling pressure. I will be very interested to see what the independent special committee comes up with.

Spoken like a true banker ;D

Holders of the series A or B preferred shares are not entitled to vote on any sale of all or substantially all of the assets of OdysseyRe, and I am not aware of any change in Delaware law that would require a vote by the preferred shareholders. Therefore, it doesn't trigger early redemption rights to my knowledge, and the company has been current on dividend payments, and there has been no announced change to the rights of the preferred shareholders. In addition, certain transactions that would vary the rights of holders of the series A preferred shares cannot be made without the approval in writing of the holders of 66-2/3% of the series A preferred shares then outstanding or the sanction of a resolution passed by a majority of the votes cast at a separate meeting of the holders of the series A preferred shares.

The ORH preferreds are not redeemable prior to October of 2010. In addition, there is no change of control covenant to redeem at par.

That is a very good question, Sanjeev. It doesn't make any sense to me either.

Given that Current book value per share is very close to $60, i think they are attempting to get the company for pretty much 1x book value per share. Must say i am disappointed with the price they are attempting to get ORH for, which should reflect the market rally (and hence the large increase in book value) since June 30th 2009.

They will have to sweeten that significantly to get my vote, as i would be VERY disappointed with that price! As of June 30, 2009 the Book Value per share of Odyssey Re was $51.90. Since that time, the S&P 500 has increased 10%. And looking over the last 13-F, I suspect Odyssey Re's investment portfolio did even better than the S&P. Nonetheless, lets be conservative and use the book value per share as of June 30th, inclusive of the market's return since June 30th through today's date. This would imply a CURRENT book value per share of $57.09! (And this even ignores the leverage used in ORH boosting equity further, and ignores the Odyssey Re repurchases that were done well under book after June 30th). But lets be extra conservative and ignore all that as well) Therefore, 1.16x current book value would conservatively be $66.23!! If they want to claim they are making an offer for 1.16x book value, then they should use CURRENT book value which we all know is significantly higher that that of June 30th, 2009 (the market has rallied significantly since then). We all know book value per share that is to be reported for the 3rd Quarter is much higher. In addition, as Parsad suggested, the premium for Northbridge was 1.30x book value per share. Using the Northbridge premium of 1.30, times the CURRENT book vaule of approx. $57.09 = $74.22 per share for Odyssey Re. They need to sweet that Deal quite a bit to get this concerned shareholder anywhere near in the ballpark of wanting to tender any shares. I would be perfectly happy owning Odyssey Re shares as a standalone company if it means giving the company away at that price.

You know what that means. Time to buy a basket of reinsurers. :P http://finance.yahoo.com/news/Analyst-sees-buying-apf-1822558007.html?x=0&.v=2

I saw a Buffett interview about a month or two ago, where WEB said that the "housing problem will be over in 18 months, or something like that."

Me too. I love to see rational criticisms.

Shiller is referring to residential, but acknowledges the possibility of another housing bubble due to affordability: http://www.nbcchicago.com/news/business/US_Housing_Market_Could_Be_Facing_Another_Bubble__Shiller-53697742.html

What do you really think, Cardboard. :D lol Whether they consolidate or not certain investments is no big deal. It will effect the reported book value, income statement, and this and that, but I'm sure they don't judge their equity investments by the effect it will have on the reported GAAP accounting numbers. At least they shouldn't. I'm sure its the cash they care about. They definitely made mistakes with those investments you mentioned. It seems when the company goes distressed shopping in non-U.S. markets it doesn't work out as well. These are distressed investments, and some such as Brick need more time to determine whether or not they will be successful. I do think Fairfax has to take a loss sometimes, instead of continuously plowing money into sinking ships, when they realized that a company is broken. Not all distressed investments work out. If they did work out, we would be calling them a genius, but it is a difficult type of investing which usually results in either a homerun or a total loss.

If they consolidate Brick, then it will negatively effect the balance sheet, given that the company has a net deficit in equity.