valuecfa

I'm sure investors last year would have liked to have known the puck was going to be 50% lower right now. :P Just joking. These guys are great investors, but there is a price at which anyone should be willing to pay for any business. Even Cumming sold quite a lot of stock in June 2008 for around $49/share (when it seemed overvalued) and a little at the end of last year around $15.50/share for whatever reasons. I didn't attend, but I recall reading notes that... at the 2005 Shareholder's meeting, Cumming said LUK's shares were overvalued during Q&A. He was asked again this last meeting, and responded with a no comment this time around. I think LUK is neither very cheap nor overvalued at current prices. Another way of putting it is by saying that... if those two investors were not at the helm then I would say that it is slightly overvalued with current holdings. ~Long LUK

At current market valuations/environment, I wouldn't tender any Odyssey Re shares for less than $68/share. But that is me. I am perfectly happy with ORH's progress as a stand alone company. I also don't expect any buyout of ORH this year (but who knows), as future near term investment gains won't be of the magnitude of the past year, in which to allocate to such a major investment. The less float/remaining shares in ORH as the buybacks continue over the quarters/years, the more FFH would be willing to offer in premium for ORH. I think they would be more likely to pay a higher premium, closer to 1.3x book value if there were only 10% remaining float vs. 25-28%.

And equipment rental companies: Hertz, United Rentals, RSC Holdings ~Long URI & FAIRX

I haven't looked at their debt denominations relative to assets in any real detail as of yet. Perhaps they just are trying to match up some assets and liabilities in the same currency CDN$, to reduce currency fluctuation/exposure on Canadian held assets. Perhaps Northbridge or long term Canadian equity investments. However, if this is strategic...if they forsee CDN$ debt as more attractive than US$ debt over a 10yr period, I would be interested to know why, as i don't see it.

Good Stuff. The amendment now shows the same number of ORH shares owned by Fairfax. We all knew there was something screwy going on there (with no sales disclosures in the Q's and no corresponding SEC filings showing an ownership change), and good to see it has been cleared up. Let the speculation resume. :D

Given the term of the note, i think that a US$ note would have been more appropriate. Especially given the U.S. fiscal and monetary situation that Buffett himself has said will hurt the US Dollar and bring about inflation in the future. If there is the inflationary scenario Buffet expects during this 10yr period, i would think the Canadian currency would be more valuable over the next 10yrs than the U.S. Dollar, especially given that the Canadian $ is a commodity currency.

Is anyone else a bit confused as to why the 10-yr debt offering is to be placed in Canadian Dollars? http://sec.gov/Archives/edgar/data/915191/000095012309035705/o56636ussuppl.htm USE OF PROCEEDS The net proceeds to be received by the Company pursuant to this offering are estimated at Cdn$394,906,000 after payment of the Agents’ fee and estimated expenses of the offering (assuming the Agents’ fee is Cdn$2,900,000). The net proceeds of the offering shall be used to augment our cash position, to increase short term investments and marketable securities held at the holding company, to retire outstanding debt and other corporate obligations from time to time, and for general corporate purposes.

I would be satisfied with 1.3x current book value as an ORH shareholder acquisition price. In the meantime, I would like to see more ORH buybacks in the $40-$70 million range per quarter as long as it stays this undervalued, assuming excess captial at ORH is available.

I thought that this 13-F focused only on the US insurance subs and holding companies. You may be on to something there, Vinyard. The 13-F doesn't show Fairfax holdings of non-U.S. listed company shares; however, I really don't know if it shows the U.S. equity investment holdings of 100% owned non-U.S. companies. Perhaps it only shows the equity holdings of 100% owned U.S. listed companies. For example, it definitely doesn't show Torstar in FFH's 13F-HR. And if Torstar were a U.S. company and was 100% owned by FFH (lets pretend) and Torstar held an equity investment in ORH, then that ORH investment would show up in FFH's consolidated 13F-HR. But, if Torstar was 100% owned by Fairfax and Torstar owned shares in ORH, would that ORH holding show up in FFH's 13F, given that Torstar is actually a non-U.S. listed company? I really don't know.

Wouldn't the number of shares in the 13-F remain the same if FFH had just moved shares around from 100% owned entites? Yes

Well this is a conundrum. No ownership change disclosed in the SEC filings. and The just released 13F-HR for Fairfax lists securities held as of June 30, 2009. Well, Fairfax's 2nd Quarter Interim Report showed no disclosures about any sales of ORH as of the close of June 30th 2009. Guess we have to give IR a call.

Interesting, regarding ORH. Share buybacks at ORH at the same time as sales by the FFH. Raising cash and an a bond offering at FFH. I thought they had to file an amended 13-D as well. On another note, David Winters has discovered Fairfax Financial.

Well they have said numerous times that they are interested in a Chinese acquisition. I'm curious to know of what size they are a thinking of entering the mainland market at. My guess is we will see a chinese acquisition announcement within the next quarter.

It's fun to speculate, yet i don't think the debt offering by FFH was to purchase ORH. I think it is likely that ORH just continues undervalued buybacks of their own shares, proportional to their recurring investment gains, as long as ORH remains overcapitalized and undervalued. Perhaps when the non-Fairfax ownership gets closer to the 85-90% range, they may purse using Fairfax funds to purchase ORH shares (But that is just speculation). Being a shareholder of both companies, i would prefer ORH to continue undervalued buybacks for a while longer before any outright purchase by FFH, which would likely be done at a premium to book. Interesting to think that roughly 10% of the total non-Fairfax owned shares were repurchased in the four month period ending July 30th. At that rate, they can decrease the ORH float significantly, (and progressively on a percentage basis) over the coming quarters provided the shares remain such a bargain.

As far as Odyssey is concerned, I don't think they should take it private. It's a reinsurance company and that means there will be periods of substantial catastrophe losses...think about an 8.0 earthquake in the middle of Los Angeles. You want Odyssey to be able to access the capital markets, either through debt or equity, if the need ever arises. Cheers! If they buyout the company down the road, ORH can still tap the debt and equity markets. ORH would still issue ORH debt, nonrecourse to the parent FFH, even with 100% ownership. If the ORH division got into trouble they could still tap the equity markets with a partial IPO on ORH, as was the case in early 2000s. It would grant the parent, FFH, much more flexibility in moving cash around from the subsidiaries, baring restrictive covenants on the subsidiary debt, if the parent needing extra holding company cash, for any reasons.

People started renting cars again. The company's low share price and bond yields reflected a fear of insolvency, given large debt maturities. The plan was for the company to shrink its fleet to increase free cash flow, to put a dent in near term debt maturities. and to increase utilization rates. Alas, people started renting cars again, as the economy has not gone to hell, and the company has been buying cars at discounts like crazy to meet this unexpected upturn in rental demand. Basically, a much quicker than expected upturn in demand.

That's right, it was Hertz. The other company he spoke highly of as his other favorite investment idea in that OID issue was United Rentals. I believe United Rentals is still an outstanding bargain. ~Long: URI

Given the incredible fluctuations in the markets, many are likely finding unique investment opportunities. For those that have finished acquiring their position and are willing to reveal their "fat pitch" I think this is a good forum to share ideas (unless you are hoping for undervalued corporate buybacks :-\) A simple ticker symbol and 2-liner may be appropriate, yet if you wish to expand on the case for the investment (be it equity or debt) a bit more that would be great! I think there is a fairly unanimous conclusion that ORH and FFH are below fair value, so other ideas would be preferable. I am a bit embarassed to only have one fat pitch, yet i can not share at the moment do to its small market capitalization and still acquiring of the position. Understandable if you want to keep your best ideas close to your chest, but if you care to share i think there are many here always looking for a good idea, that would appreciate it. Cheers

Very, very interesting. Hoisington's view seem to run contrary to the popular opinion. Yet, more importantly, they run contrary to Bill Gross's and Warren Buffett's views of inflation. ???

I don't know. Jim Grant (one of the few economists I actually listen too) has been bullish on Gold recently. Interesting video today on CNBC as well where he is interviewed: http://www.stockbox.tv/jim-grant-fed-would-be-shut-down-if-it-were-audited/

The large spread still exists in the 'AA' preferred too (as well as the other prefs being converted), of which i will continue to hold. It is funny that the TRUPs are yielding more than the prefs in several of the banks, some b/c of conversions (Citi) and some just b/c of the current anomalies in the debt markets. Citi being one. Bank of America's MBNA notes being another where the current yield on the debt is higher (or the same) than the preferred despite having a higher capital structure position.

Who is minding the store at the Federal Reserve?

I'd like to thank this thread as well. I would have not thought to even look at the bank preferreds & TRUPs were it not for this thread. My only wish is that i had read it sooner. Trying to do my part, I'll throw out a few others that are interesting (to me) HJA & DKR. These are SATURNS (Structured Asset Trust Unit Repackagings), The Hertz Corp. Debenture Backed, Series 2003-15, 7.00% Class A Callable Units, issued in $25 denominations. Underlying securities are the 7.625% Debentures due 6/1/2012 issued by The Hertz Corp. Distributions of 7.00% ($1.75) per annum are paid semi-annually on 6/1 & 12/1 to holders of record on the third business day prior to the payment date. The ex-dividend is coming up soon (and being a semi-annual payment is nothing to sneeze at). For further due diligence on Hertz, the Fairholme Fund's website has a great analysis of the company through their link to a recent OID interview. Bruce owns Hertz bonds as well as the common. Once caveat is that these are very illiquid exchange traded instruments, that have had a big move up recently (along with everything else). They do not qualify for the 15% tax treatment, and they have a $25 par maturity date of 6/01/2012. Their is another illiquid pref, on a well known company that i am near finished in building a position in, that i will mention shortly. As an aside, I am using for sorta money market purposes the MBNA TRUPs, symbol KRB-D (along with WFC-L), which have a current yield of 11.7%, and i perceive as very safe instruments. MBNA Capital D, 8.125% Trust Preferred Securities (TRUPS), Series D, liquidation amount $25 per share, guaranteed by MBNA Corp., now a part of Bank of America. This is hardly a money market, yet that is how i am using it with the 5 - 10% of portfolio parking place (combined with WFC-L, which is have been recently lightening up on). Discussion is welcomed on the riskiness of the above issues. Once again, this has been a very helpful thread. Thank you.

Do folks here think that an ORH buyout is likely (over the next year) given its small float, ongoing buybacks, and cheap valuation?

Without getting into details, I favor ORH at current prices. Though FFH is fairly cheap as well.