ourkid8

Yes, they picked up a small position on Q4 2016 /Q1 2017 for ~$30 /share so they can exit the position with a nice gain.

https://www.bloomberg.com/news/articles/2018-03-26/berkshire-hathaway-says-knauf-made-offer-for-usg-at-42-a-share Fairfax can sell their position in USG for a nice little gain...

https://finance.yahoo.com/news/fairfax-announces-pricing-offering-senior-200820172.html Fairfax is issuing 600 million euro debt with a coupon of 2.75% per year and due 2028. This is extremely cheap euro denominated debt and looks to be used to refinance higher yielding debt. "Fairfax intends to use the net proceeds from this offering to refinance or repay outstanding debt or other corporate obligations of Fairfax and its subsidiaries and for general corporate purposes. This may include the redemption or repurchase of certain of Fairfax’s previously issued senior unsecured notes. "

Fairfax has deployed a bit over $1B in debt/warrant deals so far in the last year. I was wondering are they using float or cash at the Holdco for these deals? If it is using float and we average a CRs of 100, there is no further built in leverage, correct? Or is the leverage derived from the differential between government rates and CR written? Sorry for these noob questions, I am trying to better understand the company and cash deployment opportunities.

http://www.seaspancorp.com/press-release-post/press-release-122843/ (A second round of $250m investment by Fairfax to be funded next January on the same terms as first debenture/warrant deal) If we exercise all the warrants @ $6.50 on the 5th anniversary, Fairfax has a potential ownership in SSW of 44.8% and we will be enjoying a coupon of $27.5M a year waiting... I love it!

They are authorized to repurchase 2,672,504 (Daily limit of 15,318) common shares. At the current market price, that's around C$1.7B. They have also entered into an automatic share purchase plan with a designated broker to allow for the purchase of its Subordinate Voting Shares under the NCIB at times when Fairfax normally would not be active in the market due to applicable regulatory restrictions or internal trading black-out periods. (Second link) http://www.fairfax.ca/news/press-releases/press-release-details/2017/Intention-to-Make-a-Normal-Course-Issuer-Bid-for-Subordinate-Voting-Shares-and-Preferred-Shares/default.aspx http://www.fairfax.ca/news/press-releases/press-release-details/2017/Fairfax-Enters-Into-Automatic-Share-Purchase-Plan/default.aspx So, if I've understood you correctly, your money is on repurchases rather than acquisitions? I'm clearly on the other side as Prem always seems to find a target that he finds attractive.To buy back say $1b of shares, the normal course issuer bid hardly seems adequate. I guess we'll see whether there's a tender offer. Time will tell SJ

I did a quick search of the last 10 years of shareholder's letters and Prem only referenced that he plans to repurchase stock in the last 2. Last year they were digesting the acquisitions + unlocking value (ICICI/First Capital) and this year I strongly believe Prem will keep to his word and repurchase stock with FCF. I understand your doubts as actions speak louder than words so we will have to wait until Q1 earnings are released. Without using the capital that was unlocked from ICICI / First capital, I do not see them aggressively repurchasing stock via a tender offer. They will slowly repurchase shares in the open market which is rather unfortunate especially at the current price however that is what he is guiding. "Having said that, we are raising our threshold for acquisitions now so as to benefit from the ones we have already made – and to buy back our stock." -March 10, 2017 annual letter "Henry Singleton, at Teledyne, reversed this trend, as you know, and over the next ten years we expect to do the same – use our free cash flow to buy back our shares!" - March 9, 2018 annual letter Agreed, but he hasn't made a commitment and they are value monkeys at heart. My guess is they will be very disciplined. I think of it more as a floor, like the Buffet 1.2x BV floor. That said he clearly thinks IV is well above book so it will be interesting to see where they stop! Prem talking about buybacks is a bit like a teenager talking about sex. They both engage the subject with a great deal of enthusiasm, but when the rubber hits the road (or something!), they don't actually do it anywhere near as often or as successfully as their optimistic plans would suggest. Working from memory, Prem has made enthusiastic references to buybacks in about half of the annual letters -- on some occasions promising to go on offence while on other occasions trying to contextualize a share issuance. My observation is that Prem is a serial acquirer, picking up a new meaningful sub every second year or so. As long as that's his approach, FFH will be capital constrained. There will be no meaningful buyback unless he runs out of insurance subs to buy and actually allows cash to accumulate for a couple of years. While I'm not shy to criticize Prem's management when I think it is merited, in this case it amounts to a question of the relative value proposition of buying your own shares vs buying somebody else's. He mostly finds reasonably priced subs to acquire, so it's not obvious that buybacks would necessarily have been better. Going forward, my sense is that FFH could throw a Bil at buybacks during 2018 if it so desired. A tender offer for 2m shares at US$550 would likely get the desired response. But, I would be shocked to see it happen. I'm guessing that the over/under for sharecount in 2023 would be 30m. SJ

25% of the daily trading volume. He's referenced Singleton and Teledyne before and in the letter. Teledyne issued to acquire for years and then turned the ship and bought back for years. The buyback is a long term thing. They can't put too much to work too fast - the stock isn't liquid enough, unless they do an SIB, but then they'd have to pay a premium - and they've never said they wanted to. Expect the share count to be much lower in 10 years but not necessarily in 10 months. I vaguely remember there is a restriction by the TSX by how many % of O/S a company can buy back in a year under NCIB, as well as a restriction based on trading volume (i.e. not exceeding X% of daily volume). Is anyone familiar with such rules on TSX?

The proceeds at the Holdco ( First Capital/ICICI) looks to be earmarked to buy out their joint venture partner OMERS to control Eurolife, Brit etc... -"We expect to buy out OMERS within the next two years, so Eurolife will become a Fairfax insurance subsidiary. " -"Fairfax currently owns 70.1% of Brit and has the ability to repurchase the shares owned by OMERS over time."

It's released. http://s1.q4cdn.com/579586326/files/doc_financials/2017/annual/WEBSITE-Fairfax-Financial's-Shareholders'-Letter.pdf

I believe it should be released Friday after market close...

Agreed and it took Teledyne 15 years... "Our hero, Henry Singleton, whom I have mentioned before in our Annual Reports, built Teledyne by taking shares outstanding from seven million in 1960 to 88 million in 1972 and then down to 12 million in 1987 – an 87% drop in shares outstanding. Our long term focus is clear."

Why 51%? He can swallow the whole company...

No. I assumed they were repurchasing USD shares based on the below statement: (However, I did realize they are reporting their finances in USD but I did not realize they could be converting the amount for share repurchases from CAD to USD) - Thanks! During the fourth quarter of 2017, the company repurchased for cancellation 184,367 subordinate voting shares under the terms of its normal course issuer bids at a cost of $96.2 (approximately $522 per subordinate voting share). Holy smokes! That's quite a spread. Was it just a bid-ask before this morning's bell, or was it an actual spread during the trading day? FFH does its financial reporting in US dollars, so any buybacks will be converted (if necessary) to US dollars before being disclosed in the quarterly or in a presser. But, I don't recall ever seeing any text from FFH stating whether their buybacks were done on the TSX or US markets. Do you have a presser that you recall seeing that in? SJ

It was this morning during the trading day. Right now it is not as bad (Bid: $510 and Ask: $520)... My question is, why did they only purchase shares in USD instead of CAD? Due to the spread , I can understand why they were unable to buy a lot more shares -There is hardly any liquidity in USD! Holy smokes! That's quite a spread. Was it just a bid-ask before this morning's bell, or was it an actual spread during the trading day?

Why is FFH not repurchasing CAD shares instead of USD? The CAD shares have significant more liquidity compared to the USD (Bid: $495 and Ask: $550) Maybe that has something to do with the low level of repurchases?

How quickly ppl forget that we are retaining a 25% quota share in first capital!!! FFH sold the business at over 3x book which allows us to repurchase our stock at book value while that business supercharged their growth! Sounds like an absolute win which will benefit shareholders tremendously.

Based on my quick and dirty estimate, we are around 1.1x book which includes sale of First Capital and The Keg, retained earnings from operations, reducing interest expense etc... Come off it! This selloff hasn't created the kinds of values that would make them go all in. Unless it's in the 2y treasury for a yield pickup over cash with little duration risk. They'll keep leveraging their position as a preferred provider of capital but the fact that the S&P is back where it was 6 weeks ago isn't going to tempt them. Agreed. We seem to have collectively forgotten what constitutes a sea-change in the markets. That's what FFH is waiting for. As you said, the bump in short term interest rates won't hurt them any, but I don't see many bargains yet in equities. The one exception to that might soon be FFH's own shares. Another few days of this fun, and we might be bouncing around BV, which IMO, would be a decent place to initiate a large repurchase. SJ

https://www.theglobeandmail.com/report-on-business/fairfax-poised-to-acquire-embattled-carillion-canada/article37851533/ "Carillion Canada, which accounts for about 11 per cent or about $1-billion of global revenues". We are not buying all the Canadian assets so that's a rough idea of the size of this acquisition.

Cardboard, you make a very valid point. Fairfax is slowly tackling this issue by calling and replacing their high yield debt. I would personally like them to substantially reduce leverage so earnings from their insurance operations will shine with consistent and upward pre-tax operational growth. I am really excited for the number of debt/warrant financing they are undertaking as this would provide that steady stream of FCF along with substantial upside. I really believe we are at a turning point in the company. (1. Prem unlocking value in First Capital / ICICI 2. improving capital structure 3. debt/warrant investments 4. holding a ton of cash and waiting to deploy 5. Large share repurchase etc...)

http://www.cornerofberkshireandfairfax.ca/forum/fairfax-financial/fairfax-has-started-repurchasing-shares/ Fairfax has repurchased $208M in stock as of Sept 25, 2017. Let's all hope that number is closer to $1B when they announce their earnings.

https://globenewswire.com/news-release/2017/09/29/1134849/0/en/Fairfax-Enters-Into-Automatic-Share-Purchase-Plan.html I believe this would be an approved exemption to allow them to repurchase stock during the quiet period.

Why would he announce earnings early when he can aggressively repurchase the maximum daily shares quietly?

TD Waterhouse 1.21800...

Why would you select TD over RBC, is it because of their focus on retail banking?