bluedevil

Sokol was given at least 1 million shares of Atlas around when he took on Chairman role. May have received further since then. Parsad, I agree with your view on Atlas. It has been fun to watch the progress that has been made since Sokol took over -- the company has systematically improved every aspect of its business in that time frame - board, management, safety; financing; counterparty risk; and so on. I own shares separately, but also happy that FFH is a 40% shareholder. It seems to me the market has not given the company sufficient credit for the progress. The post-pandemic runup in prices and the newbuilds have essentially locked in a very large sum of future cash flow and greatly mitigated the big risks the company had -- potential revenue drop as most charters were going to run off in 2022-2024 and were going to be exposed to market rates; and large concentration with a couple of customers. It seems to me there's a lot of momentum now. The company has 12 b in contracted cash flow; the counterparties are stronger; the company has scale and good operating management, and we have a potential call option in terms of Sokol growing a business in an area where he has a tremendous record - power.

Link to results: Fairfax Financial Holdings Limited: Financial Results for the First Quarter Toronto Stock Exchange:FFH (globenewswire.com)

Q1 results are out. The total TRS position on Fairfax's own shares has grown to nearly 2 million shares: Net gains on long equity exposures of $1,028.5 million was primarily comprised of unrealized appreciation of common stocks and long equity total return swaps, including unrealized gains with respect to swaps on 1,620,936 Fairfax subordinate voting shares with an original notional amount of $577.6 million (Cdn$740.3 million) or approximately $356.36 (Cdn$456.71) per share. Currently the company holds long equity total return swaps on 1,964,155 Fairfax subordinate voting shares with an original notional amount of $732.5 million (Cdn$935.0 million) or approximately $372.96 (Cdn$476.03) per share.

There can't be a debate that Fairfax's stock has performed very poorly in the last decade - that's an objective fact. But question is will it be a good investment going forward for the next decade? I think it has a pretty good shot. I thought this year's letter was detailed and informative. (If I have one concern it is that Prem seems unwilling/unable to discuss mistakes. It would seem a helpful practice to avoid making them again.) And I love Viking's analogy of a tanker turning around -- I think that's right. Good core performance has been obscured/hurt by BIG mistakes (shorting; deflation swaps; concentrated bets on high risk investments) that have wiped out a lot of capital and left the overall company treading water. Stop the diversions and we start to swim forward. Looking forward, here is what I see: (1) Six very high quality, growing insurance companies that generate 18-billion in profitable float. (2) A number of insurance companies in the developing world -- India (we own 76% of Digit as soon as Gov't allows from convertible securities!); Middle East; LatAm; Asia; and South Africa -- that have long, secular growth runways in front of them. (3) A investment operation that faces no artificial restraints -- can focus on the long-term; can go anywhere in the world; growth or value; public or private or venture; and so on. The operation is structured as a platform with many different people on the team. Those that grow capital over time take on a more important role; those that fail to take on less of a role. (4) No capital lost to shorting or acquisitions or the financial strain that comes from bad bets on them. (5) Excess cash going to strengthen financial position (agree 100% with Parsad's observation that FFH should not use debt!!) and then buy back shares. It seems like the company a pretty clear path to compounding book value per share at say 10% a year for the next 5-10 years. There's no magic or homeruns required. Just keep the tanker on the new path! Would love to hear from people who view the future differently for FFH and the reasons why. Potential risks I see to FFH's book value compounding by 10% a year for the next decade: Investing stinks: Maybe, but I think that what has created the real problems has been the macro and shorting misadventures. Even making some mistakes on security selection they can do fine. Where they have gotten in trouble in the last 10 years was underperformance of their picks; being wrong on shorts; and being wrong on deflation swaps. They are lucky interest rates went down (a macro call they got right), or else the problems would have been worse. But they seem to have extricated themselves from the problem activities. Tech disruption of their UW subs. I don't know enough to handicap this. But they have a front row seat with Digit and Ki to learn the lessons. Interest rates stay low and Fairfax keeps UW float in cash, which produces negative real returns. My thought is that if interest rates stay where they are, then the "hard market" should really be a new normal to make up for it.

Fairfax has not done well on these deals with OMERS. Paying 7-9% interest when their investment portfolio has earned far less than that is not ideal. I believe the idea was to pay these off sooner and it hasn't worked out because lack of cash. If you go through and add up all the costs of these acquisitions, they have been pricey in many ways (share issuances, poor underwriting performance at times; issuing preferred shares; OMERS deals), as doing Brit and Allied back to back was a stretch. So it has not all gone according to plan. BUT the good news is that Fairfax has built out a global insurance empire that can service all manner of companies and risks all across the world and it does not need more acquisitions going forward. In the past two years alone, GWP have gone from 15.5 billion to 19.1 billion -- an increase of $3.6 billion! Brit wrote significantly less premiums than that when we paid almost $2billion to acquire it in 2015. With tentacles all over the world, there's room to run over the years ahead.

My interpretation on BB: They are an insider and they haven’t filed anything. But they did SOMETHING. Otherwise he wouldn’t be so careful and would have just said something like “We like the stock” and didn’t sell. Obviously, I am speculating.

Here's what Prem said on last earning's call about going to 75% if they can: Prem Watsa Yeah. Digit is a phenomenal company that is growing. In a few years or three years maximum, since it began on the [indiscernible] it's revenue end of March 2021 will be plus minus $400 million, $375 million to $400 million from scratch. It's breaking even already. It's fully digitized and it's in India. And the Indian market is wide open. So the growth opportunity for this company is huge. It's growing at - its aim is to grow at 20 25 percentage points more than the industry which is growing at 20%. So it's been growing at 45% something like that. And Kamlesh is, he's an insurance guy. He's built the second largest insurance company in India. And so we think it's going to be a phenomenal success. And we owned a little below 50% and when that government gives us the ability to go to 75%, we expect to be at 75%

There is zero chance they do anything with Digit other than hold on for many years. At the first chance when it is legal, they are going to increase their ownership to 75%, even if they have to pay nosebleed prices. (My hope is that they have some right to increase their ownership based on some pre-set formula. I had the same hope with ICICI Lombard, turned out not to be the case, but Fairfax still did great when it had the opportunity to increase its stake at 3x book.) We are only in the first inning with Digit. Don't want to cut this beautiful flower. Hopefully they use it as a model across their divisions. From a recent interview from the head of Digit, there are plenty of people from Fairfax coming in and looking at Digit's operations. http://timesofindia.indiatimes.com/articleshow/80756808.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst And as Prem said in podcast with Southeastern asset: We've got a digital operation that we started from scratch as you know in India, called Go Digit. It's run by a fellow by the name of Kamesh Goyal. Fantastic guy. They're running at about $175 million in about a little more than a year, year and a half. Everything is digital, no paper. That operation, once it continues in the next few years, we'll move it to other countries under Kamesh's guidance.

It seems to me if the stock goes public at 10-17 dollars a share, there has to be creative ways to hedge/lock in some gains. Perhaps you can buy puts; or buy puts on other ag tech companies, etc.

I am hoping in the future, there will be less "volatility". Prem has laid out a roadmap for that once we get beyond the current balance sheet issues (and perhaps we have already done so). No more insurance acquisitions - let the current empire grow organically, rather than having to deal with bad acquisitions or having to stretch the balance sheet to do them (e.g. Allied). No more hedges/shorting, and the boom/busts that come with it. Hopefully, from experience, be more wary of value traps. Buy back shares with excess cash flow. And we all live happily ever after :)

Bloomberg article on IPO: https://www.bloomberg.com/news/articles/2021-02-09/farmers-edge-files-papers-for-initial-public-offering-in-canada

With accrued interest, it is 272m in debs. And some deal with Osmington that suggests FFH gets 10m more shares for 2.40. Plus they get 18m additional shares as warrants for the debs. At no cost. If the IPO pricing is right even at the very low end of the range, this seems like a huge payoff. All in all, if I followed everything, they will have 140m shares at a cost of ballpark 300m. 10 dollars per share means ballpark profit of 1.1 billion! 17 dollars per share means ballpark profit of 2.1 billion! I hope I’m reading this right and they IPO range is real.

Assuming they have a reporting obligation, they have five days to report. That means they didn't do anything last week, or else it would have needed to have been disclosed by yesterday. We'll know by EOD Friday (or Saturday I suppose) whether they sold.

-- Right. I am hoping they convert the note and sell everything! Take the 1B of profit on the note and run before reality reasserts itself.

Barring a restraint, I think there is virtually no chance FFH has not sold out much of its common stock over the last three days. Just a gut feel from following this company for a long time. They don't wait for the last dollar when something is "growing to the sky", as Prem likes to say. But why no press release announcing the conversion of the note. :-\

I noticed this language in the FFH press release about the convertible debt and what appears to be a six month standstill agreement. Does anyone know what the terms of the standstill agreement are? Please tell me it will not affect FFH's ability to sell its BB stock here. In connection with the acquisition of the Purchased Debentures, Fairfax agreed to a “standstill” provision (the “Standstill”) as more particularly described in the early warning report to be filed by Fairfax. Fairfax has acquired the Purchased Debentures for investment purposes, and in the future, it may discuss with management and/or the board of directors of BlackBerry any of the transactions listed in clauses (a) to (k) of item 5 of Form F1 of National Instrument 62-103 – The Early Warning System and Related Take-over Bid and Insider Reporting Issues and, subject to the Standstill, it may further purchase, hold, vote, trade, dispose or otherwise deal in the securities of BlackBerry, in such manner as it deems advisable to benefit from changes in market prices of BlackBerry securities, publicly disclosed changes in the operations of Blackberry, its business strategy or prospects or from a material transaction of BlackBerry.

Soft stuff only. Partnership with Google; partnership with MunichRe and a host of other insurance companies (including Fairfax Brazil and Hudson); a deal to help digitize 3m acres in Brazil. No hard numbers seem available though.

Thanks for posting. I had not thought much of Farmers Edge before. But having spent some time on its website, it is a business that seems to have some real momentum, and is of course in a very hot space. A press release from today about a partnership with Google Cloud: https://www.farmersedge.ca/farmers-edge-partners-with-google-cloud-to-digitally-transform-agriculture/

And John Chen knows more about BB than Prem and he recently agreed to give fairfax a boatload of warrants at $6 per share for a lower interest rate.

In light of the Blackberry experience, we really need to add the Rocketship emoji to the menu here. It is very difficult to express where BB is going without it.

So at this point today over 315m shares have traded at prices between 16-19 dollars -- trading volume is 10x normal. Seems like enough volume for BB to move their 47m shares if they wanted--represents only about 15% of today's volume.

LOL: WATERLOO, ON, Jan. 25, 2021 /PRNewswire/ -- BlackBerry Limited (NYSE: BB; TSX: BB) is issuing this press release in response to a request by the Investment Industry Regulatory Organization of Canada ("IIROC") to comment on recent trading activity of its stock. The Company is not aware of any material, undisclosed corporate developments and has no material change in its business or affairs that has not been publicly disclosed that would account for the recent increase in the market price or trading volume of its common shares. It is possible this has something to do with FFH and desire to monetize? I'm probably just being hopeful

Can they really do a TRS with a bank on a stock that is going haywire and doesn't have a huge market cap? I get Exxon, but this I would imagine would be much harder to pull off, as much more complicated and difficult for bank to hedge.

Blackberry is screaming higher in pre-market trading - over $20 a share. About a 600 million paper gain for FFH. Now I REALLY hope they sell their common shares before the WSB crowd moves on.

With the stock price of Blackberry exploding higher for no real reason, I hope Fairfax takes the opportunity to take some chips off the table. They have the convertible bonds which let them participate fully in any further upside while effectively presenting no risk of a permanent impairment on the invested amount. Happy to see them ride that till the converts expire in 2023, but would be great to seem them cashing out some of the common stock as we get above $12. Recall that BB was priced at less than $3 nine months ago! The risk/reward has changed dramatically. BB has a few avenues to pay off big, and the converts will be very valuable if one of them hits, but still seems pretty risky. BB is playing in some good places (hat tip to John Chen on that), but it doesn't seem to be winning anywhere.