FFH price not enjoying the 25% bump in BBY

[investmd]

Should there be any correlation btw BBY price and principle shareholder FFH? BBY up 25% over past 2 days, while FFH is flat. Conversely, would a sudden drop in BBY price move the needle on FFH price?

 

I do realize that while FFH is a big part of BBY, BBY makes up only a small percentage of FFH.

 

 

 

 

[oldye]

Time to go back and reread Intelligent Investor? The stock market in the. short-term is a voting machine...it doesn't have to, and does not revalue a stock based on fundamental changes, hence creating opportunities for value investors to do what we do.  ::) 

 

During the cds/short days we were buying after huge moves had already happened, I would not consider bbry up 25% to be a huge move, especially since ffh is trading substantially above tangible book.

[TwoCitiesCapital]

I think you're over estimating the impact this will have on Fairfax. It was a very good quarter for BBRY.

 

Fairfax 46M shares would have resulted in a profit around 100M for the quarter.

 

Their 500M in convertibles would've registered income/gains of around 12M in the quarter. $112M is less than 1 percent of Fairfax's market cap. This is what Prem was talking about when he was downplaying the results of BBRY in FFHs investment portfolio when it was doing poorly. Even if it went to $20 we'd only see a 10% return on today's current price.

[A_Hamilton]

I think you're over estimating the impact this will have on Fairfax. It was a very good quarter for BBRY.

 

Fairfax 46M shares would have resulted in a profit around 100M for the quarter.

 

Their 500M in convertibles would've registered income/gains of around 12M in the quarter. $112M is less than 1 percent of Fairfax's market cap. This is what Prem was talking about when he was downplaying the results of BBRY in FFHs investment portfolio when it was doing poorly. Even if it went to $20 we'd only see a 10% return on today's current price.

 

Zach,

 

I agree that BBRY's impact isn't so large as to cause a major impact on FFH's valuation.

 

However, I think your valuation of the converts may need some refinement. The call option embedded in the convert went from $2 out of the money to in the money during the quarter. This is surely worth more than 12 million on a $500 million par value convert with a 6% coupon and $10 conversion price.

[TwoCitiesCapital]

I think you're over estimating the impact this will have on Fairfax. It was a very good quarter for BBRY.

 

Fairfax 46M shares would have resulted in a profit around 100M for the quarter.

 

Their 500M in convertibles would've registered income/gains of around 12M in the quarter. $112M is less than 1 percent of Fairfax's market cap. This is what Prem was talking about when he was downplaying the results of BBRY in FFHs investment portfolio when it was doing poorly. Even if it went to $20 we'd only see a 10% return on today's current price.

 

Zach,

 

I agree that BBRY's impact isn't so large as to cause a major impact on FFH's valuation.

 

However, I think your valuation of the converts may need some refinement. The call option embedded in the convert went from $2 out of the money to in the money during the quarter. This is surely worth more than 12 million on a $500 million par value convert with a 6% coupon and $10 conversion price.

 

I have no idea what the value of the converts was prior to the run. My assumption was that they'd be valued near par (maybe even above given the yield) if the option isn't in the money and on the value of the underlying and capitalized 6% yield once it is.

 

I'm sure it's not quite as simple as that but the gain from the converts won't mimic the gain in the stock unless if the stock is trading above the conversion price. Regardless if how much the gain was, impact to FFH is snall which was the point.