Fairfax India new issue

[jbwent63]

It will most certainly be interesting to see how this was structured. Possible it was a simple loan from Parent Co to FIH? If it was share issuance, one would think that would be a disclosable event under securities regulations.

[SafetyinNumbers]

7 minutes ago, jbwent63 said:

It will most certainly be interesting to see how this was structured. Possible it was a simple loan from Parent Co to FIH? If it was share issuance, one would think that would be a disclosable event under securities regulations.

Zero chance new FIH shares are issued. I assume it will be a GP/LP structure with an FIH subsidiary as the GP and FFH along with other global investors as LPs.

 

Ashith Lulani asked the question in the 2024 AGM and I think the answer is probably the same today.

 

 

 

[gfp]

28 minutes ago, SafetyinNumbers said:

Ashith Lulani asked the question

 

what are you f'ing Hawaiian?!  

[ValueNation]

 

6 minutes ago, gfp said:

 

what are you f'ing Hawaiian?!  

[SafetyinNumbers]

45 minutes ago, gfp said:

 

what are you f'ing Hawaiian?!  

I’m Canadian. No clue on Mr. Lulani!

[valueinvesting101]

Most likely, this is just a way to lock in a high yield effectively in dollars, given the recent Indian government efforts to bring in dollars to shore up the rupee. It also helps them earn brownie points with the Indian government to speed up approval for their investments.

Edited yesterday at 12:45 AM by valueinvesting101

[SafetyinNumbers]

27 minutes ago, valueinvesting101 said:

Most likely, this is just a way to lock in a high yield effectively in dollars, given the recent Indian government efforts to bring in dollars to shore up the rupee. It also helps them earn brownie points with the Indian government to speed up approval for their investments.

I think it was more to do with the escrow requirements but I’m an optimist.

 

 

[Crip1]

6 hours ago, SafetyinNumbers said:

Zero chance new FIH shares are issued. I assume it will be a GP/LP structure with an FIH subsidiary as the GP and FFH along with other global investors as LPs.

 

Ashith Lulani asked the question in the 2024 AGM and I think the answer is probably the same today.

 

 

 

 

People want to partner with us...India is ripe with opportunity...the government will privatize business...Poseidon going public...these notions have been around for a looong time, and, honestly, the more these things are said, the more they ring hallow. I feel like Charlie Brown having the ball pulled away right before kicking it.

 

Please understand, FFHI is my #2 or #3 holding, depending on the day, so I did drink the Kool-Ade, and I still believe in the company and the potential, but it's interesting to see these attachments from April of 2024 26 months later realize that minimal tangible progress has been made. We have to trust that intangible progress is being made that is unseeable right now. i THINK that's happening, and really hope it is, but the fact that it hasn't yet does bring up the notion that either it won't, or that my patient capital would be better off being patient elsewhere.

 

The above comments are well over 90% frustration with the rest being concern, anger or bewilderment. And, yes, one has to think that management is as frustrated as this shareholder.

 

-Crip

 

-Crip  

[SafetyinNumbers]

5 minutes ago, Crip1 said:

 

People want to partner with us...India is ripe with opportunity...the government will privatize business...Poseidon going public...these notions have been around for a looong time, and, honestly, the more these things are said, the more they ring hallow. I feel like Charlie Brown having the ball pulled away right before kicking it.

 

Please understand, FFHI is my #2 or #3 holding, depending on the day, so I did drink the Kool-Ade, and I still believe in the company and the potential, but it's interesting to see these attachments from April of 2024 26 months later realize that minimal tangible progress has been made. We have to trust that intangible progress is being made that is unseeable right now. i THINK that's happening, and really hope it is, but the fact that it hasn't yet does bring up the notion that either it won't, or that my patient capital would be better off being patient elsewhere.

 

The above comments are well over 90% frustration with the rest being concern, anger or bewilderment. And, yes, one has to think that management is as frustrated as this shareholder.

 

-Crip

 

-Crip  

Intrinsic value growth has been double digits since inception after fees. It not being reflected in the stock is the opportunity. Just like FFH, the conservatism and accounting policy make it so that book value growth lags intrinsic value growth. After 11 years, like FFH, the NAV can only be suppressed for so long. 

[Parsad]

5 hours ago, SafetyinNumbers said:

Intrinsic value growth has been double digits since inception after fees. It not being reflected in the stock is the opportunity. Just like FFH, the conservatism and accounting policy make it so that book value growth lags intrinsic value growth. After 11 years, like FFH, the NAV can only be suppressed for so long. 

 

I think shareholders at many successful companies get spoiled by great annual results for a period, and feel a sense of deflation when things aren't still going up double digits every year.

 

The irony with Fairfax is that they are still growing at terrific annual results, but because the stock price has stagnated slightly in the last 8-12 months, the sense of deflation has come swiftly!

 

Even long-term investors are vulnerable to that emotion...no matter how long they've held and what they've been through in the past.  It's like eating just the right amount of your favorite food and instead of being satiated the next day, you feel let down that the feeling didn't linger longer.

 

I've seen every shape of shareholder do this and go through this, including with Fairfax.  It's just funny to see it happen so quickly after 5 years of massive growth and returns...that are still continuing...but in book value, rather than stock price!  

 

Cheers!

[gfp]

This stock is all over the place recently... someone is chatting behind the scenes about something or other

 

[Crip1]

10 hours ago, Parsad said:

 

I think shareholders at many successful companies get spoiled by great annual results for a period, and feel a sense of deflation when things aren't still going up double digits every year.

 

The irony with Fairfax is that they are still growing at terrific annual results, but because the stock price has stagnated slightly in the last 8-12 months, the sense of deflation has come swiftly!

 

Even long-term investors are vulnerable to that emotion...no matter how long they've held and what they've been through in the past.  It's like eating just the right amount of your favorite food and instead of being satiated the next day, you feel let down that the feeling didn't linger longer.

 

I've seen every shape of shareholder do this and go through this, including with Fairfax.  It's just funny to see it happen so quickly after 5 years of massive growth and returns...that are still continuing...but in book value, rather than stock price!  

 

Cheers!

There may be an element of being spoiled by “great annual results” out there, but with FFH and FFHI, there are significant differences.

FFH – The company is simply worth more than it’s currently selling for. How much more is debatable, but definitely more. The frustration is not hugely significant, at least from my perspective. It’s more of a curiosity at the manic nature of Mr. Market, offset in large part by the fact that every share I own is becoming a larger share of the company as they use this downturn in price to buy back shares at an attractive price. Over the past several years, the company has performed tremendously well and the share price has followed. Frustration level – very low.

FFHI – The presentations by Ben Watsa as well as the quotes from the AGM a couple of years ago, shown above, point to the immense potential of India and Fairfax’ position to capitalize on said potential. I bought into it when starting my

position in 2017 at $15/share. To date, capitalizing on that potential has been very slow, and that is very frustrating. Yes, BIAL continues to increase in value each passing day, but if we’d have asked back in, say, Mid-2021, when do we think we’ll be able to monetize that, the majority of the board would have guessed before mid-2026. The company’s holdings have changed here and there but not significantly so in the past 5 years. The pace of transitioning “opportunity” to “tangible returns” has been disappointing. Worth noting that my investing style really is lethargy, bordering on sloth as most of my top 5 holdings have been not only multi-year, but multi-decade (FFH, BRK, MKL, JNJ). Frustration level – Medium, but increasing.

 

-Crip
 

[This2ShallPass]

51 minutes ago, Crip1 said:

FFHI – The presentations by Ben Watsa as well as the quotes from the AGM a couple of years ago, shown above, point to the immense potential of India and Fairfax’ position to capitalize on said potential. I bought into it when starting my

position in 2017 at $15/share.

You are right to be frustrated. Fairfax India hasn't delivered. 11 years is a LONG time. 

 

The biggest change I see is BIAL value is meaningfully increasing over the last year. That should reflect in FFI share price sooner or later..

 

[SafetyinNumbers]

1 hour ago, Crip1 said:

I bought into it when starting my

position in 2017 at $15/share. 

What do you think intrinsic value was when you bought in 2017? 

[Crip1]

1 hour ago, SafetyinNumbers said:

What do you think intrinsic value was when you bought in 2017? 

Good question and, honestly, I can't recall. Somewhat higher than BV which was 14 and change at the time. 

 

-Crip

[SafetyinNumbers]

52 minutes ago, Crip1 said:

Good question and, honestly, I can't recall. Somewhat higher than BV which was 14 and change at the time. 

 

-Crip

The discount to IV is probably over 50% now. Have you added to your position?

[Crip1]

3 minutes ago, SafetyinNumbers said:

The discount to IV is probably over 50% now. Have you added to your position?

Repeatedly...position size is about 2.5X initial, all purchased in 2022 and 2023. Since late 2023, I've traded here and there when I thought it was beaten up by the market and then sold when I made a decent gain. 

[djokovic1]

My personal opinion is there is a big difference between Fairfax and Fairfax India. 2 big ones.

 

1) Fairfax doesn’t need great equity investments to be a great investment. A mediocre equity performance there will lead to a more than satisfactory result ie 15%+ because of the float/investment leverage and locked in income streams. Fairfax India doesn’t have that. It’s an investment vehicle and its performance is directly correlated to its equity investments and at this point majority of it is linked to Bial. If you look 10 years out you have to trust their investment acumen much more than you have to do for Fairfax.

 

2) Fairfax can solve its own problems re low valuation by buying back its own shares. Fairfax India cannot do this as its cashflow poor ie its an investment vehicle. This is a major disadvantage. For Fairfax India you have to rely on a multiple rerate which again is most likely dependent on BIAL and its IPO and that will be a one time uplift.

A third one is with Fairfax India you are always fighting against the headwind of currency depreciation.

 

So structurally there are big differences. Of course I am rooting for Fairfax India but for me the investment case is much clearer for one than the other.

Edited 2 hours ago by djokovic1

[SafetyinNumbers]

27 minutes ago, djokovic1 said:

My personal opinion is there is a big difference between Fairfax and Fairfax India. 2 big ones.

 

1) Fairfax doesn’t need great equity investments to be a great investment. A mediocre equity performance there will lead to a more than satisfactory result ie 15%+ because of the float/investment leverage and locked in income streams. Fairfax India doesn’t have that. It’s an investment vehicle and its performance is directly correlated to its equity investments and at this point majority of it is linked to Bial. If you look 10 years out you have to trust their investment acumen much more than you have to do for Fairfax.

 

2) Fairfax can solve its own problems re low valuation by buying back its own shares. Fairfax India cannot do this as its cashflow poor ie its an investment vehicle. This is a major disadvantage. For Fairfax India you have to rely on a multiple rerate which again is most likely dependent on BIAL and its IPO and that will be a one time uplift.

A third one is with Fairfax India you are always fighting against the headwind of currency depreciation.

 

So structurally there are big differences. Of course I am rooting for Fairfax India but for me the investment case is much clearer for one than the other.

1. We know we are buying it for less than half of liquidation which lowers the hurdle rate.
 

2. BIAL dividends and potentially fees from IDBI LPs might change this dynamic. 
 

3. A lot of changes are happening in the macro. Is there anyway this changes?

 

I think FFH is superior to FIH because of the market structure and leverage but FIH could do better in any given year. I own 7.5x more FFH than FIH but a year ago it was 11x. 

Edited 2 hours ago by SafetyinNumbers