Fairfax India new issue

[Viking]

6 hours ago, ranimo said:

@Viking - that, but if Prem does ever fall into a pattern of repeated errors, it will probably be different than the previous errors - he's a very smart guy (which is my basic thesis for holding FFH in the first place).

So I'm not trying to predict anything, just to state that this is a risk. And my understanding is that this risk is common to Fairfax India as well. So to repeat my question - given that you stated that you'd like to reduce exposure to FFH, how do you think about managing your overall exposure to Fairfax entities?

 

@ranimo When I look at Fairfax, when it comes to capital allocation, I value their track record from 2018 to present MUCH MORE than their track record 2017 and earlier. And the facts are clear - Fairfax's capital allocation since 2018 has been best in class (when compared to P/C insurance peers) and it's not even close. That is 6.5 years and running.

 

Now I do closely monitor what Fairfax is doing. If they do something significant that I don't like - something that materially impacts the fundamentals of the business - then I will do what any rational investor would do: I would likely reduce my exposure. That is the same for every investment I hold.

 

My recent investment in Fairfax India is not complicated: it was because I thought it represented good value. Yes, I also own Fairfax. Am I concerned about my total weighting (Fairfax India and Fairfax)? No.

Edited June 14 by Viking

[valueventures]

2 hours ago, Viking said:

 

@ranimo When I look at Fairfax, when it comes to capital allocation, I value their track record from 2018 to present MUCH MORE than their track record 2017 and earlier. And the facts are clear - Fairfax's capital allocation since 2018 has been best in class (when compared to P/C insurance peers) and it's not even close. That is 6.5 years and running.

 

Now I do closely monitor what Fairfax is doing. If they do something significant that I don't like - something that materially impacts the fundamentals of the business - then I will do what any rational investor would do: I would likely reduce my exposure. That is the same for every investment I hold.

 

My recent investment in Fairfax India is not complicated: it was because I thought it represented good value. Yes, I also own Fairfax. Am I concerned about my total weighting (Fairfax India and Fairfax)? No.

Viking - just out of curiosity, what is your approximate total weighting to Fairfax and Fairfax India as a % of your total portfolio / total actively managed portfolio? Thanks!

[ranimo]

On 6/14/2024 at 9:20 PM, Viking said:

 

@ranimo When I look at Fairfax, when it comes to capital allocation, I value their track record from 2018 to present MUCH MORE than their track record 2017 and earlier. And the facts are clear - Fairfax's capital allocation since 2018 has been best in class (when compared to P/C insurance peers) and it's not even close. That is 6.5 years and running.

 

Now I do closely monitor what Fairfax is doing. If they do something significant that I don't like - something that materially impacts the fundamentals of the business - then I will do what any rational investor would do: I would likely reduce my exposure. That is the same for every investment I hold.

 

My recent investment in Fairfax India is not complicated: it was because I thought it represented good value. Yes, I also own Fairfax. Am I concerned about my total weighting (Fairfax India and Fairfax)? No.

Thanks for the answer!

[PJM]

I know I'm taking bit of a short cut to ask here but does anyone have an excel file with the latest holdings and respective valuation for Fairfax India? Also is the fee structure of 1.5/20 based on the book value and is it paid in equity or cash? Does it have any hurdle rate or high water mark?

[dartmonkey]

Check out this recent analysis: 

 

 

But for thoroughness, it's hard to beat Viking's spreadsheets, but I can't find it quickly. If memory serves, he had one posted here a few months ago. Maybe someone else can post a link.

 

As for the fee structure, it is 1.5/20 on the book value as you say, but the 20% only kicks in after a 5% hurdle. It is paid in cash or in shares, every 3 years, and after 9 1/2 years of existence, has been paid 3 times already, the first 2 times in shares, and recently in cash. The hurdle is a fixed 5%, not annualized (i.e. it is $10, $10.50, $11.00, etc., not $10, $10.50, $11.025, ...), so it is already only about a 3.4% hurdle because of the doubling of FIH's book value in the last 9 years, and in 10 more years it will have drifted down to 2.6%.

[Viking]

12 hours ago, PJM said:

I know I'm taking bit of a short cut to ask here but does anyone have an excel file with the latest holdings and respective valuation for Fairfax India? Also is the fee structure of 1.5/20 based on the book value and is it paid in equity or cash? Does it have any hurdle rate or high water mark?

 

@PJM The attached Excel file has what I have for Fairfax India (FIH tab). It has not been updated for 2 years (2022?)? But it might be better than starting from scratch. The Fairfax India tab shows you Fairfax's increase in ownership over the years. The BIAL tab shows you Fairfax India's increase in ownership over the years.

 

This file also contains my share information for most of Fairfax's equity holdings.

Fairfax Charts - Subs.xlsx

Edited June 20 by Viking

[ICUMD]

Anyone note the afterhours trading with a $15.15 close in FIH.U? Huge spike in volumes also. Didn't think this traded after hours.  Buybacks?

 

[gfp]

8 minutes ago, ICUMD said:

Anyone note the afterhours trading with a $15.15 close in FIH.U? Huge spike in volumes also. Didn't think this traded after hours.  Buybacks?

 

 

I see the trades but no clue what went down.  The only news I found was about Bangalore needing a second airport (and KIA getting a new taxiway).  I doubt that is the reason for the trading.  Hopefully we will learn something interesting soon

[SafetyinNumbers]

1 hour ago, gfp said:

 

I see the trades but no clue what went down.  The only news I found was about Bangalore needing a second airport (and KIA getting a new taxiway).  I doubt that is the reason for the trading.  Hopefully we will learn something interesting soon

It looks like there was a Market On Close (MOC) imbalance at the close. I used to check these religiously when I was on the prop desk at UBS as it was brand new and there was a lot of edge available. Maybe I should again .

 

The TSX publishes the imbalance at 3:40pm and brokers can enter orders in the MOC facility to offset the imbalance until the close. If the stock is going to move on the imbalance more than a certain percentage from the VWAP of the last 20 minutes of trading or the last price they publish a Price Movement Extension (PME). This allows brokers another opportunity to offset the imbalance.

 

This afternoon had a buy imbalance on the MOC and it grew when they published the PME. Meaning investors saw there was an imbalance to buy and more added to it then provided an offset. The stock went up to 15.15 because that was the clearing price. The buy imbalance acts like a tender at the close. For a buy imbalance, the shares offered at the lowest price in the MOC facility and in the open market get priority but all trades clear at the price needed to satisfy the buying.

 

i hope that’s explanation is helpful. I don’t remember all of the specifics but fairly certain on the mechanics.

 

It has me wondering why someone decided to trade it this way and if they have more to buy. 
 

 

 

 

[ICUMD]

@SafetyinNumbers thank you for sharing this info.

 

I suppose if someone wanted to develop a large position quickly in a thinly traded company, this would be the way to do it.  

 

Nice to see it head higher, though time will tell it's holding power.  Price is set by the small hands that trade.  

 

Perhaps a harbinger of good news to come.

[netcash1]

Volume could be all noise.   Very difficult to underwrite.

 

Possible someone getting excited that CapEx cycle at BIAL could be coming to an end as government preparing to develop new airport in the region.

[Viking]

On 6/10/2024 at 11:44 AM, Viking said:

@Crip1 Good idea. I have reestablished a starter position in Fairfax India at $13.80. The publicly traded holdings have increased nicely so far in Q2 so we should see a nice bump in book value when they report Q2. BIAL continues to execute well. It’s a little surprising to me that the stock continues to trade below $14. 

 

To close the loop, I exited my Fairfax India position today. The stock was up almost 8% in two weeks; not sure what caused the big increase Friday/today but I'll take it. The position was purchased in tax-free accounts (RRSP). I will be happy to re-establish a position should the stock aggressively sell off again. 

[Crip1]

4 hours ago, Viking said:

 

To close the loop, I exited my Fairfax India position today. The stock was up almost 8% in two weeks; not sure what caused the big increase Friday/today but I'll take it. The position was purchased in tax-free accounts (RRSP). I will be happy to re-establish a position should the stock aggressively sell off again. 

Surprised by this. Yes, an 8% return in 2 weeks is stellar, and chances are pretty good you can get back into this position 5% lower than it is today. Ironically, it was one of your posts that compelled me to leave everything in Fairfax and not take some profits off the table.

 

-Crip

 

P. S. Please don't take this as a criticism in the slightest. Far be it from me to criticize anybody else as I've made more than my fair share of mistakes. Any I especially would not criticize someone whose skill and analysis is far better than mine.

[dartmonkey]

5 hours ago, Viking said:

 

To close the loop, I exited my Fairfax India position today. The stock was up almost 8% in two weeks; not sure what caused the big increase Friday/today but I'll take it. The position was purchased in tax-free accounts (RRSP). I will be happy to re-establish a position should the stock aggressively sell off again. 

I have done this before, quickly selling something for a 8% gain, because the math looks so appealing, if you annualize it.

 

And it would make sense if you thought the shares were worth $14.50 give or take 25c, and would trade quite closely around that number, and then you buy at $14 (at least 25c beneath intrinsic value) and get an opportunity to sell them at $15 (25c above the upper limit of intrinsic value.) If all this were true, you might very well get lots of opportunities to do this kind of profitable round-trip trade.

 

My experience, however is that our assessment of intrinsic value has a much much wider error bar around it than 50c, and Mr Market is also very undecided about exactly what that value is. When the price starts moving up, it can go a long way up, without ever revisiting the previous range, and too often I have ended up sitting on my $1 gain when I could have had a $10 gain a few months later. In the case of FIH,the price might stay around $15 for a long time, or it could move quickly to $25 which would still not be a crazy price. So my investing strategy has moved to being patient with a company that is performing well and not selling shares just because they have moved up 10% or so.

 

Of course, personal circumstances can differ - you might sell because you need the money, or because you see some better investment opportunity, or because you are a lot less optimistic about the long-term value of a company. But I do have trouble imagining a business that I would buy at $14 because I thought it was underpriced and then selling it at $15 because I thought it had reached full value or was even overpriced. I hope you get an opportunity to buy back in again at similar prices!

[Viking]

6 hours ago, Crip1 said:

Surprised by this. Yes, an 8% return in 2 weeks is stellar, and chances are pretty good you can get back into this position 5% lower than it is today. Ironically, it was one of your posts that compelled me to leave everything in Fairfax and not take some profits off the table.

 

-Crip

 

P. S. Please don't take this as a criticism in the slightest. Far be it from me to criticize anybody else as I've made more than my fair share of mistakes. Any I especially would not criticize someone whose skill and analysis is far better than mine.

@Crip1 As a general rule, i prefer to own Fairfax over Fairfax India. Fairfax continues to be a monster position for me.
 

About 25% of my total portfolio today is for shorter term/tactical trades and/or cash (all in tax free accounts). I was sitting on a fair bit of cash (over 15%) when Fairfax India dropped to $13.80 so i decided to make it a small 3% position. For these types of trades, I only buy positions in companies i am comfortable holding for the long term (because it’s not knowable WHEN the stock might move higher). And i keep my weighting small enough so that i can meaningfully add if the stock continues to sell off (I would have been comfortable taking my Fairfax India position to a 5% weighting - perhaps higher - if it had continued to fall to below $13).

 

Fairfax closed Friday at US$1,090. That is getting close to a price where i might want to add to my position. We are also beginning hurricane season - so it would not surprise me to see the shares of all P/C insurers sell off IF we get a couple of big events. Bottom line, i want to have some cash on hand to take advantage in any temporary weakness that might happen in Fairfax shares. I like to flex my Fairfax position up and down (perhaps by 5% or 10%) depending on what the share price is doing. 
 

So given the weakness in Fairfax shares on Friday (dropping to an interesting level) and the opportunity to lock in a 2 week gain of almost 8% in Fairfax India i decided lock in the gain. i have done this with Fairfax India many times over the past 3 years. I love the optionality of having some cash on hand. 
 

One other factor was Canfor. The stock closed today at C$14.15. I think that is wicked cheap. I own a little (average price of $14.70). If it falls below $14 i will likely add. I have been in and out of Canfor probably 3 times already this year. Small 4% to 8% gains each time. 
 

Stelco is also at an interesting price (C$36.67).
 

Sorry for all the detail. I just wanted to provide some information of a few of the variables that were/are rattling around in my head. It is sometimes a pretty fluid process for me. Lots of different variables at play. I am sure it looks pretty crazy to an outsider (someone not inside my head). But my process has usually worked out pretty well for me. 

Edited June 25 by Viking

[Junior R]

5 hours ago, Viking said:

@Crip1 As a general rule, i prefer to own Fairfax over Fairfax India. Fairfax continues to be a monster position for me.
 

About 25% of my total portfolio today is for shorter term/tactical trades and/or cash (all in tax free accounts). I was sitting on a fair bit of cash (over 15%) when Fairfax India dropped to $13.80 so i decided to make it a small 3% position. For these types of trades, I only buy positions in companies i am comfortable holding for the long term (because it’s not knowable WHEN the stock might move higher). And i keep my weighting small enough so that i can meaningfully add if the stock continues to sell off (I would have been comfortable taking my Fairfax India position to a 5% weighting - perhaps higher - if it had continued to fall to below $13).

 

Fairfax closed Friday at US$1,090. That is getting close to a price where i might want to add to my position. We are also beginning hurricane season - so it would not surprise me to see the shares of all P/C insurers sell off IF we get a couple of big events. Bottom line, i want to have some cash on hand to take advantage in any temporary weakness that might happen in Fairfax shares. I like to flex my Fairfax position up and down (perhaps by 5% or 10%) depending on what the share price is doing. 
 

So given the weakness in Fairfax shares on Friday (dropping to an interesting level) and the opportunity to lock in a 2 week gain of almost 8% in Fairfax India i decided lock in the gain. i have done this with Fairfax India many times over the past 3 years. I love the optionality of having some cash on hand. 
 

One other factor was Canfor. The stock closed today at C$14.15. I think that is wicked cheap. I own a little (average price of $14.70). If it falls below $14 i will likely add. I have been in and out of Canfor probably 3 times already this year. Small 4% to 8% gains each time. 
 

Stelco is also at an interesting price (C$36.67).
 

Sorry for all the detail. I just wanted to provide some information of a few of the variables that were/are rattling around in my head. It is sometimes a pretty fluid process for me. Lots of different variables at play. I am sure it looks pretty crazy to an outsider (someone not inside my head). But my process has usually worked out pretty well for me. 

 

@Viking do you ever do swing trades in TFSA? 

 

Also STLC is interesting price level I been adding 

Edited June 25 by juniorr

[Viking]

4 hours ago, juniorr said:

 

@Viking do you ever do swing trades in TFSA? 

 

No. My TFSA is for buy and hold. My swing trades are only in my RRSP/LIF accounts. 

[ICUMD]

https://timesofindia.indiatimes.com/city/bengaluru/kempegowda-international-airport-sees-25-rise-in-international-passengers/articleshow/111270365.cms

[Junior R]

Quote

FIH Mauritius Investments is likely to sell a 9.72% stake in CSB Bank on Thursday through block deals to raise about Rs 595 crore. According to the term sheet issued by the banker IIFL, FIH Mauritius is expected to sell 1.68 crore shares in the Kerala-based bank at a floor price of Rs 352.4 per share. The floor price represents a 1% discount to Wednesday’s closing price of Rs 355.95.
 

Read more at:
https://economictimes.indiatimes.com/markets/stocks/news/fairfax-group-to-sell-a-9-72-stake-in-csb-bank-via-block-deal/articleshow/111290588.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

 

https://economictimes.indiatimes.com/markets/stocks/news/fairfax-group-to-sell-a-9-72-stake-in-csb-bank-via-block-deal/articleshow/111290588.cms?from=mdr

[Junior R]

Quote

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES

 

(Note: All dollar amounts in this news release are expressed in U.S. dollars except as otherwise noted.)

 

TORONTO, June 26, 2024 (GLOBE NEWSWIRE) —  Fairfax India Holdings Corporation (“Fairfax India” or the “Company”) (TSX: FIH.U) announces that its wholly-owned subsidiary, FIH Mauritius Investments Ltd has sold a 9.7% equity interest in CSB Bank Limited (“CSB Bank”) over the stock exchange in India (the “CSB Bank Sale”) for gross proceeds of INR 5.9 billion (approximately $70 million at current exchange rates) in order to comply with the dilution requirements of the Reserve Bank of India (“RBI”), the banking regulator in India. As a result of the CSB Bank Sale, Fairfax India’s share ownership in CSB Bank will be reduced to 40% and Fairfax India will be in compliance with the RBI’s dilution schedule.

Article content

 

About Fairfax India

 

Fairfax India is an investment holding company whose objective is to achieve long term capital appreciation, while preserving capital, by investing in public and private equity securities and debt instruments in India and Indian businesses or other businesses with customers, suppliers or business primarily conducted in, or dependent on, India.

 

For further information, contact:

John Varnell, Vice President, Corporate Affairs (416) 367-4755

 

[nwoodman]

Delhi airport roof collapse highlights Modi's infrastructure challenges

https://www.reuters.com/world/india/delhi-airport-roof-collapse-highlights-modis-infrastructure-challenges-2024-06-28/

 

Summary:

 

1. On Friday, June 28, 2024, a portion of the roof at Terminal 1 of Indira Gandhi International Airport in New Delhi collapsed following heavy rainfall and strong winds. The incident occurred around 5:00 am local time in the departure forecourt area, where the canopy roof and its metal support beams gave way, falling onto parked vehicles below

 

2. The collapse resulted in the death of one person, a taxi driver who was crushed in his vehicle, and injuries to eight others. Videos and images from the scene show the collapsed white canopy and several cars severely damaged by the fallen beams.

 

3. As a result of the incident, all departures from Terminal 1 were suspended, leading to flight cancellations and diversions to other terminals. Rescue operations were carried out by the Delhi Fire Services, who faced challenges in retrieving the deceased driver’s body from the wreckage.

 

4. Terminal 1, despite being the oldest at Delhi airport, had recently undergone renovations. The collapsed section was part of an older area, distinct from the newly expanded sections. The cause of the collapse is being investigated, with initial assessments pointing to the heavy rainfall as a primary factor.

 

5. The incident has raised concerns about India’s infrastructure and safety standards amidst the country’s rapid development. Opposition politicians have criticized the government’s infrastructure record, highlighting recent mishaps. In response, India’s aviation minister announced compensation for the affected families and ordered thorough safety inspections at airports nationwide.

 

6. The collapse occurred during a period of severe weather in Delhi, which received nearly nine inches of rain by Friday morning, the highest June rainfall in 15 years. The heavy downpour provided relief from the intense heatwave that had gripped the region since April.

[ICUMD]

Looks like BIAL is pressured to get involved with the Hosur airport, despite proximity to BIAL.  They have protection until 2033 not to have a competitor run airport within 150km of BIAL.

 

They may not have any choice but to build it. 

At least they are getting first right of refusal.

BIAL capacity will be reached by 2033. 

 

Then comes the next question, of how they raise funds. Share issuance? IPO? Private investors?

 

https://www.moneycontrol.com/technology/tamil-nadu-govt-dials-fairfax-backed-bangalore-international-airport-to-set-up-hosur-airport-article-12758336.html

 

 

[nwoodman]

3 hours ago, ICUMD said:

Then comes the next question, of how they raise funds. Share issuance? IPO? Private investors?

 

 

No shortage of opportunities.  Hopefully their project delivery and operational expertise also featured in the invite.

[Thrifty3000]

16 hours ago, ICUMD said:

Then comes the next question, of how they raise funds. Share issuance? IPO? Private investors?

50+ year bonds!

[dartmonkey]

The recovery of IIFL Finance continues.

 

To recap, they got into some regulatory trouble in March as the Reserve Bank of India (RBI) asked IIFL FInance to stop sanctioning or disbursing gold loans after raising concerns about the company's gold loan portfolio. The share price dropped from about 600 to close to 300, and IIFL issued shares (at 300 INR) and debt, FIH participating in both. FIH now owns 15.1% of the firm, and with shares at 517.60 at the June 30 close, well up from 340.10 at the end of Q1 and 2/3 of the way back to the 600 region.

 

For FIH, the impact on Q2 results should be significant, as this represents a $137m increase in this mark-to-market stake, reversing most of the $178m Q1 loss, for a gain of almost exactly $1 per FIH share.

 

Most of FIH's book value is in the Bangalore Airport, and there are other private investments like Sanmar Chemical, 7 Islands Shipping and Maxop Engineering. But looking at the five big public investments, worth about a third of FIH's total book value, they seem to have all gone in the right direction. Ignoring USD:INR (which stayed at exactly 83.7), FIH's 5 biggest public investments were up 30% in total:

 

 

 

Q2 report was August 3rd last year, so I guess we'll know in about 4 weeks, but it looks like results should be dramatically better than Q1.

 

 

 

Edited July 2 by dartmonkey
table red