Fairfax stock positions

[FairFacts]

Eurobank closed in Athens today up 9.58% on 3 times normal volume.

[TwoCitiesCapital]

Eurobank closed in Athens today up 9.58% on 3 times normal volume.

 

Saw this too but can't find any news. Maybe just catching back up to where it trades pre-Covid which was still cheap?

[Viking]

Fairfax has three very large equity holdings:

1.) Atlas - including warrants

2.) Blackberry - including debentures

3.) Eurobank

 

A 10% move in Eurobank = about US $80million for Fairfax. The market value of the position is now worth about $900 million. The carrying value is $1,137.

 

If the move in Eurobank continues, given its size, this will be very good for Fairfax’s equity holdings. Yes, the position is not mark to market. However, for the consolidated equity positions taken as a group, it is a positive to see the market value exceed carrying value. This in turn supports Fairfax’s stated BV.

 

There have been times when the market value of Fairfax’s consolidated equity holdings was far lower than their carrying value. When this is the case it makes sense to me to discount Fairfax BV (to be conservative). As fair value grows in excess of carrying value then perhaps a premium to BV is warranted. Fairfax wants to get out ahead of this issue and this is a primary reason they have promised additional disclosure in the upcoming annual report.

[petec]

Eurobank closed in Athens today up 9.58% on 3 times normal volume.

 

Saw this too but can't find any news. Maybe just catching back up to where it trades pre-Covid which was still cheap?

 

One of the local brokers came out with a buy.

 

Agree it is cheap, although I am not sure where it should trade (relative to BV) given low rates and impaired revenue generation capacity.

[Viking]

Holy moly Batman! Boat Rocker should be next. It will be interesting to see what Fairfax reports as its cost base for Farmers Edge when they report Q1 results (and what the size of the realized gain is). Bottom line, it looks to me like Fairfax is executing exceptionally well right now  being very opportunistic. Their equity holdings are on fire :-) And yet the stock continues to trade well below BV (which will be jumping again when they report Q1 results, even after accounting for the US $10 dividend payment).

————————

Farmers Edge jumps 18% in Canada trading debut after IPO

- https://www.bnnbloomberg.ca/farmers-edge-jumps-18-in-canada-trading-debut-after-ipo-1.1571590

 

Agricultural technology startup Farmers Edge Inc. surged 18 per cent in its Toronto trading debut after raising $125 million (US$99 million) in its Canadian initial public offering.

Shares of the Winnipeg, Manitoba-based firm jumped to $20 at 9:30 a.m. trading, above its IPO price of $17 a share. That gives the company a market value of about $814 million, based on about 40.7 million shares outstanding.

[FairFacts]

Altius IPO’d today, closing just below it’s C$14 opening price.

[FairFacts]

Atco (Seaspan) announces yet another acquisition of 8 newbuilds plus an option on an additional 4.

 

https://finance.yahoo.com/news/statement-minister-veterans-affairs-minister-140000272.html

[TwoCitiesCapital]

Altius IPO’d today, closing just below it’s C$14 opening price.

 

Altius Renewable Resources (ARR) IPO'd.

 

Fairfax's interest is in Altius Minerals (ALS) which owns a portion of ARR, but I don't believe Fairfax owns any ARR directly. Ultimately, there will be some pass through benefit if ARR succeeds and raises ALS' price/visibility and Fairfax is able to earn more profits on the conversion of its preferred shares, but ultimate benefit to Fairfax of ARR's success will be likely be small.

[petec]

Altius IPO’d today, closing just below it’s C$14 opening price.

 

Altius Renewable Resources (ARR) IPO'd.

 

Fairfax's interest is in Altius Minerals (ALS) which owns a portion of ARR, but I don't believe Fairfax owns any ARR directly. Ultimately, there will be some pass through benefit if ARR succeeds and raises ALS' price/visibility and Fairfax is able to earn more profits on the conversion of its preferred shares, but ultimate benefit to Fairfax of ARR's success will be likely be small.

 

Agreed. It may be that the warrant strike price is reduced for the spin, but they don’t have a huge number of warrants anyway.

[petec]

Eurobank results are out. This company has done a super job of navigating the past few years and based on guidance it trades on 4.3x 2022 earnings and 0.43x 2022 book value. I think it will double in the next 18 months. Unfortunately this won’t all feed into FFH book value since it is already carried well above market, but there is scope for a nice gain.

[Xerxes]

Eurobank results are out. This company has done a super job of navigating the past few years and based on guidance it trades on 4.3x 2022 earnings and 0.43x 2022 book value. I think it will double in the next 18 months. Unfortunately this won’t all feed into FFH book value since it is already carried well above market, but there is scope for a nice gain.

 

It shouldn't matter.

Whether the carrying value is above or below the market value, FFH's portion of earning (net of dividends) will continue to stack up on FFH's book value (i.e. carrying value).

 

In equity accounting, market value is only relevant as a yardstick for analyst to question the carrying value.

[TwoCitiesCapital]

Eurobank results are out. This company has done a super job of navigating the past few years and based on guidance it trades on 4.3x 2022 earnings and 0.43x 2022 book value. I think it will double in the next 18 months. Unfortunately this won’t all feed into FFH book value since it is already carried well above market, but there is scope for a nice gain.

 

It shouldn't matter.

Whether the carrying value is above or below the market value, FFH's portion of earning (net of dividends) will continue to stack up on FFH's book value (i.e. carrying value).

 

In equity accounting, market value is only relevant as a yardstick for analyst to question the carrying value.

 

Then let us hope Eurobank is on it's way to sustainable earnings growth instead of constantly being plagued by large one-time writedowns and restructuring costs like it has been for the past several years.

 

[petec]

Eurobank results are out. This company has done a super job of navigating the past few years and based on guidance it trades on 4.3x 2022 earnings and 0.43x 2022 book value. I think it will double in the next 18 months. Unfortunately this won’t all feed into FFH book value since it is already carried well above market, but there is scope for a nice gain.

 

It shouldn't matter.

Whether the carrying value is above or below the market value, FFH's portion of earning (net of dividends) will continue to stack up on FFH's book value (i.e. carrying value).

 

In equity accounting, market value is only relevant as a yardstick for analyst to question the carrying value.

 

Then let us hope Eurobank is on it's way to sustainable earnings growth instead of constantly being plagued by large one-time writedowns and restructuring costs like it has been for the past several years.

 

Agreed - although in their defence, most of those costs were predictable and I think management have handled the situation well. On the other side of the coin, if things go well they have the potential to go very well. For example, due to tax loss carryforwards they expect to generate more capital than earnings in the future - in fact they guide to generating 100bps a year from 2022. That’s 25-30% of the market cap generated annually. Dividend potential is significant.

[TwoCitiesCapital]

Eurobank results are out. This company has done a super job of navigating the past few years and based on guidance it trades on 4.3x 2022 earnings and 0.43x 2022 book value. I think it will double in the next 18 months. Unfortunately this won’t all feed into FFH book value since it is already carried well above market, but there is scope for a nice gain.

 

It shouldn't matter.

Whether the carrying value is above or below the market value, FFH's portion of earning (net of dividends) will continue to stack up on FFH's book value (i.e. carrying value).

 

In equity accounting, market value is only relevant as a yardstick for analyst to question the carrying value.

 

Then let us hope Eurobank is on it's way to sustainable earnings growth instead of constantly being plagued by large one-time writedowns and restructuring costs like it has been for the past several years.

 

Agreed - although in their defence, most of those costs were predictable and I think management have handled the situation well. On the other side of the coin, if things go well they have the potential to go very well. For example, due to tax loss carryforwards they expect to generate more capital than earnings in the future - in fact they guide to generating 100bps a year from 2022. That’s 25-30% of the market cap generated annually. Dividend potential is significant.

 

Yes. I am bullish and bought more in the March/April dip, but it has been a frustrating ride! I was wiped out in 2015. Rebought back in when momentum was going well, but covid-19 took all of that away as well. Now we're back to the bottom of the range it's bee in since 2016 and even a double from pre-earnings price only takes it a hair above its 2016 and 2018 highs.

 

Hopefully the completion of the spin-outs, the corporate restructuring, and the pandemic all in the rear-view we can finally get to a sustained trend of earnings growth (and dividend potential), but I don't think this stock is going to move much until that happens. And it'll probably trade at a substantial discount to book like all European banks do even if it pays a 6-7% dividend. We're really banking on massive book value growth to make this work for us.

[petec]

Eurobank results are out. This company has done a super job of navigating the past few years and based on guidance it trades on 4.3x 2022 earnings and 0.43x 2022 book value. I think it will double in the next 18 months. Unfortunately this won’t all feed into FFH book value since it is already carried well above market, but there is scope for a nice gain.

 

It shouldn't matter.

Whether the carrying value is above or below the market value, FFH's portion of earning (net of dividends) will continue to stack up on FFH's book value (i.e. carrying value).

 

In equity accounting, market value is only relevant as a yardstick for analyst to question the carrying value.

 

Then let us hope Eurobank is on it's way to sustainable earnings growth instead of constantly being plagued by large one-time writedowns and restructuring costs like it has been for the past several years.

 

Agreed - although in their defence, most of those costs were predictable and I think management have handled the situation well. On the other side of the coin, if things go well they have the potential to go very well. For example, due to tax loss carryforwards they expect to generate more capital than earnings in the future - in fact they guide to generating 100bps a year from 2022. That’s 25-30% of the market cap generated annually. Dividend potential is significant.

 

Yes. I am bullish and bought more in the March/April dip, but it has been a frustrating ride! I was wiped out in 2015. Rebought back in when momentum was going well, but covid-19 took all of that away as well. Now we're back to the bottom of the range it's bee in since 2016 and even a double from pre-earnings price only takes it a hair above its 2016 and 2018 highs.

 

Hopefully the completion of the spin-outs, the corporate restructuring, and the pandemic all in the rear-view we can finally get to a sustained trend of earnings growth (and dividend potential), but I don't think this stock is going to move much until that happens. And it'll probably trade at a substantial discount to book like all European banks do even if it pays a 6-7% dividend. We're really banking on massive book value growth to make this work for us.

 

Yes, but the combination of book value growth and capital generation (which as you know are related, but not the same) could be very powerful. If they’re right about 15c in EPS and 100bps of capital generation then they could easily pay an annual dividend exceeding 10% of the current share price. Or they could buy back shares. And that’s without assuming any real reflation in the Greek economy. Given they’re exiting a 10y depression, and doing the right things policy wise, I think there is scope for loan growth well ahead of the European average and also for real estate prices to rise which could drive book value growth well ahead of what you’d expect simply from retaining operating earnings. Overall I think this is a lot cleaner than the other euro banks, given what it has been through.

 

I tried to buy this and couldn’t, so I get my exposure through FFH.

 

[drzola]

Bailed on Churchill Port it appears.

 

https://www.winnipegfreepress.com/local/loss-of-corporate-rail-port-partners-presented-as-win-for-churchill-573971602.html

 

https://www.realagriculture.com/2021/03/port-of-churchill-moves-under-100-local-and-indigenous-ownership/

[Xerxes]

Not happy about this.

Not saying this was a crown jewel.

 

But i do recall at the 2018 AGM, management talking about the potential some decades down the road, as the Arctic opens up for trade, and how they had very limited exposure for a large upside. Two years later it is all gone.

 

I guess if Masayoshi Son can be forgiven to shrink his 300 years vision into managing quarterly results and shorter 5 year timeframe, than we can forgive Fairfax for letting this go. If it was a substantial financial gain maybe that make sense, but they are not disclosing, which means it was not.

[petec]

Not happy about this.

Not saying this was a crown jewel.

 

But i do recall at the 2018 AGM, management talking about the potential some decades down the road, as the Arctic opens up for trade, and how they had very limited exposure for a large upside. Two years later it is all gone.

 

I guess if Masayoshi Son can be forgiven to shrink his 300 years vision into managing quarterly results and shorter 5 year timeframe, than we can forgive Fairfax for letting this go. If it was a substantial financial gain maybe that make sense, but they are not disclosing, which means it was not.

 

I'm happy about this, because I would rather they walked away from things that didn't pan out. I do not expect every investment to work, but I do want to see clear and decisive action around things that are not going to work. For years I think Fairfax was awful at this. I think they are improving.

[StubbleJumper]

Not happy about this.

Not saying this was a crown jewel.

 

But i do recall at the 2018 AGM, management talking about the potential some decades down the road, as the Arctic opens up for trade, and how they had very limited exposure for a large upside. Two years later it is all gone.

 

I guess if Masayoshi Son can be forgiven to shrink his 300 years vision into managing quarterly results and shorter 5 year timeframe, than we can forgive Fairfax for letting this go. If it was a substantial financial gain maybe that make sense, but they are not disclosing, which means it was not.

 

 

I, for one, am delighted that FFH cut bait once it was apparent that the asset was not commercially viable and has no prospect of a reasonable financial return.  Holding out for some ethereal value that *might* appear in 30 of 40 years is a fool's errand.  Take that ethereal future value and discount it back to today.  When you divide X by 1.08^30 or 1.08^40 even that imagined future value isn't worth anything today.

 

 

SJ

[Xerxes]

Understood, let's just say i am a romantic for anything related to Canadian North and Arctic.

In fact was also looking into going up to Churchill next year maybe.

[petec]

On Digit, my understanding is that

1) they currently own 49% at a carrying value of $900 for 100%, implying an asset of c. $450m.

2) recent fundraising was done at a value of $1.9bn for 100%.

3) Fairfax own convertibles that get them to 74% without injecting additional capital.

 

In other words, you could argue that their $450m asset is actually worth 74%*1900=$1400, an unrealised and unbooked gain of $950m or $35 per share.

 

Is this right?

 

Edit: their cost is actually $42+$475 = $517 so the bvps gap is more like $33.

[StevieV]

I'll beat a dead horse with BB earnings report this afternoon.  BB run-up was a gift for those who took advantage and sold.

[Viking]

Attached below is my tracking file for Fairfax equity positions updated for March 31 stock prices. Please note, I have NOT updated any of the positions to reflect information in the AR (hoping to do this in May). I also added Farmers Edge and Boat Rocker but need to confirm shares owned by Fairfax. 

Fairfax saw an increase of about $1.5 billion = US$60/share (pre-tax). About $20 of the total is market to market and $40 is associates/consolidated. This is similar to what I came up with for Q4 and Fairfax blew that number out of the water when they reported results; so my guess is my estimate for Q1 is low again. Gains were very broad based.

Biggest gainers for Q1:

1.) Atlas = $350 million (shares + warrants)

2.) Blackberry = $183 (shares + debentures)

3.) Eurobank = $166

4.) Fairfax India = $154

5.) Resolute Forest Products = $166

6.) Fairfax Total Return Swaps = $133

7.) Quess = $99

8.) Recipe = $81

9.) IIFL Finance = $65

10.) Stelco = $59

  

 

Fairfax Equity Holdings Mar 31 2021.xlsx

Edited April 5, 2021 by Viking

[nwoodman]

1 hour ago, Viking said:

Attached below is my tracking file for Fairfax equity positions updated for March 31 stock prices. Please note, I have NOT updated any of the positions to reflect information in the AR (hoping to do this in May). I also added Farmers Edge and Boat Rocker but need to confirm shares owned by Fairfax. 

Fairfax saw an increase of about $1.5 billion = US$60/share (pre-tax). About $20 of the total is market to market and $40 is associates/consolidated. This is similar to what I came up with for Q4 and Fairfax blew that number out of the water when they reported results; so my guess is my estimate for Q1 is low again. Gains were very broad based.

Biggest gainers for Q1:

1.) Atlas = $350 million (shares + warrants)

2.) Blackberry = $183 (shares + debentures)

3.) Eurobank = $166

4.) Fairfax India = $154

5.) Resolute Forest Products = $166

6.) Fairfax Total Return Swaps = $133

7.) Quess = $99

8.) Recipe = $81

9.) IIFL Finance = $65

10.) Stelco = $59

  

 

Fairfax Equity Holdings Mar 31 2021.xlsx 113.02 kB · 3 downloads

Thanks VIking.  Even with a most remarkable re-valuation of their major holdings, there is still a modest discount to  fair value.  It is going to be interesting to see the price they retire the swaps on themselves.  My guess would be around USD600/CAD750 per share, P/B~1.2

[Pedro]

Wondering if the below excerpt from the 2020 annual report is a sign that they sold some BB. An additional $1.5B to manage for Wade & Lawrence had to come from somewhere. Maybe a clue by Prem? or maybe  me reaching/hearing what I want to hear..

 

Wade and Lawrence had an excellent year in 2020 managing $1.5 billion in invested assets. They did so well that we will give them another $1.5 billion to manage in 2021. At that rate, they will soon be managing the whole portfolio! (No clapping please!)