Fairfax stock positions

[mcliu]

Hard to say what will happen.

They exited 2009 with $370 BVPS.

12 years later.. $562 BVPS.

Hopefully next 5 will be better.

[Thrifty3000]

3 hours ago, mcliu said:

Hard to say what will happen.

They exited 2009 with $370 BVPS.

12 years later.. $562 BVPS.

Hopefully next 5 will be better.

If you keep that up you’re going to convince me to start selling puts.

[drzola]

How do you plan to sell Fairfax puts here?

[Thrifty3000]

2 hours ago, drzola said:

How do you plan to sell Fairfax puts here?

My bankers are amazing. I’m having them draw something up by COB. (Totally joking. I don’t have bankers. Haha.)

 

My comment about selling puts was just some good-natured ribbing from one investor nerd to another - an attempt to goad mcliu into digging deeper on a contrarian thesis.

 

Gosh knows this board could use some serious contrarian argument to combat the optimistic groupthink (count myself among the guilty optimists).

 

But, at this point we have to dig deeper than superficial statements about the last decade’s performance.

 

To improve our financial models I think we need to delve deeper into things like:

 

- Prem’s succession plan

- mid-cycle (post hard market) insurance earnings potential

- reasonable/deserved conglomerate discount

- reasonable/deserved discount for Watsa ownership structure

 

Those are the kinds of factors that can materially impact future valuation. (And they make it hard for me to assign a value greater than 1x book until resolved or better understood.)

The missteps and corrections made over the last decade have been pretty thoroughly debated in this and the other FFH threads. 

[drzola]

Thank you for the thoughtful response Thrifty3000. I really appreciate your FFH posts here.

[Viking]

Here are Dec 31 numbers for Fairfax's equity holdings. My math says we should see mark-to-market gains of about +$320 million = +$12/share (Fairfax owns much more stuff than I track). The Associates/Consolidated Equity holdings are about ($100) million = ($4)/share.

 

Movers:

- FFH TRS +$174

- RFP         +$103

- Atlas        ($101) + warrants another ($25)

- CIBank     +$84

- Eurobank +$82 

 

Bottom line, Fairfax's returns from the equity holdings in 2021 were stellar (among the best ever). Prem is going to enjoy writing his letter for the annual report this year (and he should). Lot's of very good things going on under the hood. The set up for 2022 looks promising. Well done Fairfax!

Fairfax Equity Holdings Dec 31 2021.xlsx

[Viking]

As we start 2022 Eurobank will be a Fairfax holding to watch. It is Fairfax’s second largest equity holding so how it performs matters. Financials are getting a lot of love. And we could see a monster year from international travel (as we get to the other side of Omicron) and this would be very bullish for the Greek economy. Real estate prices are also expected to be strong. Lots of tailwinds for Eurobank.

 

Eurobank stock is up 13% in less than 2 weeks to start the year (from € 0.89 to 1.01). This is about a US$150 million increase for Fairfax. I think the stock is trading at a new multiyear high which is nice to see.
 

We should see solid earnings combined with PE multiple expansion in 2022. My guess is the party is just getting started. 

Edited January 12, 2022 by Viking

[glider3834]

5 hours ago, Viking said:

As we start 2022 Eurobank will be a Fairfax holding to watch. It is Fairfax’s second largest equity holding so how it performs matters. Financials are getting a lot of love. And we could see a monster year from international travel (as we get to the other side of Omicron) and this would be very bullish for the Greek economy. Real estate prices are also expected to be strong. Lots of tailwinds for Eurobank.

 

Eurobank stock is up 13% in less than 2 weeks to start the year (from € 0.89 to 1.01). This is about a US$150 million increase for Fairfax. I think the stock is trading at a new multiyear high which is nice to see.
 

We should see solid earnings combined with PE multiple expansion in 2022. My guess is the party is just getting started. 

+1

 

 

 

 

[Xerxes]

AGT Food CEO signals openness to returning to capital markets - BNN Bloomberg

[StubbleJumper]

8 hours ago, Xerxes said:

AGT Food CEO signals openness to returning to capital markets - BNN Bloomberg

 

There's a good reason for that: 

 

https://www.theglobeandmail.com/business/article-fed-co-op-agt-foods-to-build-canola-crushing-facility-in- saskatchewan/

 

AGT is partnering on a CAD$2 billion canola crush plant and biodiesel plant.  So, I am guessing that AGT will need to find its 49% of the capex from somewhere.

 

 

SJ

[petec]

6 hours ago, StubbleJumper said:

 

There's a good reason for that: 

 

https://www.theglobeandmail.com/business/article-fed-co-op-agt-foods-to-build-canola-crushing-facility-in- saskatchewan/

 

AGT is partnering on a CAD$2 billion canola crush plant and biodiesel plant.  So, I am guessing that AGT will need to find its 49% of the capex from somewhere.

 

 

SJ

If it does IPO, Prem will be able to claim another “monetisation”. 

[StubbleJumper]

Yes, if it does IPO, we will have a ready-made evaluation framework for FFH management because they just took it private three years ago!  So if they bought AGT for $XXX and three years later they issue shares we'll be able to declare at least a short-term victory or defeat based on whether the valuation has grown adequately...

 

SJ

[glider3834]

looking at the 13F - no major changes among Fairfax's largest equity positions in Q4 from what I can see

https://www.dataroma.com/m/holdings.php?m=FFH

[lessthaniv]

Interesting looking Arb on FFH’s conversion of Avante Logixx debentures 

Edited February 18, 2022 by lessthaniv

[glider3834]

There has been some volatility in Quess shares due to recent change in CEO but i think this article addresses issues - business strategy unchanged and outlook sounds positive as covid reopening should drive more staffing demand/outsourcing https://www.moneycontrol.com/news/business/we-selected-the-best-man-for-the-job-ive-never-felt-more-comfortable-with-the-business-as-it-is-today-quess-corp-chairman-ajit-isaac-8123061.html

[cwericb]

Sometimes it is interesting to see how others (non COBF members) see Fairfax. Here is an article from Seeking Alpha.

 

“Fairfax Financial Holdings: Further Growth Possible, But Catastrophe Losses Pose A Challenge”

https://seekingalpha.com/article/4488164-fairfax-financial-holdings-further-growth-possible-catastrophic-losses-pose-challenge?mailingid=26752043&messageid=2800&serial=26752043.1154&utm_campaign=rta-stock-article&utm_medium=email&utm_source=seeking_alpha&utm_term=26752043.1154

 

While it seems that the writer doesn’t quite grasp how a P&C insurance company operates, but I thought some might find it interesting. Certainly Cat losses and inflation are a concern but one would assume that Fairfax is well aware of that and accounts for it in its premiums.

 

Glad to see a number of CBOF members responded to the article.

[Crip1]

On 2/19/2022 at 7:40 AM, cwericb said:

Sometimes it is interesting to see how others (non COBF members) see Fairfax. Here is an article from Seeking Alpha.

 

“Fairfax Financial Holdings: Further Growth Possible, But Catastrophe Losses Pose A Challenge”

https://seekingalpha.com/article/4488164-fairfax-financial-holdings-further-growth-possible-catastrophic-losses-pose-challenge?mailingid=26752043&messageid=2800&serial=26752043.1154&utm_campaign=rta-stock-article&utm_medium=email&utm_source=seeking_alpha&utm_term=26752043.1154

 

While it seems that the writer doesn’t quite grasp how a P&C insurance company operates, but I thought some might find it interesting. Certainly Cat losses and inflation are a concern but one would assume that Fairfax is well aware of that and accounts for it in its premiums.

 

Glad to see a number of CBOF members responded to the article.

Before I say anything it's gotten to epidemic proportions the level with which people hide behind a computer keyboard and harshly criticize just about anyone. I refrain from doing that just because I find it so distasteful. That said, I saw this on Seeking Alpha and was pretty surprised somebody took the time to write about a subject on which they have extraordinarily limited insight. Beyond that, the author could have I really did make his point about a third of the way through article. The rest of it was simply rehashing what he'd already said. 

 

It's not right to impune this individual's character or mock their intelligence or knowledge. But this person ventured a little too far outside their circle of confidence.

 

- Crip

 

[petec]

6 hours ago, Crip1 said:

Before I say anything it's gotten to epidemic proportions the level with which people hide behind a computer keyboard and harshly criticize just about anyone. I refrain from doing that just because I find it so distasteful. That said, I saw this on Seeking Alpha and was pretty surprised somebody took the time to write about a subject on which they have extraordinarily limited insight. Beyond that, the author could have I really did make his point about a third of the way through article. The rest of it was simply rehashing what he'd already said. 

 

It's not right to impune this individual's character or mock their intelligence or knowledge. But this person ventured a little too far outside their circle of confidence.

 

- Crip

 

 

I think this issue is that his circle of confidence and his circle of competence don't entirely overlap 

[nwoodman]

At first pass seems pretty sweet.  Paid to wait and option on the upside

 

https://ir.kennedywilson.com/news-events-and-presentations/press-releases/2022/02-23-2022-211613501

[glider3834]

28 minutes ago, nwoodman said:

At first pass seems pretty sweet.  Paid to wait and option on the upside

 

https://ir.kennedywilson.com/news-events-and-presentations/press-releases/2022/02-23-2022-211613501

Looks like a good move - 13 mil warrants provide potential upside 

[nwoodman]

It is a sizeable jump in the debt platform too.  They must be liking what they are seeing.  Looks like the move from short duration is starting.  Gotta put all that new float somewhere 

 

“Along with the equity investment, Fairfax has increased its first mortgage target within Kennedy Wilson’s debt investment platform by $3 billion to $5 billion. Kennedy Wilson expects to have an approximate 5% interest in future debt investments within the platform while earning customary fees in its role as asset manager. In addition to the $2 billion already invested across Kennedy Wilson’s global debt platform, there is now approximately $4 billion in additional investment capacity with a strong pipeline of future opportunities.”

Edited February 23, 2022 by nwoodman

[glider3834]

3 hours ago, nwoodman said:

It is a sizeable jump in the debt platform too.  They must be liking what they are seeing.  Looks like the move from short duration is starting.  Gotta put all that new float somewhere 

 

“Along with the equity investment, Fairfax has increased its first mortgage target within Kennedy Wilson’s debt investment platform by $3 billion to $5 billion. Kennedy Wilson expects to have an approximate 5% interest in future debt investments within the platform while earning customary fees in its role as asset manager. In addition to the $2 billion already invested across Kennedy Wilson’s global debt platform, there is now approximately $4 billion in additional investment capacity with a strong pipeline of future opportunities.”

Yes makes complete sense - KW have a great track record

 

Fairfax could become a liquidity provider this year & if this volatility keeps up it could offer some big opportunities for them in fixed income/equity side  - they couldn't be in a better position honestly with just over 50% of their portfolio in cash/ST investments - Prem has finally been proved dead correct with this tech correction finally coming to play - I just wish they had reduced their BB holding which has sold off YTD ( that is my only criticism) although that looks to be  offset from their gains on Eurobank - otherwise the rest of their portfolio positioning looks ok

Edited February 24, 2022 by glider3834

[petec]

10 hours ago, nwoodman said:

It is a sizeable jump in the debt platform too.  They must be liking what they are seeing.  Looks like the move from short duration is starting.  Gotta put all that new float somewhere 

 

Yes, I think this is the key part of this announcement. I'm not sure the duration is *all* that much longer - probably 3-4 years, so it's not like they're buying 30 year treasuries. I think the bigger tradeoff is lower liquidity for a higher return. This is what is driving investors who don't need liquidity into the private credit markets. The big challenge for owners of long duration liabilities today is sourcing appropriate assets to back them at sufficient returns. Fairfax have basically failed to do this in private credit so they have to pay KW a fee to do it for them (rather as others pay FFH a fee to source investments in India for FIH). Still, it's a move in the right direction.

 

It would not entirely surprise me to see KW merge into FFH one day. FFH would then own the platform and command the fee.

[petec]

6 hours ago, glider3834 said:

Yes makes complete sense - KW have a great track record

 

Fairfax could become a liquidity provider this year & if this volatility keeps up it could offer some big opportunities for them in fixed income/equity side  - they couldn't be in a better position honestly with just over 50% of their portfolio in cash/ST investments - Prem has finally been proved dead correct with this tech correction finally coming to play - I just wish they had reduced their BB holding which has sold off YTD ( that is my only criticism) although that looks to be  offset from their gains on Eurobank - otherwise the rest of their portfolio positioning looks ok

 

I think it is a bit too much to say Prem has been proven dead right. He spent much of the last few years saying things like Google and Amazon were overvalued. I don't think he was right and that's not the bubble that is bursting. The real bubble was in all the crap that was valued on P/S because there was no E, and that bubble formed and burst over the last 18 months. If Prem points to that as evidence that he is a sage, he will be being a little disingenuous.

[nwoodman]

33 minutes ago, petec said:

 

Yes, I think this is the key part of this announcement. I'm not sure the duration is *all* that much longer - probably 3-4 years, so it's not like they're buying 30 year treasuries. I think the bigger tradeoff is lower liquidity for a higher return. This is what is driving investors who don't need liquidity into the private credit markets. The big challenge for owners of long duration liabilities today is sourcing appropriate assets to back them at sufficient returns. Fairfax have basically failed to do this in private credit so they have to pay KW a fee to do it for them (rather as others pay FFH a fee to source investments in India for FIH). Still, it's a move in the right direction.

 

It would not entirely surprise me to see KW merge into FFH one day. FFH would then own the platform and command the fee.

Agree (1) It is more yield than duration, but potentially the beginning of the move out of “cash” . (2) I was thinking about your observation today too.  High probability that FFH keeps chipping away and ends up, at the very least, with a position size that leads to equity accounting.  If KW keeps buying back shares FFH might get their without any additional purchases after converting the warrants.  A possibility that is seven years out but consider it another placeholder.

Edited February 24, 2022 by nwoodman