Fairfax stock positions

[petec]

3 minutes ago, Viking said:

I would love to see Fairfax use Recipe as a piggy bank (kind of like Berkshire) and use Recipe’s free cash flow

 

Agreed. And if they're paying 7.5x future FCF it will be a serious growth engine.

 

Recipe have always talked about international growth. I have always idly wondered if any of Recipe's assets could be franchised to Fairfax India.

Edited August 9, 2022 by petec

[Viking]

20 minutes ago, Parsad said:

 

We've all been the fool before...you just happened to join the club a little later!    It's the one club that no one wants to ever be a part of.  Cheers!

Agreed. Lots of misses on my part (i sold my Recipe shares after Q2 earnings for a nice, small gain). Fortunately, also a few home runs (over the years).  The key is to stay in the game and get ready for when the next fat pitch is thrown your way by Mr Market.

Edited August 9, 2022 by Viking

[Viking]

8 minutes ago, petec said:

 

Agreed. And if they're paying 7.5x future FCF it will be a serious growth engine.

 

Recipe have always talked about international growth. I have always idly wondered if any of Recipe's assets could be franchised to Fairfax India.

CARA / Recipe has been a terrible, terrible long term investment for minority shareholders. And this stretches back to before Fairfax was involved and the Phelon family/CARA were in charge. There are important lessons in the previous 10 years history if Fairfax is open minded. The restaurant industry tends to be a wealth destroyer over time - except for the most well run operators (and clearly Recipe is not one of those - that long term history thing). It will be interesting to see what Fairfax does… learn from the past? Or double down on a failed strategy? Decisions like these will inform my decision of whether Fairfax continues to be a trade or becomes a more permanent holding. 

[petec]

7 minutes ago, Viking said:

CARA / Recipe has been a terrible, terrible long term investment for minority shareholders. And this stretches back to before Fairfax was involved and the Phelon family/CARA were in charge. There are important lessons in the previous 10 years history if Fairfax is open minded. The restaurant industry tends to be a wealth destroyer over time - except for the most well run operators (and clearly Recipe is not one of those - that long term history thing). It will be interesting to see what Fairfax does… learn from the past? Or double down on a failed strategy? Decisions like these will inform my decision of whether Fairfax continues to be a trade or becomes a more permanent holding. 

 

As someone who runs a restaurant, I am always a little sceptical of these claims. Get it right - right offer, right brand, right location - and it is a very cash generative business. The problem is that few restaurants fit that mould, so 90% fail - but that's not a reason to write off the other 10%. I think the risk is reinvesting in it - which is why I agree I hope they use it as a cash cow, and if they do grow it I hope they do it on someone else's balance sheet by franchising it.

[glider3834]

4 hours ago, Viking said:

So how much will Fairfax spend to take Recipe private? I am using the ownership % provided in Globe and Mail article from today.

 

Recipe total shares = 58.8 million

Fairfax = 45.8% = 27 million

Phelan Family = 22% = 12.9 million

- Fairfax will buy up to 4 million shares from Phelon Family (if i am reading things properly)

- so assuming Phelon Family stake will fall to 9 million shares

 

Fairfax buys 23 million shares @ C$20.73 = $475 million

Fairfax owns 85% 

Phelon Family owns 15%

—————

Total market cap of Recipe = $1.2 billion. 

From Recipe 2019AR: “Free Cash Flow before growth capex, dividends, and share repurchases under the Company’s normal course issuer bid (“NCIB”) for the 13 and 52 weeks ended December 29, 2019 was $44.3 million and $155.9 million compared to $47.3 million and $158.7 million in 2018, respectively.”

—————

Now what does Fairfax do with Recipe after the purchase goes through? I really hope Fairfax does not provide any additional funding for Recipe to expand into the US. If Recipe wants to expand make them fund it with their own earnings. I would love to see Fairfax use Recipe as a piggy bank (kind of like Berkshire) and use Recipe’s free cash flow to fund growth into better returning assets as chosen by Hamblin Watsa. I hope Recipe does not turn into another version of the Abitibi/Resolute frankenstein.

 

I noticed in Q2 interim - may be to free up up funds (cash flow) for this Recipe acquisition?

 

Subsequent to June 30, 2022, AVLNs with a guaranteed value of approximately $543 were amended such that the underlying securities must be purchased by or sold at the direction of Hamblin Watsa prior to the end of 2023. The remainder of the AVLNs are unchanged and their underlying securities must be purchased by or sold at the direction of Hamblin Watsa prior to the end of 2022.

 

 

Edited August 10, 2022 by glider3834

[Viking]

1 hour ago, petec said:

 

As someone who runs a restaurant, I am always a little sceptical of these claims. Get it right - right offer, right brand, right location - and it is a very cash generative business. The problem is that few restaurants fit that mould, so 90% fail - but that's not a reason to write off the other 10%. I think the risk is reinvesting in it - which is why I agree I hope they use it as a cash cow, and if they do grow it I hope they do it on someone else's balance sheet by franchising it.

i also wonder if the margin for error is smaller in Canada. Most provinces have high and generally increasing minimum wages. My guess is regulation and taxes are higher in Canada than the US. 

[glider3834]

4 hours ago, Viking said:

So how much will Fairfax spend to take Recipe private? I am using the ownership % provided in Globe and Mail article from today.

 

Recipe total shares = 58.8 million

Fairfax = 45.8% = 27 million

Phelan Family = 22% = 12.9 million

- Fairfax will buy up to 4 million shares from Phelon Family (if i am reading things properly)

- so assuming Phelon Family stake will fall to 9 million shares

 

Fairfax buys 23 million shares @ C$20.73 = $475 million

Fairfax owns 85% 

Phelon Family owns 15%

—————

Total market cap of Recipe = $1.2 billion. 

From Recipe 2019AR: “Free Cash Flow before growth capex, dividends, and share repurchases under the Company’s normal course issuer bid (“NCIB”) for the 13 and 52 weeks ended December 29, 2019 was $44.3 million and $155.9 million compared to $47.3 million and $158.7 million in 2018, respectively.”

—————

Now what does Fairfax do with Recipe after the purchase goes through? I really hope Fairfax does not provide any additional funding for Recipe to expand into the US. If Recipe wants to expand make them fund it with their own earnings. I would love to see Fairfax use Recipe as a piggy bank (kind of like Berkshire) and use Recipe’s free cash flow to fund growth into better returning assets as chosen by Hamblin Watsa. I hope Recipe does not turn into another version of the Abitibi/Resolute frankenstein.

 

viking it looks like the purchase price is being funded by Fairfax affiliates (?) using equity & debt -  details are not clear at this stage! 

 

The Proposed Transaction would be financed by equity proceeds contributed by members of the Buying Group and debt financing, and would not be subject to any financing condition. 

Edited August 10, 2022 by glider3834

[nwoodman]

7 hours ago, petec said:

 

Again, why is this t*tf*ckery? 

 

1) Why is 7x 2-year-forward and possibly peak earnings a lowball offer for a levered lessor in a commoditised industry? Nobody has explained this to me yet.

 

2) If Fairfax didn't own a share of Atlas, but offered this price, and shareholders could accept or refuse by minority vote, would we be angry?

 

I think our (on both sides) reactions are more reflective of the pre-existing positions of each commentator than of anything else.

 

1.  if that is all this company is going to be then OK.  However there was some embedded optionality (speculation) that it could be a lot more.  IIRC Prem muttered something about $20/share in a CC a while back.  We will know in a few years time 

 

2. Probably,  but Fairfax definitely has a history of doing this.  That reputation is only being reinforced here.  While many others don’t agree, these episodes further tarnish their brand and make it difficult to achieve a full valuation or even a sensible valuation in the markets for their subs.  I think general wariness of their way of doing business is what leads to the current discount in their own share price.  Hopefully strong earnings going forwards outweighs all other concerns.

 

 

Edited August 10, 2022 by nwoodman

[petec]

1 hour ago, nwoodman said:

 

1.  if that is all this company is going to be then OK.  However there was some embedded optionality (speculation) that it could be a lot more.  IIRC Prem muttered something about $20/share in a CC a while back.  We will know in a few years time 

 

2. Probably,  but Fairfax definitely has a history of doing this.  That reputation is only being reinforced here.  While many others don’t agree, these episodes further tarnish their brand and make it difficult to achieve a full valuation or even a sensible valuation in the markets for their subs.  I think general wariness of their way of doing business is what leads to the current discount in their own share price.  Hopefully strong earnings going forwards outweighs all other concerns.

 

 

 

1. Question is, how much of that embedded optionality do you capitalise up front. To my mind it's fair to (and the market does) capitalise some of it in competitively advantaged businesses with cookie-cutter formulae for allocating capital, such as CSU. However its much harder to justify capitalising capital allocation up front when you have no idea what the capital will be spent on, and the market generally doesn't capitalise it up front in those situations, even when the jockey is Warren Buffett. Given that Atlas/Sokol's attempts to allocate away from shipping have been lacklustre so far, I wouldn't expect a buyer to capitalise that optionality up front.

 

2. If I'm right, then this is a fair offer and does not reinforce Fairfax's reputation in the way you suggest.

 

Interesting to see how others see this - thanks all for the debate as usual.

[Xerxes]

Isn't interesting that Prem Watsa so far that we know did not use the 2022 bear market to buy the dip on what everyone defines as quality here [big tech and other well known names] { (13F are coming soon), I dont expect needle moving changes on those publically traded names that don't have that much weighing to beging with.

 

He stuck to the name he knows best. Fine, I guess, since that is the purpose of being invested in him as a "mind-diversifier".

[maxthetrade]

On 8/9/2022 at 2:15 PM, bearprowler6 said:

More news...this time concerning Recipe Unlimited:

 

https://www.newswire.ca/news-releases/recipe-unlimited-enters-into-letter-of-intent-with-fairfax-887927427.html

 

Geez, I hoped they were done buying crappy businesses.

[Viking]

Dexterra reported Q2 results. Top line is growing nicely; profitability was off due to modular issues (expected) and inflation. Based on how the stock traded, results likely hit expectations.

 

When Dexterra did the reverse takeover of Horizon North right before covid hit the management team set an annual goal of $1 billion in revenue and $100 million in EBITDA. Beginning in Q3 Dexterra could hit $250 million in revenue (for sure they will be there in Q4). And my guess is they could be close to $25 million in EBITDA in Q4. Dexterra also expects EBITDA conversion of 50% to free cash flow. 
 

Modular has been a big disappointment but should return to profitability in Q3. And inflation pressures have hit the business hard but cost increases are coming so this headwind should slow some. My guess is inflation will remain a headwind.

 

Bottom line, despite experiencing their fair share of adversity Dexterra looks to be on track once again to growing both its top and bottom line. And as a Fairfax shareholder i am happy they will be funding their growth internally with free cash flow.

 

- https://dexterra.com/wp-content/uploads/2022/08/Q2-2022-Analyst-Presentation-Final-Aug10-2022.pdf

[Viking]

Not sure if this interview July 25 with Digit CEO has been posted. Good update. There is so much going on with Fairfax today it is easy to forget about Digit. This company is shaping up to be a real game changer for Fairfax shareholders. 

- https://www.moneycontrol.com/news/business/startup/will-assess-timing-of-ipo-based-on-market-conditions-digit-insurance-chairman-kamesh-goyal-8881791.html

——-

In FY22, Kamesh Goyal’s startup Go Digit General Insurance became the fastest general insurer to cross Rs 5,000 crore in annual gross written premiums. The next pit stop for the company, backed by Canadian billionaire investor Prem Watsa’s Fairfax Holdings, is to go public soon after the company completes five years in business this October. Per Insurance Regulatory and Development Authority of India (IRDAI) norms, promoters cannot sell a stake before five years.

 

However, the insurance industry veteran has larger plans to build an insurance conglomerate. Digit has applied to the IRDAI seeking licences to set up a life insurance and a reinsurance entity.

 

Valued at $3.5 billion, the company raised a total of $284 million in 2021. Besides Fairfax Holdings, the company counts Sequoia Capital India, A91 Partners, Faering Capital, TVS Capital and cricketer Virat Kohli as its investors.

 

In an interview with Moneycontrol, Goyal said that the company will assess the timing of its IPO at the end of the five-year tenure, based on market conditions. Meanwhile, he believes that the tough macro environment owing to rising interest rates and inflation will slow down the pace of growth for the general insurance industry.

 

Goyal worked in both life and general insurance before founding Digit in 2017 and has 32 years of experience in the space. Digit is an insurance manufacturer and provides motor, health, travel, fire and other small-ticket insurance. The company has an overall market share of 2.4 percent and a share of 4.7 percent in the motor insurance space.

[Viking]

Some new news from EXCO Resources. 2 new additions to the board. Sale coming? Or is EXCO looking to perhaps be a buyer?

 

EXCO is largely a natural gas producer. If nat gas prices spike further this fall (as Russia puts the screws to Europe) nat gas producers will continue to make windfall profits. Could be a great time for Fairfax to unload an asset like EXCO (i think Fairfax owns 44%). 

————-

August 10, 2022

DALLAS, TEXAS – EXCO Resources, Inc. (“EXCO” or the “Company”) announced that the Board of Directors has increased in size to seven members. Paul Aronzon and Harold L. Hickey have been appointed to the Company’s Board of Directors.

 

Mr. Aronzon has over 40 years of experience, as lead advisor, in mergers and corporate reorganizations, including extensive experience advising companies, boards and board committees, independent directors, sponsors, debtors, creditors, parties acquiring debt, assets or companies and other parties in corporate transactions. From 2008 to 2019, Mr. Aronzon was the co-managing partner of the Los Angeles office of Milbank LLP, an international law firm, and co-leader of Milbank’s Global Financial Restructuring Group. Mr. Aronzon was also the Executive Vice President and Managing Director of Imperial Capital from 2006 to 2008. Mr. Aronzon has advised companies, boards, board committees, independent directors, sponsors, parties acquiring assets, debt or companies and others in transactions across a wide array of industries.

 

Mr. Hickey is Chief Executive Officer and President of the Company and has more than 40 years of experience in the oil and gas industry. Mr. Hickey has been the Chief Executive Officer and President of the Company since 2015. Since he joined the Company in 2001, Mr. Hickey has served in various senior management roles, including President of North Coast Energy, and Chief Operating Officer, President and Chief Executive Officer of EXCO. Before joining the Company, Mr. Hickey worked at Mobil Oil Corporation, in various technical, commercial and managerial roles from 1979 to 2000. Mr. Hickey has extensive knowledge of the Company and the oil and gas industry as well as significant operations, engineering, and executive leadership experience, including senior management roles in multiple acquisitions and divestitures and complex energy joint ventures.

About EXCO Resources, Inc.
EXCO Resources, Inc. is an oil and natural gas exploration, exploitation, acquisition, development and production company headquartered in Dallas, Texas with principal operations in Texas, North Louisiana and the Appalachia region. EXCO’s headquarters are located at 12377 Merit Drive, Suite 1700, Dallas, TX 75251.

 

- http://www.excoresources.com/exco-resources-inc-announces-appointment-of-paul-aronzon-and-harold-l-hickey-to-board-of-directors/

[Viking]

Here is an update on Fairfax equity holdings at about the 1/2 way point through Q3. My math says equity holdings (tracked in the spreadsheet below) are up $1.21 billion since June 30. About $250 million is mark to market ($10.50/share) and $950 million ($40/share) is not mark to market.   (The $950 million more than offsets the $803 million deficiency of fair value over carrying value of investments in non-insurance associates and consolidated non-insurance subsidiaries that existed at June 30.)

 

Movers:

1.) Atlas                $430 million

2.) Resolute FP    $237 

3.) Blackberry     $140

4.) Recipe            $123

Fairfax Equity Holdings Aug 12 2022.xlsx

Edited August 12, 2022 by Viking

[glider3834]

https://www.albawaba.com/business/pr/gulf-insurance-group-announces-net-profit-kd-15-million-us-489-million-27-growth-first

 

 

 

 

 

Edited August 15, 2022 by glider3834

[Viking]

17 hours ago, glider3834 said:

https://www.albawaba.com/business/pr/gulf-insurance-group-announces-net-profit-kd-15-million-us-489-million-27-growth-first

@glider3834 Gulf Insurance Group is growing into quite a large player in MENA. The big AXA acquisition that closed last year is looking like a home run. Based on the link you provided, GIG is on track to earn around US$100 million in 2022. Fairfax owns a little over 40% of GIG so their share of earnings is about $40 million. Attach a 12 multiple and you get a value of $500 million (15 multiple = US$600 million) for Fairfax’s stake in GIG. A holding Fairfax has been cultivating for over a decade now. Another under-appreciated solid Fairfax investment. 

Edited August 15, 2022 by Viking

[glider3834]

13F new additions 

BAC 80mil

OXY 52 mil

https://www.sec.gov/edgar/browse/?CIK=915191&owner=exclude

[Viking]

4 hours ago, glider3834 said:

13F new additions 

BAC 80mil

OXY 52 mil

https://www.sec.gov/edgar/browse/?CIK=915191&owner=exclude

@glider3834 thanks for posting. So what did we learn? Fairfax now has positions worth $200 million in 3 US companies that Buffett loves. Is this yet another example of Fairfax continuing to slowly upgrade the quality of its equity portfolio?
 

At current market prices here are the adds:

1.) new BAC $93 million

2.) new OXY $58 million

3.) add CVX $25 (total is $49)

4.) new INTC $22 million

5.) add BABA $$14 (total $27)

 

Edited August 15, 2022 by Viking

[Xerxes]

2 hours ago, Viking said:

@glider3834 thanks for posting. So what did we learn? Fairfax now has positions worth $200 million in 3 US companies that Buffett loves. Is this yet another example of Fairfax continuing to slowly upgrade the quality of its equity portfolio?
 

At current market prices here are the adds:

1.) new BAC $93 million

2.) new OXY $58 million

3.) add CVX $25 (total is $49)

4.) new INTC $22 million

5.) add BABA $$14 (total $27)

 

 

That is very far-fetched Viking.

Fairfax's equity portfolio has two buckets:  (1) the big longs and (2) the rest of portfolio

 

The (2) portion broadly follows the market, are trading positions and are really not Prem specific. I dont think he even manages those. The bulk of weight is in the (1) bucket, and those are #neversell like deep value or quasi deep value names.

 

I am personally am in Fairfax for its (1), and like it the way it is, and could not care less about (2).

 

 

 

[Parsad]

2 hours ago, Xerxes said:

 

That is very far-fetched Viking.

Fairfax's equity portfolio has two buckets:  (1) the big longs and (2) the rest of portfolio

 

The (2) portion broadly follows the market, are trading positions and are really not Prem specific. I dont think he even manages those. The bulk of weight is in the (1) bucket, and those are #neversell like deep value or quasi deep value names.

 

I am personally am in Fairfax for its (1), and like it the way it is, and could not care less about (2).

 

 

 

 

Yeah, I would agree with that.  The (2)'s are probably Wade and Lawrence/team picks...similar to positions that Tom Gaynor/team at MKL would pick.  The (1)'s are probably more Prem/Brian/committee specific...big positions...Wade and Lawrence are involved, but hold two of the six/seven votes of the committee.  Cheers!  

[Viking]

1 hour ago, Xerxes said:

 

That is very far-fetched Viking.

Fairfax's equity portfolio has two buckets:  (1) the big longs and (2) the rest of portfolio

 

The (2) portion broadly follows the market, are trading positions and are really not Prem specific. I dont think he even manages those. The bulk of weight is in the (1) bucket, and those are #neversell like deep value or quasi deep value names.

 

I am personally am in Fairfax for its (1), and like it the way it is, and could not care less about (2).

@Xerxes my thesis is Fairfax, starting about 5 years ago, has been making much better decisions with its portfolio of equity holdings. My view is that something actually changed at Fairfax around this time (2017-2018). There was a recognition of past failures (that stop digging thing) and a come to Jesus type of recognition that Fairfax/Hamblin Watsa was not a turnaround shop. Each turnaround usually involved a significant financial cost to Fairfax (sometimes running into the hundreds of millions) and required significant time from the small senior team at Fairfax/Hamblin Watsa. Fairfax simply did not have the resources or the expertise to do this on a large scale. But that was the hole Fairfax was standing in at the time. Change was needed. And, i think, changes were made in how Fairfax selected equity buys and how it managed the group of equities it owned/controlled. (A similar pivot on the insurance side might have happened in 2010 when Andy Bernard was promoted from running Odyssey Re to VP in charge of all of Fairfax’s insurance operations.)

 

So Since 2018 or so we have seen what i like to call the ‘new Fairfax’:

1.) new equity purchases are higher quality and better risk/reward. Quality of management team is weighted much higher than past years (perhaps now at the top of the lost of criteria). Avoiding high risk of failure type investments is another.

2.) legacy holdings were looked at with a fresh set of eyes. Fairfax correctly concluded that there were serious problems with lots of the legacy holdings and set to work fixing them. Some were merged with other organizations (replacing management with a better team). Some were restructured. 
3.) Legacy equity holdings were told the bank of Fairfax was closed. Over were the days were poorly run companies could keep going to Fairfax for a costly bail out. Or for funds to grow. Holdings were told to get their financial house in order (including debt levels) and get profitable (that was how they could fund their future growth). 
4.) significantly more funds were given to Wade Burton/Lawrence Chin and their team - because of their very good performance

5.) significantly more funds were given to private equity partners (BDT  Capital Partners, ShawKwei & Partners etc) - because of their very good performance
 

So we now have a Fairfax where a performance culture is becoming entrenched on the equity side of the business. Fairfax is feeding/rewarding the top performers. New capital is getting allocated to the best opportunities. Year after year. 
 

But shareholders are yelling (and have been for years): SHOW ME THE MONEY. When will we see the improvements from ‘new Fairfax’ actually hit reported results? Covid, unfortunately, set things back about a year. But I think we are ‘there’ today. And have been ‘there’ for about at least a year now. 
—————

My view is Fairfax is largely done with the fixes so the significant hit to results year after year from this issue is largely done. There will always be some restructuring charges happening at a company the size of Fairfax - with the collection of businesses they own - but the number and amounts involved will be easily digested moving forward.
 

For new equity purchases it usually takes about 4-5 years for an equity holding to blossom (or not). Of course, this is highly variable. If i am right then moving forward we should see performance from Fairfax’s equity holding slowly improve. Some will be harvested. Others will continue to grow in value on Fairfax’s balance sheet. 
 

We could very well see all three legs of the Fairfax stool perform very well all at the same time: underwriting + interest & dividend income + investment portfolio. Trading today at $515/share, Fairfax is not priced for that outcome. 

—————

In the past too much new capital went to fix problems at legacy holdings (bail outs). $500 million (on average) for 8 or 9 years was also burned up due to the disastrous short macro bet. For many years Fairfax was burning up $700-$800 million each year. That is a big hole to dig out of. And the opportunity cost (loss of future compounding of that $700-$800 million) was what caused Fairfax results to grossly underperform for almost a decade. The good news is the opposite is happening now - and has been for a few years. This bodes very well for future returns. 

[Viking]

19 minutes ago, Parsad said:

 

Yeah, I would agree with that.  The (2)'s are probably Wade and Lawrence/team picks...similar to positions that Tom Gaynor/team at MKL would pick.  The (1)'s are probably more Prem/Brian/committee specific...big positions...Wade and Lawrence are involved, but hold two of the six/seven votes of the committee.  Cheers!  

How much money did Wade/Lawrence manage 5 years ago? How much are they managing today? My guess is they are managing significantly more money today - perhaps $1 billion more. Because they are delivering great long term results. They are investing largely in US large caps (look at the portfolio they have been building out the past few years). That is not ‘same old Fairfax’.
 

Old Fairfax was buying Reitmans. And Torstar. And APR. And AGT. And Exco (2016 version). And Farmers Edge. And Mosaic Capital. And launching Fairfax Africa. And just about any Canadian Restaurant chain available for sale (Fairfax was largely bankrolling Recipe’s rapid expansion).

Edited August 15, 2022 by Viking

[Parsad]

16 minutes ago, Viking said:

How much money did Wade/Lawrence manage 5 years ago? How much are they managing today? My guess is they are managing significantly more money today - perhaps $1 billion more. Because they are delivering great long term results. They are investing largely in US large caps (look at the portfolio they have been building out the past few years). That is not ‘same old Fairfax’.
 

Old Fairfax was buying Reitmans. And Torstar. And APR. And AGT. And Exco (2016 version). And Farmers Edge. And Mosaic Capital. And launching Fairfax Africa. And just about any Canadian Restaurant chain available for sale (Fairfax was largely bankrolling Recipe’s rapid expansion).

 

Hi Viking,

 

I agree.  That's why I said those picks are more in line with Wade/Lawrence and relatable to the way Tom Gaynor invests MKL's portfolio.  That's probably better for Fairfax and Fairfax shareholders long-term.

 

Unfortunately, it's hard to teach old dogs new tricks, and the bulk of the portfolio will be managed the "old" Fairfax way as long as the "old" dogs control the votes.  Not a bad thing, just more volatile.

 

Cheers!

[Viking]

1 hour ago, Parsad said:

 

Hi Viking,

 

I agree.  That's why I said those picks are more in line with Wade/Lawrence and relatable to the way Tom Gaynor invests MKL's portfolio.  That's probably better for Fairfax and Fairfax shareholders long-term.

 

Unfortunately, it's hard to teach old dogs new tricks, and the bulk of the portfolio will be managed the "old" Fairfax way as long as the "old" dogs control the votes.  Not a bad thing, just more volatile.

 

Cheers!

@Parsad  I think ‘old Fairfax’ has also changed. Compare the RIM/Blackberry purchase to Seaspan/Atlas. RIM/Blackberry was a technology play (Fairfax clearly had no idea) and was badly run by founders (who, yes, were brilliant creators). Seaspan was a finance company (something any good insurer should be able to understand) run by a new all star team with a very good track record (headed up by Sokol). As things got worse at Blackberry, Fairfax doubled down and spent more. As things got better at Atlas, Fairfax spent more. There is no comparing the two other than they were both the largest investments for Fairfax of their day. 
 

The other billion $ investment Fairfax has made recently (in terms of exposure) was the TRS giving Fairfax exposure to 1.96 million Fairfax shares when they were trading wicked cheap. Did Fairfax understand… Fairfax? Yup. Low risk. Very high return potential. Creative. Opportunistic. Ballsy. Maybe old dogs can learn new tricks…
 

So i think ‘old Fairfax’ is also doing some important things differently. And i love it. 
—————

Now before everyone thinks i am a complete Fairfax fanboy (probably too late) there are things i do not like. Looking from the outside, i wish they would move on from problems quicker. The fact they still own Blackberry? (Sorry if i caused anyone to vomit). Farmers Edge just got a $75 million loan earlier this year (ignore that thing i said earlier about legacy holdings not suckling on Fairfax’s hind teat anymore). The Recipe take private is a watch-out for me (given its size) - but i think it is the minority shareholders who poured money into the company the past 10 years who are the actual losers - Fairfax is getting a decent collection of assets at a rock bottom price (so hopefully limited downside).
 

My view is Fairfax is now hitting on way more of their investment decisions than pre-2018. So i can cut them some slack on the misses. Or some of the legacy position they want to keep around. Resolute Forest Products was a massive win for shareholders in that regard.
 

 

Edited August 15, 2022 by Viking