Fairfax stock positions

[dartmonkey]

13 hours ago, SafetyinNumbers said:

I think long term holders should prefer a much higher multiple because the optionality of raising money at a low cost of capital if it’s needed because of a shock or an opportunity comes along is worth more than buying shares at 1.2x BV. If the goal is a higher ROE and BVPS, a higher multiple helps a lot more.

I see your point about raising money - if shares were at 2x BV they could issue shares rather than selling bonds at 8% or selling preferred shares to OMERS and paying them 8%. 

 

But I don’t see how the company’s share price has much to do with ROE (except marginally, by decreasing interest cost.) Say the share price rose to $2000, or 2x book, how will that help them increase book more quickly?

 

I guess the ideal would be to get the best of both worlds: low share price for a while to repurchase shares cheaply, then a high price to issue shares profitably. I’m just stating the obvious, buy cheap and sell dear, but it would be good to get a little bit of the "sell dear" part for a while. 

[SafetyinNumbers]

46 minutes ago, dartmonkey said:

I see your point about raising money - if shares were at 2x BV they could issue shares rather than selling bonds at 8% or selling preferred shares to OMERS and paying them 8%. 

 

But I don’t see how the company’s share price has much to do with ROE (except marginally, by decreasing interest cost.) Say the share price rose to $2000, or 2x book, how will that help them increase book more quickly?

 

I guess the ideal would be to get the best of both worlds: low share price for a while to repurchase shares cheaply, then a high price to issue shares profitably. I’m just stating the obvious, buy cheap and sell dear, but it would be good to get a little bit of the "sell dear" part for a while. 

Issuing shares above book value increases book value pretty quickly. In the late 1990s, Fairfax (and BRK for that matter) benefited greatly from issuing shares over 3x book on top of booking 20%+ ROE/year for four years. BVPS roughly doubled on the fundamental performance but BVPS was up another ~$90+ off of the share issuance alone as the share count was up 33%. 
 

If the share issuances are used to buy investments with ROI > 10% when combined with the leverage and offset by little dilution increases the ROE. This is the benefit Intact Financial enjoys with its P/B of 2.5x+. They issue equity to do acquisitions at 1x premiums which make them automatically accretive in a big way. The best thing shareholders can do for good capital allocators is to give them a low cost of capital.

 

[Xerxes]

Berkshire was not designed with an end goal in mind of what it ought to look like. It sort of happened over the decades, as different opportunities came and some were added. Mostly by being an opportunity at the right time. 
 

Markel in contrast was “architectured” with a clear goal of having a non-insurance business (Ventures) to grow in parallel. Copying Berkshire. 
 

Fairfax copied the float idea from Berkshire (easier said than done of course) but ultimately Fairfax was there first as an investor. The insurance outfit was added  as a source of float to invest (what Ackman wishes to have). I don’t think there is any “architectural” copying from Berkshire except for the float. 
 

One could say Fairfax’ international profile is in deep contrast to Berkshire’ largely domestic business. That takes courage !!

[This2ShallPass]

On 3/10/2024 at 10:15 AM, Viking said:

Bottom line, Fairfax looks very well positioned today. But the story gets better: like the past 6 years, I expect the quality of Fairfax's equity holdings to continue to improve in 2024. That will improve future returns. And, like a virtuous circle, the growing cash flows will be re-invested growing the companies even more.

 

Thoughts? Am I missing something? What number below is most wrong? Why?

 

 

Thanks @Viking for another great post. Appreciate your deep dives into various aspects of Fairfax.

 

BDT and ShawKwei partners, combined investment is $1.2B. Has anyone followed them, are these good inv managers?

 

They have done great on their big investments, but when looking at this portfolio, first thought that comes to me is why is this high quality? Most  investments seem to be in cyclical industries, economically / politically unstable countries (Sri Lank, Egypt) etc. 

 

Even Atlas doesn't look to be doing that great from @nwoodman post. Pretty much all the metrics seemed to have worsened. I haven't followed Atlas, is this really a homerun investment? They are in a not so great industry though.

 

[This2ShallPass]

On 3/15/2024 at 4:06 PM, Dinar said:

That is correct.  In terms of IRA, yes, but with a caveat if you put in more than USD 100K, there may be a filing requirement.  I am having my accountant check on it.  

@Dinar did you find more details on this?

 

The one requirement US has is on FBAR. US citizens have to file every year (during tax time) if they have foreign financial assets above $10k. No implication on taxes unless your end of year balance is >$100k (and >$150k any time of the year). But I don't think this applies to securities held in US brokers.

[nwoodman]

@This2ShallPass  I am hoping there a few questions asked about Atlas at the AGM. As referred to in an earlier post Graham Talbot the CFO departed after the last Fairfax AGM. It would be great to get some color around his leaving along with an overall update on their thinking in regard to this very large position.

 

https://www.linkedin.com/in/grahamstuarttalbot?utm_source=share&utm_campaign=share_via&utm_content=profile&utm_medium=ios_app

[Dinar]

6 hours ago, This2ShallPass said:

@Dinar did you find more details on this?

 

The one requirement US has is on FBAR. US citizens have to file every year (during tax time) if they have foreign financial assets above $10k. No implication on taxes unless your end of year balance is >$100k (and >$150k any time of the year). But I don't think this applies to securities held in US brokers.

From what my accountant told me before, FBAR does NOT apply to foreign stocks held in US brokerage accounts.  My accountant is still working on the IRA requirements, once she is done, I will let you know (it is a large firm, she is checking with another department, and my guess is that everyone is trying to cover their behind...)

[Viking]

14 hours ago, This2ShallPass said:

 

Thanks @Viking for another great post. Appreciate your deep dives into various aspects of Fairfax.

 

BDT and ShawKwei partners, combined investment is $1.2B. Has anyone followed them, are these good inv managers?

 

They have done great on their big investments, but when looking at this portfolio, first thought that comes to me is why is this high quality? Most  investments seem to be in cyclical industries, economically / politically unstable countries (Sri Lank, Egypt) etc. 

 

Even Atlas doesn't look to be doing that great from @nwoodman post. Pretty much all the metrics seemed to have worsened. I haven't followed Atlas, is this really a homerun investment? They are in a not so great industry though.

@This2ShallPass you ask a great question: “is Fairfax’s equity portfolio high quality?” (I am paraphrasing your question so please correct me if i got it wrong.)

 

This is a hard question to answer. Compared to what?

 

Here is the question i am asking: “is Fairfax’s total equity portfolio increasing in quality?”

 

Using a time horizon of 6 years or more, I think the answer to this second question is an unambiguous yes.  
 

Go back to 2017 and look at Fairfax’s equity portfolio. Blackberry was a big position (when you include the debentures). Exco. Fairfax Africa. Farmers Edge. APR Energy. AGT Foods. Mosaic Capital. Astarta. Resolute Forest Products. Recipe. Eurobank.

 

Back in 2017, the drag on the equity portfolio was twofold:

- many positions were poor performers - definitely not hitting Fairfax’s 15% return target.
- many holdings were actually bleeding money - in total, hundreds of millions every year (losses, write-downs, etc).

 

The underperformance/losses from equity portfolio was a material amount. For years, this depressed the total return Fairfax was earning on its equity portfolio. This bled through to Fairfax’s total results and structurally lowered earnings and ROE for years. This in turn lowered the P/BV multiple Mr Market assigned to Fairfax’s share price. 

 

Fast forward to 2024. It is amazing to me the transformation that has happened within Fairfax’s equity portfolio. When you look at the change that has happened over the past 6 years, it’s like someone came in and completely cleaned house. Think of a sports franchise where the GM and coach both get fired at the same time and a new regime takes over - with a new philosophy.
 

With Fairfax, it looks to me like a new regime has taken over except we don’t know what happened internally (yes, i am talking metaphorically here). And it is pointless to speculate (and not fair to the people involved). Of course, i am exaggerating to make my point. And as per usual i am getting off topic.

 

What were some of the changes?

 

Internal
1.) restructured: Exco

2.) put into ‘run-off’: Fairfax Africa, Farmers Edge, Boat Rocker

3.) sold: APR, Mosaic, Resolute Forest Products

4.) take private: AGT, Recipe

5.) other: Blackberry $500 million debenture has been exited

 

External

1.) Greece elected a pro-business government in 2019/2023: Eurobank

Six years later, we are almost to the finish line. Farmers Edge and Boat Rocker might deliver another $50 million in losses/writedowns moving forward.

 

The equity portfolio will always have a few laggards. Fairfax’s problem in 2017 was it was stuffed with problem children. 

Looking forward

Importantly, it looks to me like Fairfax has a new framework for how it manages its equity portfolio. Hamblin Watsa is not a turn-around shop. A higher premium has been put on management. All holdings are now expected to deliver an acceptable return - Fairfax will no longer be a piggy bank for chronically underperforming units. Moving forward, capital will go to the best risk/adjusted opportunities. Bottom line, really like what i have seen from management since 2018.
 

Why do we care today? 
 

If the quality of the equity holdings is materially better than it was pre-2017 then the return it will be capable of delivering moving forward will be much higher than in the past. The change is the key. Higher earnings = higher ROE = higher P/BV multiple.

 

The best example of the improvement is the ‘share of profit of associates’ bucket. Driven by Eurobank, is is now delivering +$1 billion per year in pre-tax earnings.

 

I think the non-insurance consolidated holdings are getting ready to pop higher in the coming years.

 

And i think the table is getting set for Fairfax to start delivering higher than expected ‘gains on investments’ - unrealized and realized.

 

The great thing is investors are currently expecting historical (low) returns from Fairfax’s equity portfolio - sustainable higher future returns is not built into Fairfax’s stock price today. 

 

Two things drive earnings at Fairfax:

 

1.) insurance - underwriting profit

2.) investments - average return on investments

 

I think Fairfax’s insurance business and investment portfolio has been slowly, incrementally improving in quality since 2017. If my thesis is correct then future earnings will likely continue to surprise to the upside. It will take years for all the positive changes to fully flow through to earnings. As i stated already, higher earnings = higher ROE = higher P/BV multiple.

Edited March 25, 2024 by Viking

[This2ShallPass]

22 hours ago, Viking said:

Go back to 2017 and look at Fairfax’s equity portfolio. Blackberry was a big position (when you include the debentures). Exco. Fairfax Africa. Farmers Edge. APR Energy. AGT Foods. Mosaic Capital. Astarta. Resolute Forest Products. Recipe. Eurobank.

 

Yes, that's the question I was trying to ask Viking - is Fairfax equity holdings high quality? They have knocked it out of the park in the last 6 years and it's been amazing. But, looking at the equity portfolio list, are the current holdings that different from this list from 2017 (without the benefit of hindsight of course)..

 

Atlas - most metrics have worsened. Not a good industry

Recipe - what has fundamentally changed to make it a better business?

Grivalia - yet to be proven, seems like a jockey bet on the CEO

Kennedy Wilson - down 50% last year and 35% ytd, temporary blip or fundamental issues?

Mining - cyclical industry, why is this different than buying Resolute 10 years back?

John Keels / CIB - is Sri Lanka and Egypt the best places for money. What specific advantage Fairfax has investing in these countries?

BDT/Shaw Kwei - what are their historical returns and why are they different from Mosaic capital

Dexterra - what has changed

 

I'm not suggesting these are poor businesses, but the portfolio is starting to slightly worry me. One of the concerns many here had back in the day was Fairfax always buys very cheap and low quality businesses, how can we be sure they're not going back to old habits. 

 

[Xerxes]

On 3/9/2024 at 3:15 PM, lathinker said:

Do people on this board have toughts on Commercial International Bank ? It is the largest position of the "Common Stocks - Mark-To-Market" section with a value of 480m USD per end of 2023. In the annual letter, Prem states that "The key driver of value to Fairfax and other foreign investors in CIB is the stability of the Egyptian Pound."

 

Well, last week, we learned that the stability is a thing of the past since the EGP was devalued from about 30 to 50 per USD and Egypt received an IMF package. Interest rates stand at 28%:

 

https://www.reuters.com/world/middle-east/egypt-raises-interest-rates-by-600-bps-pound-tumbles-2024-03-06/

 

It is still a small position in relation to FFH and the development may not even harm CIB too much, but it underscores the risks of EM investing.

see this podcast. 
the sheer size of this Emirati FDI in Egypt is staggering. Looks like one of the UAE SWF owns a piece of CIB as well. 
 

[valueventures]

Strathcona is supposed to be releasing earnings tonight and having an earnings call tomorrow. 

[Parsad]

On 3/23/2024 at 9:59 AM, Xerxes said:

Berkshire was not designed with an end goal in mind of what it ought to look like. It sort of happened over the decades, as different opportunities came and some were added. Mostly by being an opportunity at the right time. 
 

Markel in contrast was “architectured” with a clear goal of having a non-insurance business (Ventures) to grow in parallel. Copying Berkshire. 
 

Fairfax copied the float idea from Berkshire (easier said than done of course) but ultimately Fairfax was there first as an investor. The insurance outfit was added  as a source of float to invest (what Ackman wishes to have). I don’t think there is any “architectural” copying from Berkshire except for the float. 
 

One could say Fairfax’ international profile is in deep contrast to Berkshire’ largely domestic business. That takes courage !!

 

Prem was heavily influenced by Sir John Templeton.  They've always had a more global vision for investing/business than any other value team I know of...other than Peter Cundill.  Cheers!

[Parsad]

On 3/25/2024 at 10:39 AM, Viking said:

 

I think Fairfax’s insurance business and investment portfolio has been slowly, incrementally improving in quality since 2017. If my thesis is correct then future earnings will likely continue to surprise to the upside. It will take years for all the positive changes to fully flow through to earnings. As i stated already, higher earnings = higher ROE = higher P/BV multiple.

 

I think this is attributable primarily to Andy Barnard on insurance and Wade Burton/Lawrence Chin on investments.  The culture is now there of quality at a fair price, rather than lesser quality at a great price.  Cheers!

[Viking]

On 3/26/2024 at 9:36 AM, This2ShallPass said:

Yes, that's the question I was trying to ask Viking - is Fairfax equity holdings high quality? They have knocked it out of the park in the last 6 years and it's been amazing. But, looking at the equity portfolio list, are the current holdings that different from this list from 2017 (without the benefit of hindsight of course)..

 

Atlas - most metrics have worsened. Not a good industry

Recipe - what has fundamentally changed to make it a better business?

Grivalia - yet to be proven, seems like a jockey bet on the CEO

Kennedy Wilson - down 50% last year and 35% ytd, temporary blip or fundamental issues?

Mining - cyclical industry, why is this different than buying Resolute 10 years back?

John Keels / CIB - is Sri Lanka and Egypt the best places for money. What specific advantage Fairfax has investing in these countries?

BDT/Shaw Kwei - what are their historical returns and why are they different from Mosaic capital

Dexterra - what has changed

 

I'm not suggesting these are poor businesses, but the portfolio is starting to slightly worry me. One of the concerns many here had back in the day was Fairfax always buys very cheap and low quality businesses, how can we be sure they're not going back to old habits. 

 

 

@This2ShallPass , great discussion. I am preparing a longer post on this topic because I think it is important. 

 

Quick question: how do you define 'high quality'? What metrics/criteria do you look at to help you determine if a company is 'high quality'?

 

[Viking]

16 hours ago, Parsad said:

 

I think this is attributable primarily to Andy Barnard on insurance and Wade Burton/Lawrence Chin on investments.  The culture is now there of quality at a fair price, rather than lesser quality at a great price.  Cheers!

 

@Parsad I wonder if Fairfax has not been a tale of two businesses over the past decade. My guess is the insurance operations have been slowly improving in quality since Andy was put in his role (overseeing all insurance operations) in 2011. Every year Fairfax makes a couple of tweaks to its insurance operations to improve them - in 2023 it was reducing Brit's catastrophe exposure. Bottom line, insurance has been a solid business at Fairfax for the past decade. When I describe Fairfax as a turnaround play I am really doing a dis-service to the insurance operations.

 

Where the wheels came of Fairfax was on the investment side of the business. Yes, global central banks zero interest rate policies stunted the returns of the fixed income portfolio over the past decade (pre-2022). But fixed income wasn't really the problem.

 

Fairfax's problems from 2010-2020 were twofold:

1.) equity hedges / shorts

2.) equity portfolio

 

The first problem has been addressed. And, looking at the decisions the team at Hamblin Watsa has been making over the past 6 years, it looks to me like the second problem has also been addressed. At the AGM I would like to ask Wade Burton a question - what is the investing framework Hamblin Watsa uses today when investing in equities? Have there been any tweaks to the framework over the past 6 years or so? 

Edited March 27, 2024 by Viking

[Parsad]

3 hours ago, Viking said:

 

@Parsad I wonder if Fairfax has not been a tale of two businesses over the past decade. My guess is the insurance operations have been slowly improving in quality since Andy was put in his role (overseeing all insurance operations) in 2011. Every year Fairfax makes a couple of tweaks to its insurance operations to improve them - in 2023 it was reducing Brit's catastrophe exposure. Bottom line, insurance has been a solid business at Fairfax for the past decade. When I describe Fairfax as a turnaround play I am really doing a dis-service to the insurance operations.

 

Where the wheels came of Fairfax was on the investment side of the business. Yes, global central banks zero interest rate policies stunted the returns of the fixed income portfolio over the past decade (pre-2022). But fixed income wasn't really the problem.

 

Fairfax's problems from 2010-2020 were twofold:

1.) equity hedges / shorts

2.) equity portfolio

 

The first problem has been addressed. And, looking at the decisions the team at Hamblin Watsa has been making over the past 6 years, it looks to me like the second problem has also been addressed. At the AGM I would like to ask Wade Burton a question - what is the investing framework Hamblin Watsa uses today when investing in equities? Have there been any tweaks to the framework over the past 6 years or so? 

 

Hi Viking,

 

Yeah, I think that would be a great question.  It would provide more color on the investment strategy at Fairfax going forward.  

 

Cheers!

[SafetyinNumbers]

On 3/26/2024 at 7:12 PM, valueventures said:

Strathcona is supposed to be releasing earnings tonight and having an earnings call tomorrow. 

SCR results looked fine. Confirmed they will reach the debt target to begin dividends at the end of Q2. The stock has already rerated somewhat from the lows but it’s still got a long way to go as it is trading well below NAV.
 

I think the analysts should be looking at it based on where the puck is going which is a tight float, strong execution and a dividend mean a rerating and eventual acquisition to get SCR into the Composite. Their reasons for not owning it have nothing to do with intrinsic value but a concern for where the puck is i.e. low liquidity and not in anyone’s benchmark.
 

Ironically, the tight float makes it easier for the shares to be rerated and some institutions may have already figured it’s better to own the shares before the dividends start and before they do an acquisition at valuation closer to NAV to backdoor their way into the Composite.

 

 

[This2ShallPass]

On 3/27/2024 at 10:16 AM, Viking said:

Quick question: how do you define 'high quality'? What metrics/criteria do you look at to help you determine if a company is 'high quality'?

 

@Viking good question. I can think of some characteristics that make a high quality company. Would love to hear from others also on their definition.

• Have a defensible moat. Something they do that's different than others (most commodity companies fail this test)
• Ability to consistently make money through good times and bad (not feast or famine like cyclical industries)
• Lower capex - no need to pour all the profits back into the business
• Consistent top and bottom line growth
• Solid balance sheet
• Price setters and not takers (again commodity companies fail this one)

Metrics could be growth rates, capital intensity (capex as a % of revenue), consistent FCF generation, debt coverage ratios, return on assets, equity, TBV etc..

 

[SafetyinNumbers]

15 hours ago, This2ShallPass said:

@Viking good question. I can think of some characteristics that make a high quality company. Would love to hear from others also on their definition.

• Have a defensible moat. Something they do that's different than others (most commodity companies fail this test)
• Ability to consistently make money through good times and bad (not feast or famine like cyclical industries)
• Lower capex - no need to pour all the profits back into the business
• Consistent top and bottom line growth
• Solid balance sheet
• Price setters and not takers (again commodity companies fail this one)

Metrics could be growth rates, capital intensity (capex as a % of revenue), consistent FCF generation, debt coverage ratios, return on assets, equity, TBV etc..

 

I can shorten this to anything that screens well.

[Viking]

Change in value of Fairfax’s equity portfolio in Q1 - 2024

 

Fairfax’s equity portfolio (that I track) had a total value of about $19 billion at March 31, 2024. This is an increase of about $585 million (pre-tax) or 3.2%, which is a solid start to 2024.

 

 

I include the FFH-TRS position in the mark to market bucket and at its notional value. 

 

My tracker portfolio is not an exact match to Fairfax’s actual holdings. My summary has been updated to include information from Fairfax’s 2023 annual report.

 

My tracker portfolio is useful only as a tool to understand the rough change in Fairfax’s equity portfolio (and not the precise change).

 

Split of total holdings by accounting treatment

 

About 48% of Fairfax’s equity holdings are mark to market - and will fluctuate each quarter with changes in equity markets. The other 52% are Associate and Consolidated holdings.

 

Over the past couple of years, the share of the mark to market portfolio has been shrinking. This means Fairfax's quarterly results will be less impacted by volatility in equity markets.

 

 

Split of total gains by accounting treatment

 

The total change is an increase of $585 million = $25.45/share

The mark to market change is an increase of $390 million = $16.96/share. The change in this bucket of holdings will show up in ‘net gains (losses) on investments’ (along with changes in the value of the fixed income portfolio) when Fairfax reports results each quarter.

 

 

What were the big movers in the equity portfolio Q1-YTD?

• FFH-TRS is up $311 million. This position is now Fairfax’s second largest holding. 
• Eurobank is up $184 million and it is now Fairfax’s largest equity holding at $2.4 billion.
• Micron Technology is up $127 million. It is now a top-10 holding at $461 million.
• Thomas Cook India is up $108 million. TCIC continues its strong performance. 
• Commercial International Bank is down $118 million. Egypt devaluated its currency 40% on March 7. It is a well run bank. Country is an economic mess.

 

Excess of fair value over carrying value (not captured in book value)

 

For Associate and Consolidated holdings, the excess of fair value to carrying value is about $1,206 million or $52/share (pre-tax). Book value at Fairfax is understated by about this amount.

• Associates:       $722 million = $31/share
• Consolidated:   $484 million = $21/share

Equity Tracker Spreadsheet explained:

 

We have separated holdings by accounting treatment: mark to market, associates – equity accounted, consolidated, other Holdings – total return swaps.

 

We come up with the value of each holding by multiplying the share price by the number of shares. Are holdings are tracked in US$, so non-US holdings have their values adjusted for currency. 

 

This spreadsheet contains errors. It is updates as new and better information becomes available.

 

 

 

 

Fairfax Mar 30 2024.xlsx

Edited March 30, 2024 by Viking

[longlake95]

Viking:

I apologize if you covered this in the various threads already, but, don't you find it very interesting that the TRS counter-party is the Canadian banks. I guess they (the banks) really do have a "Chinese wall", when you have the investment research side of the banks basically all pounding the table on FFH now. If the analysts are already onside/or coming on side recently, as to the value in FFH, then who the hell is making the call to be the counter party to the FFH swaps? Just seems very peculiar.

 

LL

 

[SafetyinNumbers]

1 minute ago, longlake95 said:

Viking:

I apologize if you covered this in the various threads already, but, don't you find it very interesting that the TRS counter-party is the Canadian banks. I guess they (the banks) really do have a "Chinese wall", when you have the investment research side of the banks basically all pounding the table on FFH now. If the analysts are already onside/or coming on side recently, as to the value in FFH, then who the hell is making the call to be the counter party to the FFH swaps? Just seems very peculiar.

 

LL

 

I hope Viking doesn’t mind me responding but I’m almost certain the Canadian banks that are acting as counterparties are fully hedged (i.e. they own the shares directly). The play here is the income they earn on financing the TRS for FFH. They are not betting against FFH, they are simply providing credit.

[longlake95]

Just now, SafetyinNumbers said:

I hope Viking doesn’t mind me responding but I’m almost certain the Canadian banks that are acting as counterparties are fully hedged (i.e. they own the shares directly). The play here is the income they earn on financing the TRS for FFH. They are not betting against FFH, they are simply providing credit.

okay, that makes sense, thanks, so the banks are the middle man... would love to know who the underlying counterparty is...

[SafetyinNumbers]

54 minutes ago, longlake95 said:

okay, that makes sense, thanks, so the banks are the middle man... would love to know who the underlying counterparty is...

FFH is long the swaps, Canadian banks are short the swaps and long FFH. I think that’s the whole picture. It could be if someone wanted to go short FFH via swaps, the banks would take the other side and sell some shares to offset their net position but that’s likely marginal at best.

[dartmonkey]

25 minutes ago, SafetyinNumbers said:

FFH is long the swaps, Canadian banks are short the swaps and long FFH. I think that’s the whole picture. 

Yes, it’s pretty unlikely they found counterparties that wanted 2 million shares’ worth of short exposure, when the shares were trading at US$373, so this explanation makes sense. In other words, FFH is long 2m shares and the banks are neutral. It’s basically just a dressed up share repurchase. Which also suggests that counting it as a long position and tracking its returns is a bit odd, since you wouldn’t do that with repurchased shares, if they had structured the transaction that way.