Fairfax stock positions

[SafetyinNumbers]

1 hour ago, petec said:

 

Them and me both. 

 

Couple of questions. First, I think they've bought more than they announced here - why would this be? Source: 

 

 

Second: is this disclosure normal in an announcement like this? 

 

The Common Shares are being acquired by Fairfax for investment purposes and in the future, it may discuss with management and/or the board of directors any of the transactions listed in clauses (a) to (k) of item 5 of Form F1 of National Instrument 62-103 – The Early Warning System and Related Take-over Bid and Insider Reporting Issues.

 

I ask because I could see FFH leading an MBO. FFH and management already own ~50% of the shares between them. Free cash flow yield to equity is nearly 50%. There's a lot of debt, but it would obviously be non-recourse to FFH (like Poseidon) and it is being paid down fast. There are too many rigs in North America but the market is slowly, inexorably tightening driven by 4 factors:

• ROCE at current dayrates is well below replacement cost so nobody is building new land rigs (except Saudi).
• Current drilling techniques are very wear-intensive so rigs are slowly being eliminated from the fleet.
• International drilling is starting to demand higher spec rigs so rigs are leaving North America.
• LNG will spur more drilling for gas.

All these factors are offset by continued gains in efficiency (fewer rigs can do more work) but as long as rigs are not being built the net movement has to be towards a tighter market, I think. That means FCF is more likely to rise than fall over FFH's long term time horizon. And an MBO would get them into bed with Murray Edwards, Ensign's Chairman and the founder of CNQ, arguably one of the greatest Canadian entrepreneurs and capital allocators of them all.

 

So, that bit of disclosure caught my eye. Or is it boilerplate?

 

Thanks, P

 

 

Not throwing cold water on a potential MBO but technically they have to file an early warning report for every 2% they buy after the initial EWR when they cross 10%. The most recent purchase pushed them through the next 2% threshold which triggered the EWR and press release.

[petec]

57 minutes ago, SafetyinNumbers said:

Not throwing cold water on a potential MBO but technically they have to file an early warning report for every 2% they buy after the initial EWR when they cross 10%. The most recent purchase pushed them through the next 2% threshold which triggered the EWR and press release.

 

Perfect, that's what I needed, thanks.

[Junior R]

9 hours ago, petec said:

 

Them and me both. 

 

Couple of questions. First, I think they've bought more than they announced here - why would this be? Source: 

 

 

Second: is this disclosure normal in an announcement like this? 

 

The Common Shares are being acquired by Fairfax for investment purposes and in the future, it may discuss with management and/or the board of directors any of the transactions listed in clauses (a) to (k) of item 5 of Form F1 of National Instrument 62-103 – The Early Warning System and Related Take-over Bid and Insider Reporting Issues.

 

I ask because I could see FFH leading an MBO. FFH and management already own ~50% of the shares between them. Free cash flow yield to equity is nearly 50%. There's a lot of debt, but it would obviously be non-recourse to FFH (like Poseidon) and it is being paid down fast. There are too many rigs in North America but the market is slowly, inexorably tightening driven by 4 factors:

• ROCE at current dayrates is well below replacement cost so nobody is building new land rigs (except Saudi).
• Current drilling techniques are very wear-intensive so rigs are slowly being eliminated from the fleet.
• International drilling is starting to demand higher spec rigs so rigs are leaving North America.
• LNG will spur more drilling for gas.

All these factors are offset by continued gains in efficiency (fewer rigs can do more work) but as long as rigs are not being built the net movement has to be towards a tighter market, I think. That means FCF is more likely to rise than fall over FFH's long term time horizon. And an MBO would get them into bed with Murray Edwards, Ensign's Chairman and the founder of CNQ, arguably one of the greatest Canadian entrepreneurs and capital allocators of them all.

 

So, that bit of disclosure caught my eye. Or is it boilerplate?

 

Thanks, P

 

 

Would add if they pay dividend ..Undervalued company

[petec]

3 hours ago, Junior R said:

Would add if they pay dividend ..Undervalued company

 

No way. Repaying debt is very additive here. Not only does market cap rise if EV stays the same, but ev/ebitda multiple will rise as debt comes down and risk reduces (all else equal). Dividend would be dumb here. Target is to repay $600m of debt 2023-2026; they are halfway through, and once that's done they've said they will consider returns to shareholders. But debt has to come first. Added today.

[nwoodman]

https://cyprus-mail.com/2024/08/07/eurobank-completes-mandatory-public-offer-for-hellenic-bank-shares/#
 

“Finally, according to the bank’s articles of association, nominations for the position of director can be submitted by shareholders from August 4, 2024, until the close of business (2:30 p.m. Cyprus time) on August 30, 2024.”

 

Still intrigued to learn whether Hellenic’s current concentrated shareholder base is consistent with listing rules.  Either way it’s an interesting stalemate in terms of a full takeover.  My only concern is the likes of Demetra and ETYK keep agitating for reversal of the merger.  A reversal is highly unlikely, so more an irritation.

[nwoodman]

From Bloomberg: Imports Are Surging Again at US Ports, But Without the Logjams

 

“Today, despite worries about a softening economy, the busiest US port complex — Los Angeles and Long Beach, which account for roughly a third of all container imports to the country — is processing import volumes near the highs set during the pandemic.

The complex had its third-strongest month ever in July, just shy of an all-time high reached in May 2021. Total US container imports through major ports this year will reach 24.9 million measured in 20-foot equivalent units, close to 2021 and 2022 levels that topped 25 million, according the National Retail Federation.”

 

 

“In addition to back-to-school demand and preparation for the year-end holiday season that typically sees an uptick in activity this time of year, volumes have also been affected by moves to build up inventories ahead of potential increases in US tariffs on Chinese goods.”

 

[wondering]

https://www.theglobeandmail.com/business/article-ccm-bauer-true-hockey-sale/

 

"

CCM Hockey, Bauer Hockey LLC and the hockey division of True Temper Sports are all being auctioned by their long-time owners, according to two sources involved in the sales process. The Globe and Mail is not naming the sources because they are not permitted to publicly comment for their employers.

Bauer and True Temper are attempting to take advantage of buyer interest generated by CCM, the first business to hit the market, according to the sources"

 

"

Sagard and Fairfax acquired Bauer out of bankruptcy in 2017 for US$575-million and are targeting a US$800-million exit, according to one of the sources. Bauer’s EBITDA is just more than US$100-million annually, the source said.

In early August, Bauer’s advisers received expressions of interest from 11 potential buyers and moved to the next stage of the sale process with eight players, including several U.S. private equity funds, according to the source, and several bidders for Bauer also looked at CCM."

 

"Bauer set a Sept. 16 deadline to move forward with a maximum of four bidders, and plans to be in the final round of negotiations with one buyer by the end of October, the source said"

 

According to the 2023 shareholder letter Peak Performance (Bauer) has a carrying value of $129M and a market value of $226M.  They actually paid $154M in 2017.  They received $54M in dividends which I guess brought down the carrying value to 129M.

 

At the moment, I can't find their percentage share of Peak Performance.

 

[StubbleJumper]

49 minutes ago, wondering said:

According to the 2023 shareholder letter Peak Performance (Bauer) has a carrying value of $129M and a market value of $226M.  They actually paid $154M in 2017.  They received $54M in dividends which I guess brought down the carrying value to 129M.

 

Yeah, that one wasn't a home run.  They won't lose money on it but you'd hope for a double-digit return when you buy a speciality business out of bankruptcy.

 

 

SJ

Edited August 24 by StubbleJumper

[SafetyinNumbers]

2 hours ago, wondering said:

According to the 2023 shareholder letter Peak Performance (Bauer) has a carrying value of $129M and a market value of $226M.  They actually paid $154M in 2017.  They received $54M in dividends which I guess brought down the carrying value to 129M.

 

At the moment, I can't find their percentage share of Peak Performance.

 

They own 43% according to the annual report.
 

Given the  purchase price, return of capital from dividends and the rumoured selling price that seems to easily be a double digit return. Also another source of Q4 gains that analysts aren’t factoring in to their estimates.

 

 

Edited August 24 by SafetyinNumbers

[StubbleJumper]

3 minutes ago, SafetyinNumbers said:

They own 43% according to the annual report.
 

Given the  purchase price, return of capital from dividends and the rumoured selling price that seems to easily be a double digit return. Also another source of Q4 gains that analysts aren’t factoring in to their estimates.

 

Well, I hope you are right, but I haven't seen any combination of rumoured capital gains or annual divvies that gets me to a 10%+ annualized return.  A US$575m acquisition cost and a US$800m sale would be fine if it were a one-year or a two-year hold...but it's been seven years and by the time they get the cash it could be eight years.

 

 

SJ

[SafetyinNumbers]

2 hours ago, StubbleJumper said:

 

Well, I hope you are right, but I haven't seen any combination of rumoured capital gains or annual divvies that gets me to a 10%+ annualized return.  A US$575m acquisition cost and a US$800m sale would be fine if it were a one-year or a two-year hold...but it's been seven years and by the time they get the cash it could be eight years.

 

 

SJ

I guess it depends on how you carefully you calculate returns. The EV of the acquisition was $575m but that must have included some debt as FFH only put up $154m. They have received $72m of dividends so far reducing the net investment to $82m. The rumoured selling price of $800m seems low for the whole EV with EBITDA north of $100m so my guess is that is just for the equity. 
 

I’m not sure why it will take a year to close but to achieve a 10% CAGR (i.e. double digit), they would need to receive net proceeds of $330m less the present value of the dividends received already but if we don’t give them much credit there, they only need to clear ~$250m on the sale which is ~$600m for the equity value. That means there could be $200m in debt included in the $800m selling price. 
 

It’s another ~$6+ in earnings that no analyst is forecasting.

 

 

Edited August 24 by SafetyinNumbers

[StubbleJumper]

51 minutes ago, SafetyinNumbers said:

I guess it depends on how you carefully you calculate returns. The EV of the acquisition was $575m but that must have included some debt as FFH only put up $154m. They have received $72m of dividends so far reducing the net investment to $82m. The rumoured selling price of $800m seems low for the whole EV with EBITDA north of $100m so my guess is that is just for the equity. 
 

I’m not sure why it will take a year to close but to achieve a 10% CAGR (i.e. double digit), they would need to receive net proceeds of $330m less the present value of the dividends received already but if we don’t give them much credit there, they only need to clear ~$250m on the sale which is ~$600m for the equity value. That means there could be $200m in debt included in the $800m selling price. 
 

It’s another ~$6+ in earnings that no analyst is forecasting.

 

 

 

Yes, if Sagard put in some debt and FFH's position were leveraged, that would improve the net result. 

 

No, it shouldn't take a year to close this transaction.  The reason why it might end up being an 8-yr hold for FFH is that Bauer isn't quite sold yet.  According to the Globe article, FFH is probably hoping to complete the negotiations in late-fall 2024, and then it would typically be a couple of months later that the transaction actually closes (assuming no regulatory issues).  If the negotiations drag out for a couple of months longer than hoped or if a buyer's existing business triggers the involvement of competition agencies that could also cause it drag on a couple of months (ie, there aren't many manufacturers of hockey equipment).  My understanding was the purchase was consummated in early 2017, so it wouldn't be a shocker to me if this one ends up dragging into early 2025 and becomes an 8-yr hold.  But, time will tell.

 

 

SJ

Edited August 24 by StubbleJumper

[SafetyinNumbers]

1 hour ago, StubbleJumper said:

 

Yes, if Sagard put in some debt and FFH's position were leveraged, that would improve the net result. 

 

No, it shouldn't take a year to close this transaction.  The reason why it might end up being an 8-yr hold for FFH is that Bauer isn't quite sold yet.  According to the Globe article, FFH is probably hoping to complete the negotiations in late-fall 2024, and then it would typically be a couple of months later that the transaction actually closes (assuming no regulatory issues).  If the negotiations drag out for a couple of months longer than hoped or if a buyer's existing business triggers the involvement of competition agencies that could also cause it drag on a couple of months (ie, there aren't many manufacturers of hockey equipment).  My understanding was the purchase was consummated in early 2017, so it wouldn't be a shocker to me if this one ends up dragging into early 2025 and becomes an 8-yr hold.  But, time will tell.

 

 

SJ

If you do all of your analysis without looking at the facts or doing any math I can see why you think FFH forward ROE is 10-12%.

[StubbleJumper]

37 minutes ago, SafetyinNumbers said:

If you do all of your analysis without looking at the facts or doing any math I can see why you think FFH forward ROE is 10-12%.

 

Yeah, we'll likely see in the Q1 or Q2 how this one turns out.
 

SJ

[Viking]

Change in value of Fairfax’s equity portfolio QTD (July 1 – Aug 23) 2024

 

Fairfax’s equity portfolio (that I track) increased in value QTD in Q3 (to Aug 23) by about $650 million (pre-tax) or 3.3%, which is a solid result. It had a total value of about $20.6 billion at August 23, 2024. After being a headwind in 1H 2024 (US$ strength), currency flipped to being a tailwind in Q3 (US$ weakness).

 

 

Notes:

• I include the FFH-TRS position in the mark to market bucket and at its notional value. I also include warrants and debentures that Fairfax holds in the mark to market bucket.

My tracker portfolio is not an exact match to Fairfax’s actual holdings. It 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 46% of Fairfax’s equity holdings are mark to market - and will fluctuate each quarter with changes in equity markets. The other 54% are Associates and Consolidated holdings. Over the past couple of years, the share of the mark to market holdings has been shrinking. This means Fairfax's quarterly reported results will be less impacted by volatility in equity markets.

 

 

 Split of total gains by accounting treatment

 

The total change is an increase of about $650 million = $29/share

The mark to market change is an increase of about $172 million = $8/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 each quarter.

 

 

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

• Stelco is up $273 million. Fairfax will book an estimated pre-tax gain of $390 million on the sale of its 13 million shares in Stelco. The sale is expected to close in Q4 2024.
• Eurobank is up $204 million. Currency is a tailwind QTD (strong Euro).
• The FFH-TRS is up $81 million and is now Fairfax’s second largest holding at $2.2 billion.
• Quess continues its big move higher, and is up another $78 million. Market value of $447 million now exceeds carrying value of $432 million.
• Thomas Cook India, down $103 million, gave back some of its recent gains. Market value of $767 million significantly exceeds carrying value of $214 million.

 

 

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 $2.0 billion pre-tax ($88/share), up about $300 million QTD. The 'excess' of FV to CV has been materially increasing in recent years. This is one good example of how book value at Fairfax is understated.

 

Excess of FV over CV:

• Associates:           $1.3 billion = $59/share
• Consolidated:       $656 million = $30/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 updated as new and better information becomes available.

 

 

 

 

 

Edited August 25 by Viking

[Viking]

I am in the process of getting back up to speed on Poseidon. With profitability at the company spiking (as the new-builds come on line) and interest rates come back down my guess is this investment is poised to outperform (perhaps significantly) in the coming years. This is Fairfax's 3rd largest equity holding (after Eurobank and FFH-TRS) so this would be very good news for Fairfax and its shareholders.  

 

I have a question for board members: What type of an investment is Poseidon (well really Seaspan)? What other company is it mostly like?

 

It is in the containership industry. But from a functional perspective, with its contracted/stable long term cash flow business model, is Poseidon (the Seaspan part) in practice more a utility-like business? 

 

Is Poseidon (the Seaspan part) kind of like Fairfax's equivalent of Berkshire Hathaway's Mid-American energy? Not an exact match of course. 

 

My guess it's not a fluke that Sokol, who was the architect of Mid-American Energy when he has at Berkshire Hathaway, chose Seaspan/Atlas as his next act. Are the two businesses more similar than is generally recognized? 

 

Anyways, how do other board members view this investment?

 

Edited August 26 by Viking

[nwoodman]

1 hour ago, Viking said:

What other company is it mostly like?

 

AerCap springs to mind.  Maybe GATX.  However there is an operational/service aspect that is unique to Seaspan (crew, maintenance, compliance etc). I always figured between capital allocation and the ops side of the business it was a good fit for Sokol. 

Edited August 26 by nwoodman

[petec]

6 hours ago, nwoodman said:

AerCap springs to mind.  Maybe GATX.  However there is an operational/service aspect that is unique to Seaspan (crew, maintenance, compliance etc). I always figured between capital allocation and the ops side of the business it was a good fit for Sokol. 

 

Exactly this. It is Aercap without the rational OEM suppliers. 

 

If you want a simple sector comparison then it is a specialist investment bank. It captures the spread between the capital it can raise and the capital it can lease out. Being a great operator and having a good platform matters but really, as in investment and insurance, the only real differentiator in the long term is management. 

 

It is definitely not a utility, since these tend to be characterised by local monopolies and regulated returns.

[Viking]

Peak Achievement (Bauer, Easton/Rawlings & Maverick)

 

In February of 2017, Fairfax partnered with Paul Desmarais III and his team at Sagard Capital to purchase Performance Sports out of bankruptcy. The new company was re-named Peak Achievements. Fairfax paid $154 million for a 42.6% equity and 50% voting interest in Peak.

 

At the time of purchase, Performance Sports housed three of the top sports brands in North America:

• Bauer - the leading brand in hockey
• Easton - the #3 brand in baseball
• Maverik - a leading brand in lacrosse

In 2020, Peak partnered with Rawlings’ controlling shareholder, Seidler Equity Partners, and merged Easton with Rawlings. Peak received a payment of $65 million and a 28% interest in Rawlings. In Q2-2024, Peak sold its 28% stake in Rawlings. The sale amount was not disclosed; share of profit of associates for Peak in Q2-2024 was a significant $31.5 million.

 

It should be note that Covid in 2020 and 2021 hit sports manufacturers especially hard.

 

Is Peak up for sale?

 

There are fresh reports that Bauer is now up for sale (or do they mean Peak?).

 

From the article in the Globe & Mail:

 

“Sagard and Fairfax acquired Bauer out of bankruptcy in 2017 for US$575-million and are targeting a US$800-million exit, according to one of the sources. Bauer’s EBITDA is just more than US$100-million annually, the source said.

 

“In early August, Bauer’s advisers received expressions of interest from 11 potential buyers and moved to the next stage of the sale process with eight players, including several U.S. private equity funds, according to the source, and several bidders for Bauer also looked at CCM.

 

“Bauer set a Sept. 16 deadline to move forward with a maximum of four bidders, and plans to be in the final round of negotiations with one buyer by the end of October, the source said.”

• https://www.theglobeandmail.com/business/article-ccm-bauer-true-hockey-sale/#:~:text=Sagard%20and%20Fairfax%20acquired%20Bauer,to%20one%20of%20the%20sources.

Financial overview

 

In February of 2017, Fairfax paid $154 million for a 42.6% stake in Peak. Over the subsequent 6.80 years (to December 31, 2023), Fairfax has received total dividend payments from Peak of $72 million. Given the sale of Rawlings in Q2, we could see an outsized dividend payment to Fairfax in 2024.

 

Assuming the fair value estimate for Peak is accurate, Fairfax has earned a total return of about 94% on its investment over the past 6.8 years (to Dec 31, 2023) = CAGR of 10%.

 

 

Summary

 

Despite Covid related challenges in 2020/2021 (bad luck), over the past 6.8 years, Peak has developed into a solid business/investment for Fairfax. If the company is sold in the coming months at a premium to ‘fair value’ it would likely become a very good investment for Fairfax.

 

Summary of financial information provided by Fairfax

 

—————

Notes from Fairfax annual and quarterly reports:

 

2024 Q2 Report

 

Consolidated share of profit of associates of $221.4 in the second quarter of 2024 principally reflected share of profit of $126.1 from Eurobank, $66.5 from Poseidon and $31.5 from Peak Achievement (principally reflecting its sale of Rawlings Sporting Goods), partially offset by share of loss of $39.0 from Sanmar Chemicals Group.

 

2023AR

 

Fairfax continues to jointly own Peak Achievement with our partner, Sagard Holdings. Peak’s core brands are Bauer, the leading hockey brand, and Maverik, a leading lacrosse brand. Peak also owns a minority investment in Rawlings, which is the number one brand in baseball. Fairfax paid $154 million for its stake in Peak in 2017. Since that time, EBITDA has increased steadily in the hockey and lacrosse businesses, and Fairfax has received $72 million in dividends. Hockey participation growth continues post-pandemic and exciting developments such as Bauer’s partnership with the new Professional Women’s Hockey League are expected to drive incremental girls’ participation. More to come under CEO Ed Kinnaly’s leadership, with opportunities in direct-to-consumer, apparel and training. We carry Peak on our balance sheet at less than 5x free cash flow.

 

2020AR

 

Fairfax continues to jointly own Peak Achievement with our partner, Sagard Holdings led by Paul Desmarais III. Peak’s core assets are Bauer, the leading hockey brand, and Easton, the number three manufacturing player in baseball. During 2020 Peak merged Easton with Rawlings, the clear number one manufacturer in baseball. The transaction resulted in $65 million cash paid to Peak, while retaining a 28% stake in Rawlings. Peak is now partnered with Rawlings’ controlling shareholder, Seidler Equity Partners. Fairfax recognized a $15 million gain on the sale of Easton which closed just before year end.

 

2017AR

 

On March 1, 2017 the restructuring of Performance Sports Group Ltd. (‘‘PSG’’) was substantially completed after all of the assets and certain related operating liabilities of PSG were sold to an intermediate holding company (‘‘Performance Sports’’) co-owned by Fairfax and Sagard Holdings Inc. The company’s $153.5 equity investment in Performance Sports represents a voting interest of 50.0% and an equity interest of 42.6%. On April 3, 2017 Performance Sports was renamed Peak Achievement Athletics Inc. (‘‘Peak Achievement’’).

 

2016AR

 

Also, early in 2017 we partnered with Paul Desmarais III and his excellent team at Sagard Capital to purchase Performance Sports. Performance Sports is the owner of the leading names in hockey, baseball and lacrosse equipment: Bauer, Easton and Cascade.

—————

Performance Sports Group completes sale of substantially all of its assets to investor group led by Sagard and Fairfax Financial (article from Feb 27, 2017)

• https://www.torys.com/en/work/2016/10/52382aeb-7e85-42dd-903c-309be9bb261a

Edited August 27 by Viking

[adventurer]

Hello all,

 

consider the excerpt attached of the Fairfax annual letter for 2023. I don`t understand how Exco Resources is being carried at $418 million or $18,24 per share on the balance sheet while the company itself has never reached that valuation. 

What am I missing?

[SafetyinNumbers]

1 minute ago, adventurer said:

Hello all,

 

consider the excerpt attached of the Fairfax annual letter for 2023. I don`t understand how Exco Resources is being carried at $418 million or $18,24 per share on the balance sheet while the company itself has never reached that valuation. 

What am I missing?

It’s equity accounted for since FFH owns more than 20% and less than 50%. FFH increases the carrying value by its share of earnings every quarter. The trading price in the illiquid OTC trading market isn’t relevant. 

[adventurer]

18 minutes ago, SafetyinNumbers said:

It’s equity accounted for since FFH owns more than 20% and less than 50%. FFH increases the carrying value by its share of earnings every quarter. The trading price in the illiquid OTC trading market isn’t relevant. 

Ah ok, so due to the equity accounting method profits over the years increased the value of the investment even though the company`s market cap never reached that amount.

The company has a market cap of approx. $200 million. Does anyone know when FFH invested in Exco for the first time? Because over $218 million in profits seems like a lot. 

[SafetyinNumbers]

3 hours ago, adventurer said:

Ah ok, so due to the equity accounting method profits over the years increased the value of the investment even though the company`s market cap never reached that amount.

The company has a market cap of approx. $200 million. Does anyone know when FFH invested in Exco for the first time? Because over $218 million in profits seems like a lot. 

They had a bond investment that was reorganized into equity during bankruptcy in 2019. 
 

[TwoCitiesCapital]

4 hours ago, adventurer said:

Ah ok, so due to the equity accounting method profits over the years increased the value of the investment even though the company`s market cap never reached that amount.

 

Correct. The carrying value is increased for their proportional earnings and decreased for any dividends paid. 

 

It's a bit of a crude mechanism assuming the purchase price plus retained earnings is the value, but it's grounded in reason. 

[SafetyinNumbers]

5 hours ago, TwoCitiesCapital said:

 

Correct. The carrying value is increased for their proportional earnings and decreased for any dividends paid. 

 

It's a bit of a crude mechanism assuming the purchase price plus retained earnings is the value, but it's grounded in reason. 

The mechanics are interesting and help explain why consensus estimates are way too low on any FTM period. Eurobank for example trades at ~6x earnings but our carrying value is lower than the market value so the earnings yield boosts returns of the non-fixed income portfolio disproportionately especially given its size. 

Edited August 28 by SafetyinNumbers