Fairfax stock positions

[dartmonkey]

I hate to bring up this painful subject, but...

 

What the hell is happening at Blackberry?

 

Recap from last year's AR:

 

We got our money back on our convertible ($167 million in 2020, $183 million in 2023 and $150 million in 2024) plus cumulative interest income of approximately $200 million. Our common stock position as of 2023 ($162 million or 8% of the company) which was acquired at a cost of $17.16 per share was valued on our balance sheet at $3.54 per share. Another horrendous investment by your Chairman.

 

At $3.54 at the end of 2023, this would mean they owned 45.8m shares, which is what they reported on p.15 of the report. Dataroma says they have 46.7m, maybe because Watsa owns some personally, but let's take that 45.8m, assuming they have neither bought nor sold any shares. A year later, the share price was much the same, $3.68, after trading as low as $2.01 during the year 2024. But in the last 6 weeks, the price has soared, to $6.20 right now, or up 68% year to date, in a flat market. Ok, that's only a gain of $115m, which is small fry for Fairfax nowadays, but still, it's something.

 

And I can't see any news that would justify this: Blackberry just sold off their cybersecurity business (Cylance) at a huge loss, and are focusing on Internet of Things (IoT), whose revenues are growing a bit (13% last year, to all of $62m...), and now they are trying to give away the software (QNX) to engineers in India and elsewhere in the hope that it will become a standard. 

 

Blackberry's current market cap is $3.7b, hard to fathom. Is there speculation they might be acquired? As a long-suffering Fairfax shareholder, I can only dream...

[dartmonkey]

I hate to bring up this painful subject, but...

 

What the hell is happening at Blackberry?

 

Recap from last year's AR:

 

We got our money back on our convertible ($167 million in 2020, $183 million in 2023 and $150 million in 2024) plus cumulative interest income of approximately $200 million. Our common stock position as of 2023 ($162 million or 8% of the company) which was acquired at a cost of $17.16 per share was valued on our balance sheet at $3.54 per share. Another horrendous investment by your Chairman.

 

At $3.54 at the end of 2023, this would mean they owned 45.8m shares, which is what they reported on p.15 of the report. Dataroma says they have 46.7m, maybe because Watsa owns some personally, but let's take that 45.8m, assuming they have neither bought nor sold any shares. A year later, the share price was much the same, $3.68, after trading as low as $2.01 during the year 2024. But in the last 6 weeks, the price has soared, to $6.20 right now, or up 68% year to date, in a flat market. Ok, that's only a gain of $115m, which is small fry for Fairfax nowadays, but still, it's something.

 

And I can't see any news that would justify this: Blackberry just sold off their cybersecurity business (Cylance) at a huge loss, and are focusing on Internet of Things (IoT), whose revenues are growing a bit (13% last year, to all of $62m...), and now they are trying to give away the software (QNX) to engineers in India and elsewhere in the hope that it will become a standard. 

 

Blackberry's current market cap is $3.7b, hard to fathom. Is there speculation they might be acquired? As a long-suffering Fairfax shareholder, I can only dream...

[dartmonkey]

I hate to bring up this painful subject, but...

 

What the hell is happening at Blackberry?

 

Recap from last year's AR:

 

We got our money back on our convertible ($167 million in 2020, $183 million in 2023 and $150 million in 2024) plus cumulative interest income of approximately $200 million. Our common stock position as of 2023 ($162 million or 8% of the company) which was acquired at a cost of $17.16 per share was valued on our balance sheet at $3.54 per share. Another horrendous investment by your Chairman.

 

At $3.54 at the end of 2023, this would mean they owned 45.8m shares, which is what they reported on p.15 of the report. Dataroma says they have 46.7m, maybe because Watsa owns some personally, but let's take that 45.8m, assuming they have neither bought nor sold any shares. A year later, the share price was much the same, $3.68, after trading as low as $2.01 during the year 2024. But in the last 6 weeks, the price has soared, to $6.20 right now, or up 68% year to date, in a flat market. Ok, that's only a gain of $115m, which is small fry for Fairfax nowadays, but still, it's something.

 

And I can't see any news that would justify this: Blackberry just sold off their cybersecurity business (Cylance) at a huge loss, and are focusing on Internet of Things (IoT), whose revenues are growing a bit (13% last year, to all of $62m...), and now they are trying to give away the software (QNX) to engineers in India and elsewhere in the hope that it will become a standard. 

 

Blackberry's current market cap is $3.7b, hard to fathom. Is there speculation they might be acquired? As a long-suffering Fairfax shareholder, I can only dream...

[TwoCitiesCapital]

54 minutes ago, dartmonkey said:

I hate to bring up this painful subject, but...

 

What the hell is happening at Blackberry?

 

Recap from last year's AR:

 

We got our money back on our convertible ($167 million in 2020, $183 million in 2023 and $150 million in 2024) plus cumulative interest income of approximately $200 million. Our common stock position as of 2023 ($162 million or 8% of the company) which was acquired at a cost of $17.16 per share was valued on our balance sheet at $3.54 per share. Another horrendous investment by your Chairman.

 

At $3.54 at the end of 2023, this would mean they owned 45.8m shares, which is what they reported on p.15 of the report. Dataroma says they have 46.7m, maybe because Watsa owns some personally, but let's take that 45.8m, assuming they have neither bought nor sold any shares. A year later, the share price was much the same, $3.68, after trading as low as $2.01 during the year 2024. But in the last 6 weeks, the price has soared, to $6.20 right now, or up 68% year to date, in a flat market. Ok, that's only a gain of $115m, which is small fry for Fairfax nowadays, but still, it's something.

 

And I can't see any news that would justify this: Blackberry just sold off their cybersecurity business (Cylance) at a huge loss, and are focusing on Internet of Things (IoT), whose revenues are growing a bit (13% last year, to all of $62m...), and now they are trying to give away the software (QNX) to engineers in India and elsewhere in the hope that it will become a standard. 

 

Blackberry's current market cap is $3.7b, hard to fathom. Is there speculation they might be acquired? As a long-suffering Fairfax shareholder, I can only dream...

 

I don't know how to value it, but I know back when I was following Blackberry that there was supposedly large value tied up in the patents that they own that they could license or sell. 

 

The market cap might be more reflecting the value of a competitor acquiring the patent portfolio versus anything the operating businesses are doing. 

 

I had hoped Fairfax would exit in the euphoria of 2021 that took this over $10/share. Hoping again they sell now just to get the money invested productively. But I tend to agree that it is rounding error for their overall portfolio at this point and have largely stopped following/caring about the position as a result. 

[nwoodman]

4 hours ago, petec said:

 

I would add two things:

1) there's virtually no equity in the deal, so the junior part of the debt is effectively equity, and is earning equity-like returns as a result, which looks right.

2) these rates are not out of line with what I read about in the secured private credit market.

 

Obviously we don't know the asset economics so we can't judge whether Fairfax are getting adequately paid for the risk, but the rates don't stand out to me as worrying per se.

 

4 hours ago, petec said:

 

I would add two things:

1) there's virtually no equity in the deal, so the junior part of the debt is effectively equity, and is earning equity-like returns as a result, which looks right.

2) these rates are not out of line with what I read about in the secured private credit market.

 

Obviously we don't know the asset economics so we can't judge whether Fairfax are getting adequately paid for the risk, but the rates don't stand out to me as worrying per se.

These are important points, and the second one is something I’ve been thinking about a lot since the CC. This deal gives a glimpse into the kind of earnings power that comes from shifting a portion of the fixed-income portfolio from safe treasuries into higher-yield corporates. They have been telegraphing this intent for a couple of years now.

 

I’m not saying that shift has fully started yet—you probably need some real stress in credit markets for that to accelerate—and even then, it’s only ever going to be a portion (maybe 25% at most?) of the FI portfolio, given RBC constraints and regulatory capital rules.  That said, it illustrates how much earnings power can change under these conditions. As you pointed out, it’s easy to be anchored to a decade of low rates, but these yields aren't necessarily outliers in an HFL (higher-for-longer) environment.

 

I still don’t think that kind of optionality is being priced in. If Fairfax continues to lean into private credit and structured high-yield deals like this, the long-term earnings profile of the fixed-income book could look very different from what the market is currently expecting.

[dartmonkey]

3 hours ago, TwoCitiesCapital said:

 

I don't know how to value it, but I know back when I was following Blackberry that there was supposedly large value tied up in the patents that they own that they could license or sell. 

 

The market cap might be more reflecting the value of a competitor acquiring the patent portfolio versus anything the operating businesses are doing. 

 

I had hoped Fairfax would exit in the euphoria of 2021 that took this over $10/share. Hoping again they sell now just to get the money invested productively. But I tend to agree that it is rounding error for their overall portfolio at this point and have largely stopped following/caring about the position as a result. 

John Chen took over in 2013 and I thought the hypothesis was that the patent portfolio was worth a fortune. Ten years later, I doubt it.

 

I guess having Blackberry in that 13-F investment profile probably helps us keep the share price low and maximizes the value of share repurchases. But I would still be happy to see it gone, even if the repurchase window closes, and maybe now that Watsa is off the Blackberry board (Feb 15 2024) it can happen this time...

[Viking]

Fairfax’s equity portfolio (that I track) increased in market value from December 31, 2024 to February 18, 2025, by about $726 million (pre-tax). The equity portfolio had a total value of about $22.0 billion at February 18, 2025.

 

Included in our estimates is information from Fairfax’s Q4-2024-13F and its year-end earnings news release on February 13, 2025. When Fairfax releases their annual report (March 7th) we will get updates to lots of important information, especially the YE 2024 carrying values of many of the large associate and consolidated equity holdings. 

 

 

Notes:

• The FFH-TRS position is included in the mark to market bucket and at its notional value. The warrants and debentures captured are also included in the mark to market bucket.

The ‘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).

 

The ‘tracker portfolio’ does not include the following:

• Any change in value of Digit, Fairfax's publicly traded P/C insurance company in India.

Split of holdings by accounting treatment

 

About 47% of Fairfax’s equity holdings are mark to market - and will fluctuate each quarter with changes in equity markets. The other 53% are Associates and Consolidated holdings. The Sleep Country and Peak Achievement (Bauer) acquisitions closed in Q4. We have included a guess of the carrying value for these two holdings – it will be updated when Fairfax releases its annual report.

 

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 $726 million = $33/share (pre-tax)
• The mark to market change is an increase of about $452 million = $21/share.

 

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

 

The usual suspects continue to perform very well - Eurobank and FFH-TRS. Fairfax India's stock price has spiked higher to start the new year. Not sure what is up with Blackberry's big move higher. Orla Mining (a gold stock) continued to run higher which is not surprising given the big move in the price of gold. At the same time, after a strong 2-year run higher, stocks in India have been selling off in recent months.

 

 

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

 

For Associate and Consolidated holdings (in my tracker), the excess of fair value to carrying value is about $1.48 billion pre-tax ($68/share). The 'excess of FV to CV’ has been materially increasing in recent years. This is economic value that has been created by Fairfax that is not captured in book value – it is a good example of how book value is understated at Fairfax.

 

Excess of FV over CV:

• Associates:           $838 million
• Consolidated:       $644 million

Equity Tracker Spreadsheet explained:

 

We have separated holdings by accounting treatment:

• Mark to market
• Associates – equity accounted
• Consolidated
• Other Holdings – total return swaps and warrants/debentures

The value of each holding is calculated by multiplying the share price by the number of shares. All 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.

 

PS: I have attached the updated version of my Excel workbook at the bottom of this post. 

 

 

 

Fairfax Feb 18 2025.xlsx

Edited Wednesday at 06:17 PM by Viking

[glider3834]

11 hours ago, Viking said:

Fairfax’s equity portfolio (that I track) increased in market value from December 31, 2024 to February 18, 2025, by about $726 million (pre-tax). The equity portfolio had a total value of about $22.0 billion at February 18, 2025.

 

Included in our estimates is information from Fairfax’s Q4-2024-13F and its year-end earnings news release on February 13, 2025. When Fairfax releases their annual report (March 7th) we will get updates to lots of important information, especially the YE 2024 carrying values of many of the large associate and consolidated equity holdings. 

 

 

Notes:

• The FFH-TRS position is included in the mark to market bucket and at its notional value. The warrants and debentures captured are also included in the mark to market bucket.

The ‘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).

 

The ‘tracker portfolio’ does not include the following:

• Any change in value of Digit, Fairfax's publicly traded P/C insurance company in India.

Split of holdings by accounting treatment

 

About 47% of Fairfax’s equity holdings are mark to market - and will fluctuate each quarter with changes in equity markets. The other 53% are Associates and Consolidated holdings. The Sleep Country and Peak Achievement (Bauer) acquisitions closed in Q4. We have included a guess of the carrying value for these two holdings – it will be updated when Fairfax releases its annual report.

 

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 $726 million = $33/share (pre-tax)
• The mark to market change is an increase of about $452 million = $21/share.

 

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

 

The usual suspects continue to perform very well - Eurobank and FFH-TRS. Fairfax India's stock price has spiked higher to start the new year. Not sure what is up with Blackberry's big move higher. Orla Mining (a gold stock) continued to run higher which is not surprising given the big move in the price of gold. At the same time, after a strong 2-year run higher, stocks in India have been selling off in recent months.

 

 

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

 

For Associate and Consolidated holdings (in my tracker), the excess of fair value to carrying value is about $1.48 billion pre-tax ($68/share). The 'excess of FV to CV’ has been materially increasing in recent years. This is economic value that has been created by Fairfax that is not captured in book value – it is a good example of how book value is understated at Fairfax.

 

Excess of FV over CV:

• Associates:           $838 million
• Consolidated:       $644 million

Equity Tracker Spreadsheet explained:

 

We have separated holdings by accounting treatment:

• Mark to market
• Associates – equity accounted
• Consolidated
• Other Holdings – total return swaps and warrants/debentures

The value of each holding is calculated by multiplying the share price by the number of shares. All 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.

 

PS: I have attached the updated version of my Excel workbook at the bottom of this post. 

 

 

 

Fairfax Feb 18 2025.xlsx 342.72 kB · 2 downloads

cheers viking we can update John Keells to 24.3% now they have exercised the convertible 

 

 

https://keells.com/resource/reports/investor-presentations/investor-presentation-Q3-2025.pdf

[mananainvesting]

$ESI.TO - Bison Interests (Josh) on their new position in Ensign. I am long as well.

 

 

 

 

 

[Viking]

On 2/19/2025 at 8:19 PM, glider3834 said:

cheers viking we can update John Keells to 24.3% now they have exercised the convertible 

 

 

https://keells.com/resource/reports/investor-presentations/investor-presentation-Q3-2025.pdf

 

@glider3834 I appreciate the heads up. Board members, please let me know if you see any other items that can be updated. Your input helps me greatly in keeping the summary accurate/up to date. 

Edited 13 hours ago by Viking