Fairfax stock positions

[Txvestor]

4 hours ago, Hoodlum said:

if shipping companies start struggling, that could provide an opportunity for Seaspan.  As a private company with access to funds, they would be able take advantage of the situation and possibly pick up ships at below the current build cost. 

https://www.cnbc.com/2025/04/17/trump-administration-announces-fees-on-chinese-ships-docking-at-us-ports.html
 

Well, it looks as if Chinese vessels might hit the market for a discount but....... $1.5M per trip up to 5x a year. IDK if the numbers work out at those docking prices. Depending on the construction cost delta of American built ships it may drive demand for them. 
Sokol has his work cut out next year or two navigating these cross currents. 

[gfp]

10 hours ago, Txvestor said:

https://www.cnbc.com/2025/04/17/trump-administration-announces-fees-on-chinese-ships-docking-at-us-ports.html
 

Well, it looks as if Chinese vessels might hit the market for a discount but....... $1.5M per trip up to 5x a year. IDK if the numbers work out at those docking prices. Depending on the construction cost delta of American built ships it may drive demand for them. 
Sokol has his work cut out next year or two navigating these cross currents. 

 

How can they hit the market at a discount if they are "all the ships."  I'm sure everyone will take the cheaper route:  pay the fees and pay the lobbyists!

[Viking]

14 hours ago, Txvestor said:

https://www.cnbc.com/2025/04/17/trump-administration-announces-fees-on-chinese-ships-docking-at-us-ports.html
 

Well, it looks as if Chinese vessels might hit the market for a discount but....... $1.5M per trip up to 5x a year. IDK if the numbers work out at those docking prices. Depending on the construction cost delta of American built ships it may drive demand for them. 
Sokol has his work cut out next year or two navigating these cross currents. 

@Txvestor , I am certainly not an expert on shipbuilding. I watched the 20 minute video at the bottom of the link you provided. Here are some thoughts:

1.) The US has a very small capability to build ships today.

2.) What capability it has serves the military - that likely means it is high cost/bloated/ highly inefficient. 
 

How long will it take for the US to create an efficient shipbuilding industry? A decade? Longer? Because to builds ships you need to build out the infrastructure - raw materials, energy, suppliers and highly skilled labour. Any ships built in the next few years will likely be small in number and among the highest cost in the world. My guess is that will not make current Chinese ships worth less. 
 

These new policies are going to hit immediately. The policies are not well thought out - they are a blunt tool. Some Americans are going to make a killing (follow the lobby money). Some Americans are going to get killed (like workers at the smaller ports who lose volume). Blunt tools = arbitrary outcomes, especially in the short term.
 

Costs to ship goods are going to go up immediately and by a lot. And my guess is it will be US consumers who end up footing the bill. That is what happened with Covid - so it seems reasonable to me to use this as a base case for the current situation.

 

Is it just me… or are significant cost pressures building again in the US economy? These pressures are not cyclical… they are structural. Making America great again is going to be extremely expensive - and it is likely going to slowly play out over many years. 

—————-

 

One thing to watch might be how the different shipping alliances respond. During Covid, they operated in a cooperative way and made historic amounts of money. With the recent changes in the alliances, we may not get the same level of cooperation - if it gets destructive then that would not be good (for them). So that might be something to watch for. (That is always a risk with an oligopoly.)

 

Edited April 18, 2025 by Viking

[Viking]

As Canadians cut back on travel to the US, what are they doing? Eating out in Canada more. Reservations at restaurants are up 20%. Who is one on the winners? Fairfax. They own Recipe. With 1,200 locations, it is the largest full-service restaurant company in Canada. 
 

It appears Recipe has become a Fairfax holding that is generating a solid amount of free cash flow (C$114 million in 2024). Leverage has come down (the take-private of Recipe in 2022 was largely funded with borrowings at Recipe - similar I think to what Fairfax has done recently with the take private of Peak Achievement). Smart. Fairfax gets a control position of a business it likes. The additional debt taken on to fund the purchase is paid down over time. Rinse and repeat. Over time, Fairfax ends up with a control position in a growing number of businesses that it likes. (AGT Food and Ingredients is another example of Fairfax using this strategy. It was taken private in 2019. In Q1, 2025, AGT sold its rail/infrastructure assets for C$192 million and used the proceeds to pay down debt.)

Comments from Prem about Recipe from Fairfax’s 2024AR:

 

“Recipe surpassed its record-breaking system sales in 2023 (adjusted for the 53rd week) with system sales of $3.6 billion in 2024.Revenue was up 0.5% driven by improvements in corporate restaurants and the consumer packaged goods business. The company delivered Cdn$114 million in free cash flow and reduced overall leverage to less than 2x.With a strong underlying business, Frank Hennessey, Ken Grondin and their team are focused on top line growth. Expansion is under way in the United States and Indian markets, complemented by organic growth in Canada from new restaurants.The company will also be launching new products in its already sizable consumer packaged goods business (where Recipe’s brands are sold in grocery stores). Recipe is carried on our balance sheet at 10x free cash flow.”

 

—————-

 

Article from the Globe and Mail

 

As Canadians ditch travel to the U.S., restaurants get a boost

• https://www.theglobeandmail.com/business/article-travel-boycott-us-canada-restaurants/

“Canadians are saving a bundle by cancelling their trips to the U.S., and one of the big beneficiaries of the travel boycott appears to be restaurants here at home.”

 

“The number of reservations at Canadian restaurants has grown more than 20 per cent so far in April compared to last year, continuing a months-long trend of Canada leading many other countries in restaurant dining growth.”

Edited April 18, 2025 by Viking

[Red Lion]

On 4/15/2025 at 12:35 PM, Viking said:

Driven by uncertainty and inflation fears, gold continues its improbably run higher. Who was smart enough to buy gold stocks 2 years ago? Yes, Fairfax was. Their stake in Orla is now up +US$500 million YTD-2025. Yes, not too shabby.

 

Orla now has a market value of $1.136 billion. My guess is their cost basis is a little over $500 million. This puts the total return on this investment at about $600 million in less than 2 years (+119%). See the second chart below. That is nuts. 

 

They sold Resolute Forest Products in 2022 at the top of the last lumber cycle at a premium valuation. They sold Stelco in late 2024 at a bubble-high price. Their recent investment in Orla (they started building out their stake in 2023), a gold producer, has more than doubled in value in less than 2 years. They own a large piece of a copper mine that will begin production later in 2025. 

 

Active management is back. And Fairfax has been putting on a clinic the past 5 years. Can't wait to see what they do in the coming years. $ORLA $OLA.TO

 

 

----------

 

 

-----------

 

What is going on with gold today makes me think back to a Conan skit... Raffi knows - Gold is best!

 

 

Fairfax is my second biggest position and honestly that’s been based on the insurance operations and fixed income, with a great deal of skepticism in regard to stock picking. 
 

But it seems like their stock picking has been working these last few years. Could it be that the outperformance of “deep value”/“shitcos” have returned at long last? 

[SafetyinNumbers]

37 minutes ago, Red Lion said:

Fairfax is my second biggest position and honestly that’s been based on the insurance operations and fixed income, with a great deal of skepticism in regard to stock picking. 
 

But it seems like their stock picking has been working these last few years. Could it be that the outperformance of “deep value”/“shitcos” have returned at long last? 

I wouldn’t buy an ETF off of it but it makes sense that idiosyncratic positions might become very cheap if they are growing value while capital is fleeing companies that don’t screen well for 15+ years post GFC.
 

Eventually the stocks get so cheap like Fairfax that the returns are very high. Fairfax in particular has taken all the write downs on its positions but only gets to mark them up by their share of earnings. It’s an incredible set up. 
 

 

[Santayana]

6 hours ago, Viking said:

“Recipe surpassed its record-breaking system sales in 2023 (adjusted for the 53rd week) with system sales of $3.6 billion in 2024.Revenue was up 0.5% driven by improvements in corporate restaurants and the consumer packaged goods business. The company delivered Cdn$114 million in free cash flow and reduced overall leverage to less than 2x.With a strong underlying business, Frank Hennessey, Ken Grondin and their team are focused on top line growth. Expansion is under way in the United States and Indian markets, complemented by organic growth in Canada from new restaurants.The company will also be launching new products in its already sizable consumer packaged goods business (where Recipe’s brands are sold in grocery stores). Recipe is carried on our balance sheet at 10x free cash flow.”

I thought I had read the AR pretty closely, but I missed the part about Recipe expansion into India.  Love seeing this sort of thing, probably not risking much to try it out and huge upside if it takes off.  Does anyone know what type of restaurant(s) they're doing there?

[Txvestor]

6 hours ago, Viking said:

As Canadians cut back on travel to the US, what are they doing? Eating out in Canada more. Reservations at restaurants are up 20%. Who is one on the winners? Fairfax. They own Recipe. With 1,200 locations, it is the largest full-service restaurant company in Canada. 
 

It appears Recipe has become a Fairfax holding that is generating a solid amount of free cash flow (C$114 million in 2024). Leverage has come down (the take-private of Recipe in 2022 was largely funded with borrowings at Recipe - similar I think to what Fairfax has done recently with the take private of Peak Achievement). Smart. Fairfax gets a control position of a business it likes. The additional debt taken on to fund the purchase is paid down over time. Rinse and repeat. Over time, Fairfax ends up with a control position in a growing number of businesses that it likes. (AGT Food and Ingredients is another example of Fairfax using this strategy. It was taken private in 2019. In Q1, 2025, AGT sold its rail/infrastructure assets for C$192 million and used the proceeds to pay down debt.)

Comments from Prem about Recipe from Fairfax’s 2024AR:

 

“Recipe surpassed its record-breaking system sales in 2023 (adjusted for the 53rd week) with system sales of $3.6 billion in 2024.Revenue was up 0.5% driven by improvements in corporate restaurants and the consumer packaged goods business. The company delivered Cdn$114 million in free cash flow and reduced overall leverage to less than 2x.With a strong underlying business, Frank Hennessey, Ken Grondin and their team are focused on top line growth. Expansion is under way in the United States and Indian markets, complemented by organic growth in Canada from new restaurants.The company will also be launching new products in its already sizable consumer packaged goods business (where Recipe’s brands are sold in grocery stores). Recipe is carried on our balance sheet at 10x free cash flow.”

 

—————-

 

Article from the Globe and Mail

 

As Canadians ditch travel to the U.S., restaurants get a boost

• https://www.theglobeandmail.com/business/article-travel-boycott-us-canada-restaurants/

“Canadians are saving a bundle by cancelling their trips to the U.S., and one of the big beneficiaries of the travel boycott appears to be restaurants here at home.”

 

“The number of reservations at Canadian restaurants has grown more than 20 per cent so far in April compared to last year, continuing a months-long trend of Canada leading many other countries in restaurant dining growth.”

Interesting. May or may not be sustained but certainly a good thing for recipe for as long as it lasts. I'm surprised that with 1200 restaurants it was only $114M of free cash flow for the year on $3.6B in sales.
Thats under $100k a restaurant with ~$3M annual sales per year.
Which suggests to me the potential for great operational leverage. Prem also mentioned focus on top line growth which should certainly come their way now. Will be interesting to see what happens to margins. 

[Txvestor]

Agree with Viking on the US shipbuilding. The policies seem more to negotiate, otherwise the implementation will be quite turbulent and definitely inflationary. I know everyone is saying transitory but it could be stickier than people think if it plays out over many years. 
the US is near full employment and just wage inflation could drive it. 

[SafetyinNumbers]

4 minutes ago, Txvestor said:

Interesting. May or may not be sustained but certainly a good thing for recipe for as long as it lasts. I'm surprised that with 1200 restaurants it was only $114M of free cash flow for the year on $3.6B in sales.
Thats under $100k a restaurant with ~$3M annual sales per year.
Which suggests to me the potential for great operational leverage. Prem also mentioned focus on top line growth which should certainly come their way now. Will be interesting to see what happens to margins. 

Has anyone calculated the original invested capital? It’s been deleveraging so the carrying value has been going up and the returns going down. They could always increase the leverage if they wanted to boost returns again. A nice source of capital if it’s needed at the holdco for any reason. 

[Dinar]

21 minutes ago, Txvestor said:

Agree with Viking on the US shipbuilding. The policies seem more to negotiate, otherwise the implementation will be quite turbulent and definitely inflationary. I know everyone is saying transitory but it could be stickier than people think if it plays out over many years. 
the US is near full employment and just wage inflation could drive it. 

I don't think that the US is near full employment.  Gut welfare, and see the workforce swell.  25% of the country is on Medicaid, and it sure as hell ain't the 65 and over crowd.  

[Txvestor]

2 hours ago, Dinar said:

I don't think that the US is near full employment.  Gut welfare, and see the workforce swell.  25% of the country is on Medicaid, and it sure as hell ain't the 65 and over crowd.  

Well!! That's a whole another topic. It's not that easy in such a polarized political climate. Would have been far raise to have never got to this point. 

[ourkid8]

On 4/18/2025 at 9:42 PM, Santayana said:

I thought I had read the AR pretty closely, but I missed the part about Recipe expansion into India.  Love seeing this sort of thing, probably not risking much to try it out and huge upside if it takes off.  Does anyone know what type of restaurant(s) they're doing there?

 

They are planning to open 35 NY Fries franchise's in the next 5 years .  Please see press release:  News

[jbwent63]

On 4/18/2025 at 10:03 PM, Txvestor said:

Interesting. May or may not be sustained but certainly a good thing for recipe for as long as it lasts. I'm surprised that with 1200 restaurants it was only $114M of free cash flow for the year on $3.6B in sales.
Thats under $100k a restaurant with ~$3M annual sales per year.
Which suggests to me the potential for great operational leverage. Prem also mentioned focus on top line growth which should certainly come their way now. Will be interesting to see what happens to margins. 

Note that the sales are "System" sales. I'm not sure how many of the units are corporate vs franchised, so Recipe's revenue would not be the full $3.6 B (that is my understanding) in that Recipe would only record franchise fees, royalties and advertising fees on the franchised restaurants.

[[email protected]]

Hi, 

 

Can I get anyone to confirm Prem may have invested into KKR & Co? If so, any thoughts?

[SafetyinNumbers]

1 hour ago, [email protected] said:

Hi, 

 

Can I get anyone to confirm Prem may have invested into KKR & Co? If so, any thoughts?

https://whalewisdom.com/filer/fairfax-financial-holdings-ltd-can

 

It’s a tiny position on the 13F

[villainx]

3 hours ago, [email protected] said:

Hi, 

 

Can I get anyone to confirm Prem may have invested into KKR & Co? If so, any thoughts?

 

I saw there was a yahoo clickbait article about Prem and KKR.  $3 million position and it's suppose to have a deep mean?

[[email protected]]

10 hours ago, SafetyinNumbers said:

https://whalewisdom.com/filer/fairfax-financial-holdings-ltd-can

 

It’s a tiny position on the 13F

That’s what I find interesting….they bought 66k shares at 1.8 million, sold 42 million shares for 275% gain and still hold 2.5 million worth of shares.

 

Great moves and solid gain for less than 5 years….but such tiny amounts…why are they playing with such low numbers? 

[villainx]

I don't know other than it's fairly common to see managers have a tracker type position.  A resident expert here might have better answer.

[[email protected]]

I only ask because I was wondering if they were experimenting with more of a quality investing type approach. Using the tracker like you said. 

I’ve been a shareholder since 2003 and I see how cautious they can be, so in the back of my mind, I am wondering if they are evaluating their ability to play in the quality space and not just pure value.

 

Not sure.

 

[MMM20]

Haven’t they empowered junior members of the team to make small investments like that? I assume it’s that and don’t read much into it but maybe I’m wrong. 
 

Edited April 24, 2025 by MMM20

[[email protected]]

Fair enough… I hope that junior member keeps up the good work and is given a bit more to play with. Solid work.

[MMM20]

On 10/8/2021 at 9:57 AM, MMM20 said:

From a starting point of an all-time low (post-9/11) valuation, the risk/reward seems skewed to the upside

 

 

 

I gotta take a victory lap here. Almost ~5x on my biggest position since Jan '21 which has made up for a lot of dumb mistakes. It's now trading around what I'd previously considered a fair P/B if we're talking about a ~15% normalized ROE through cycles, but that's an extremely simplistic heuristic that misses the key changes under the hood over the past few years. Nowadays I still think it's too cheap by half, but I might cut it in half anyway. And now that I've posted this, I'm sure the next 50% drawdown is right around the corner.

 

Edited May 2, 2025 by MMM20

[Gregmal]

3 minutes ago, MMM20 said:

 

 

I gotta take a victory lap here. Almost ~5x on my biggest position since Jan '21 which has made up for a lot of dumb mistakes. It's now trading around what I'd previously considered a fair P/B if we're talking about a ~15% normalized ROE through cycles, but that's an extremely simplistic heuristic that misses the key changes under the hood over the past few years. Nowadays I still think it's too cheap by half, but I might cut it in half anyway.

 

Thoughts @Gregmal?

I mean outside of you taking a more in depth conversation completely out of context? 
 

There were several things that I listed, care to list what they were? At the point in time you were referring to the debate was basically Fairfax was trading at ~$425 a share and all you guys were high fiving about a ~50% move off the Covid bottom…to which I merely pointed out how you could’ve done way better throwing darts at lots of stuff from the Covid bottoms and done 100-500% and in many cases even more, during the 12-15 month stretch of time. 
 

 

[nwoodman]

2 minutes ago, MMM20 said:

 

 

I gotta take a victory lap here. Almost ~5x on my biggest position since Jan '21 which has made up for a lot of dumb mistakes. It's now trading around what I'd previously considered a fair P/B if we're talking about a ~15% normalized ROE through cycles, but that's an extremely simplistic heuristic that misses the key changes under the hood over the past few years. Nowadays I still think it's too cheap by half, but I might cut it in half anyway.

 

Thoughts @Gregmal?

Not Greg but sounds like you have this nailed, why stuff around and keep half a position.  Plenty of great ideas out there.  Keep that alpha coming.