Fairfax stock positions

[Duke In Shadows]

FIH have said BIAL IPO is planned for "later in the decade"...any more detail/precision to when this is likely to happen....

[Viking]

1 hour ago, Parsad said:

Are the three of us the only twats posting on Fairfax on Christmas Eve? 

 

Redskin are the kids asleep?  The Mrs?  

 

Viking, are your kids coming over tomorrow?  The Mrs?

 

I'm sitting here watching A Christmas Carol with a vodka cranberry next to me, while keeping an eye on the site!

 

Merry Christmas fellas!  Cheers!

We have a houseful. I am multitasking (something I don’t normally do). Cheers Sanjeev  

[Hamburg Investor]

6 hours ago, SafetyinNumbers said:

t will be interesting to compare these returns to the accounting return. It’s part of what gives me high confidence in forward ROE over the next 5 years. These deferred gains may take years to realize in names like Eurobank meanwhile the accounting return on carrying value remains high enough that ROE gets a big boost at 3:1 leverage. 

+1

 

Totally agree. The accounted ROE already is really, really nice, but the „real“ ROE is even better (and the real look-through PE ratio). That’s one of the underlying reasons why my base case is a triple of share price over the next five years, while it could easily get to way more, if the „real“ ROE would average above 20% and the market finally realizes what’s happening.

 

Have a merry Christmas everyone - all the best from Hamburg, Germany, to all of you!

[Redskin212]

I of course was up last and up first cooking breakfast  

Need to sleep more, but bad habits are hard to break.

Always keep an eye on the board at the end of the day, never know what my extended family is talking about.

 

Merry Xmas to you and everyone on the board.  Truly an exciting year and I think more to come in 2026!

 

Now all the presents are open, time to get ready and watch some football.  Terrible how all pro sports are bleeding into this holiday - the reality of getting everyone home and under one roof for the day.

 

Merry Christmas!!

[dartmonkey]

7 hours ago, Hamburg Investor said:

+1

 

Totally agree. The accounted ROE already is really, really nice, but the „real“ ROE is even better (and the real look-through PE ratio). That’s one of the underlying reasons why my base case is a triple of share price over the next five years, while it could easily get to way more, if the „real“ ROE would average above 20% and the market finally realizes what’s happening.

 

Have a merry Christmas everyone - all the best from Hamburg, Germany, to all of you!

My message seems to have been swallowed up so I will try again, more briefly: I think we probably agree that E is being understated by accounting conventions by about 10% ($25b book value, probably about $2.5b difference between 'fair value' and accounting valuie for the 20-50% holdings, notably Eurobank, Poseidon and FIH.) But this would actually make the ROE look higher, not lower, since the equity is in the denominator of the fraction.

 

Of course, at the end of the day, what matter is earnings, not equity, and accounting conventions probably ARE understating earnings, since part of earnings is the unrealized gains from equity holdings. For instance, Eurobank is held at $2.7b based on the price paid for the stake, plus undistributed retained earnings, minus dividends, whereas the stake is actually worth $4.9b, and an increase of over $2b just this year! If the stake were marked to market, that would be $2b of pre-tax earnings right there. If Fairfax is at 8.5x earnings despite having grown EPS by 21%/year since 2015, why the hell should I care about book value?

[SafetyinNumbers]

26 minutes ago, dartmonkey said:

If Fairfax is at 8.5x earnings despite having grown EPS by 21%/year since 2015, why the hell should I care about book value?

Whatever floats your boat! Some investors use P/B to determine intrinsic value. I use P/B based on forward ROE / 7, 15x PE (above market ROE, fair market multiple) and book value + float (Buffett method) to triangulate mine.

 

The recent article below has its own methodology. All end up in the same ballpark which is encouraging. 

 

https://seekingalpha.com/article/4855494-fairfax-financial-valueadded-acquisitions-and-disciplined-investments-are-yielding-rewards

[Hamburg Investor]

4 hours ago, dartmonkey said:

My message seems to have been swallowed up so I will try again, more briefly: I think we probably agree that E is being understated by accounting conventions by about 10% ($25b book value, probably about $2.5b difference between 'fair value' and accounting valuie for the 20-50% holdings, notably Eurobank, Poseidon and FIH.) But this would actually make the ROE look higher, not lower, since the equity is in the denominator of the fraction.

 

Of course, at the end of the day, what matter is earnings, not equity, and accounting conventions probably ARE understating earnings, since part of earnings is the unrealized gains from equity holdings. For instance, Eurobank is held at $2.7b based on the price paid for the stake, plus undistributed retained earnings, minus dividends, whereas the stake is actually worth $4.9b, and an increase of over $2b just this year! If the stake were marked to market, that would be $2b of pre-tax earnings right there. If Fairfax is at 8.5x earnings despite having grown EPS by 21%/year since 2015, why the hell should I care about book value?

I don’t think we are that far apart, but my thinking is more like the following:

 

Whatever „R“ a company has accumulated until end of year in any given year (like accounted Earnings plus hidden earnings like e. g. the 20% to 50% holdings ) should be divided through „E“ of beginning of the same year.

 

So yes, the „E“ is higher today, lowering ROE of today all else equal - but than the same amount of hidden „E“ should have been „R“ in the years before, and we shouldn’t forget that, as that’s all important! In the released numbers of prior years that „hidden R“ is exactly missing.
 

So when you are saying real „E“ is higher by 10% today, than you should have added those 2.5 bn dollar to „R“ in the years before, before calculating the „real“ ROE of those years.
 

And those were years, when the „E“ was way smaller, so any additional „R“ has a more meaningful impact on ROE in those years than on todays.
 

In other words: For every „E“ there has to be a „R“ before imho. So just applying a higher „E“ today, while at the same time ignoring the higher real „R“s (and ROEs of the years in the rearview mirror), ignores an important part of the story. It’s comparing apples to oranges. Either you ignore the higher hidden returns and higher equity until they flow through the books - or you apply for both. 

 

 

Of course it will run through the books later, and than there’s tax to pay etc. so you could apply a theoretical tax rate to that 2.5bn for any given year when recalculating the roe. And of course you are right, that than the real „E“ of today would be higher, so that would lower the future ROEs.

 

As @Viking has laid out multiple times I agree that there are more hidden assets. As an example some years ago FFH sold a pet insurer for 1.3 bn. And in this forum I think most (if not all) participants were surprised, that FFH owned such a thing. Earnings were around 800mn to over 1bn from that sell decision alone in that year. I would be surprised, if we won’t be surprised again.
 

Regarding higher „E“ as for the 2.5bn and that being a drag to future ROEs: I’d find that a rather static view as a starting point when thinking about FFHs future. Don’t the higher „real“ ROEs of the years behind us (as laid out here) point to some general overall quality of management, which will not just disappear like that tomorrow? At least I think so. So I‘d start to think about future ROEs (and potential reinvestment returns) by looking at the same metrics of the past as a starting point, instead of projecting a static (or linear) return to a higher equity. 

 

 

 

[sholland]

@SafetyinNumbers Where does your valuation metric of P/B based on forward ROE / 7 come from?  Based on your following comment you made on 12/12/2024 am I correct in assuming that you empirically derived it based on FFH peers?

[SafetyinNumbers]

10 minutes ago, sholland said:

@SafetyinNumbers Where does your valuation metric of P/B based on forward ROE / 7 come from?  Based on your following comment you made on 12/12/2024 am I correct in assuming that you empirically derived it based on FFH peers?

It’s a shorthand way to calculate the relationship between ROE and P/B taught to me by another investor. I think it builds in some margin of safety when the ROE is high and probably means paying fair value when the ROE is low. The actual relationship should be exponential especially with a low payout ratio as the retained capital is compounded at a higher rate. 

[Hoodlum]

It would be interesting to see some of the analyst reports on Metlen.  They have some very high price targets compared to current stock price from the past few weeks. 
 

https://en.protothema.gr/2025/12/26/where-foreign-investment-firms-set-the-bar-for-greek-equities-in-2026/
 

Citi places Metlen at the heart of the European industry for 2026 and within its top three mid-cap picks. It gives a “buy” recommendation and a base target price of EUR 52. The US investment bank refers to a company that has now transcended the narrow boundaries of the aluminium sector and is evolving into a modern industrial group, with parallel growth drivers in energy, EPC projects, circular metallurgy, and the defence industry.

Bank of America raises its target price on Metlen to 64 euros and underlines that it has significant growth potential in both the metals and energy sectors.

Morgan Stanley says Metlen remains “misunderstoodly cheap” in terms of its prospects, giving it a target price of €66, highlighting that it retains a clear lead as one of the most diversified and resilient growth stories in the European energy and metals market.

[Viking]

Fairfax has made many very good investments in recent years. Like its purchase in late 2020/early 2021 of total return swaps giving it exposure to 1.96 million Fairfax shares at an average cost of $373/share. Position is up $900M in 2025 and $2.9B over the past 5 years (not including dividend or carrying cost). Unconventional and brilliant.

 

For perspective, common shareholders’ equity was $12.5 billion at Dec 31, 2020. A $2.9 billion return over a 5 years period from one investment is material.

 

Will this become Fairfax’s best ever single investment? (Capital required to put position on. Risk profile. Timeframe involved. Etc)

 

Edited December 29, 2025 by Viking

[Viking]

What is Fairfax’s best performing equity investment? Eurobank. Up $2.3B in 2025 and $4.4B over the last 5 years.

 

The 5-year gain from Eurobank and FFH-TRS (see previous post in this thread) has been about $7.3 billion ($4.4 + $2.9). To put this number into perspective, common shareholders equity at Fairfax at Dec 31, 2020 was $12.5 billion. That is nuts. (Actually the crazy part is the returns from Eurobank and FFH-TRS is just scratching the surface of what has been happening under the hood at Fairfax over the past 5 years. The value creation has been enormous... and that is not hyperbole.) 

 

Eurobank is very well managed. Still cheap. Bright future. (Sound familiar?)

 

My summary below is broken into two parts:

• Current position (1,178 million shares): the change in market value + dividends paid
• The position Fairfax sold in January 2025 (80 million shares). Greek regulators do not allow foreign ownership of a bank to exceed 33% (Fairfax was a little over). 

Yes, my current position (1,178 million shares) is not accurate given Eurobank is buying back stock and Fairfax is selling on a pro-rated basis (to keep their ownership below 33%). I will update my share count when Fairfax releases their 2025AR. 

 

The goal with my analysis is to get the big picture/themes right (not to be precise - when it is not possible).

 

PS: Eurobank is equity accounted - so much of gain in MV has not been captured in accounting results (EPS, BV and ROE). 

 

Edited December 29, 2025 by Viking

[SafetyinNumbers]

5 hours ago, Viking said:

PS: Eurobank is equity accounted - so much of gain in MV has not been captured in accounting results (EPS, BV and ROE). 

This is such an important point. This position was marked at US$2.26 at the end of Q3 and Eurobank could earn US$0.47 on a FTM basis. That’s a 20% ROCV (return on carrying value). The CV goes up every quarter by our share of earnings but gets reduced by dividends paid and our cost basis from selling into the buyback. At the current rate FFH is selling over a 100k shares of Eurobank a day but the claim on earnings remains the same.
 

Recall given the ~3:1 investments to equity leverage, the largest position with a 20% return takes the pressure off the rest to meet the expectations of 6-7% for the equity portfolio as a whole.

Edited December 29, 2025 by SafetyinNumbers

[Hamburg Investor]

On 12/25/2025 at 11:11 PM, Hamburg Investor said:

I don’t think we are that far apart, but my thinking is more like the following:

 

Whatever „R“ a company has accumulated until end of year in any given year (like accounted Earnings plus hidden earnings like e. g. the 20% to 50% holdings ) should be divided through „E“ of beginning of the same year.

 

So yes, the „E“ is higher today, lowering ROE of today all else equal - but than the same amount of hidden „E“ should have been „R“ in the years before, and we shouldn’t forget that, as that’s all important! In the released numbers of prior years that „hidden R“ is exactly missing.
 

So when you are saying real „E“ is higher by 10% today, than you should have added those 2.5 bn dollar to „R“ in the years before, before calculating the „real“ ROE of those years.
 

And those were years, when the „E“ was way smaller, so any additional „R“ has a more meaningful impact on ROE in those years than on todays.
 

In other words: For every „E“ there has to be a „R“ before imho. So just applying a higher „E“ today, while at the same time ignoring the higher real „R“s (and ROEs of the years in the rearview mirror), ignores an important part of the story. It’s comparing apples to oranges. Either you ignore the higher hidden returns and higher equity until they flow through the books - or you apply for both. 

 

 

Of course it will run through the books later, and than there’s tax to pay etc. so you could apply a theoretical tax rate to that 2.5bn for any given year when recalculating the roe. And of course you are right, that than the real „E“ of today would be higher, so that would lower the future ROEs.

 

As @Viking has laid out multiple times I agree that there are more hidden assets. As an example some years ago FFH sold a pet insurer for 1.3 bn. And in this forum I think most (if not all) participants were surprised, that FFH owned such a thing. Earnings were around 800mn to over 1bn from that sell decision alone in that year. I would be surprised, if we won’t be surprised again.
 

Regarding higher „E“ as for the 2.5bn and that being a drag to future ROEs: I’d find that a rather static view as a starting point when thinking about FFHs future. Don’t the higher „real“ ROEs of the years behind us (as laid out here) point to some general overall quality of management, which will not just disappear like that tomorrow? At least I think so. So I‘d start to think about future ROEs (and potential reinvestment returns) by looking at the same metrics of the past as a starting point, instead of projecting a static (or linear) return to a higher equity. 

 

 

 

@dartmonkey

 

Just as a follow up, not to be misunderstood. If we are talking about ROE, then of course it’s important to mean the exact same thing.

 

Charlie Munger once said that over the very long term, an investor’s return in a stock will roughly mirror the business’s return on equity.  This statement is deeply insightful, but only if ROE is understood in an economic sense, not as a narrow accounting ratio.

 

What Munger really points to is the idea that a business with a high and sustainable ability to compound capital – a strong economic “engine” – will, over decades, deliver shareholder returns that broadly track that compounding power.  In this view, ROE is less “net income divided by GAAP equity this year” and more “owner’s earnings generated on the true equity base of the business.”

For holdings and serial acquirers, the standard GAAP ROE often underestimates that engine. Goodwill, intangibles and conservative accounting can bloat the equity line, while reported earnings can lag the real value creation from smart deals and operational improvements.

 

To get closer to Munger’s idea of ROE, it is more useful to think in terms of owner’s earnings and look‑through earnings: the economic earnings attributable to shareholders, including their share of retained earnings inside subsidiaries and affiliates.

 

If we do that with FFH, then we surely will come up with higher ROE then what accounting is saying. And that is true, even though you are, of course, right that the true equity base will be higher. But the R is even more higher. 

 

A practical way to approximate this for complex groups is to focus on the growth in intrinsic value per share: for example, starting from the growth of book value per share plus dividends over multiple yeara, and then adjusting qualitatively for cases where book value becomes a poor proxy (e.g. very asset‑light businesses, or where market values of holdings diverge strongly from carrying values).  
 

In other words, when talking about ROE in the Munger sense, the reference is always to this economic, look‑through return on owners’ capital – not the year‑to‑year GAAP ROE printed in the financial statements.

 

I am sure that’s how we both think, don’t we?

[netcash1]

Can anyone on the board share how about how many shares of Strathcona Resources Fairfax held?  Trying to figure out the size of the distribution from the $10 dividend?

Thank you 

[Viking]

Orla Mining (gold producer) is a recent investment for Fairfax. They are partnered with Pierre Lassonde. How did it perform in 2025? It delivered a gain of about $747M. Outstanding performance. The big dogs at Fairfax have been feasting in 2025.

 

The bigger story: exceptional capital allocation 

 

In 2022 Fairfax sold Resolute Forest Products at the top of the lumber cycle ($626 million). They started buying Orla in Q3 2022 (open market purchases) and continued until Q3 2024. My guess is a chunk of capital from RFP was recycled into Orla. On December 5th, Fairfax sold 25% of their position in Orla (taking advantage of the bull market in gold). Proceeds from the Orla sale will now be recycled into a new investment. 

 

Orla was a very unconventional investment when it was made. Today? Gold has gone mainstream - Gundlach recently recommended investors have a 25% weighting to gold in their portfolios.

 

Fairfax has been putting on a capital allocation clinic over the past 5 years. There are so many examples of exceptional decisions - Orla is just one in a long list.

 

What Fairfax is doing is a skill - it is repeatable. And they are demonstrably good at it. Yet, from a valuation perspective, Fairfax trades at the low end when compared to peers. Fairfax shares continue to climb the 'wall of worry.' 

 

Edited December 30, 2025 by Viking

[Hoodlum]

On 12/19/2025 at 1:31 PM, dochood said:

I think it's 9% of the "A" shares, around 4% overall.  

 

It's also interesting that BDT owns 65 million "C" shares (non-voting) since 2023.  Roughly 15% economic interest.  Perhaps BDT shared some insights about UAA with Fairfax.

Fairfax continues to buy both the A and C shares of UAA.  The stock jumped 8% today on the latest stock purchase update. 
 

https://www.stocktitan.net/sec-filings/UA/form-4-under-armour-inc-insider-trading-activity-913ef43993b8.html

[Crip1]

3 hours ago, Viking said:

Orla Mining (gold producer) is a recent investment for Fairfax. They are partnered with Pierre Lassonde. How did it perform in 2025? It delivered a gain of about $747M. Outstanding performance. The big dogs at Fairfax have been feasting in 2025.

 

The bigger story: exceptional capital allocation 

 

In 2022 Fairfax sold Resolute Forest Products at the top of the lumber cycle ($626 million). They started buying Orla in Q3 2022 (open market purchases) and continued until Q3 2024. My guess is a chunk of capital from RFP was recycled into Orla. On December 5th, Fairfax sold 25% of their position in Orla (taking advantage of the bull market in gold). Proceeds from the Orla sale will now be recycled into a new investment. 

 

Orla was a very unconventional investment when it was made. Today? Gold has gone mainstream - Gundlach recently recommended investors have a 25% weighting to gold in their portfolios.

 

Fairfax has been putting on a capital allocation clinic over the past 5 years. There are so many examples of exceptional decisions - Orla is just one in a long list.

 

What Fairfax is doing is a skill - it is repeatable. And they are demonstrably good at it. Yet, from a valuation perspective, Fairfax trades at the low end when compared to peers. Fairfax shares continue to climb the 'wall of worry.' 

 

Do we know what the purchase prices were on the Common Shares/Convert Bonds and Warrants?

 

-Crip

[Viking]

6 hours ago, Crip1 said:

Do we know what the purchase prices were on the Common Shares/Convert Bonds and Warrants?

 

-Crip

 

My very rough estimate is the average cost on the common shares is about C$5.30/share. I use C$5.50/share (to be a little more conservative). 

• 56.8 million common shares: total cost = $228 million
• Convertible Bonds: total cost = $150 million
• Total amount invested by Fairfax to date = $378 million

Proceeds from the sale of 25M shares Dec 5 = $316 million

• This drops the total amount invested by Fairfax to $62 million. 
• The market value of 76.9 million shares = $1.05B 

The convertible bonds can be converted to 27.2 million shares (C$7.90 or $5.51/share).

The warrants can be exercised into 17.9 million shares (C$11.50 or $8.03/share)

• Cost to exercise the warrants = additional $144 million. 
• This would bring Fairfax's investment in Orla to $206 million (cost basis)

Fairfax is getting paid a 4.5% coupon on the convertible bonds = $6.75 million per year. This lowers the cost basis a little. 

 

Bottom line, Orla has turned into a fantastic investment. Very high return. Very short timeframe (the convertible bonds/warrant deal was struck 14 months ago). Fairfax is getting paid a coupon on the convertibles (they are getting paid to wait). And the warrants give Fairfax exposure to the upside at a very low upfront cost. The structure of the deal is amazing.

 

Edited December 31, 2025 by Viking

[Hamburg Investor]

5 hours ago, Viking said:

Bottom line, Orla has turned into a fantastic investment. Very high return. Very short timeframe (the convertible bonds/warrant deal was struck 14 months ago). Fairfax is getting paid a coupon on the convertibles (they are getting paid to wait). And the warrants give Fairfax exposure to the upside at a very low upfront cost. The structure of the deal is amazing.

Yes, it’s nearly unbelievable, how the equity investments performed in recent years.

 

@Viking: A big thank you at the end of the year goes out to you. I don’t write too much, but everyday I drop by here and read. It’s like you would show all the little mosaics in incredible detail and than one only has to step back for getting a rich picture or better than that a movie, that shows evolvement over time.

And that big thank you of course goes to all other contributors, the bigger and the smaller ones. I learn a lot from all of you!

[Hoodlum]

On 12/19/2025 at 12:54 AM, TwoCitiesCapital said:

Yea. Feels like the UA ship has sailed. I was on board, in like 2016, that they could parse some of the market share from Nike. But neither has done enviably since - just a tough industry. 

 

But for $100MM, who really cares. Is tiny for now. 

 

Based on the latest Form 4, Fairfax now owns 38.2M share (~$190M) 

 

https://www.sec.gov/Archives/edgar/data/915191/000094787125001099/xslF345X05/ownership.xml

Edited December 31, 2025 by Hoodlum

[Berk]

Does anyone value Fairfax through a SOTP method? If so, how do you think about assigning multiples to life insurance/runoff and share of associates' profits? 

fyi - I am new to investing (less than a year), very new to Fairfax, and extremely new to COBF. So, I appreciate all the thought I've read so far and apologize if I've missed a prior discussion on this...

[dartmonkey]

2 hours ago, ashton said:

Does anyone value Fairfax through a SOTP method? If so, how do you think about assigning multiples to life insurance/runoff and share of associates' profits? 

I think it's a very good question, and I was thinking the same thing myself. Buffett suggests a 'five groves' technique for Berkshire and the same sort of thinking could be applied to Fairfax.

 

Many people follow price book (around 1.6), given the facts that earnings can be quite variable, as the company's stock holdings fluctuate and underwriting is pretty variable from year to year. But I think earnings is really the crucial metric, ideally separating out the stock and bond investments (and valuing them at market value), and of course removing dividends from those stock and bond holdings, and taking some sort of average combined ratio (say 96%, although recent results have been better), and assigning some sort of conservative multiple (say 15) to the pre-tax operating earnings of the non-insurance businesses. I haven't seen such an estimate on these boards, but perhaps I am forgetting. Perhaps others would like to chime in on how this should best be done and then when we have settled on the best way of doing it we could divvy up the work.

 

So as a first draft, my approach would be:

 

1. Calculate the value of the stock and bond portfolios, these will be valued at market value

2. Find the income from all of the above, so that it can be subtracted from pre-tax earnings

3. Calculate the value of associates (companies with 20-50% ownership)

4. Find the average combined ratio of the past 10 years; I'm guessing it's about 96%, so 4% underwriting earnings, but whatever it is, apply it to current net premiums written (NPW)

5. Calculate the earnings from all the consolidated businesses (positions with >50% ownership), and subtract minority owners' shares.

6. Calculate the ratio of earnings from 3,4 and 5, minus minority stakes, minus income from stocks and bonds marked to market.

7. Calculate the current market value of FFH, minus the stock and bond portfolios in #1.

8. Calculate what the P/E ratio of operating businesses is, i.e. #7/#6

 

This will not count the value that Fairfax occasionally creates by opportunistically selling holdings acquired at lower prices, but I think it would be a good metric to follow.

[roundball100]

7 minutes ago, dartmonkey said:

I think it's a very good question, and I was thinking the same thing myself. Buffett suggests a 'five groves' technique for Berkshire and the same sort of thinking could be applied to Fairfax.

 

....

 

So as a first draft, my approach would be:

 

1. Calculate the value of the stock and bond portfolios, these will be valued at market value

...

8. Calculate what the P/E ratio of operating businesses is, i.e. #7/#6

 

...

What would be the best approach to accounting for the float?

[sholland]

5 hours ago, ashton said:

Does anyone value Fairfax through a SOTP method? If so, how do you think about assigning multiples to life insurance/runoff and share of associates' profits? 

fyi - I am new to investing (less than a year), very new to Fairfax, and extremely new to COBF. So, I appreciate all the thought I've read so far and apologize if I've missed a prior discussion on this...

My recommendation to a newbie in Fairfax would be to just look at the price to book value (currently at 1.6x) as that is the primary metric that the market uses.  Understand that the current high return on equity (ROE) justifies a P/B of 2x to 2.5x.  Also understand that management is aiming to increase book value 15% per year.  Finally I would recommend getting comfortable with Fairfax’s representation of book value.  

 

The accounting for an insurance company is somewhat complex and even if you study the accounting for years and understand it backwards and forwards you still can’t get around the challenge that the largest portion of your liabilities are an estimate. There is a huge element of trust that goes into investing in an insurance company.  Furthermore, managerial talent has a disproportionate impact on the outcomes.  Therefore it is important to look for a long track record of having a conservative balance sheet.