Fairfax stock positions

[This2ShallPass]

On 4/23/2026 at 8:56 AM, gfp said:

That is correct - I have previously asked the company and the TRS gains/losses are taxable each quarter.  Conversely, trades in an issuers own common stock are not taxable to the issuer. 

It's interesting they are keeping the TRS w the tax. It made sense when they put it on since they didn't have the cash. Now should be a no brainer to close it and buyback shares. The only other thing that makes sense is they will keep the TRS and buyback shares. If that's the case, TRS closure will be a good sign we're closer to intrinsic value.

 

[djokovic1]

They will be much more sensitive to close the TRS (ie well before intrinsic value is reached) vs buying back stock.

 

Also they cannot buy back all the TRS through buybacks because they don’t have that much excess capital lying around. So it will have to be a mix of buy backs and selling it down.

[SafetyinNumbers]

5 hours ago, djokovic1 said:

They will be much more sensitive to close the TRS (ie well before intrinsic value is reached) vs buying back stock.

 

Also they cannot buy back all the TRS through buybacks because they don’t have that much excess capital lying around. So it will have to be a mix of buy backs and selling it down.

What makes a really good compounder is that they have high returns on excess capital. Fairfax has in order the ability to buy stock back in the open market, buy in minority interests and closing out the TRS. My assumption is they will buy in the open market below 1.5x BV and close out TRS above that. The beauty is that it’s 3+ years of free cash flow where we know the returns on excess capital are high and help maintain the investment to equity leverage. 

[dartmonkey]

1 hour ago, SafetyinNumbers said:

What makes a really good compounder is that they have high returns on excess capital. Fairfax has in order the ability to buy stock back in the open market, buy in minority interests and closing out the TRS. My assumption is they will buy in the open market below 1.5x BV and close out TRS above that.

I'm struggling to understand how there is any economic difference between holding the TRSs with the current number of shares versus selling the TRS investment and repurchasing an equivalent number of shares with the proceeds (apart from taxes on capital gains or possible differences in how insurance regulators consider the TRSs.) If they have enough capital to buy stock on the open market, and they are limited as to how much they can buy, either because they don't want to move the price, or because they are capped at a certain percentage of shares, then I can understand holding on to the TRSs AND buying back shares. But I don't think either of those restraints applies: their NCIB allows them to buy up to 2.187m shares this year and they have never come close to buying that many shares in a year, and the average volume of shares traded is 77,000 a day, so their typical rate of up to a million shares a year, or 4,000 a day, is not high enough to materially move the market.

 

My understanding (correct me if I'm wrong) is that buying the TRSs and buying stock are economically equivalent - in both cases, every $1 the stock moves up is $1 more in the pockets of the company. So apart from tax and regulatory consequences, if they sell a TRS on one share and use the proceeds to buy back one share, they have exactly the same return on capital going forward as if they had not sold the TRS and not bought the extra share. Whoever their counterpary on the TRSs is is effectively short FFH, and has probably hedged that position by holding an equivalent number of shares. Why not just simplify for both parties and sell the TRS in exchange for the shares held by the counterparty?

[SafetyinNumbers]

2 hours ago, dartmonkey said:

Why not just simplify for both parties and sell the TRS in exchange for the shares held by the counterparty?

I think that is what ultimately will happen but the multiple it’s transacted at really doesn’t matter as they locked in the price when the swaps were put on. To that end, it makes sense to buy in shares via NCIB first as long as valuation stays low. If the multiple goes up they can unwind TRS instead. The most important thing for me is that I know excess capital has a high return home and that the share count is ultimately heading a lot lower.

[RichardGibbons]

4 hours ago, dartmonkey said:

Why not just simplify for both parties and sell the TRS in exchange for the shares held by the counterparty?

 

My understanding of this transaction is pretty simplistic, so I could easily be wrong. But I view the tax on the TRS as a big deal. However, I think one thing that the TRS provide that hasn't really been mentioned is optionality. As long as the TRS exists, they have the ability to close the TRS, effectively issuing shares without any of the complications associated with actually issuing shares. That optionality does have some value, but I think it probably has the less value than the additional tax paid because of the TRS.

[gfp]

6 hours ago, dartmonkey said:

if they sell a TRS on one share and use the proceeds to buy back one share, they have exactly the same return on capital going forward as if they had not sold the TRS and not bought the extra share.

 

I think people are missing that there is noting to "sell" with a swap.  You either have the swap on or off but you don't receive proceeds for "selling it" / taking it off.

 

 

[Munger_Disciple]

25 minutes ago, gfp said:

 

I think people are missing that there is noting to "sell" with a swap.  You either have the swap on or off but you don't receive proceeds for "selling it" / taking it off.

 

 

 

[SafetyinNumbers]

3 hours ago, RichardGibbons said:

 

My understanding of this transaction is pretty simplistic, so I could easily be wrong. But I view the tax on the TRS as a big deal. However, I think one thing that the TRS provide that hasn't really been mentioned is optionality. As long as the TRS exists, they have the ability to close the TRS, effectively issuing shares without any of the complications associated with actually issuing shares. That optionality does have some value, but I think it probably has the less value than the additional tax paid because of the TRS.

I think the taxable income from the TRS is actually a feature because we need it to offset interest expense at the holdco. To me the TRS strategy is very well thought out and not appreciated enough. 

[TwoCitiesCapital]

9 hours ago, dartmonkey said:

I'm struggling to understand how there is any economic difference between holding the TRSs with the current number of shares versus selling the TRS investment and repurchasing an equivalent number of shares with the proceeds (apart from taxes on capital gains or possible differences in how insurance regulators consider the TRSs.)

 

The difference is the ROE. Buying $1 billion of TRS requires only ~150 million plus maintenance margin. 

 

Buying $1 billion of stock requires $1 billion. 

 

In both instances you'll get the return of the stock (less a small financing and taxes in the case of the TRS), but one of them you put up 6-8x as much capital to achieve. 

 

[Junior R]

10 hours ago, TwoCitiesCapital said:

 

The difference is the ROE. Buying $1 billion of TRS requires only ~150 million plus maintenance margin. 

 

Buying $1 billion of stock requires $1 billion. 

 

In both instances you'll get the return of the stock (less a small financing and taxes in the case of the TRS), but one of them you put up 6-8x as much capital to achieve. 

 

Also for FFH to hold the TRS they see the value in FFH

[gfp]

12 hours ago, SafetyinNumbers said:

I think the taxable income from the TRS is actually a feature because we need it to offset interest expense at the holdco. To me the TRS strategy is very well thought out and not appreciated enough. 

 

Fairfax Holding company doesn't need taxable income from the TRS in order to deduct the interest expense from borrowings at the holdco.  Even though operating subsidiary dividends to the Holdco are generally fully deductible and not taxed, they still qualify as income that allows the interest expense to be deducted.

 

The money was borrowed to create income from a property or business, which makes the interest deductible - despite the "income" also ending up being tax free as subsidiary dividends of income that was already taxed at the subsidiary level.

 

To other posters' points, the TRS is not equivalent to repurchasing shares at all.  If a profit is earned on the TRS, it sends money to the company.  A repurchase sends money out of the corporation, basically permanently - like a slow motion liquidation.  A successful TRS increases capital, all buybacks decrease capital (whether they are later thought of a being 'profitable' or not).

[SafetyinNumbers]

5 hours ago, gfp said:

 

Fairfax Holding company doesn't need taxable income from the TRS in order to deduct the interest expense from borrowings at the holdco.  Even though operating subsidiary dividends to the Holdco are generally fully deductible and not taxed, they still qualify as income that allows the interest expense to be deducted.

 

The money was borrowed to create income from a property or business, which makes the interest deductible - despite the "income" also ending up being tax free as subsidiary dividends of income that was already taxed at the subsidiary level.

 

To other posters' points, the TRS is not equivalent to repurchasing shares at all.  If a profit is earned on the TRS, it sends money to the company.  A repurchase sends money out of the corporation, basically permanently - like a slow motion liquidation.  A successful TRS increases capital, all buybacks decrease capital (whether they are later thought of a being 'profitable' or not).

Thanks I didn’t realize that. So they would get a refund at the holdco for the interest expense even if they didn’t have any taxable income in Canada?

[gfp]

1 hour ago, SafetyinNumbers said:

Thanks I didn’t realize that. So they would get a refund at the holdco for the interest expense even if they didn’t have any taxable income in Canada?

 

No I don't think there is a refund mechanism for that type of thing in the US or Canada.  A few years carry back and something like 20 years carry forward if they truly had no income to offset it.  But it wouldn't lose its deductibility 

 

[SafetyinNumbers]

3 minutes ago, gfp said:

 

No I don't think there is a refund mechanism for that type of thing in the US or Canada.  A few years carry back and something like 20 years carry forward if they truly had no income to offset it.  But it wouldn't lose its deductibility 

 

Does this mean the TRS income would be useful to offset head office and leverage costs at the holdco assuming there was no other income at the holdco?

[Hoodlum]

Blackberry stock jumped again today after a WSJ article on Blackberry.  More opportunity for Fairfax to exit their position.

[dartmonkey]

31 minutes ago, Hoodlum said:

Blackberry stock jumped again today after a WSJ article on Blackberry.  More opportunity for Fairfax to exit their position.

Maybe they want to keep it there, staring at them every year, so they don't get too cocky. Here's what they mentioned in the AR while gloating about the amazing Eurobank investment:

 

"As the table shows, our annualized return since inception went from -7% in 2020 to 15% today as the Eurobank stock price increased. The long term is where it’s at and patience quite often (not always, remember BlackBerry!) is a virtue!"

 

It looks like they have 34.98m shares left, right? With a cost basis of about $17, trading now at $5.74, or about $201m. Blackberry now disappears into the category 'Other' in the section of the AR where they talk about common stock holdings, but it may reappear in the 2026 AR if the share price holds up and if, as I expect, they don't sell it by the end of the year.

[Whensthepaintdry?]

 

I’m not sure if it was already posted, but I really enjoyed this presentation on AGT. 

[glider3834]

On 5/5/2026 at 2:05 AM, Hoodlum said:

Blackberry stock jumped again today after a WSJ article on Blackberry.  More opportunity for Fairfax to exit their position.

they look to be under 5% now 

 

on another tech stock Micron - by my estimate this was likely a double for Fairfax maybe around $200M profit or so a few years ago but they missed the big run up since

 

Well the flip side on Micron I guess is 1. they are fishing in the right waters & 2. after they reduced Micron, they upped their Orla stake & we know that has worked out pretty well too

 

Can't win them all hey 

 

 

Edited May 10 by glider3834

[Hoodlum]

32 minutes ago, glider3834 said:

they look to be under 5% now 

 

on another tech stock Micron - by my estimate this was likely a double for Fairfax maybe around $200M profit or so a few years ago - but please don't look at the share price today & how many shares Fairfax used to own - OMG

 

Well the flip side on Micron I guess is 1. they are fishing in the right waters & 2. after they reduced Micron, they upped their Orla stake & we know that has worked out pretty well too

 

Can't win them all hey 

 

 

at the current price and volume, they could get out over the coming weeks. 

[glider3834]

59 minutes ago, Hoodlum said:

at the current price and volume, they could get out over the coming weeks. 

yep potentially

[Maverick47]

On 5/7/2026 at 6:10 AM, Whensthepaintdry? said:

 

I’m not sure if it was already posted, but I really enjoyed this presentation on AGT. 

Thanks @Whensthepaintdry?!  I really appreciated the opportunity to learn a bit more about the competitive advantage Fairfax provides to its partners compared to private equity.  And it was fascinating to hear a company Fairfax is partnered with speak the same sort of value investing language that we appreciate.

[Whensthepaintdry?]

He had great energy in his presentation. Sounds like a great pitch for a very important product. 

[yesman182]

On 5/7/2026 at 8:10 AM, Whensthepaintdry? said:

 

I’m not sure if it was already posted, but I really enjoyed this presentation on AGT. 

@SafetyinNumbers do you have a best guess on what the dividend for AGT will be? Has it been announced or do you think it will be this week? Seems like in the past you speculated 5% might be possible, and with the price drop it seems more possible. 

[SafetyinNumbers]

3 hours ago, yesman182 said:

@SafetyinNumbers do you have a best guess on what the dividend for AGT will be? Has it been announced or do you think it will be this week? Seems like in the past you speculated 5% might be possible, and with the price drop it seems more possible. 

The 5% was based on their ability to pay it and what FFH was getting on the debt they replaced the equity with but perhaps too optimistic. FCF estimates are all over the place but at RBC, less than a half payout ratio of FCF would be a 5% yield at current prices. I added some today. I don’t think numbers this year are going to be great so might be too early.