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18 hours ago, Viking said:

Greece has been an interesting geography for Fairfax for the last decade. And given the size of Fairfax’s two Greek investments (Eurobank and Eurolife) I thought it would be interesting to dust off a few old annual reports and learn a little more about how Fairfax got to where it is today.

 

Fairfax’s 10 year history in Greece has had a couple of triumphs (Grivalia, Eurolife), one catastrophe (initial investment in Eurobank), continuing adversity and perseverance, heroes, villains, a depression, a pestilence, loyalty, creativity (merger of Praktiker with Eurolife) and years of hard work - it all reads like one of the books of the Iliad by Homer.

 

So what does Fairfax have in Greece today?

  • Eurolife: 80% ownership of a well managed and profitable insurance company; has about 10% marketshare in Greece.
  • Eurobank: 32.4% ownership of a well managed bank that includes a very large and profitable property company (former Grivalia); its balance sheet fixed and profitability poised to jump as the Greek economy improves and real estate prices continue their multi-year move higher.
  • Praktiker: 100% ownership - a Home Depot type business? Much smaller than the other two listed above.

————————

Eurobank

  • Dec 31 2019 - Fair Value $1,164.4 million; Carrying Value (associates) $1,164.4; share of profit n/a
  • Dec 31 2020 - Fair Value $799.9 million; Carrying Value (associates) $1,166.3; share of profit (-11.9)

Eurolife

  • Dec 31 2019 50% ownership - Fair Value 403.1 million; share of profit $154.8
  • Dec 31 2020 50% ownership - Fair Value 457.9 million; Carrying Value (associates) 336.2; share of profit 6.1

—————————

Below is a short summary of the odyssey of how Fairfax got to where it is today with its 3 large Greek investments. 3 investments? Read on…

 

All good stories always start at the beginning. So…

 

Why did Fairfax invest in Greece? Answer: Ireland. What?

 

Fairfax had outstanding success investing in a distressed Irish bank (Bank of Ireland) in late 2011 after the Great Financial Crisis (I think they made +$800 million on this investment - tripled their money in a little over 5 years). And business partner, Kennedy Wilson, had great success investing in real estate in Dublin. So as the cash register was ringing on their Irish investment Fairfax saw similar opportunities in Greece.

 

What was the timeline of the Greek purchases?

2011: purchased 3.8% position in Grivalia (Europroperties)

  • run by George Chryssiko who is one of the heroes of this story
  • the Greek journey begins

Aug 2012: Grivalia (Eurobank Properties REIT) - Fairfax increased ownership from 3.8 to 18% for $50 million

2013: Grivalia (Eurobank Properties REIT) - Fairfax increased ownership to 41% for $20 million (plus?)

Dec 2014: Eurobank: Fairfax makes initial investment of 400 million Euro with group of investors (including Brookfield, Wilbur Ross, Fidelity, Mackenzie, Capital Research and Management)

  • unemployment rate in Greece in 2014 is 28%!

Nov 2015: Eurobank recapitalization (forced by ECB, definitely one of the villains of our story 😞 Fairfax invests an additional 350 million Euro; ownership increases from 12.5% to 17%. 1 for 100 reverse share split; sold new shares for 1 euro.

Aug 2016: Eurolife: Fairfax purchases 80% ownership; 40% to Fairfax for $181 million and 40% to OMERS for $181 million.

  • purchased from Eurobank. Fairfax was aided in its bid by its ownership in Eurobank (viewed as being good partner); important to Eurobank because the bank was retaining 20% ownership and much of Eurolife’s business was transacted through Eurobank distribution channels.
  • referendum in Greece in 2015; Tsipras/Syriza elected; Syria refugees

2017: Grivalia - Fairfax Increased ownership to 52.7% for $100 million   

2018: Eurolife - Fairfax increased ownership to 50%; bought 10% from OMERS (whose ownership decreased to 30%)

Nov 2018 (closed May 2019): Eurobank - Fairfax increases stake to 32.4% via merger with Grivalia Properties.

  • all stock transaction valued at US$866 million
  • Fairfax owned 18% Eurobank and 54% of Grivalia; on close Fairfax owned 32.4% of new Eurobank
  • Grivalia paid 40.5 million Euro special dividend
  • Eurobank launched property management business run by Grivalia CEO

July 2021 Eurolife: increased ownership to 80% (purchased OMERS 30% stake for $142.6); Eurobank owns remaining 20%

————————-

Other Greek investments:

2013 Mytilineos - 5% for 30 million Euro ($41 million) - sold in 2018?

2014 Praktiker Hellas AE - bought 100% for 21 million Euro - still owns?

————————-

Why is Eurolife considered a gem?

2019AR: Through the crisis in Greece, we acquired a gem in Eurolife, a Greek property and casualty and life insurance company that operates predominantly in Greece but also in Romania. Alex Sarrigeorgiou has run Eurolife since 2004, following Eurobank’s decision to grow its insurance business, and we acquired it with OMERS as our partner in 2016. Since our initial 40% purchase of Eurolife in 2016 for Euro163 million, Eurolife has earned Euro347 million and paid dividends of Euro298 million and shareholders’ equity has increased from Euro400 million to Euro720 million at the end of 2019 after the payment of dividends. This phenomenal performance was predominantly because Eurolife had a significant holding of Greek government bonds whose rates went from 8% to 1% during that time period while its non-life business had an average combined ratio of 72%. We currently own 50% and equity account for Eurolife but plan to buy the rest of OMERS’ shares in 2020.

 

2020AR: Finally, in Greece, Eurolife has been an extraordinary investment for Fairfax. Writing both Life and Property/Casualty lines, the company in 2020 generated over $500 million of gross premiums written and produced net income of $130 million. Led by Alex Sarrigeorgiou, Eurolife has a track record second to none in the Greek market.

—————————

Here is a little more information on Grivalia which is now part of Eurobank. With property prices on a multi-year move higher Grivalia is an important profit engine for Eurobank.

2017AR: In 2017, we raised our equity interest in Grivalia to 52.7% by buying 10.3% for $100 million when Eurobank decided to divest its interest in Grivalia. It has been six years since we first met George Chryssikos, the outstanding CEO of Grivalia. Through Wade Burton, we took our first position in Grivalia in 2011 at Euro5.77 per share. George has navigated the Greek economic crisis superbly by buying only the highest quality commercial buildings and shopping centres at huge discounts to replacement cost and unlevered returns of 8% to 10%, not using excessive leverage and always focusing on the long term. We are very excited to be partners with George and his team as they build a fantastic real estate company. Like Bill McMorrow at Kennedy Wilson, George has a unique nose for value in real estate! And like all our Fairfax companies, he is building a fine company, focused on its customers, looking after its employees, making a return for shareholders and gratefully reinvesting in the communities where it operates. Business is a good thing!!

—————————

2019AR: Merger of Grivalia Properties REIC and Eurobank Ergasias S.A.

Early in 2019, Fokion Karavias (CEO of Eurobank) and George Chryssikos (CEO of Grivalia) came up with the idea of merging Grivalia into Eurobank, to strengthen the capital position of Eurobank, and accelerating its non-performing loan stock reduction through spinning out Euro7.5 billion of non-performing loans from the bank to its shareholders. We thought it was a brilliant idea but the process took time as it was subject to shareholder approval at Eurobank and Grivalia and regulatory approval from the ECB. As part of the same plan, Eurobank sold its non-performing loans management unit, FPS, to doValue S.p.A. (a public company listed in Italy) for Euro360 million. We expect all these transactions to close by March 31, 2020 and Eurobank to be well capitalized and on its way to earning 10% on its shareholders’ equity in 2020. Last year, Greece had an election in which the business friendly party of Kyriakos Mitsotakis won a majority in the parliament. As the new Prime Minister, Kyriakos has the opportunity to transform Greece by encouraging foreign investment into the country and by being business friendly. Ten-year Greek government bonds, which peaked at a yield of 37% in 2012, came down to 10% in 2016 and are now trading below 1%. Recently, Greece did a 15-year bond issue at 1.9% and a 30-year issue at 2.5%. The animal spirits are coming back to Greece and we think the Greek economy and Greek companies will thrive. Eurobank should benefit!! Our cost of 1.2 billion shares of Eurobank after the Grivalia transaction is now 94¢ versus a book value of approximately 135¢ per share post the transaction. At year end, Eurobank was selling at 68% of book value and 6.5x normalized earnings. We still believe it will be a good investment for us.

 

On May 17, 2019 Grivalia Properties REIC (‘‘Grivalia Properties’’) merged into Eurobank Ergasias S.A. (‘‘Eurobank’’), as a result of which shareholders of Grivalia Properties, including the company, received 15.8 newly issued Eurobank shares in exchange for each share of Grivalia Properties. Accordingly, the company deconsolidated Grivalia Properties from the Non-insurance companies reporting segment, recognized a non-cash gain of $171.3 and reduced non-controlling interests by $466.2. In connection with the merger, Grivalia Properties had paid a pre-merger capital dividend of Euro0.42 per share on February 5, 2019. The company owned approximately 53% of Grivalia Properties and 18% of Eurobank prior to the merger, and owned 32.4% of Eurobank upon completion of the merger. 

thanks Viking!

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Fairfax’s most recent brand new equity investment was Foran Mining in August. Fairfax invested C$100 million and received 55.6 million shares (cost of C$1.80) and 16 million warrants (exercisable at C$2.09).

 

Shares popped two days ago and closed today at $2.52. So Fairfax’s position has increased in price by C$45 million.
 

Why? Positive drill results. 

 

Yes, early days. But a positive development with hopefully more to come.  Chug, chug, chug… 
 

Foran Announces 70% Increase in Indicated Resources at McIlvenna Bay

https://finance.yahoo.com/news/foran-announces-70-increase-indicated-110000525.html

 

VANCOUVER, BC, Oct. 14, 2021 /CNW/ - Foran Mining Corporation (TSXV: FOM) ("Foran" or the "Company") is pleased to announce an updated mineral resource estimate (the "2021 Resource Estimate") for the Company's 100%-owned McIlvenna Bay Deposit ("McIlvenna Bay" or the "Deposit") located in east-central Saskatchewan. The 2021 Resource Estimate outlines significant changes to the resource at McIlvenna Bay compared to the previous resource estimate published in 2019, with over 25,000m of infill and expansion drilling in 36 holes were completed since the prior estimate. To date, the Deposit has been defined by approximately 152,000m of drilling within 285 holes. 

———————-

Fairfax’s investment:

https://www.newswire.ca/news-releases/foran-mining-announces-completion-of-strategic-c-100-million-private-placement-by-fairfax-893112199.html

 

“The net proceeds of the Financing will be used to rapidly advance the development of the McIlvenna Bay Project and centralized mill for the Hanson Lake District as well as further exploration on the Company's substantial land holdings, enable further investment in key technological and operational research and equipment, and for general corporate purposes.”   

Edited by Viking
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On 10/13/2021 at 11:50 AM, Gregmal said:

Have faith….FFH is the next Naspers.

I think this is in reference to my post. So, round numbers, FFH is up 15x on Digit. It now represents ~20-25% of FFH's market cap. Digit is growing like a weed in a huge and rapidly growing market. Dyed in the wool deep value guys like Prem and his loyal followers are notoriously terrible at recognizing this sort of opportunity. Ironic then, isn't it, that nearly 3/4ths of Digit's ownership happens to be embedded in FFH? What if Digit does, in fact, have a better mousetrap and ends up a massive low cost operator in the not-too-distant future? Where might that put the Digit piece vs. the hypothetical FFH stub? Maybe it ends up just a thought exercise but my point was that I don't dismiss the possibility of it playing out that way, especially after Sequoia's investment. And yet FFH trades at an all-time low valuation. Fun. I'll take the gift from Mr. Market and see how it plays out.

Edited by MMM20
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23 hours ago, MMM20 said:

I think this is in reference to my post. So, round numbers, FFH is up 15x on Digit. It now represents ~20-25% of FFH's market cap. Digit is growing like a weed in a huge and rapidly growing market. Dyed in the wool deep value guys like Prem and his loyal followers are notoriously terrible at recognizing this sort of opportunity. Ironic then, isn't it, that nearly 3/4ths of Digit's ownership happens to be embedded in FFH? What if Digit does, in fact, have a better mousetrap and ends up a massive low cost operator in the not-too-distant future? Where might that put the Digit piece vs. the hypothetical FFH stub? Maybe it ends up just a thought exercise but my point was that I don't dismiss the possibility of it playing out that way, especially after Sequoia's investment. And yet FFH trades at an all-time low valuation. Fun. I'll take the gift from Mr. Market and see how it plays out.

 

I actually like the Naspers analogy and it might apply Atlas as well, if it goes multi-fold from here [big if].

 

[sarcasm starts] What we need now is validation of Digit by Masayoshi Son plunging in by throwing money at it   [sarcasm ends]

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On 10/19/2021 at 11:37 AM, MMM20 said:

I think this is in reference to my post. So, round numbers, FFH is up 15x on Digit. It now represents ~20-25% of FFH's market cap. Digit is growing like a weed in a huge and rapidly growing market. Dyed in the wool deep value guys like Prem and his loyal followers are notoriously terrible at recognizing this sort of opportunity. Ironic then, isn't it, that nearly 3/4ths of Digit's ownership happens to be embedded in FFH? What if Digit does, in fact, have a better mousetrap and ends up a massive low cost operator in the not-too-distant future? Where might that put the Digit piece vs. the hypothetical FFH stub? Maybe it ends up just a thought exercise but my point was that I don't dismiss the possibility of it playing out that way, especially after Sequoia's investment. And yet FFH trades at an all-time low valuation. Fun. I'll take the gift from Mr. Market and see how it plays out.

 

Another Fairfax insurtech investment which appears to be off to a good start is Ki insurance - below from Brit's 1H 2021 report 

 

KI: Underwriting traction and continued development In its first six months of trading, Ki, the first algorithmically driven Lloyd’s of London syndicate, has gained excellent traction, with GWP recorded during the period of US$114.2m. It has had a very positive reception from its broking partners since launch, and has transacted with each of its broking partners and in all of its planned classes of business. It has also significantly expanded its market presence by onboarding the reinsurance divisions of its partner brokers. Working closely with its partner brokers, Ki has continued to update and enhance the platform, further streamlining the placement of risks. Enhanced by the launch of version two of its platform, Ki now has over 1,000 active users and is generating approximately 40 quotes per day. Interim Report – 30 June 2021 12 Ki has also developed and released its first broker API. This transformative step will allow partner brokers to integrate digitally with Ki and create a totally seamless connection to Ki’s algorithm to obtain quotes within their own broking platform. This will further accelerate access to Ki’s capacity, providing straight-through processing of data and a fully integrated end-to-end quotation process between market participants at Lloyd’s. We were delighted that Ki won the Digital Insurance Award at the 2021 National Insurance Awards.

 

https://www.artemis.bm/news/blackstone-puts-weight-behind-ki-as-brits-algorithmic-syndicate-raises-500m/

 

 

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article on Eurobank - sorry the English translation is not great 

 

https://www.mononews.gr/trapezes/chrimatistirio-ti-odigise-tin-eurobank-se-ipsila-21-minon

 

Estimates are already circulating in the market for the dividend that Eurobank is going to distribute, which is estimated to be between three and four cents, which, if it happens, justifies a dividend yield of about 4% . The revenue for the dividend that Fairfax should expect, without the 5% tax, should be estimated between 37-49 million euros .

As recorded by foreign reports, such as Morgan Stanley a month ago, Eurobank aims at 2022, and in the first months of next year may have managed to reduce the percentage of red loans from its balance sheet to its levels European average, which provides for 5% .

 

Already after the agreement with DoValue , the NPE's index is expected to fall to just over 7%.

The prospect of a dividend, however, is what fuels investment interest today, as foreign analysts give a target price above 1 euro (1.07 euros according to Morgan Stanley).
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I thought it would be interesting to look at the investment portfolio of Fairfax at a very high level. And specifically everything except the bond/cash holdings. So equities, partnerships, derivatives (like the TRS) and real estate. So I am treating the TRS on FFH shares as a stock position of $827 million. Fairfax India is calculated as a $678 million position (shares owned x stock price). All stock prices are based on Oct 19 closing price. Needless to say this is not an exact science with some estimates coming from different sources (2020YE and Q2 reports). Yes, there are errors as I have not spend a great deal of time of digging through what is included in the ‘other’ buckets (like Digit preferred shares?). The goal is to put something together that is generally accurate to help us understand the size and composition of Fairfax’s equity holdings (and I say equity in the broadest of definitions - see below). Please let me know if you see any big mistakes.

 

Estimate of Fairfax’s total investment portfolio = $45 billion

‘Equity Holdings’ defined: equity holdings + partnerships + TRS + real estate = $14.8 billion = 33% of total investments

 

Some Key Take Aways (file is attached below):

1.) Fairfax has a VERY large number of holdings. I actually track 50 different holdings. That does not include the more than 25% of the portfolio that is included in the various ‘other’ and ‘partnerships’ and real estate buckets.

2.) Atlas is the largest single holding at $1.83 billion or 12.4% (of what I broadly define as the ‘equity holdings' bucket)

3.) Total limited partnerships was $2.1 billion (June 30, 2021) or 14.2%. Yes, a much larger position than Atlas.

4.) Emerging market positions = 16% of portfolio. This is large. India is about 2/3 of this total. This is not including Digit preferred shares.

5.) Eurobank is the #2 holding at $1.18 billion = 8.0%. Is Greece considered EM? If so, this would increase Fairfax’s EM weighting to 24%.

6.) Resource positions = 10% of portfolio. Also large.

7.) Blackberry is the #3 holding at $1.17 billion = 7.9% ($11.52 stock price was used; this number moves lots)

8.) FFH Total Return Swaps is the #4 position at $827 million = 5.6%

9.) Fairfax India rounds out the top 5 (#5 position) at $678 million = 4.6% ($13 stock price vs $20 BV 🙂

10.) Top 3 individual positions = 28% of total. 72% is invested in something other than Atlas, Eurobank and Blackberry. Not as concentrated as I thought.

11.) 4 of the 5 largest holdings look cheap to crazy cheap to me: Atlas at $14.66; Eurobank at Euro0.90; Fairfax at US$421; Fairfax India at $13. Despite the massive increase in the value of this bucket the past 3 quarters there is lots of upside left. 

Fairfax Equity Holdings Oct 19 2021.xlsx

Edited by Viking
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1 hour ago, glider3834 said:

article on Eurobank - sorry the English translation is not great 

 

https://www.mononews.gr/trapezes/chrimatistirio-ti-odigise-tin-eurobank-se-ipsila-21-minon

 

Estimates are already circulating in the market for the dividend that Eurobank is going to distribute, which is estimated to be between three and four cents, which, if it happens, justifies a dividend yield of about 4% . The revenue for the dividend that Fairfax should expect, without the 5% tax, should be estimated between 37-49 million euros .

As recorded by foreign reports, such as Morgan Stanley a month ago, Eurobank aims at 2022, and in the first months of next year may have managed to reduce the percentage of red loans from its balance sheet to its levels European average, which provides for 5% .

 

Already after the agreement with DoValue , the NPE's index is expected to fall to just over 7%.

The prospect of a dividend, however, is what fuels investment interest today, as foreign analysts give a target price above 1 euro (1.07 euros according to Morgan Stanley).


Glider, thanks for posting. I noticed the stock was up to Euro0.90 yesterday and was wondering why 🙂. I think the rise in property prices in Greece (that is happening everywhere in the world) is really helping Eurobank in two big unexpected ways:

- tailwind to NPE estimates

- tailwind to their profitable and large property business unit (former Grivalia). 
 

Hopefully Eurobank is able to get the dividend re-instated in 2022. That will confirm to investors that they are indeed through the Great Greek Financial Crisis and starting to write the next chapter in their history. A big deal. And should be very profitable for investors for many years to come.

Edited by Viking
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1 hour ago, glider3834 said:

As recorded by foreign reports, such as Morgan Stanley a month ago, Eurobank aims at 2022, and in the first months of next year may have managed to reduce the percentage of red loans from its balance sheet to its levels European average, which provides for 5% .

 

Good stuff Glider.  A couple of attachments

 

1. Eurobank Research MS Eurobank - Focus Shifts to Loan Growth.pdfMS Eurobank.pdf

2. MS Model

3.  A link to a recent MS Podcast featuring Nida Iqbal the MS analyst on Eastern Europe, Middle East, and Africa (EEMEA)

 

https://www.dropbox.com/s/quhxgbbck3oaj2w/MS Greek Bank Podcast.mp3?dl=0

 

Eurobank remains MS only overweight rec for Greece.  Main reason is balance sheet clean up. 

 

2022 is shaping up to be an absolute ripper for Fairfax. Between Atlas and Eurobank alone there could be >$100m of annual dividends heading Fairfax's way.

 

 

Eurobank Model 10-21.xlsm

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1 hour ago, Viking said:

I thought it would be interesting to look at the investment portfolio of Fairfax at a very high level. And specifically everything except the bond/cash holdings. So equities, partnerships, derivatives (like the TRS) and real estate. So I am treating the TRS on FFH shares as a stock position of $827 million. Fairfax India is calculated as a $678 million position (shares owned x stock price). All stock prices are based on Oct 19 closing price. Needless to say this is not an exact science with some estimates coming from different sources (2020YE and Q2 reports). Yes, there are errors as I have not spend a great deal of time of digging through what is included in the ‘other’ buckets (like Digit preferred shares?). The goal is to put something together that is generally accurate to help us understand the size and composition of Fairfax’s equity holdings (and I say equity in the broadest of definitions - see below). Please let me know if you see any big mistakes.

 

Estimate of Fairfax’s total investment portfolio = $45 billion

‘Equity Holdings’ defined: equity holdings + partnerships + TRS + real estate = $14.8 billion = 33% of total investments

 

Some Key Take Aways (file is attached below):

1.) Fairfax has a VERY large number of holdings. I actually track 50 different holdings. That does not include the more than 25% of the portfolio that is included in the various ‘other’ and ‘partnerships’ and real estate buckets.

2.) Atlas is the largest single holding at $1.83 billion or 12.4% (of what I broadly define as the ‘equity holdings' bucket)

3.) Total limited partnerships was $2.1 billion (June 30, 2021) or 14.2%. Yes, a much larger position than Atlas.

4.) Emerging market positions = 16% of portfolio. This is large. India is about 2/3 of this total. This is not including Digit preferred shares.

5.) Eurobank is the #2 holding at $1.18 billion = 8.0%. Is Greece considered EM? If so, this would increase Fairfax’s EM weighting to 24%.

6.) Resource positions = 10% of portfolio. Also large.

7.) Blackberry is the #3 holding at $1.17 billion = 7.9% ($11.52 stock price was used; this number moves lots)

8.) FFH Total Return Swaps is the #4 position at $827 million = 5.6%

9.) Fairfax India rounds out the top 5 (#5 position) at $678 million = 4.6% ($13 stock price vs $20 BV 🙂

10.) Top 3 individual positions = 28% of total. 72% is invested in something other than Atlas, Eurobank and Blackberry. Not as concentrated as I thought.

11.) 4 of the 5 largest holdings look cheap to crazy cheap to me: Atlas at $14.66; Eurobank at Euro0.90; Fairfax at US$421; Fairfax India at $13. Despite the massive increase in the value of this bucket the past 3 quarters there is lots of upside left. 

Fairfax Equity Holdings Oct 19 2021.xlsx 149.52 kB · 3 downloads

thanks Viking - on the limited partnerships - AR 2020

 

At December 31, 2020 limited partnerships and other consisted of 51 investments, the three largest being $299.5 (beverage manufacturing), $191.8 (industrials) and $146.4 (oil and gas extraction) 

 

BDT Capital partners do have a $4 bil position in Keurig Dr Pepper, so could this be the mystery beverage manufacturer investment ?  https://www.sec.gov/Archives/edgar/data/1510974/000095012321011542/xslForm13F_X01/0000950123-21-011542-5304.xml

 

The oil & gas extraction business appeared as 3rd largest for the first time in 2020 - opportunistic timing perhaps 🙂

 

 

 

 

Edited by glider3834
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1 hour ago, Viking said:

I thought it would be interesting to look at the investment portfolio of Fairfax at a very high level. And specifically everything except the bond/cash holdings. So equities, partnerships, derivatives (like the TRS) and real estate. So I am treating the TRS on FFH shares as a stock position of $827 million. Fairfax India is calculated as a $678 million position (shares owned x stock price). All stock prices are based on Oct 19 closing price. Needless to say this is not an exact science with some estimates coming from different sources (2020YE and Q2 reports). Yes, there are errors as I have not spend a great deal of time of digging through what is included in the ‘other’ buckets (like Digit preferred shares?). The goal is to put something together that is generally accurate to help us understand the size and composition of Fairfax’s equity holdings (and I say equity in the broadest of definitions - see below). Please let me know if you see any big mistakes.

 

Estimate of Fairfax’s total investment portfolio = $45 billion

‘Equity Holdings’ defined: equity holdings + partnerships + TRS + real estate = $14.8 billion = 33% of total investments

 

Some Key Take Aways (file is attached below):

1.) Fairfax has a VERY large number of holdings. I actually track 50 different holdings. That does not include the more than 25% of the portfolio that is included in the various ‘other’ and ‘partnerships’ and real estate buckets.

2.) Atlas is the largest single holding at $1.83 billion or 12.4% (of what I broadly define as the ‘equity holdings' bucket)

3.) Total limited partnerships was $2.1 billion (June 30, 2021) or 14.2%. Yes, a much larger position than Atlas.

4.) Emerging market positions = 16% of portfolio. This is large. India is about 2/3 of this total. This is not including Digit preferred shares.

5.) Eurobank is the #2 holding at $1.18 billion = 8.0%. Is Greece considered EM? If so, this would increase Fairfax’s EM weighting to 24%.

6.) Resource positions = 10% of portfolio. Also large.

7.) Blackberry is the #3 holding at $1.17 billion = 7.9% ($11.52 stock price was used; this number moves lots)

8.) FFH Total Return Swaps is the #4 position at $827 million = 5.6%

9.) Fairfax India rounds out the top 5 (#5 position) at $678 million = 4.6% ($13 stock price vs $20 BV 🙂

10.) Top 3 individual positions = 28% of total. 72% is invested in something other than Atlas, Eurobank and Blackberry. Not as concentrated as I thought.

11.) 4 of the 5 largest holdings look cheap to crazy cheap to me: Atlas at $14.66; Eurobank at Euro0.90; Fairfax at US$421; Fairfax India at $13. Despite the massive increase in the value of this bucket the past 3 quarters there is lots of upside left. 

Fairfax Equity Holdings Oct 19 2021.xlsx 149.52 kB · 7 downloads

great work too Viking  🙂 - will check it out

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1 hour ago, nwoodman said:

 

Good stuff Glider.  A couple of attachments

 

1. Eurobank Research MS Eurobank - Focus Shifts to Loan Growth.pdfMS Eurobank.pdf

2. MS Model

3.  A link to a recent MS Podcast featuring Nida Iqbal the MS analyst on Eastern Europe, Middle East, and Africa (EEMEA)

 

https://www.dropbox.com/s/quhxgbbck3oaj2w/MS Greek Bank Podcast.mp3?dl=0

 

Eurobank remains MS only overweight rec for Greece.  Main reason is balance sheet clean up. 

 

2022 is shaping up to be an absolute ripper for Fairfax. Between Atlas and Eurobank alone there could be >$100m of annual dividends heading Fairfax's way.

 

 

Eurobank Model 10-21.xlsm 4.49 MB · 2 downloads

great podcast thanks nwoodman 

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1 hour ago, glider3834 said:

thanks Viking - on the limited partnerships - AR 2020

 

At December 31, 2020 limited partnerships and other consisted of 51 investments, the three largest being $299.5 (beverage manufacturing), $191.8 (industrials) and $146.4 (oil and gas extraction) 

 

BDT Capital partners do have a $4 bil position in Keurig Dr Pepper, so could this be the mystery beverage manufacturer investment ?  https://www.sec.gov/Archives/edgar/data/1510974/000095012321011542/xslForm13F_X01/0000950123-21-011542-5304.xml

 

The oil & gas extraction business appeared as 3rd largest for the first time in 2020 - opportunistic timing perhaps 🙂

 

 

 

 

 

I haven't checked the AR so these might be dumb comments, but:

- Might beverage be the Sokol JV? Can't remember the name nor, when it was sold.

- And wouldn't oil & gas be Exco post bk? I'm not aware of another big oil and gas investment unless its a collection of Ensign, H&P, and others?

 

Another one we have not heard about in ages is Quantum, which was meant to be India's Vanguard but doesn't seem to have made much progress. 

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1 hour ago, petec said:

 

I haven't checked the AR so these might be dumb comments, but:

- Might beverage be the Sokol JV? Can't remember the name nor, when it was sold.

- And wouldn't oil & gas be Exco post bk? I'm not aware of another big oil and gas investment unless its a collection of Ensign, H&P, and others?

 

Another one we have not heard about in ages is Quantum, which was meant to be India's Vanguard but doesn't seem to have made much progress. 

no worries

different - Davos brands was sold in 2020

Exco an equity accounted associate & has different carrying value - this oil & gas business (one business not a collection) sits under limited partnerships so sits under 'Common Stocks' that are MTM on Balance sheet

 

Looks like Quantum are managing around 3bil USD & HWIC (Fairfax) own around 49% https://www.quantumamc.com/about-us/our-sponsor/95 - I had a quick look at SEBI to confirm but got lost & now my partner is calling me for dinner 😉 

 

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@Viking Thank-you for investing the time to meticulously quantify those holdings.  Followers of FFH knew the rough importance of each, but such a systematic coverage is an excellent resource for all of us.

 

Sometimes when I see a list, my mind jumps to what is not on the list.  In this case, your size-ranked list made me think a bit about where the Toys R Us holding would fit if it were publicly traded.  Recently, FFH astutely unloaded the operational element of Toys, but retained the real estate (I say "astutely" because I am guessing that Toys is getting its ass handed to it by Amazon...).  When FFH bought Toys for CAD$300m in 2018, the story was that the real estate alone was worth the purchase price, and now FFH has effective severed the real estate from the operations.  So, given that real estate prices in Canada have gone absolutely bonkers over the past three years, what are those properties worth today?  Has big-box real estate tracked the insanity of the residential real estate market?  Is it possible that those real estate holdings are worth something similar to FFH's holding in Recipe (ie, US$336m) today?   If anyone has any insight on the value of big-box sites, I'd love to read it.

 

Thanks again for the excellent work.

 

 

SJ

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9 hours ago, nwoodman said:

 

Good stuff Glider.  A couple of attachments

 

1. Eurobank Research MS Eurobank - Focus Shifts to Loan Growth.pdfMS Eurobank.pdf

2. MS Model

3.  A link to a recent MS Podcast featuring Nida Iqbal the MS analyst on Eastern Europe, Middle East, and Africa (EEMEA)

 

https://www.dropbox.com/s/quhxgbbck3oaj2w/MS Greek Bank Podcast.mp3?dl=0

 

Eurobank remains MS only overweight rec for Greece.  Main reason is balance sheet clean up. 

 

2022 is shaping up to be an absolute ripper for Fairfax. Between Atlas and Eurobank alone there could be >$100m of annual dividends heading Fairfax's way.

 

 

Eurobank Model 10-21.xlsm 4.49 MB · 6 downloads


@nwoodman thanks for all the info. Learned lots (hate that when it happens 🙂 ). The Greek economy looks like it is turning the corner with 8% growth in 2021 and 4% predicted for 2022. Lots of tailwinds for Eurobank. 

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1 hour ago, StubbleJumper said:

@Viking Thank-you for investing the time to meticulously quantify those holdings.  Followers of FFH knew the rough importance of each, but such a systematic coverage is an excellent resource for all of us.

 

Sometimes when I see a list, my mind jumps to what is not on the list.  In this case, your size-ranked list made me think a bit about where the Toys R Us holding would fit if it were publicly traded.  Recently, FFH astutely unloaded the operational element of Toys, but retained the real estate (I say "astutely" because I am guessing that Toys is getting its ass handed to it by Amazon...).  When FFH bought Toys for CAD$300m in 2018, the story was that the real estate alone was worth the purchase price, and now FFH has effective severed the real estate from the operations.  So, given that real estate prices in Canada have gone absolutely bonkers over the past three years, what are those properties worth today?  Has big-box real estate tracked the insanity of the residential real estate market?  Is it possible that those real estate holdings are worth something similar to FFH's holding in Recipe (ie, US$336m) today?   If anyone has any insight on the value of big-box sites, I'd love to read it.

 

Thanks again for the excellent work.

 

 

SJ

 

I do not have any comments on the real-estate, but if memory serves, Amazon obliterated Toy' R Us side that is based in the U.S. The Canadian operation was profitable, but was being used by the parent U.S.-based Toy' R Us to subsidies its losses in the U.S. So, when FFH bought the Canadian side of the business, they bought a profitable business.

 

 

 

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1 minute ago, Xerxes said:

 

I do not have any comments on the real-estate, but if memory serves, Amazon obliterated Toy' R Us side that is based in the U.S. The Canadian operation was profitable, but was being used by the parent U.S.-based Toy' R Us to subsidies its losses in the U.S. So, when FFH bought the Canadian side of the business, they bought a profitable business.

 

 

 

 

Yes, I'd say that Canada has been a couple of years behind the US in adopting Amazon as a preferred retailer.  My anecdotal observation is that the number of empty Amazon boxes at the curb on recycling day and the number of white mini-vans prowling through my neighbourhood have sky-rocketed over the past few years.  The pandemic likely hasn't helped matters either, as Toys would likely have been designated as a "non-essential" retailer in Canada's largest province and therefore could only offer curbside pickup.  If you have to order something for curbside pickup, you're better off just ordering it from Amazon and getting home delivery.

 

All of that to say that I suspect that Toys' retail business hasn't gone well since FFH purchased it in 2018.  I was very happy to see FFH sever the real estate from the actual business because then it will not be FFH which needs to make the agonizing decision of whether to close shop if (when?) the retail ops can no longer generate positive cash from ops.  Instead, that will be Putnam's decision and, as long as they pay the rent, FFH is golden.  And if they can't pay the rent, that's a minor speedbump on the road to ultimately divesting the real estate (hopefully at a large profit!).

 

When FFH bought Toys, I groaned out loud because it looked to me like a reprise of Eddie Lampert's Sears purchase.  In principle the assets are worth more than the purchase price, but that kind of investment only works if you don't lose a bunch of money from ops before you are able to divest the valuable assets.  That doesn't look to be a risk anymore. 👍

 

 

SJ

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1 hour ago, petec said:

Viking, doesn’t Fairfax own more of Atlas than 37%? I thought it was nearer 50%. 


@petec, i made the mistake of adjusting all my spreadsheets to reflect what Fairfax reported in the 2020AR. The issue is their stated ownership stakes in their equity holdings excluded the Riverstone positions. So i am slowly reverting back to ownership numbers that include Riverstone positions (for all holdings). So for Atlas i am using share count from the most recent 13F. The 37% is from the 2020AR (and is understated); i think Fairfax ownership of Atlas is the low 40% range. I will update Atlas after both companies report Q3 results when we should get updated information. Some of the debentures may have been converted to stock as well. Bottom line, given its size, i will be updating the Atlas numbers (% ownership and shares owned). 

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5 hours ago, StubbleJumper said:

 

Yes, I'd say that Canada has been a couple of years behind the US in adopting Amazon as a preferred retailer.  My anecdotal observation is that the number of empty Amazon boxes at the curb on recycling day and the number of white mini-vans prowling through my neighbourhood have sky-rocketed over the past few years.  The pandemic likely hasn't helped matters either, as Toys would likely have been designated as a "non-essential" retailer in Canada's largest province and therefore could only offer curbside pickup.  If you have to order something for curbside pickup, you're better off just ordering it from Amazon and getting home delivery.

 

All of that to say that I suspect that Toys' retail business hasn't gone well since FFH purchased it in 2018.  I was very happy to see FFH sever the real estate from the actual business because then it will not be FFH which needs to make the agonizing decision of whether to close shop if (when?) the retail ops can no longer generate positive cash from ops.  Instead, that will be Putnam's decision and, as long as they pay the rent, FFH is golden.  And if they can't pay the rent, that's a minor speedbump on the road to ultimately divesting the real estate (hopefully at a large profit!).

 

When FFH bought Toys, I groaned out loud because it looked to me like a reprise of Eddie Lampert's Sears purchase.  In principle the assets are worth more than the purchase price, but that kind of investment only works if you don't lose a bunch of money from ops before you are able to divest the valuable assets.  That doesn't look to be a risk anymore. 👍

 

 

SJ

Yep I remember investing in Sears years ago following that same train of thought & it was that big red CFO number that kept repeating itself that ultimately caused me to exit.

 

Its interesting Fairfax has a a lot of real estate indirectly owned via Common Stock holdings whose primary business is not real estate investment - just three that come to mind

 

- via Eurobank equity holding - (ex Grivalia) real estate portfolio has asset value of 1.4 bil (FFH 31% share worth approx $504 mil)

-via Stelco (FFH 15% share $37 mil??)  - Stelco also is preparing to sell a parcel of land adjacent to its operations in Hamilton, Ontario that could be worth $250 million.https://www.barrons.com/articles/canadian-steelmaker-stelco-is-a-low-cost-producer-and-has-an-investor-friendly-ceo-how-that-could-boost-the-stock-51633365262

- via BIAL (via Fairfax India 54% ownership of BIAL) - 460 acres - (FFH stake assuming Riverstone buyback 460 x 54% x 36.6% = 90 acres - value???) 

Real Estate Monetization: BIAL has approximately 460 acres of land adjoining the airport that can be developed. Most of this land is undeveloped and Bangalore’s historical population areas are getting congested, so the city is expanding in the airport’s direction. BIAL anticipates significant upside, over time, from monetization of this real estate. We provide below an update on the significant progress made in the actions to monetize the land available for development. • A 100% owned special purpose vehicle (SPV) subsidiary of BIAL was incorporated to carry on the real estate activities of BIAL. This entity, Bangalore Airport City Limited (BACL), is now capitalized and staffed and is expected to be self-funding as we move forward. Plans to develop the first 176 acres of land have 9 FAIRFAX INDIA HOLDINGS CORPORATION been advanced and several deals are being negotiated. Infrastructure planning and detailed design for this parcel have been completed. • Anchored on the principles of a smart city, BACL will focus on four asset classes – business parks; a retail, dining and entertainment village (RDE); hospitality; and convention and exhibition centres. • Despite potential partners’ and investors’ inability to visit the site because of the pandemic, significant progress has been made in project plans. • A land lease for a 3D printing facility has been completed and the first payment received. • A land lease for a large central kitchen for the premier airline services company has been agreed, although payment has been delayed because of pandemic related disruptions. • A term sheet has been signed for a joint development ‘‘built to suit’’ campus for a multinational corporation. • A term sheet has been signed for a joint development trade centre.

Edited by glider3834
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