Fairfax stock positions

[StubbleJumper]

With January in the rear-view mirror here is an update of Fairfax's equity holdings. The spreadsheet is attached below. Please let me know if you find any big errors :-).

 

As a reminder, in Q4 their holdings were up about US$1.45 billion (see spreadsheet 2).

One month into 2021 their holdings are up about $1.060 billion.

So Q4 + January the equity holdings are up about $2.5 billion.

 

Obviously in January Blackberry ($US 14.42) was the driver, up almost $800 million. What does this mean? We should find out in the next couple of weeks, latest when they report earnings.

 

I made a few updated to the spreadsheet:

- added John Keells and Nations Trust Bank (two Sri Lanka holdings)

- Fairfax Africa has been updated to Helios; I am not sure if I have this holding captured properly.

------------

As a reminder, the purpose of the spreadsheet is to help us understand in broad terms what is going on with the equity holdings in Fairfax's portfolio. Some holdings are mark-to-market; most are not. Fairfax also has debentures (Blackberry) and warrants (Atlas). It is also nice to see position sizes.

 

 

So, taking at look at your Feb 1 spreadsheet, there has been a bit of jockeying of the largest positions over the past 10 days?  So from largest to smallest it currently roughly:

 

1) ATCO ~ US$1.4 billion

2) BB ~ US$1.3 billion

3) Farmers Edge ~ CAD$1.4 billion (or something)

4) Eurobank ~ US$0.8 billion.

5) Fairfax India ~ US$0.6 billion

 

 

On February 1 when you shared your spreadsheet, I don't think that I would have said that Farmer's Edge would come in at #3 on that list.

 

 

SJ

 

[Parsad]

The undervaluation isn't bizarre. But the number of things that seem to be aligning at one time is impressive. And the fact that Prem is being bailed out by a tech bubble he railed against (I refer to the valuations of Digit, Blackberry, and Farmer's Edge) is downright amusing.

 

But people say that every time.  He was bailed out by his friends.  He was bailed out by being right on the housing crisis and buying collateralized bonds.  He was right because he is being bailed out by a tech bubble.  As I said, in June he threw $150M of personal money into his own stock and explained why...that it was cheap.  I told you guys why it was cheap even before Prem said he bought stock.  A couple of other long-time FFH owners also said the same.

 

There was an enormous amount of capital sitting on the sidelines over the last 3 years.  Combine that with massive amounts of stimulus flowing into hands that don't need the cash, but they invest it in the markets, you have capital that was originally flowing into growth stocks now moving into value stocks.  The Reddit and millennial bulls drew cash from sideline investors as well...so that had to find a place.  This is the normal transition of capital flowing from expensive stocks into cheaper stocks...with the more expensive bubble stocks eventually crashing up to 90% of their value down the road.  It's not a bailout...it's patience!  Cheers!

 

I have owned this for 13 years now and added materially in 2020. You do not need to persuade me that it was cheap!

 

I did not, however, think they might have a chance to monetise Blackberry at $20, or that Digit would be marked up quite so fast, or that Farmer's Edge might generate a $1-2bn profit within 6 months - and I certainly did not think that all three would happen at once.

 

I have never felt that he got bailed out before, personally. But I do not believe he invested in Farmer's Edge or Blackberry because he saw an epic bubble coming in unprofitable stocks. He thought they were great businesses and, frankly, there is precious little evidence so far that he was right.

 

Even if BB and FDGE turn out to be super-profitable over the next decade, getting the chance to monetise them now at silly prices is transformative to Prem's IRR. That is pure luck. And being able to do it when he desperately needs capital is beyond luck.

 

So no, sorry, he's been bailed out on this one. And I am not complaining at all.

 

It be saying the same thing that Elon Musk was bailed out by an inflated stock price or was simply lucky.  While the bubble might be true, it doesn't negate the fact that markets and observers were still wrong on Tesla and Musk's vision.  Did Steve Jobs get bailed out because he invented the iPhone?  Without the iPhone, AAPL today would not exist in its present form. 

 

With investing and entrepreneurship, there is always a bit of luck...but the winners always position themselves to benefit from that luck.  If Buffett had not bought Blue Chip Stamps, met Munger, or eliminated derivatives contracts at Gen Re, Berkshire might not be the same either.  Cheers!

[drzola]

If Farmers Edge turns out to be a Homerun for Fairfax I have skin in the game here too so GO FDGE Go as your Wed morning quarterback.

P.S> The founder is a very good marketer/ promoter fyi but not near as good as the great one heading AGT tho I find.

[petec]

The undervaluation isn't bizarre. But the number of things that seem to be aligning at one time is impressive. And the fact that Prem is being bailed out by a tech bubble he railed against (I refer to the valuations of Digit, Blackberry, and Farmer's Edge) is downright amusing.

 

But people say that every time.  He was bailed out by his friends.  He was bailed out by being right on the housing crisis and buying collateralized bonds.  He was right because he is being bailed out by a tech bubble.  As I said, in June he threw $150M of personal money into his own stock and explained why...that it was cheap.  I told you guys why it was cheap even before Prem said he bought stock.  A couple of other long-time FFH owners also said the same.

 

There was an enormous amount of capital sitting on the sidelines over the last 3 years.  Combine that with massive amounts of stimulus flowing into hands that don't need the cash, but they invest it in the markets, you have capital that was originally flowing into growth stocks now moving into value stocks.  The Reddit and millennial bulls drew cash from sideline investors as well...so that had to find a place.  This is the normal transition of capital flowing from expensive stocks into cheaper stocks...with the more expensive bubble stocks eventually crashing up to 90% of their value down the road.  It's not a bailout...it's patience!  Cheers!

 

I have owned this for 13 years now and added materially in 2020. You do not need to persuade me that it was cheap!

 

I did not, however, think they might have a chance to monetise Blackberry at $20, or that Digit would be marked up quite so fast, or that Farmer's Edge might generate a $1-2bn profit within 6 months - and I certainly did not think that all three would happen at once.

 

I have never felt that he got bailed out before, personally. But I do not believe he invested in Farmer's Edge or Blackberry because he saw an epic bubble coming in unprofitable stocks. He thought they were great businesses and, frankly, there is precious little evidence so far that he was right.

 

Even if BB and FDGE turn out to be super-profitable over the next decade, getting the chance to monetise them now at silly prices is transformative to Prem's IRR. That is pure luck. And being able to do it when he desperately needs capital is beyond luck.

 

So no, sorry, he's been bailed out on this one. And I am not complaining at all.

 

It be saying the same thing that Elon Musk was bailed out by an inflated stock price or was simply lucky.  While the bubble might be true, it doesn't negate the fact that markets and observers were still wrong on Tesla and Musk's vision.  Did Steve Jobs get bailed out because he invented the iPhone?  Without the iPhone, AAPL today would not exist in its present form. 

 

With investing and entrepreneurship, there is always a bit of luck...but the winners always position themselves to benefit from that luck.  If Buffett had not bought Blue Chip Stamps, met Munger, or eliminated derivatives contracts at Gen Re, Berkshire might not be the same either.  Cheers!

 

Agreed there is always luck. But every example you have given (including Watsa with CDS's) is an example of an entrepreneur doing something extremely smart in a way that skewed the risk/reward in his favour.

 

I actually think Watsa and Digit is another example of the same.

 

But Watsa and Blackberry isn't, and I am not sure Watsa and FDGE is either. These strike me as examples of poor underwriting that seem to have got bailed out by a phuquing enormous bubble.

 

[petec]

We have been in/out of FFH ever since SAC Capital took a run at it. We've done very well by FFH, and along the way, have borrowed a few pages from the masters investment book; one of which is what buy/hold really means.

 

FFH is always going to be garbage collecting, and turning it into compost. The volatility and timing uncertainty of the process, hedged against the much larger insurance business. Very effective long term, but in the short-term (<1yr) largely a function of ever changing stars alignment. At times, everything aligns, and it's hail the hero! At other times, it's fire the bum!! 

 

Like most everything else, FFH isn't a buy and forget investment, One has to be willing to trade around future prospects, and the overall manic/depressive gyration of the market. Not an easy sell in the OPM world.

 

Simply enjoy the ride, and let it be.

 

SD

 

Interesting. 13 years ago I took the opposite view: that results would be lumpy in unpredictable ways and therefore trading would not work. I committed to holding the thing long term.

 

Your way might be better  :o

[petec]

With January in the rear-view mirror here is an update of Fairfax's equity holdings. The spreadsheet is attached below. Please let me know if you find any big errors :-).

 

As a reminder, in Q4 their holdings were up about US$1.45 billion (see spreadsheet 2).

One month into 2021 their holdings are up about $1.060 billion.

So Q4 + January the equity holdings are up about $2.5 billion.

 

Obviously in January Blackberry ($US 14.42) was the driver, up almost $800 million. What does this mean? We should find out in the next couple of weeks, latest when they report earnings.

 

I made a few updated to the spreadsheet:

- added John Keells and Nations Trust Bank (two Sri Lanka holdings)

- Fairfax Africa has been updated to Helios; I am not sure if I have this holding captured properly.

------------

As a reminder, the purpose of the spreadsheet is to help us understand in broad terms what is going on with the equity holdings in Fairfax's portfolio. Some holdings are mark-to-market; most are not. Fairfax also has debentures (Blackberry) and warrants (Atlas). It is also nice to see position sizes.

 

 

So, taking at look at your Feb 1 spreadsheet, there has been a bit of jockeying of the largest positions over the past 10 days?  So from largest to smallest it currently roughly:

 

1) ATCO ~ US$1.4 billion

2) BB ~ US$1.3 billion

3) Farmers Edge ~ CAD$1.4 billion (or something)

4) Eurobank ~ US$0.8 billion.

5) Fairfax India ~ US$0.6 billion

 

 

On February 1 when you shared your spreadsheet, I don't think that I would have said that Farmer's Edge would come in at #3 on that list.

 

 

SJ

 

It's an astonishing possibility.

 

Even if the IPO goes well I can't really believe it will hold these valuation levels until the sell restrictions pass but hey.

 

[bluedevil]

It seems to me if the stock goes public at 10-17 dollars a share, there has to be creative ways to hedge/lock in some gains.  Perhaps you can buy puts; or buy puts on other ag tech companies, etc.

[petec]

It seems to me if the stock goes public at 10-17 dollars a share, there has to be creative ways to hedge/lock in some gains.  Perhaps you can buy puts; or buy puts on other ag tech companies, etc.

 

I think the lockup provisions preclude this but I need to reread.

[Xerxes]

On the question about luck or not.

I tend to agree with the camp says luck is part of the equation.

 

Prem had a long string of being unlucky in some bets. After the fact, of course we can piece together a story that explain that the initial bet was wrong and has nothing to do with being unlucky and it was so obvious etc. etc.

 

i see it as he tends to have lumpy results, he also tends to have lumpiness in his luckiness.

 

If Covid was the pinnacle of bad luck and how it affected almost all of his businesses (even the venerable airport in Bangalore), than he is allowed to have the rising tide of rotation value lifting all of his boats in late 2021-22, and have the rising tide of technology help him out with some of his more tech oriented names (few that are). 

 

Lastly, when one invest, one does need to believe that things will be different. It is an obvious statement to make, i know, but one that i have to say to myself all the time.

 

On FFH, i am capped by what i can put in my RRSP, i bought what i could with 60% of current shares bought post-March 2020 and 1/3 of my FIH shares bought below $10 USD.

 

--------------------------------------------------

FFH needs to understand who they and who they are not. They are not an operating business managing the left hand side of the balance sheet of their investments. That is not in their DNA. They are not Brookfield and they will never be. Brookfield came from the operating side and now is in asset management business. FFH' expertise when it comes to investment, is the financial aspect of it. I have seen a lot of engineers that go do an MBA (myself included) but never seen a person with a B.-Commerce go do an Masters in engineering.

 

I was listening to Brookfield Business Partners conference call for Q4. Brookfield is a complicated beast to understand, but really each of the subs on their own are doing exactly what they need  to do, without going too much outside their area of competence. How amazing is that.

 

"The strong cash flows generated by our largest businesses also provide us recurring distributions that we use to fund our growth. As an example, at year-end, Westinghouse paid a $265 million dividend, of which BBU received $115 million. Later, Denis is going to talk more about what's going on at Westinghouse, but I'll just say this continues to be a phenomenal investment for us. In about 2.5 years, and importantly, with no increase to Westinghouse's debt levels, BBU has received more than $370 million in dividends, which is nearly all of our initial equity investment, just 2.5 years ago. Westinghouse truly is a great cash generator."

 

 

[petec]

Re luck, I think the underlying point I’m trying to make is this.

 

Buying a business below intrinsic value and selling it at, or even a little above, intrinsic value is not luck. It’s skill, and it’s repeatable.

 

Buying a business because you overestimated its IV, and then getting bailed out by a bubble, is not skill, it’s luck, and you can’t rely on it being repeated.

 

So while it’s fine to say luck is part of the game, I don’t care, because I’m trying to assess Fairfax’s *future* prospects.

 

[Viking]

One key for Fairfax moving forward is how do they take advantage of the current market situation to improve the balance sheet and right size and rebalance the investment portfolio.

 

Do they lock in some gains for Blackberry? Or do they continue to simply ride the roller coaster (likely back to US$7)?

 

What happens with Farmers Edge pricing in early March? Just as important, what is the exit strategy / how do they lock in some gains while the market is so irrational. My fear is we get a bunch of talk about how it is a value investment and a long term hold and Fairfax shareholders just need to trust management and be patient. (With Fairfax management then talking about the ‘obvious’ bubble in some tech stocks which they do not own...)

 

What is the plan with Digit? That company is in the sweet spot of the current euphoria. Yes, Fairfax likely views Digit as a long term hold. If you can get a year 10 return in year 3 why not do it? Time value of money.

 

What is the plan with AGT? This could be another very large transaction.

 

Atlas is another one to watch given its massive position size (especially once it gets to $15/share or even $20 if container stocks take off). What is the exit strategy for at least part of the position.

 

Fairfax has said the word ‘monetize’ so much over the past year they now need to deliver. Because the market is finally cooperating. We could see a large number of announcements coming from Fairfax in the coming months. If they are able to exit some positions at high prices they will mint $. And Fairfax stock will jump (25-30% from current levels is not crazy... that kind of move would take the stock to Jan/Feb 2020 levels)

 

PS: a watch-out for me is how much cash actually flows to Fairfax in these ‘monetizations’. Or, horrors of horrors, does Fairfax actually spend more to facilitate these deal (buying out other partners) so the ‘monetizations’ end up being a use of cash instead of a source of cash.

[bluedevil]

There is zero chance they do anything with Digit other than hold on for many years.

At the first chance when it is legal, they are going to increase their ownership to 75%, even if they have to pay nosebleed prices.

(My hope is that they have some right to increase their ownership based on some pre-set formula.  I had the same hope with ICICI Lombard, turned out not to be the case, but Fairfax still did great when it had the opportunity to increase its stake at 3x book.)

 

We are only in the first inning with Digit.  Don't want to cut this beautiful flower.

 

Hopefully they use it as a model across their divisions.  From a recent interview from the head of Digit, there are plenty of people from Fairfax coming in and looking at Digit's operations.

http://timesofindia.indiatimes.com/articleshow/80756808.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

 

And as Prem said in podcast with Southeastern asset:

 

We've got a digital operation that we started from scratch

as you know in India, called Go Digit. It's run by a fellow

by the name of Kamesh Goyal. Fantastic guy. They're

running at about $175 million in about a little more than a

year, year and a half. Everything is digital, no paper. That

operation, once it continues in the next few years, we'll

move it to other countries under Kamesh's guidance.

 

 

[bluedevil]

There is zero chance they do anything with Digit other than hold on for many years.

At the first chance when it is legal, they are going to increase their ownership to 75%, even if they have to pay nosebleed prices.

(My hope is that they have some right to increase their ownership based on some pre-set formula.  I had the same hope with ICICI Lombard, turned out not to be the case, but Fairfax still did great when it had the opportunity to increase its stake at 3x book.)

 

We are only in the first inning with Digit.  Don't want to cut this beautiful flower.

 

Hopefully they use it as a model across their divisions.  From a recent interview from the head of Digit, there are plenty of people from Fairfax coming in and looking at Digit's operations.

http://timesofindia.indiatimes.com/articleshow/80756808.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

 

And as Prem said in podcast with Southeastern asset:

 

We've got a digital operation that we started from scratch

as you know in India, called Go Digit. It's run by a fellow

by the name of Kamesh Goyal. Fantastic guy. They're

running at about $175 million in about a little more than a

year, year and a half. Everything is digital, no paper. That

operation, once it continues in the next few years, we'll

move it to other countries under Kamesh's guidance.

 

Here's what Prem said on last earning's call about going to 75% if they can:

 

Prem Watsa

 

Yeah. Digit is a phenomenal company that is growing. In a few years or three years maximum, since it began on the [indiscernible] it's revenue end of March 2021 will be plus minus $400 million, $375 million to $400 million from scratch. It's breaking even already.

 

It's fully digitized and it's in India. And the Indian market is wide open. So the growth opportunity for this company is huge. It's growing at - its aim is to grow at 20 25 percentage points more than the industry which is growing at 20%.

 

So it's been growing at 45% something like that. And Kamlesh is, he's an insurance guy. He's built the second largest insurance company in India. And so we think it's going to be a phenomenal success. And we owned a little below 50% and when that government gives us the ability to go to 75%, we expect to be at 75%

[petec]

 

We are only in the first inning with Digit.  Don't want to cut this beautiful flower.

 

 

+1

 

Do you have a link to the Southeastern podcast?

[Xerxes]

There is an old one.

 

https://southeasternasset.com/podcasts/prem-watsa-insights-on-investing-underwriting-and-the-importance-of-culture/

 

not aware of a new one

[no_free_lunch]

Here's what Prem said on last earning's call about going to 75% if they can:

 

Prem Watsa

 

Yeah. Digit is a phenomenal company that is growing. In a few years or three years maximum, since it began on the [indiscernible] it's revenue end of March 2021 will be plus minus $400 million, $375 million to $400 million from scratch. It's breaking even already.

 

It's fully digitized and it's in India. And the Indian market is wide open. So the growth opportunity for this company is huge. It's growing at - its aim is to grow at 20 25 percentage points more than the industry which is growing at 20%.

 

So it's been growing at 45% something like that. And Kamlesh is, he's an insurance guy. He's built the second largest insurance company in India. And so we think it's going to be a phenomenal success. And we owned a little below 50% and when that government gives us the ability to go to 75%, we expect to be at 75%

 

I keep thinking that there is this other company, LMND, with $100m in sales and 50% growth it has a market cap of $8B.  LMND is overpriced but it could still pull on digits valuation.

[Viking]

Regarding Farmers Edge, here is share count information provided by Private Capital Journal:

 

“As at September 30, 2020, Farmers Edge had 69,141,225 common shares outstanding and 160,554,295 potential dilutive common shares: 5,880,592 related to stock options, 27,746,874 related to warrants and 126,926,828 related to the equity conversion option of the convertible debentures.

 

Fairfax Financial Holdings will continue to own majority of Farmers Edge following the offering.”

 

- https://privatecapitaljournal.com/fairfax-controlled-farmers-edge-files-for-100m-ipo-on-tsx/

[Viking]

OK, with Q4 results out (and 13F) I thought it would be good to update my spreadsheet to reflect new news. Also, from the Dec 31st 13F, I added any holdings over $10 million in size (resulting in 12 additions to my speadsheet). Reminder: the purpose of the spreadsheet is to provide a snapshot of what is going on 'under the hood' at Fairfax during the quarter. Please let me know you see any errors. On the conference call today Prem said we would see more detailed/easier to understand disclosure from Fairfax of their various business/equity holdings in the AR (March 5 release); this should help with accuracy moving forward.

 

Bottom line, from Dec 31-Feb 12, my math says the various equity investments (including 'Other') are up $1.540 billion = about +$59/share (pre tax). Their equity investments are up about 19% in 6 weeks (not including 'other' bucket. New item: FFH TRSwap: +$88 million. Looks like Fitbit and Gildan positions have been sold (no longer on 13F).

 

I also decided to modify the spreadsheet to 3 groupings (with equities in A and B groupings now ranked by size):

A - equities - mark to market: +$353 million = + $13.48/FFH share (pre tax)

B - equties - associates & consolidated; equity accounted: +$686 million = $26.19/share

C - other: FFH total return swap, BB debs, Atlas warrants, Altius warrants: + $501 million = $19.16/share 

 

It is informative to see that the bottom 18 equity holdings now total more than $400 million. The types of holdings are similar to what we discuss every day on the board. Many on the board (including me) have been calling for Fairfax to move up the 'quality' scale and perhaps this is slowly happening.

 

PS: I found an error with my original file; the corrected file is now attached below :-) and I updated the information in my post above to reflect the new numbers.

Fairfax_Equity_Holdings_Feb_12_2021.xlsx

[nwoodman]

OK, with Q4 results out (and 13F) I thought it would be good to update my spreadsheet to reflect new news. Also, from the Dec 31st 13F, I added any holdings over $10 million in size (resulting in 12 additions to my speadsheet). Reminder: the purpose of the spreadsheet is to provide a snapshot of what is going on 'under the hood' at Fairfax during the quarter. Please let me know you see any errors. On the conference call today Prem said we would see more detailed/easier to understand disclosure from Fairfax of their various business/equity holdings in the AR (March 5 release); this should help with accuracy moving forward.

 

Bottom line, from Dec 31-Feb 12, my math says the various equity investments (including 'Other') are up $1.481 billion = about +$56/share (pre tax). New item: FFH TRSwap: +$88 million. Looks like Fitbit and Gildan positions have been sold (no longer on 13F).

 

I also decided to modify the spreadsheet to 3 groupings (with equities in A and B groupings now ranked by size):

A - equities - mark to market: +$353 million = + $13.48/FFH share (pre tax)

B - equties - associates & consolidated; equity accounted: +$627 million = $23.93/share

C - other: FFH total return swap, BB debs, Atlas warrants, Altius warrants: + $501 million = $19.16/share 

 

It is informative to see that the bottom 18 equity holdings now total more than $400 million. The types of holdings are similar to what we discuss every day on the board. Many on the board (including me) have been calling for Fairfax to move up the 'quality' scale and perhaps this is slowly happening.

 

Thanks Viking, brilliant work!

[Viking]

nwoodman; just feeding the ocd monster :-) nice to hear others find it helpful.

 

PS: also, I found a couple of errors with my original file attached (currency got messed up for 2 positions); the file posted now is better :-)

[petec]

Excellent work, thanks! If you’re right on the $59 pretax then we are approaching $550 per share all in.

[SharperDingaan]

Viking: As a fun exercise add a new worksheet. One row per position, MV, MV portfolio weight, industry, geographic regions, etc. as additional columns; sort by the different columns. Build a per row data set using the last 3 yrs of quarterly data, populate it going forward from a macro, and use the data set to graph the changes over time. For sensitivity, add a spinner to the current MV in each row.

 

In the near-term, the big drivers are the tech. The sleepers are Eurobank and Atlas

- if the 'west' is exiting Covid in Q3/Q4 as everyone hopes, these two are going to be doing very well.

 

SD

 

[Viking]

Every dog has its day and Resolute Forest Products is barking very loudly right now. The shares traded at US $6.54 Dec 31 and are now up to $10.45 at Feb 8 = +60%. Fairfax’s position is up $119 million the past 6 weeks (to $319 million); they own 28.3% of Resolute.

 

The position is carried in the books at $US for $166 (i think the position was written down in Q2). This is an example of where BV for Fairfax is understated.

 

Why the sharp run up in Resolute shares? Primarily their lumber operations (my guess). And there is now speculation that we could see a big round of consolidation in lumber, pulp and paper verticals (Resolute plays in all 3). This is just another of many tailwinds for Fairfax. What an absolute carzy 3 months it has been for Fairfax and their equity holdings.

 

Of note, Resolute bought 3 US lumber mills from Conifer in Dec 2019. That purchase could be an absolute steal given how high lumber prices are and how long this pricing cycle may last (given the under building that went on in the US for years).

———————————

Forestry companies are takeover targets as lumber prices soar

- https://www.theglobeandmail.com/business/article-forestry-companies-are-takeover-targets-as-lumber-prices-soar/

 

Canada’s lumber and paper-products companies are expected to make significant acquisitions this year, or become takeover targets, as surging commodity prices drive industry consolidation. In the wake of West Fraser Timber Co. Ltd.’s well-received $4-billion acquisition of Norbord Inc. which closed in January, analysts and bankers predict domestic players such as Canfor Corp. will buy rivals, while familiar names such as 173-year-old Domtar Corp. may be snapped up.

 

“Given that most wood product companies now carry strong balance sheets and surplus cash, we expect that management teams have been actively looking for areas in which to invest,” said analyst Paul Quinn at RBC Capital Markets in a recent report.

 

The cyclical North American forest products industry is currently on an upswing, driven by increasing home construction and strong demand for pulp and paper products.

 

...In a sign that forest products is now a global business, in listing potential bidders for Domtar, Mr. Quinn said “a dark-horse buyer could be Nine Dragons Paper, given the company’s history of converting paper machines to containerboard and need for fiber to supply its Chinese paper manufactures.” Mr. Quinn said Nine Dragons could also bid for the paper division of Resolute Forest Products, a deal that would be worth &about $350-million for the Montreal-based company.

 

Hong Kong-based Nine Dragons has a $10-billion market capitalization and has snapped up paper mills in Wisconsin, Maine and West Virginia over the past three years.

[petec]

Actually I think they own 37.something percent. They had 33% but Resolute has been buying back shares.

[Viking]

Petec, for Resolute thanks for pointing out the discrepancy. I was using the Fairfax Q3 report where it states they own 28.8% of Resolute (up from 27.7% at Dec 31).

 

Doing a quick google search the Nasdaq site says FFH owns 30.548 million shares. This is the number i am using in my spreadsheet. With 81.53 million Resolute shares outstanding at Dec 31 that would put their ownership at 37%

- https://www.nasdaq.com/market-activity/stocks/rfp/institutional-holdings

 

March 5 we will get the AR from Fairfax and they said on the Q3 call they will be providing an easier to understand summary of all their various consolidated equity holdings which will be great to see :-) 

————————

I think the last time we saw a spike in lumber prices (a couple of years ago) Resolute paid a large special dividend. We may see the same thing later in 2021. Growing dividend income in 2H 2021 may be another tailwind for Fairfax.