valueventures Posted February 15 Posted February 15 I'm not sure if this is the right place to post this, but I came across it on X and thought it was interesting for anyone looking for an off-the-beaten-path idea with FFH validation:
SafetyinNumbers Posted February 15 Posted February 15 22 minutes ago, valueventures said: I'm not sure if this is the right place to post this, but I came across it on X and thought it was interesting for anyone looking for an off-the-beaten-path idea with FFH validation: Cormark likes BAMI. They have it earning $1.40 in their fiscal 2027 ending in August so < 5x P/E on their estimates. $19.50 target is based on 7x EV/EBITDA.
Viking Posted February 17 Posted February 17 Let’s bring the KW discussion to this thread. Another public holding of Fairfax will soon be private. Fairfax will provide up to $1.65B. It will be interesting to see what Fairfax will earn. KW was https://www.fairfax.ca/press-releases/kennedy-wilson-enters-into-agreement-to-be-acquired-by-consortium-led-by-william-mcmorrow-and-fairfax-financial-2026-02-17/ “Concurrent with entering into the Merger Agreement, Fairfax has entered into a commitment letter pursuant to which Fairfax has committed to provide the Consortium with funding up to an aggregate amount of $1.65 billion, which is the amount necessary to fund the cash purchase price in respect of the Transaction, the redemption of those preferred shares of the Company not owned by the Consortium, and certain other amounts required to be paid under the terms of the Merger Agreement. The Transaction is not subject to a financing condition. Following consummation of the Transaction, the KW Management Group, led by William McMorrow, will have effective and operational control of and will continue to lead and have ultimate responsibility for the Company and its subsidiaries. Fairfax is expected to have a majority of the economic interest in the Company immediately following the closing of the Transaction.”
Txvestor Posted February 17 Posted February 17 41 minutes ago, Viking said: Let’s bring the KW discussion to this thread. Another public holding of Fairfax will soon be private. Fairfax will provide up to $1.65B. It will be interesting to see what Fairfax will earn. KW was https://www.fairfax.ca/press-releases/kennedy-wilson-enters-into-agreement-to-be-acquired-by-consortium-led-by-william-mcmorrow-and-fairfax-financial-2026-02-17/ “Concurrent with entering into the Merger Agreement, Fairfax has entered into a commitment letter pursuant to which Fairfax has committed to provide the Consortium with funding up to an aggregate amount of $1.65 billion, which is the amount necessary to fund the cash purchase price in respect of the Transaction, the redemption of those preferred shares of the Company not owned by the Consortium, and certain other amounts required to be paid under the terms of the Merger Agreement. The Transaction is not subject to a financing condition. Following consummation of the Transaction, the KW Management Group, led by William McMorrow, will have effective and operational control of and will continue to lead and have ultimate responsibility for the Company and its subsidiaries. Fairfax is expected to have a majority of the economic interest in the Company immediately following the closing of the Transaction.” A couple of concerns I have about this are: 1) Sounds like they are mostly funding this acquisition but without a controlling interest. Clearly they like the management and that's usually fine until it's not, anyone know the details of the management control? 2) The stock has gone precisely nowhere in the last 16yrs! If stock price eventually mirrors intrinsic value, then this is an abysmal performance. I'm not clear what they're seeing in this acquisition or why the next decade would be any different. 3) The price being paid could buy back almost 5% of Fairfax shares outstanding at current prices. So this would be the capital allocation lens to consider in conjunction with point 2 above. 4) CRE sector is highly interest rate dependent, and if we are in for an era of structurally higher interest rates, it's not clear to me that CRE cap rates have fully adjusted to that reality. Arguably they're pricing in much lower rates in a year or two. I hope this works out well, but count me in the skeptical bucket.
Hoodlum Posted February 17 Posted February 17 (edited) 18 minutes ago, Txvestor said: A couple of concerns I have about this are: 1) Sounds like they are mostly funding this acquisition but without a controlling interest. Clearly they like the management and that's usually fine until it's not, anyone know the details of the management control? 2) The stock has gone precisely nowhere in the last 16yrs! If stock price eventually mirrors intrinsic value, then this is an abysmal performance. I'm not clear what they're seeing in this acquisition or why the next decade would be any different. 3) The price being paid could buy back almost 5% of Fairfax shares outstanding at current prices. So this would be the capital allocation lens to consider in conjunction with point 2 above. 4) CRE sector is highly interest rate dependent, and if we are in for an era of structurally higher interest rates, it's not clear to me that CRE cap rates have fully adjusted to that reality. Arguably they're pricing in much lower rates in a year or two. I hope this works out well, but count me in the skeptical bucket. The CEO owns 8% of the outstanding share and other board members own shares as well. It looks like Fairfax will own >75% of outstanding share once this closes so they will have control. But like all of their private businesses Fairfax doesn't run the day to day. Keep in mind that the insurance companies will actually hold these KW shares, so this investment does not hinder Fairfax buybacks that are done at the holding company level. As far as the business itself I would think that Fairfax is well of aware of what they are involved with, having been doing business with KW for the past 15 years. I am sure the Fairfax Bond team was also involved in discussions for this acquisition, as they have been an integral part of doing business with KW in the past and will continue to be going forward. Edited February 17 by Hoodlum
gfp Posted February 17 Posted February 17 8 minutes ago, Hoodlum said: It looks like Fairfax will own >75% of outstanding share once this closes so they will have control. KW Management Group will have operational and effective control of the company despite Fairfax owning the vast majority of the equity.
Viking Posted February 17 Posted February 17 (edited) 55 minutes ago, Txvestor said: A couple of concerns I have about this are: 1) Sounds like they are mostly funding this acquisition but without a controlling interest. Clearly they like the management and that's usually fine until it's not, anyone know the details of the management control? 2) The stock has gone precisely nowhere in the last 16yrs! If stock price eventually mirrors intrinsic value, then this is an abysmal performance. I'm not clear what they're seeing in this acquisition or why the next decade would be any different. 3) The price being paid could buy back almost 5% of Fairfax shares outstanding at current prices. So this would be the capital allocation lens to consider in conjunction with point 2 above. 4) CRE sector is highly interest rate dependent, and if we are in for an era of structurally higher interest rates, it's not clear to me that CRE cap rates have fully adjusted to that reality. Arguably they're pricing in much lower rates in a year or two. I hope this works out well, but count me in the skeptical bucket. In terms of what this means for Fairfax, I think it is a mistake to look at KW transaction primarily through the lens of the stock price. From Fairfax's perspective, the stock ownership was 'tablestakes.' The value of the KW relationship is: The real estate partnerships: off the top of my head, I think this has performed well over its life More recently, the $5B mortgage loans/PacWest business (7 to 8% yield?) = $350 million to $400 million per year The key question: What is the value Fairfax is deriving from its many significant partnerships with KW? What is Fairfax giving? KW stock Debentures Capital for real estate partnerships Capital for mortgage platform What is Fairfax getting? Dividends on KW stock Interest on debentures Return from real estate partnerships Return from mortgage platform And today, Fairfax is unarguably buying KW low. It looks like KW' business is stabilizing - this is the perfect time to buy it (much of the risk is gone). Importantly, Fairfax understands KW exceptionally well. Clearly, they really like the management team at KW. This now effectively locks up real estate expertise for Fairfax - across a number of verticals. This is just another example of Fairfax diversifying its business model in an opportunistic and smart way. Investors and analysts probably won't 'get it.' This transaction looks very strategic. It gives Fairfax some things that are very valuable (the platforms KW is building). These provide Fairfax with a great way to deploy large amounts of capital at very attractive rates (much higher than treasury yields). You can almost look at this as a brand new income stream for Fairfax - large and growing (a subset of the fixed income stream). I apologize in advance... my thoughts above are a mess. KW is a really complicated investment for Fairfax (especially for me) - it has a lot of really interesting layers. This could be a good one for Fairfax. Edited February 17 by Viking
Txvestor Posted February 17 Posted February 17 19 minutes ago, Viking said: In terms of what this means for Fairfax, I think it is a mistake to look at KW transaction primarily through the lens of the stock price. From Fairfax's perspective, the stock ownership was 'tablestakes.' The value of the KW relationship is: The real estate partnerships: off the top of my head, I think this has performed well over its life More recently, the $5B mortgage loans/PacWest business (7 to 8% yield?) = $350 million to $400 million per year The key question: What is the value Fairfax is deriving from its many significant partnerships with KW? What is Fairfax giving? KW stock Debentures Capital for real estate partnerships Capital for mortgage platform What is Fairfax getting? Dividends on KW stock Interest on debentures Return from real estate partnerships Return from mortgage platform And today, Fairfax is unarguably buying KW low. It looks like KW' business is stabilizing - this is the perfect time to buy it (much of the risk is gone). Importantly, Fairfax understands KW exceptionally well. Clearly, they really like the management team at KW. This now effectively locks up real estate expertise for Fairfax - across a number of verticals. This is just another example of Fairfax diversifying its business model in an opportunistic and smart way. Investors and analysts probably won't 'get it.' I apologize in advance... my thoughts above are a mess. KW is a really complicated investment for Fairfax (especially for me) - it has a lot of really interesting layers. This could be a good one for Fairfax. I get that angle, and considered it. But 1.65B for tablestakes? While not having operational or managerial control. Whilst I admit to not knowing as much as they do about this business and its leaders. I remain skeptical. There have been instances in the past where their blind faith in management has gone very badly. Sandridge Energy is one that comes to mind.
Viking Posted February 17 Posted February 17 (edited) 9 minutes ago, Txvestor said: I get that angle, and considered it. But 1.65B for tablestakes? While not having operational or managerial control. Whilst I admit to not knowing as much as they do about this business and its leaders. I remain skeptical. There have been instances in the past where their blind faith in management has gone very badly. Sandridge Energy is one that comes to mind. Look at what has quietly happened under the hood at Fairfax over the past 5 years. With this deal, Fairfax is locking in another large and growing income stream (the platforms KW is building out). This income stream is part of the fixed income bucket. It is not correlated with the P/C insurance cycle. It is $400 million and growing rapidly. Brilliant. Fairfax will be able to deploy a significant amount of capital into these platforms moving forward - growing the income stream over time (like it has been doing for the past 5 years). Lots of people are all worried about where interest rates go from here... and what it means to interest income moving forward at Fairfax. We have part of our answer today... This deal provides Fairfax with a long runway of opportunities to continue to earn strong returns on its fixed income portfolio. Of course, there is much more to the KW deal. Price is what you pay... value is what you get. Edited February 17 by Viking
Viking Posted February 17 Posted February 17 (edited) 15 minutes ago, Txvestor said: I get that angle, and considered it. But 1.65B for tablestakes? While not having operational or managerial control. Whilst I admit to not knowing as much as they do about this business and its leaders. I remain skeptical. There have been instances in the past where their blind faith in management has gone very badly. Sandridge Energy is one that comes to mind. You are focussed on the price Fairfax is paying. Can you tell me what Fairfax is getting from this transaction? "Blind faith in management" This is not a new purchase for Fairfax. They have been partnered with KW for +15 years? They KNOW this company inside out (Wade Burton is on the Board). Further, Fairfax has shown very good judgement over the past 8 years - in terms of which management teams they want to partner with long term. Their 'hit rate' has been very good. I am inclined to give them the benefit of the doubt (with my eyes wide open). Edited February 17 by Viking
jbwent63 Posted February 17 Posted February 17 It also appears that the $500 million of KW preferred shares held by Fairfax et al will be rolled into the deal. It also appears that the warrants issued with each tranche of preferred shares will be rendered worthless due to the strike prices being higher than the agreed to takeover price (as a result of KW no longer trading or ceasing to be under the Merger Agreement). It would be helpful if the future state of the equity box was clearer. Perhaps further disclosures will be forthcoming indicating the proceeds to FFH of the $1.65 billion investment to close. It is also a bit confusing as the 13-F filed today shows 13.322 million KW common shares owned by FFH, yet the 13D/A filed on November 4 shows 30.95 million or 19.9%, but this is disclosed pursuant to a shareholder agreement limiting FFH to 19.9%, the total potential number of shares controlled by FFH (upon exercise of all warrants) is 38.7 million (23.7%), but it doesn't appear that those warrants are being exercised.
SafetyinNumbers Posted February 17 Posted February 17 1 hour ago, gfp said: KW Management Group will have operational and effective control of the company despite Fairfax owning the vast majority of the equity. This is likely set up this way so that FFH doesn’t have to consolidate the KW debt. My guess is Fairfax will be well protected in the shareholder agreement.
SafetyinNumbers Posted February 17 Posted February 17 1 hour ago, Txvestor said: 3) The price being paid could buy back almost 5% of Fairfax shares outstanding at current prices. So this would be the capital allocation lens to consider in conjunction with point 2 above. I wish y’all would stop confusing the insurance subsidiary investment decisions with the holding company investment decisions.
Txvestor Posted February 17 Posted February 17 38 minutes ago, Viking said: You are focussed on the price Fairfax is paying. Can you tell me what Fairfax is getting from this transaction? "Blind faith in management" This is not a new purchase for Fairfax. They have been partnered with KW for +15 years? They KNOW this company inside out (Wade Burton is on the Board). Further, Fairfax has shown very good judgement over the past 8 years - in terms of which management teams they want to partner with long term. Their 'hit rate' has been very good. I am inclined to give them the benefit of the doubt (with my eyes wide open). My comment was in reference to the operational and effective control of the company. What is Fairfax getting? As I understand it, they are getting an economic but not controlling interest in a middling CRE management enterprise, which has a quite mediocre record over 16yrs of making on all aspects of the Capital stack in CRE, equity, construction loans, property secured loans and Pref. equity investment. If they've made money it sure hasn't shown up in the equity of the company. All during a period dominated by low interest rates(save for the post covid inflation induced rate hike cycle). Yes, the Pacwest portfolio was opportunistic and well timed around the Silicon Valley bank blow up, but did they need to own this outright to get access to that in the future? I just don't see it, but will stay curious.
Txvestor Posted February 17 Posted February 17 4 minutes ago, SafetyinNumbers said: I wish y’all would stop confusing the insurance subsidiary investment decisions with the holding company investment decisions. Why couldn't they just dividend that up to the holdco and buy back the shares?
SafetyinNumbers Posted February 17 Posted February 17 4 minutes ago, Txvestor said: Why couldn't they just dividend that up to the holdco and buy back the shares? They are sending up as much as they can. There are regulatory limits and they need to retain some capital at the insurance subsidiaries for growth in premiums.
Hoodlum Posted February 18 Posted February 18 I noticed this is a press release from AGT Foods regarding the timing of the IPO. https://www.sedarplus.ca/csa-party/records/document.html?id=6fe7036abb95a9434a55476d736131fe970f5e83549032d6baee97282f4ff54b Pricing: Expected the week of February 23rd, 2026. Closing: Expected the week of March 2nd, 2026
anshulp Posted February 20 Posted February 20 On 1/21/2026 at 7:41 PM, anshulp said: Tim Eriksen released his Q4 letter today. He made Exco 8.4% of his fund. If I remember correctly Fairfax owns 49% of the company marked at $20.01 (just about where we are at today). Posting his comments: During the quarter we added a new major expert market position, Exco Resources (expert: EXCE). We have followed the company for a number of years and previously owned shares in 2021. Exco is an independent oil and gas company focused on onshore US shale development and production. Their primary areas of focus are Haynesville and Bossier shale in east Texas and north Louisiana, Eagle Ford shale in south Texas, and Marcellus and Utica shales in Appalachia. Exco went through a restructuring and emerged from Chapter 11 in 2019. Exco has performed very well since then (see stock chart to the right). Production is nearly 90% natural gas. At the end of 2020 Exco had just over $560 million of equity ($11 per share based on 51 million shares). Fast forward to September 2025 and Exco had equity of nearly $1.1 billion ($23 per share based on roughly 46 million shares). Mark-tomarket gains and losses on derivatives (hedging) make their earnings swing wildly. We ignore most of that and focus on operating income and cash flow. What caught our attention was their increased production the last three quarters - from 22 Bcfe (billion cubic feet equivalent) in the March quarter, rising to 27 Bcfe in June, and then to nearly 36 Bcfe in September. Additionally, in December they announced a $430 million capex budget for 2026 compared to a ~$185 million budget for 2025. We don’t think you have to be an expert on future natural gas prices or well flow rates to like the setup. With production set to increase and having a proven track record of hedging successfully, we are quite optimistic. If natural gas goes to $2 per mcf, Exco is near breakeven, but will have about $4 per share in cash flow. Assuming a 10% increase in production and pricing of $3 per mcf we think they can earn about $3 per share (and have $7 per share in cash flow), and at $4 per mcf they would push $6 per share (and have total cash flow of about $10 per share) in comparison to its current $19 per share price. As we write this, current two year strip pricing averages about $3.75 per mcf. Hopefully we are underestimating their potential production increase. Lastly as of the end of 2024 reserves were 28 times production. Admittedly, 75% of reserves were undeveloped, but that is still quite impressive. Their PV-10, which is the estimated present value of Exco’s future after tax cash flows discounted back at a 10% rate, was nearly $40 per share. Natural gas pricing outlook is more favorable today than it was at the end of 2024. Obviously, they would be an attractive acquisition candidate. Link to his letter (guy is a beast btw) : https://static1.squarespace.com/static/5ea6570a0ba57d406203e048/t/6971662dea3ab16d2ec514e0/1769039405165/Q4+2025+Results+for+Cedar+Creek+Partners.pdf 1
Berk Posted February 20 Posted February 20 Hey guys - random question here. I am not an accounting and would love to hear some of your thoughts on the question below... Are interest and dividends and share of profit of associates for non-insurance companies (Pg. 126 on the 2024 AR) assigned to those companies/groups because those companies have their own investment portfolio OR are they interest and dividends and share of profit of associates from the holding company that they assign to these non-insurance companies/groups? If the latter, how do they decide that? Why this matters?: When I am valuing the non-insurance companies, I want to make sure I am not double counting if I include the interest and dividends and share of profit of associates for the non-insurance companies. For a blunt example... Where does the 10mn of interest and dividends and .1mn of share of profit of associates come from for restaurants and retail? Is it from restaurants and retail's investments? Or how does Fairfax assign those values to restaurants and retail?
glider3834 Posted February 21 Posted February 21 (edited) 10 hours ago, Berk said: Hey guys - random question here. I am not an accounting and would love to hear some of your thoughts on the question below... Are interest and dividends and share of profit of associates for non-insurance companies (Pg. 126 on the 2024 AR) assigned to those companies/groups because those companies have their own investment portfolio OR are they interest and dividends and share of profit of associates from the holding company that they assign to these non-insurance companies/groups? If the latter, how do they decide that? Why this matters?: When I am valuing the non-insurance companies, I want to make sure I am not double counting if I include the interest and dividends and share of profit of associates for the non-insurance companies. For a blunt example... Where does the 10mn of interest and dividends and .1mn of share of profit of associates come from for restaurants and retail? Is it from restaurants and retail's investments? Or how does Fairfax assign those values to restaurants and retail? I don't think I totally answered your question with my post below - but I will keep it just in case others find it useful rather than delete and maybe have another look at your question. For the interest and dividends line, I believe these are dividends they receive on common and preferred stocks after investment expenses. Dividends from associates subtract from the carrying value of the associate investment and treated as return of capital, as you already recognise the share of profit from associate. For controlled subs as I understand, dividends are eliminated on consolidation to prevent double counting as they are an internal transaction and not external income. Edited February 21 by glider3834
glider3834 Posted February 21 Posted February 21 10 hours ago, Berk said: Hey guys - random question here. I am not an accounting and would love to hear some of your thoughts on the question below... Are interest and dividends and share of profit of associates for non-insurance companies (Pg. 126 on the 2024 AR) assigned to those companies/groups because those companies have their own investment portfolio OR are they interest and dividends and share of profit of associates from the holding company that they assign to these non-insurance companies/groups? If the latter, how do they decide that? Why this matters?: When I am valuing the non-insurance companies, I want to make sure I am not double counting if I include the interest and dividends and share of profit of associates for the non-insurance companies. For a blunt example... Where does the 10mn of interest and dividends and .1mn of share of profit of associates come from for restaurants and retail? Is it from restaurants and retail's investments? Or how does Fairfax assign those values to restaurants and retail? For India based non-insurance associates and share of profit, there are those that owned by Fairfax India and others owned via FFH. So p126 is showing share of profit for those under Fairfax India. Below is the split for share of profit for india non-insurance associates held by FFH and those held via Fairfax India
SafetyinNumbers Posted February 21 Posted February 21 11 hours ago, Berk said: Why this matters?: When I am valuing the non-insurance companies, I want to make sure I am not double counting if I include the interest and dividends and share of profit of associates for the non-insurance companies. I don’t think a sum of the parts valuation is useful. The non-insurance companies are the equity investments of the insurance subsidiaries. It’s easier to think about the range of returns for the $75b investment portfolio. Historically it’s been ~7%+. We know leverage is ~3:1 and with two thirds of the portfolio earning 5%, it means the equity portfolio has to put up an 11% return to hit the 7% bogey. That’s a 21% pre-tax ROE before underwriting income and head office expenses/financing costs. 10% for the equity portfolio is a 15%+ ROE after tax for the company assuming underwriting is profitable. It’s not important what the current income of the equity portfolio is when trying to understand the difference between fair value and carrying value. If we start with the biggest position and work our way down, we can quickly see that big parts of the portfolio are earning returns well above 10%. In fact our biggest position which is over 10% of the equity book, Eurobank, earns ~20% on our carrying value which means the rest of the portfolio has a lower hurdle rate to achieve 10% and that increases the probability it’s achieved.
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