Fairfax stock positions

[Viking]

I think many people are completely missing what is going on with Atlas. Since the news first hit all of is have learned more. ONE is offering up $1.4 billion to take Atlas private. ONE is the driver of this deal. Everyone, take a deep breath and think about this. This is not a Fairfax deal. Or a David Sokol deal.
 

For Atlas this is a kick ass offer. Because going private offers many big big advantages for Atlas, especially in its current state (big time expansion). Public markets are a big pain in the ass. For the other large shareholders (like Fairfax) going private is also a big win. So what do you do? You support the proposal. It is the rational and right thing to do. This is not screwing anyone. This is how business is supposed to work. 
 

i am sorry, but i do not get all the anger on this site about this proposal. It is a business deal. Not that complicated. Atlas stock was stuck; mired in the toilet. Shipping rates could drop through the floor in the coming months. Actually it is pretty likely that shipping rates will come down. Atlas stock could easily have fallen off a cliff from here. For anyone who was paying attention, the stock tracks what is going on with container rates. NOT Atlas as a finance/leasing/capital allocation company. Mr Market WAS NOT DRINKING the Kool-Aid. And despite all the talk about how cheap Atlas stock was pretty much nobody on this board was buying when the stock was trading below $11.00. At least i wasn’t. 
 

The bottom line is current Atlas shareholders have been given a gift. An opportunity for a quick, sizeable gain. In the middle of a bear market where the funds can easily be re-deployed into lots of other great opportunities. 
—————

Many years ago when Odyssey was bought out by Fairfax a majority of my net worth was in Odyssey stock. I welcomed the news of the buyout. At the time i expected the buyout offer (unlike the current situation). Was Fairfax being opportunistic? Yes. Smart bastards. My only mistake was not waiting for the the small bump Fairfax delivered to shareholders to close the deal (very predictable in hindsight). 

Edited August 8, 2022 by Viking

[nwoodman]

44 minutes ago, Viking said:

 

For Atlas this is a kick ass offer. Because going private offers many big big advantages for Atlas, especially in its current state (big time expansion). Public markets are a big pain in the ass. For the other large shareholders (like Fairfax) going private is also a big win. So what do you do? You support the proposal. It is the rational and right thing to do. This is not screwing anyone. This is how business is supposed to work. 
 

i am sorry, but i do not get all the anger on this site about this proposal. It is a business deal. Not that complicated. Atlas stock was stuck; mired in the toilet. Shipping rates could drop through the floor in the coming months. Actually it is pretty likely that shipping rates will come down. Atlas stock could easily have fallen off a cliff from here. For anyone who was paying attention, the stock tracks what is going on with container rates. NOT Atlas as a finance/leasing/capital allocation company. Mr Market WAS NOT DRINKING the Kool-Aid. And despite all the talk about how cheap Atlas stock was pretty much nobody on this board was buying when the stock was trading below $11.00. At least i wasn’t. 

Do you think that Fairfax operates in a vacuum?  The market watches this stuff and this is just another one in a long list of bad Fairfax experiments.  Every time they do this craziness it only reinforces the perpetual discount.  I am not grumpy about ATCO as it it is a fraction of my Fairfax stake. I am grumpy that this only reinforces the view that this is more Canadian $^it&uckery.  Weren't we all salivating about the Digit IPO, ah that's right who needs the markets....until you do.     

 

I will get over it, so please don't anyone take it personally, nothing against anyone on this board.  Perhaps we will hear something in the conference call that makes us all warm and fuzzy

 

[StubbleJumper]

6 hours ago, Viking said:

i am sorry, but i do not get all the anger on this site about this proposal. It is a business deal. Not that complicated. Atlas stock was stuck; mired in the toilet. Shipping rates could drop through the floor in the coming months. Actually it is pretty likely that shipping rates will come down. Atlas stock could easily have fallen off a cliff from here. For anyone who was paying attention, the stock tracks what is going on with container rates. NOT Atlas as a finance/leasing/capital allocation company. Mr Market WAS NOT DRINKING the Kool-Aid. And despite all the talk about how cheap Atlas stock was pretty much nobody on this board was buying when the stock was trading below $11.00. At least i wasn’t. 

 

Did you pull up the chart of the stock price before you wrote that bit about being mired in the toilet?  During the market correction, ATCO's share price trended downward along with the broad-based decline in share prices.  Go ahead and pull up the one-year chart.  If somebody had offered $14.45/sh as recently as early April we would have all been shitting ourselves with laughter.  The market correction has brought many share prices down, including ATCO's.

 

On that theme, I wouldn't say that the discussion or lack of discussion on the board about or buying Atco when the price was $11 isn't particularly relevant.  To that, I would simply ask the counter-question of, "Who the hell on this board *wasn't* buying something cheap when ATCO dropped to $11?"  It was obvious that ATCO was cheap, but so were plenty of other issues, and most of us have been deploying capital in any number of companiess.  So, yeah, there was much more chat about META, GOOG, and BRK-B, but so what?  When the market corrects, there are so many things that are cheap it should be no surprise that there isn't intense discussion of just one or two, particularly when the mega-caps are included in the list of cheap shares.

 

If you figure that $14.45 is okay, then that's your view and you are free to hold it.  

 

 

SJ

[Parsad]

9 hours ago, StubbleJumper said:

 

Did you pull up the chart of the stock price before you wrote that bit about being mired in the toilet?  During the market correction, ATCO's share price trended downward along with the broad-based decline in share prices.  Go ahead and pull up the one-year chart.  If somebody had offered $14.45/sh as recently as early April we would have all been shitting ourselves with laughter.  The market correction has brought many share prices down, including ATCO's.

 

On that theme, I wouldn't say that the discussion or lack of discussion on the board about or buying Atco when the price was $11 isn't particularly relevant.  To that, I would simply ask the counter-question of, "Who the hell on this board *wasn't* buying something cheap when ATCO dropped to $11?"  It was obvious that ATCO was cheap, but so were plenty of other issues, and most of us have been deploying capital in any number of companiess.  So, yeah, there was much more chat about META, GOOG, and BRK-B, but so what?  When the market corrects, there are so many things that are cheap it should be no surprise that there isn't intense discussion of just one or two, particularly when the mega-caps are included in the list of cheap shares.

 

If you figure that $14.45 is okay, then that's your view and you are free to hold it.  

 

 

SJ

 

June 23 on the "What are you buying thread?" in General Discussion, I wrote "Lots of ATCO!  Cheap, cheap, cheap!"  Didn't see anyone respond to that.  When I posted I was buying on here...a few people asked me to justify why I thought it was cheap at $11.  Again, very few buyers.  I also bought lots of META and GOOGL...but I had plenty of time to add lots of ATCO.  

 

So, I didn't see anyone really scream out or even politely state that ATCO was cheap in the last month or two.  Now, people are saying $14.45 would have been called out as ridiculously low.  

 

The offer may not be what people really wanted, but I also call bullshit on it being unfair or lowball based on sentiment and behavior on here.  Frankly, I don't think it's going to get the majority it needs...so either they will up the offer or pull the offer.  In the meantime, I'll sit on the cash or buy something else that is still really cheap.  

 

Cheers!

[StubbleJumper]

40 minutes ago, Parsad said:

June 23 on the "What are you buying thread?" in General Discussion, I wrote "Lots of ATCO!  Cheap, cheap, cheap!"  Didn't see anyone respond to that.  When I posted I was buying on here...a few people asked me to justify why I thought it was cheap at $11.  Again, very few buyers.  I also bought lots of META and GOOGL...but I had plenty of time to add lots of ATCO.  

 

 

Did you see me respond to the posts about people buying BRK.B?  Did you see me responding to posts about people buying GOOGL?  Did you see me responding to posts about people buying META?  I also didn't mention Algoma Steel last month, but somebody else did after I already purchased.  Doesn't mean they weren't cheap and doesn't mean I wasn't buying. 

 

And on that theme, do you ever recall me participating in the annual brag-fest during January about how well we've done during the year?  In 20 years, I think I've made one comment in those annual dick-size threads, even though I might have made more.  Not my style.

 

Silence does not mean disagreement.

 

 

***edit*** And by the way, congratulations on your analysis having worked out in such a short time-frame.  You weren't wrong that ATCO was cheap, but you didn't make the assertion that the valuation gap would close within 6 weeks.  Those who bought BRK haven't gotten ~35-40% in those 6 weeks, but it's been a healthy ~10% without a special event.  In the absence of that special event, I'm not sure that your table-pounding buy would have been better than GOOGL or BRK-B.

 

 

SJ

Edited August 8, 2022 by StubbleJumper

[lessthaniv]

On 7/7/2022 at 9:17 AM, lessthaniv said:

Bought into ATCO yesterday.  Attractive against the backdrop of FCF that it could spin in a few years. 

 

Also bought in on July 6th, 2022,  Sanjeev.  You weren't alone. 

Edited August 9, 2022 by lessthaniv

[Parsad]

40 minutes ago, StubbleJumper said:

 

 

Did you see me respond to the posts about people buying BRK.B?  Did you see me responding to posts about people buying GOOGL?  Did you see me responding to posts about people buying META?  I also didn't mention Algoma Steel last month, but somebody else did after I already purchased.  Doesn't mean they weren't cheap and doesn't mean I wasn't buying. 

 

And on that theme, do you ever recall me participating in the annual brag-fest during January about how well we've done during the year?  In 20 years, I think I've made one comment in those annual dick-size threads, even though I might have made more.  Not my style.

 

Silence does not mean disagreement.

 

 

***edit*** And by the way, congratulations on your analysis having worked out in such a short time-frame.  You weren't wrong that ATCO was cheap, but you didn't make the assertion that the valuation gap would close within 6 weeks.  Those who bought BRK haven't gotten ~35-40% in those 6 weeks, but it's been a healthy ~10% without a special event.  In the absence of that special event, I'm not sure that your table-pounding buy would have been better than GOOGL or BRK-B.

 

 

SJ

 

SJ, I fully agree with you that the 30% return in a few weeks was pure luck.  At the same time, whether it was silence or not, there was little discussion in the way that ATCO was cheap.  Perhaps, you stayed out of that discussion, but it was abnormally quiet from the rest of the posters. 

 

There just seems to be a hell of a lot more confidence that the $14.45 offer is low, rather than ATCO at $10.30 a month earlier was low.  And that seems a bit disingenuous when the wilderness suddenly howls..."unfair, unfair"!  The screams of "Prem is ripping off the minority shareholders again" by many was premature as well, since we now know that Sokol or ONE are the lead on the deal.  Cheers!

 

[Parsad]

1 minute ago, lessthaniv said:

 

Also bought in on July 7th, 2022,  Sanjeev.  You weren't alone. 

 

Nice timing Lessthaniv!  I bought a bunch then too, but was averaging down from a bit earlier...so I made just under 30% in a little over a month selling at $14.30. 

 

I have a bunch still in my taxable/corporate accounts...will most likely let those play out and reap the dividend until any deal is consummated or the offer is rescinded.  If rescinded, I'll hold those shares.  If the price falls, I'll buy them all back in the non-taxable accounts too!  Cheers!

[StubbleJumper]

7 minutes ago, Parsad said:

 

SJ, I fully agree with you that the 30% return in a few weeks was pure luck.  At the same time, whether it was silence or not, there was little discussion in the way that ATCO was cheap.  Perhaps, you stayed out of that discussion, but it was abnormally quiet from the rest of the posters. 

 

There just seems to be a hell of a lot more confidence that the $14.45 offer is low, rather than ATCO at $10.30 a month earlier was low.  And that seems a bit disingenuous when the wilderness suddenly howls..."unfair, unfair"!  The screams of "Prem is ripping off the minority shareholders again" by many was premature as well, since we now know that Sokol or ONE are the lead on the deal.  Cheers!

 

 

No, the conversation at the time on this board was, yes, ATCO is cheap. BUT, BRK.B is cheap with much less risk.  AND GOOGL was cheap, and possibly cheap in a *generational* sense.  And what the hell to say about META?  The upside was clearly better than that of ATCO, but is Zuck a nut-job and has the world left him behind.

 

No, I'd say that ATCO and C were about the same level of discussion because the time to work them out was likely to be similar (ie, a good outcome with a 5-yr horizon, but unlikely to be an outstanding outcome in 1-yr).  In fact, probably C was a better buy than ATCO, but that's one that I didn't touch (and I didn't comment on it either).  Heavens, probably BAC was a better buy than ATCO (and I didn't comment on that one either)...   

 

You picked a cheap stock and it worked out well for you, but there were all kinds of cheap stocks out there.  If you have to choose between a cheap mega-cap and a ATCO, I don't at all blame board members for having bought the mega-caps instead of ATCO.

 

 

SJ

[Parsad]

4 hours ago, StubbleJumper said:

 

No, the conversation at the time on this board was, yes, ATCO is cheap. BUT, BRK.B is cheap with much less risk.  AND GOOGL was cheap, and possibly cheap in a *generational* sense.  And what the hell to say about META?  The upside was clearly better than that of ATCO, but is Zuck a nut-job and has the world left him behind.

 

No, I'd say that ATCO and C were about the same level of discussion because the time to work them out was likely to be similar (ie, a good outcome with a 5-yr horizon, but unlikely to be an outstanding outcome in 1-yr).  In fact, probably C was a better buy than ATCO, but that's one that I didn't touch (and I didn't comment on it either).  Heavens, probably BAC was a better buy than ATCO (and I didn't comment on that one either)...   

 

You picked a cheap stock and it worked out well for you, but there were all kinds of cheap stocks out there.  If you have to choose between a cheap mega-cap and a ATCO, I don't at all blame board members for having bought the mega-caps instead of ATCO.

 

 

SJ

 

Again, I totally agree with you.  META is my largest position after Fairfax.  I also bought a ton of GOOGL, AMZN, JEF and OSTK...as well as ATCO.  I'm just saying that investor's crying unfair that the tender offer came and is lower than they would have preferred is not Prem's fault...not even Sokol's fault in my opinion. 

 

If he has a choice between bringing in ONE with deep pockets that would help ATCO thrive, and minority shareholders who are along for the ride, that's a sacrifice that has to be made for the future of ATCO.  It sucks, but that's life!  He's also going to have to live with the consequences of a large partner with far greater influence over the company than minority shareholders would have had as well.  Cheers!

[bearprowler6]

More news...this time concerning Recipe Unlimited:

 

https://www.newswire.ca/news-releases/recipe-unlimited-enters-into-letter-of-intent-with-fairfax-887927427.html

[glider3834]

1 hour ago, bearprowler6 said:

More news...this time concerning Recipe Unlimited:

 

https://www.newswire.ca/news-releases/recipe-unlimited-enters-into-letter-of-intent-with-fairfax-887927427.html

Pursuant to the terms of the Proposed Transaction, the Purchaser will acquire all of the Shares, other than those Shares owned by Fairfax or its affiliates and a maximum of 4,000,000 MVS owned by CHL, for a purchase price of $20.73 per Share, payable in cash. The Buying Group is comprised of certain affiliates of Fairfax. The Proposed Transaction would be financed by equity proceeds contributed by members of the Buying Group and debt financing, and would not be subject to any financing condition. 

[Viking]

In the 2020 bear market Fairfax was playing defence. They were not able to take advantage of the low prices offered up by Mr Market. Fairfax is playing offence in this bear market. They can play offence today because they are in much better shape financially. Operating income has spiked higher… they are earning +$500 million per quarter (from underwriting and interest and dividend income). Pet insurance sale will bring in +$1 billion. Sale of Resolute will bring in even more in 1H 2023 when it closes. 
 

Recipe is cheap and C$20.73 is a very good price for Fairfax. Recipe’s business is improving as Canadians return to restaurants. Fairfax’s timing with this deal looks good.

 

The John Keels transaction also was opportunistic. Of course we also have the Atlas take private offer currently on the table. It will be interesting to see what Fairfax does with the Stelco dutch auction: tender shares or own a much bigger % of Stelco and its future earnings.
 

2022 is shaping up to be another active and very good year for Fairfax. With 4.5 months still to go… what else will Fairfax do in 2022? My guess:

1.) Fairfax India dutch auction once IIFL Wealth deal closes. This will continue the trend of Fairfax increasing its ownership stake in Fairfax India.

2.) Fairfax dutch auction once pet insurance deal closes. Or perhaps simply ramp SIB and start buying back 1 to 2% of shares each quarter moving forward.
 

 

Edited August 9, 2022 by Viking

[petec]

On 8/8/2022 at 8:16 AM, Viking said:

For anyone who was paying attention, the stock tracks what is going on with container rates.

 

Ummm, no. Atlas did not capture the spike in rates (in the short term). Rates went parabolic. Shipping lessors with lots of short term leases went parabolic. Atlas doubled. It does not track shipping rates because it leases long term (and in that market, lease rates will always reflect the cost of adding capacity, not the cost of getting a ship tomorrow).

[petec]

On 8/8/2022 at 9:15 AM, nwoodman said:

Do you think that Fairfax operates in a vacuum?  The market watches this stuff and this is just another one in a long list of bad Fairfax experiments.  Every time they do this craziness it only reinforces the perpetual discount.  I am not grumpy about ATCO as it it is a fraction of my Fairfax stake. I am grumpy that this only reinforces the view that this is more Canadian $^it&uckery.

 

Again, why is this t*tf*ckery? 

 

1) Why is 7x 2-year-forward and possibly peak earnings a lowball offer for a levered lessor in a commoditised industry? Nobody has explained this to me yet.

 

2) If Fairfax didn't own a share of Atlas, but offered this price, and shareholders could accept or refuse by minority vote, would we be angry?

 

I think our (on both sides) reactions are more reflective of the pre-existing positions of each commentator than of anything else.

[petec]

1 hour ago, Viking said:

They were not able to take advantage of the low prices offered up by Mr Market.

 

Except for the TRS

[Crip1]

1 hour ago, Viking said:

 

1.) Fairfax India dutch auction once IIFL Wealth deal closes. This will continue the trend of Fairfax increasing its ownership stake in Fairfax India.

 

 

With FFI having traded around US$11/share for the past several months, and not having been above US$13 since November of 2021, one can see a Dutch Auction at, say, US$14-$15. Shareholders get a quick 27-36% pop at a cost of $150M to take out 10% of the shares outstanding.

 

-Crip

[Parsad]

6 minutes ago, petec said:

 

Except for the TRS

 

If they hit $900-1000 per share in the next couple of years...which seems very feasible barring any major global catastrophes or market crash...those TRS are going to be looking pretty damn good!  Cheers!

[Redskin212]

7 minutes ago, petec said:

I think our (on both sides) reactions are more reflective of the pre-existing positions of each commentator than of anything else.

Agreed - nobody is saying a word about Recipe being taken under.  I presume because very few hold Recipe and do not feel robbed of potential upside

 

[Viking]

1 hour ago, petec said:

 

Ummm, no. Atlas did not capture the spike in rates (in the short term). Rates went parabolic. Shipping lessors with lots of short term leases went parabolic. Atlas doubled. It does not track shipping rates because it leases long term (and in that market, lease rates will always reflect the cost of adding capacity, not the cost of getting a ship tomorrow).

 

You are correct. Atlas shares have been a big underperformed recently compared to peers in the same industry. Modest upside in strongest market ever. And now getting crushed as sentiment in industry wanes with investors. Well, Atlas stock was getting crushed until this take private offer surfaced. Atlas is trying to do two things: re-invent itself as a finance company and double in size quickly. Mr Market/analysts were not drinking the Kool-Aid. Going private makes a ton of sense for Atlas given feedback from Mr Market, their current situation (crazy aggressive expansion) and the state of their industry (lots of uncertainly about where capacity and rates go from here). 

[Thrifty3000]

Alright, how's this for some bush league idiocy?

 

A couple days before the take private announcement I notice Fairfax trading at $500 per share. At the time I have about 2% of my portfolio in Atco, so I says to myself, self, you'll probably be able to sleep a bit better at night riding Fairfax from $500 to $1000 over the next few years than riding Atco from $11 to $25. And, you'll have one less security to keep track of.

 

With that logic in tow I promptly sold out of my Atco stake - which I'd held for a long time - for around $11 and turned around to buy Fairfax at $500, only to learn that my brokerage no longer allows OTC trades! A couple days later the take private deal is announced, and by the time I had transferred cash to my other brokerage Fairfax was already up 7%!

 

As the saying goes, a fool and his money are soon parted.

[petec]

2 hours ago, Parsad said:

 

If they hit $900-1000 per share in the next couple of years...which seems very feasible barring any major global catastrophes or market crash...those TRS are going to be looking pretty damn good!  Cheers!

Yes!

[petec]

21 minutes ago, Thrifty3000 said:

Alright, how's this for some bush league idiocy?

 

A couple days before the take private announcement I notice Fairfax trading at $500 per share. At the time I have about 2% of my portfolio in Atco, so I says to myself, self, you'll probably be able to sleep a bit better at night riding Fairfax from $500 to $1000 over the next few years than riding Atco from $11 to $25. And, you'll have one less security to keep track of.

 

With that logic in tow I promptly sold out of my Atco stake - which I'd held for a long time - for around $11 and turned around to buy Fairfax at $500, only to learn that my brokerage no longer allows OTC trades! A couple days later the take private deal is announced, and by the time I had transferred cash to my other brokerage Fairfax was already up 7%!

 

As the saying goes, a fool and his money are soon parted.

Sorry to hear it! But my word, we all have stories like that. It is the nature of the game! 

[Parsad]

27 minutes ago, Thrifty3000 said:

Alright, how's this for some bush league idiocy?

 

A couple days before the take private announcement I notice Fairfax trading at $500 per share. At the time I have about 2% of my portfolio in Atco, so I says to myself, self, you'll probably be able to sleep a bit better at night riding Fairfax from $500 to $1000 over the next few years than riding Atco from $11 to $25. And, you'll have one less security to keep track of.

 

With that logic in tow I promptly sold out of my Atco stake - which I'd held for a long time - for around $11 and turned around to buy Fairfax at $500, only to learn that my brokerage no longer allows OTC trades! A couple days later the take private deal is announced, and by the time I had transferred cash to my other brokerage Fairfax was already up 7%!

 

As the saying goes, a fool and his money are soon parted.

 

We've all been the fool before...you just happened to join the club a little later!    It's the one club that no one wants to ever be a part of.  Cheers!

[Viking]

So how much will Fairfax spend to take Recipe private? I am using the ownership % provided in Globe and Mail article from today.

 

Recipe total shares = 58.8 million

Fairfax = 45.8% = 27 million

Phelan Family = 22% = 12.9 million

- Fairfax will buy up to 4 million shares from Phelon Family (if i am reading things properly)

- so assuming Phelon Family stake will fall to 9 million shares

 

Fairfax buys 23 million shares @ C$20.73 = $475 million

Fairfax owns 85% 

Phelon Family owns 15%

—————

Total market cap of Recipe = $1.2 billion. 

From Recipe 2019AR: “Free Cash Flow before growth capex, dividends, and share repurchases under the Company’s normal course issuer bid (“NCIB”) for the 13 and 52 weeks ended December 29, 2019 was $44.3 million and $155.9 million compared to $47.3 million and $158.7 million in 2018, respectively.”

—————

Now what does Fairfax do with Recipe after the purchase goes through? I really hope Fairfax does not provide any additional funding for Recipe to expand into the US. If Recipe wants to expand make them fund it with their own earnings. I would love to see Fairfax use Recipe as a piggy bank (kind of like Berkshire) and use Recipe’s free cash flow to fund growth into better returning assets as chosen by Hamblin Watsa. I hope Recipe does not turn into another version of the Abitibi/Resolute frankenstein.