Fairfax stock positions

[nwoodman]

2 hours ago, petec said:

 

Not sure I follow?

 

 

I assume you're referring to OMERS, but I could also see FFH doing a pref+warrant deal with FIH to get the deal done. Or maybe that is what you mean.

1. The airport is the biggest and potentially undervalued asset on the FIH books.  It has to figure prominently in any capital raise for a cash purchase of IDBI but I don’t think they want to sell it completely.  
 

2. Yes OMERS is what I was referring to but they will need a substantial contribution from FFH.  Thats assuming there isn’t a “pet insurance” business lurking on the FIH balance sheet.  Warrants/Prefs makes good sense rather than equity.

 

IDBI seems to moving in the right direction from a profitability perspective but non Performing Assets were a big problem for them until recently. GNPA peaked at 28% in 2018 and is now around 4-5%. Roughly like a current Eurobank vs the 2015 version that saw NPLs peak  at 45%.

 

I am more intrigued than concerned as to how they pull it together.  Their timing was pretty good with Bank of Ireland but they were definitely early with Eurobank.  Given these experiences I am hoping their “rat sniffing” is finely tuned these days, especially in the context of banks.
 

[Hoodlum]

Farmers Edge deal will close on Thursday.

 

https://www.newswire.ca/news-releases/farmers-edge-obtains-final-court-order-approving-plan-of-arrangement-831538915.html

 

Quote

WINNIPEG, MB, March 19, 2024 /CNW/ - Farmers Edge Inc. ("Farmers Edge" or the "Company") (TSX: FDGE) today announced that it has obtained a final order of the Court of King's Bench of Manitoba approving the previously announced statutory plan of arrangement (the "Arrangement") pursuant to which 15635594 Canada Inc., a subsidiary of Fairfax Financial Holdings Limited ("FFHL") will, among other things, acquire all of the outstanding common shares of the Company (each, a "Common Share"), except for: (i) 25,718,393 Common Shares (representing approximately 61.2% of the outstanding Common Shares) held by FFHL, and its affiliates; and (ii) those Common Shares held by the Company's Chief Executive Officer; for a price of $0.35 in cash per Common Share.

 

Completion of the Arrangement remains subject to the satisfaction of certain customary closing conditions.  The Arrangement is expected to be completed on or about March 21, 2024, following which Farmers Edge will no longer be publicly held and the Common Shares will be delisted from the Toronto Stock Exchange.

 

[Viking]

2 hours ago, Hoodlum said:

Farmers Edge deal will close on Thursday.

 

https://www.newswire.ca/news-releases/farmers-edge-obtains-final-court-order-approving-plan-of-arrangement-831538915.html

One step closer to being able to (finally) close the book on this perpetual money-losing holding. It would be interesting to know what the benefits are to Fairfax of taking it private.

[Crip1]

50 minutes ago, Viking said:

One step closer to being able to (finally) close the book on this perpetual money-losing holding. It would be interesting to know what the benefits are to Fairfax of taking it private.

Part of the benefit would presumably be not having to talk about the share price any more. It's now "out of sight, out of mind" so if it does go fully belly up, it's a non issue. If, by the grace of God, somehow it starts making money, it could be sold eventually not unlike the Pet Insurance business. Improbable, but not impossible. 

 

-Crip

[Viking]

1 hour ago, Crip1 said:

Part of the benefit would presumably be not having to talk about the share price any more. It's now "out of sight, out of mind" so if it does go fully belly up, it's a non issue. If, by the grace of God, somehow it starts making money, it could be sold eventually not unlike the Pet Insurance business. Improbable, but not impossible. 

 

-Crip

 

I think in the past @glider3834 has pointed out that there may be some tax loss benefits as well. But i am not an accountant so can’t speak to those sorts of things. 

Edited March 20, 2024 by Viking

[petec]

9 hours ago, nwoodman said:

1. The airport is the biggest and potentially undervalued asset on the FIH books.  It has to figure prominently in any capital raise for a cash purchase of IDBI but I don’t think they want to sell it completely.  
 

2. Yes OMERS is what I was referring to but they will need a substantial contribution from FFH.  Thats assuming there isn’t a “pet insurance” business lurking on the FIH balance sheet.  Warrants/Prefs makes good sense rather than equity.

 

IDBI seems to moving in the right direction from a profitability perspective but non Performing Assets were a big problem for them until recently. GNPA peaked at 28% in 2018 and is now around 4-5%. Roughly like a current Eurobank vs the 2015 version that saw NPLs peak  at 45%.

 

I am more intrigued than concerned as to how they pull it together.  Their timing was pretty good with Bank of Ireland but they were definitely early with Eurobank.  Given these experiences I am hoping their “rat sniffing” is finely tuned these days, especially in the context of banks.
 

 

I find it highly unlikely that FIH would sell a crown jewel asset like BIAL to buy a struggling bank.

 

It would also distort FIH to the point of absurdity.

 

This is too big. It's a FFH+OMERS deal IMHO, with FIH participation. Could be wrong.

 

BTW I don't *think* they have ever committed to doing *everything* in India through FIH. Correct me if I am wrong.

[nwoodman]

1 hour ago, petec said:

 

I find it highly unlikely that FIH would sell a crown jewel asset like BIAL to buy a struggling bank.

 

It would also distort FIH to the point of absurdity.

 

This is too big. It's a FFH+OMERS deal IMHO, with FIH participation. Could be wrong.

 

BTW I don't *think* they have ever committed to doing *everything* in India through FIH. Correct me if I am wrong.

1. Agree about selling BIAL but it doesn’t mean you can’t use it as part of a financing deal and still maintain control.

2.  I think we are already seeing that hypothesis play out.

3.  Digit is the obvious answer to that last point.

 

I think this years AGM is shaping up to be a cracker.  I will be following it as best I can from the trek to Mera Peak in Nepal.  Have fun y’all

[TwoCitiesCapital]

11 hours ago, petec said:

 

I find it highly unlikely that FIH would sell a crown jewel asset like BIAL to buy a struggling bank.

 

It would also distort FIH to the point of absurdity.

 

This is too big. It's a FFH+OMERS deal IMHO, with FIH participation. Could be wrong.

 

BTW I don't *think* they have ever committed to doing *everything* in India through FIH. Correct me if I am wrong.

 

I believe the commitment was every new, non-insurance indian investment would be done via FIH to prevent a conflict of interest in determining which shareholders get access to which deals. 

 

If FIH and FFH are both contributing proportionately due to a deal being too big for FIH, I wouldn't be upset because it doesn't upset the apple cart of favoring one group over another. 

 

If it's structured where FFH gets the bill and FIH a token amount, I think you'll see problems. 

Edited March 20, 2024 by TwoCitiesCapital

[petec]

9 hours ago, nwoodman said:

Agree about selling BIAL but it doesn’t mean you can’t use it as part of a financing deal and still maintain control.

 

I think BIAL is the *last* asset they'd sell, because it does seem clearly undervalued.

 

9 hours ago, nwoodman said:

Digit is the obvious answer to that last point.

 

No - Digit is an insurance company. They'll always be done by FFH. FIH is meant to do everything else.- I am pretty sure they laid this out on a call a year or two back. So Digit is not a proof-point, actually.

 

I'm guessing a combination of FIH equity, plus OMERS, plus FFH lending to FIH (either straight debt or pref+warrant, but the warrant would have to be designed not to f*** over FIH minorities).

 

Potentially a nice way to deploy a few billion of the fixed income portfolio at a decent spread backed by the entire FIH portfolio.

 

 

[petec]

4 minutes ago, TwoCitiesCapital said:

I believe the commitment was every new, non-insurance indian investment

 

Yes. I am sure this is how it is meant to work.

 

[Xerxes]

12 hours ago, petec said:

 

I find it highly unlikely that FIH would sell a crown jewel asset like BIAL to buy a struggling bank.

 

It would also distort FIH to the point of absurdity.

 

This is too big. It's a FFH+OMERS deal IMHO, with FIH participation. Could be wrong.

 

BTW I don't *think* they have ever committed to doing *everything* in India through FIH. Correct me if I am wrong.

In 2018 AGM they contrasted FIH to a ship sailing independently on a discovery mission. That ship is far enough from the mainland (FFH) such that it does not cause collateral damage. 
 

Based on that I think a large bank would not go on FFH balance sheet. Unless the view above is changed. I also realize that FIH doesn’t have the firepower. 

Edited March 20, 2024 by Xerxes

[SafetyinNumbers]

44 minutes ago, Xerxes said:

In 2018 AGM they contrasted FIH to a ship sailing independently on a discovery mission. That ship is far enough from the mainland (FFH) such that it does not cause collateral damage. 
 

Based on that I think a large bank would not go on FFH balance sheet. Unless the view above is changed. I also realize that FIH doesn’t have the firepower. 

I think they could create a sidecar structure. Other asset managers use it when a particular idea or opportunity is too big for the main fund. In FIH’s case, they could contribute the CSB stake and $300m in cash or abour ~$700m in value depending on the CSB mark. The rest of the funds could be contributed by FFH and other large investors like OMERS etc… With this structure, FIH, could earn a management fee on the outside investors share of the sidecar. 
 

It makes no sense to dilute FIH equity to fund this deal or to sell a crown jewel like BIAL so I don’t think they will do that. The sidecar is a sensible solution and FIH would still have ~$5/share of exposure to banking but they might have better ideas.

[nwoodman]

1 hour ago, petec said:

 

I think BIAL is the *last* asset they'd sell, because it does seem clearly undervalued.

 

 

No - Digit is an insurance company. They'll always be done by FFH. FIH is meant to do everything else.- I am pretty sure they laid this out on a call a year or two back. So Digit is not a proof-point, actually.

 

 

I was actually referring to Digit’s float.  While relatively small, surely the appeal of an Indian P&C and Life insurer is investing in domestic assets.  I have often wondered how the investment ideas get split once Digit is large enough.  One of those nice problems to have as long as you are invested in the Parent.

[ValueMaven]

Micron up 15% in AH trading 

[Hoodlum]

32 minutes ago, ValueMaven said:

Micron up 15% in AH trading 

Someone needs to ask Prem at the AGM about Micron as an AI play. 

Edited March 20, 2024 by Hoodlum

[nwoodman]

42 minutes ago, ValueMaven said:

Micron up 15% in AH trading 

They blew thru estimates, impressive
 

Micron Q2 24 Earnings Results:
- Adj EPS: +$0.42 (est -$0.27)
- Adj Revenue: $5.82B (est $5.32B)
- Cash Flow From Ops: $1.22B (est $2.14B)
- Adj Op. Income: $504M (est -$238.4M)
- Sees Q3 Adj Revenue Between $6.4B - $6.8B (est $5.99B)

 

19 minutes ago, Hoodlum said:

Someone needs to ask Prem at the AGM about Micron as an AI play. 

“No technology investment for me!"

 

 

 

[netcash1]

as of the last filing period how much MU did Fairfax own?

[nwoodman]

13 minutes ago, netcash1 said:

as of the last filing period how much MU did Fairfax own?

This seems reasonably accurate

 

https://www.dataroma.com/m/holdings.php?m=FFH

 

 

[glider3834]

58 minutes ago, nwoodman said:

This seems reasonably accurate

 

https://www.dataroma.com/m/holdings.php?m=FFH

 

 

looks like they put most of their position on Q3'22 , Q1'23 https://www.dataroma.com/m/m_activity.php?m=FFH&typ=b 

 

not sure their avg cost but Micron was trading in a band from low 50s to low 60s - so if we assume high 50s cost & their position in MU unchanged since Q4'23, would be 2x based on AH pricing

 

 

Edited March 20, 2024 by glider3834

[nwoodman]

1 hour ago, glider3834 said:

looks like they put most of their position on Q3'22 , Q1'23 https://www.dataroma.com/m/m_activity.php?m=FFH&typ=b 

 

not sure their avg cost but Micron was trading in a band from low 50s to low 60s - so if we assume high 50s cost & their position in MU unchanged since Q4'23, would be 2x based on AH pricing

 

 

Thanks @glider3834.  Nice to see a bit of instant gratification come their way.  MU’s forward guidance was strong too.  This may be another $500+m position in the making.

Edited March 21, 2024 by nwoodman

[Xerxes]

https://www.dataroma.com/m/m_activity.php?m=FFH&typ=b 

 

I love that one single share of BRK.A that they have like forever in their portfolio. Like a single piece of artwork just hanging on the wall. 

 

I guess they want some exposure to Prem Watsa of Omaha, just in case

[dartmonkey]

15 hours ago, glider3834 said:

looks like they put most of their position on Q3'22 , Q1'23 https://www.dataroma.com/m/m_activity.php?m=FFH&typ=b 

 

not sure their avg cost but Micron was trading in a band from low 50s to low 60s - so if we assume high 50s cost & their position in MU unchanged since Q4'23, would be 2x based on AH pricing

 

Blackberry 46.725m shares, trading at $2.74, so it's a $128m position

Micron 3.912m shares, trading at $111.85, so it's a $438m position

 

Fairfax got all it's money back on its $500m in convertible shares, plus $200m in interest, roughly a 4% annual return in an era of low interest rates, so that is not so bad. But the huge loss on the common ($802m now worth $128m) has to be Watsa's worst ever investment, with a $674m loss. At least this quick $220m gain on the Micron position takes some of the sting out of the BB losses. 

 

Still, I would love to see that Blackberry line gone from the Dataroma list, especially since many investors think that these $1.5b in US and Canadian public company holdings accurately represents their $6.9b in total mark to market public equity or their $16.5b in total public equity, or their $92b in total assets. The unfortunate $128m Blackberry position stills looks like a big deal given that it is almost 10% of that $1.5b, but looking at it as  context of the $92b in assets, it is only 0.14%, and is fading out of relevance. 

 

But the easiest way for that appearance to be corrected would be to just sell the stake and be done with it. Hopefully, now that the convertibles have been sold, Chen is gone and Watsa has left the board, that is something they may do soon.

[gfp]

5 minutes ago, dartmonkey said:

Still, I would love to see that Blackberry line gone from the Dataroma list, especially since many investors think that these $1.5b in US and Canadian public company holdings accurately represents their $6.9b in total mark to market public equity or their $16.5b in total public equity, or their $92b in total assets. The unfortunate $128m Blackberry position stills looks like a big deal given that it is almost 10% of that $1.5b, but looking at it as  context of the $92b in assets, it is only 0.14%, and is fading out of relevance. 

 

But the easiest way for that appearance to be corrected would be to just sell the stake and be done with it. Hopefully, now that the convertibles have been sold, Chen is gone and Watsa has left the board, that is something they may do soon.

 

Any misconception that helps the stock trade cheaply is a help, not a hindrance.  I hope for many misconceptions like "blackberry is material to fairfax" in my investments.

[dartmonkey]

21 minutes ago, gfp said:

 

Any misconception that helps the stock trade cheaply is a help, not a hindrance.  I hope for many misconceptions like "blackberry is material to fairfax" in my investments.

 

Yes, you have a point - although I myself am unlikely to add to my hugely oversized Fairfax position, the company is still repurchasing shares so I suppose we should rejoice in these misconceptions. And along the same line of thinking, there is no reason for us to wish for Fairfax to be included in the TSX 30, either. We get more shares repurchased for the same number of dollars, the longer the share price languishes. 

[Thrifty3000]

7 minutes ago, dartmonkey said:

 

Yes, you have a point - although I myself am unlikely to add to my hugely oversized Fairfax position, the company is still repurchasing shares so I suppose we should rejoice in these misconceptions. And along the same line of thinking, there is no reason for us to wish for Fairfax to be included in the TSX 30, either. We get more shares repurchased for the same number of dollars, the longer the share price languishes. 

 

I want the shares to triple overnight so I can exit and fly private the rest of my life.