Fairfax 2020

[Viking]

Here is an update of Fairfax's equity positions Sept 30-Nov 11. In aggregate my math says total equity positions are tracking up almost $600 million. Big move in 6 weeks (and larger than I expected). I've attached my excel spreadsheet; please let me know if you see any big errors :-)

 

Yes, most of the gains do not flow through to earnings. However, as the gap between 'fair value' and 'carried value' for Investments in Associates closes this makes reported book value more meaningful (shrinking the discount to BV shares trade at). 

 

- Stocks                                            + $69 million (mark to market)

- Atlas warrants                                  + $50 million (mark to market, I think)

- Associated and Consolidated equities +$471 million 

- Total                                                + 590 million

 

Biggest movers:

- Atlas shares = +$181 million

- Atlas warants = +$50 million

- Recipe = +$129 million

- Fairfax India = +$97 million

 

PS: I added Astarta, Atlas Mara and Horizons North to the spreadsheet. Fairfax India is in tab 2; I have NOT updated yet

Fairfax_Equity_Holdings_Nov_11_2020.xlsx

[roberts1001]

Please have patience with someone new to this board.  I'm trying to estimate FRFHF's IV.  From a quick and dirty look I'm thinking of something like 1.0x BV.  Does this seem about right?  Thank you for your input. 

[Viking]

Roberts1001, welcome. Being open minded and inquisitive is a good thing :-)

 

Below is an article I was re-reading recently that i think provides a solid framework for looking at Fairfax as an investment. Fairfax today is trading at a much larger discount to BV than when the article was written. The stock sell off this year sucks for long term shareholders but provides a very attractive opportunity for new investors / new money. Especially if the news on the vaccine front the coming months is positive.

 

The question for me is what combination of CR and investment return will Fairfax need to hit to deliver a 10% ROE moving forward? What do people think is achievable over the next couple of years?

 

——————————

The Horse Story (Sept 2019)

- https://www.woodlockhousefamilycapital.com/post/the-horse-story

 

Most of the investors I’ve talked to about FFH will bring up Watsa almost immediately as, basically, someone they no longer trust to make good decisions or deliver good returns. I can understand why. (The baffling macro bets of some years ago cost FFH shareholders billions of dollars. Watsa said he not would make such bets again. But the damage was done.)

 

The insurance side of the operation has been strong for FFH in recent years. But even there, operations are below Watsa’s target of a 95% combined ratio. FFH’s Q2 number was 96.8%. Profitable – anything below 100% is profitable – but below target.

 

So, as you can see, the valuation is not such a cut-and-dried matter. FFH has had some issues. Nonetheless, we own the stock at a price below book value.

 

The most important reason is that the downside seems low. The valuation protects you, the company appears well-financed and management seems honest and well-intentioned. These are not small things.

 

Moreover, I think the assets collectively could generate a ~10%-type ROE. Watsa has made a public goal of hitting 15%. (FFH’s ROE was 15% in the second quarter, thanks to investment gains). He says a 95% combined ratio and a 7% return on FFH’s investments gets to a 15% ROE.

 

But in a low-interest rate environment, and given a large bond portfolio, a 7% return seems unlikely. But possible. Sustaining a double-digit ROE is key. (FFH can reach 10% by following a number of roads. For example, one road requires a ~95% combined ratio and ~5% return on its portfolio. That seems do-able.)

 

Anyway, a consistent 10% would grow book value at a decent clip and then you’d likely get an additional lift from the valuation even if the stock moved just to 1.2x book. As RayJay reports, a comparable set of North American insurers with an 11% ROE trades for 1.7x book value per share.

 

I admit, FFH is not exciting. It’s not fake meat or pot or sending billionaires into space. But it shouldn’t hurt you and has potential to deliver a very nice return. The current disappointing share performance could be, in the spirit of the horse story, a gift.

[bizaro86]

(The baffling macro bets of some years ago cost FFH shareholders billions of dollars. Watsa said he not would make such bets again. But the damage was done.)

 

 

I would just ask how much has Fairfax lost on shorts since this article was published?

[Viking]

(The baffling macro bets of some years ago cost FFH shareholders billions of dollars. Watsa said he not would make such bets again. But the damage was done.)

 

 

I would just ask how much has Fairfax lost on shorts since this article was published?

 

I agree that Fairfax has its warts. The question is what size of discount should reasonably be applied to shares to account for those warts. My view is the current discount is too large and likely far too large.

 

Fairfax shares are trading today (US$320) at the same level they were trading at in February 2008. That is simply crazy. Fairfax is not just ‘undervalued’ it is being historically undervalued. My view is the extreme undervaluation today is being driven primarily by sentiment (yes, the pandemic is also a factor). Fairfax has, at certain times in its history, made investors lots of money. 2003 was one. 2006-08 was another. Today looks like another.

 

Why?

 

I look at Fairfax as three buckets:

 

1.) insurance businesses - it looks to me to be as well positioned today as at any time in the companies history. Odyssey, Northbridge, Crum and Zenith are solid. Allied looks good (after a rough first year post acquisition). Brit has had its challenges but Fairfax seems to understand this and has been working for the past year to improve. Runoff, which historically was viewed as the most ‘shitty’ insurance business within Fairfax (a perennial money loser) has morphed and Fairfax was able to spin a large chunk of it off for a bucket of cash; where Riverstone UK goes from here will be interesting to follow.

 

Most importantly, we are in the beginning of an insurance hard market. And this time Fairfax has good insurance businesses. This is a huge deal that investors are completely missing.

 

Investing is the other key variable. When looking at Fairfax I break this into two buckets: fixed income and equities (stocks, associates and wholly owned companies).

 

2.) investments - fixed income. Historically, Fairfax has a very good track record when it comes to this bucket. A good recent example of this was the $5 billion? they put to work in corporates in April/May.

 

Bottom line, Fairfax has proven to be a better than average managing fixed income investments.

 

3.) investments - equities. This is the bucket that for the past 7-8 years has driven long term investors in Fairfax crazy. Bad decisions combined with bad management (of those non-insurance companies they control) combined with poor communication to shareholders = a stock trading at a historically low discount.

 

My view is Fairfax has been slowly ‘fixing’ its equity errors. Part of this fix is the slow recognition that they are not a turn around shop (for equities or wholly owned businesses) - Fairfax head office is not equipped to oversee businesses especially poorly performing businesses.

 

But Fairfax made so many purchases/mistakes over many years it is now taking a long, long time (years) to right the ship. And it is not a straight line (so there will be steps backwards). So we are not seeing the net benefits... yet.

 

To look at Fairfax equities as of Nov 2020, lets start by looking at Atlas. This is Fairfax’s largest investment, by far. This one company is more than 20% of the equity portfolio. And it is performing very well. We are in the middle of a pandemic and it is in a highly cyclical industry and how is its business doing? Very well. Solid top line growth. Solid earnings growth (remember, we are in a pandemic). Future prospects? Very good with lots of growth ahead. Stock is undervalued and every 10% move in shares is a $130 million ‘benefit’ to Fairfax. This stock alone could be a + $1 billion winner for FFH in the coming years.

 

CIB is a solid bank. Kennedy Wilson is a solid real estate company. Quess is a solid company. The IIFL triplets are all solid companies. Digit looks like it could be a home run. Bangalore Airport is a trophy asset. Fairfax India is well managed.

 

Other companies will be interesting to watch. Stelco looks to be well managed (yes, tough industry). Horizon North/Dexterra seems to have stabilized and it will be interesting to watch in the coming year. As we exit the pandemic Recipe will be ideally positioned (lots of mom and pop restaurants have closed so the big chains that Recipe owns will likely be the big winners in the short run).

 

Blackberry debentures were renewed at terms very favourable to Fairfax shareholders. Blackberry the company has value given it is involved in many of the right technology verticals.

 

Of all of Fairfax’s investments, Eurobank has been hit the hardest due to the pandemic. Pre-pandemic Eurobank had been making a great deal of progress (spinning of non performing loans) and the Greek economy was improving.

 

Fairfax continues to deal with its problem children. APR was sold/spun into Atlas. Fairfax Africa will hopefully get folded into Helios. (Last year Dexterra did a reverse takeover of Horizon North). These are examples of admission by Fairfax that they messed up (or the asset they purchased needed a new home to thrive), recognition of the mistake and the remedy. Fairfax has communicated there is more work to be done on this front. So i expect more companies to get spun out of the Fairfax black box and put in a position to sink or swim: Toys R Us/real estate, Performance Sports (Bauer), Farmers Edge etc.

 

And then of course, we have the equity shorts that (again) hit results in Q3 and came up again and again (rightly so) on the conference call. This was an example of the step back. Fairfax messed up. Again. But i think the message is getting though.

 

Bottom line, i think they are making alot of the right moves with the investment portfolio. But Fairfax has said they are not done... lots more work to do. And it will take time.

 

So when i put the three together (insurance + fixed income investing + equity investing) and shares trading at US$320 i see a $20 bill lying on the ground in plain sight :-)

[roberts1001]

Thank you to all for your helpful input.

[petec]

Viking that’s a superb summary.

[cwericb]

Thanks Viking for putting things in perspective. Fairfax is complicated, it helps to have an overview like this. I will probably check back to this post from time to time.

[Viking]

Here is another update of Fairfax's equity positions Sept 30-Nov 20. In aggregate my math says total equity positions are now tracking up over $1 billion (+26.4%). Big move in 7 weeks. The good news is the increase is broad based (all holdings are up except CIB). I've attached my excel spreadsheet; please let me know if you see any big errors :-)

 

Yes, most of the gains do not flow through to earnings. However, as the gap between 'fair value' and 'carried value' for Investments in Associates closes this makes reported book value more meaningful (shrinking the discount to BV shares trade at). 

 

- Stocks                                            + $104 million (mark to market)

- Atlas warrants                                    + $71 (mark to market, I think)

- Associated and Consolidated equities + $827 

- Total                                            + $1.001 billion

 

Biggest individual movers:

- Atlas shares =  +$254 million

- Atlas warants =  +$71

- Fairfax India = +$133

- Recipe =          +$117

- Eurobank =      +$109

- Thomas Cook =  +$72

- Blackberry =      +$55

- Stelco =            +$43

- Quess =            +$32

Fairfax_Equity_Holdings_Nov_20_2020.xlsx

[StubbleJumper]

Viking, what have you done with the BB convertible debs?  Just eye-balling the change in the BB stock price, I would guess that if the debs were marked-to-model that they would likely now trade at a premium over par value (they are not yet in the money, but clearly the conversion privilege is quite valuable and has become considerably more valuable since Sept 30)?  Probably at least another $50 million, conservatively?  As an observation, BB's $7 calls expiring in January 2023 traded at $1.91 on Friday and $0.95 back on Sept 30.  FFH's $6 calls expiring in November 2023 for 55 million shares are worth a fair bit these days...

 

 

SJ

[Viking]

Viking, what have you done with the BB convertible debs?  Just eye-balling the change in the BB stock price, I would guess that if the debs were marked-to-model that they would likely now trade at a premium over par value (they are not yet in the money, but clearly the conversion privilege is quite valuable and has become considerably more valuable since Sept 30)?  Probably at least another $50 million, conservatively?  As an observation, BB's $7 calls expiring in January 2023 traded at $1.91 on Friday and $0.95 back on Sept 30.  FFH's $6 calls expiring in November 2023 for 55 million shares are worth a fair bit these days...

 

 

SJ

 

I just listed the BB convertible debs on my spreadsheet with no value/change in value. Any increase in value in these should be added to the $1 billion. Is it correct the increase would fall in the ‘mark to market’ bucket?

[StubbleJumper]

Viking, what have you done with the BB convertible debs?  Just eye-balling the change in the BB stock price, I would guess that if the debs were marked-to-model that they would likely now trade at a premium over par value (they are not yet in the money, but clearly the conversion privilege is quite valuable and has become considerably more valuable since Sept 30)?  Probably at least another $50 million, conservatively?  As an observation, BB's $7 calls expiring in January 2023 traded at $1.91 on Friday and $0.95 back on Sept 30.  FFH's $6 calls expiring in November 2023 for 55 million shares are worth a fair bit these days...

 

 

SJ

 

I just listed the BB convertible debs on my spreadsheet with no value/change in value. Any increase in value in these should be added to the $1 billion. Is it correct the increase would fall in the ‘mark to market’ bucket?

 

 

Those particular securities are not traded, so they would need to be marked-to-model rather than marked-to-market.  I presume that they would be included in the "mark to market" bucket in the same way that the value of the CPI derivatives are adjusted every quarter based on their modelled value.  However, we probably wouldn't even notice a ~$50m mark for the debs when they are included with all of the other changes in the $30B fixed income portfolio....

 

 

SJ

[Viking]

Viking, what have you done with the BB convertible debs?  Just eye-balling the change in the BB stock price, I would guess that if the debs were marked-to-model that they would likely now trade at a premium over par value (they are not yet in the money, but clearly the conversion privilege is quite valuable and has become considerably more valuable since Sept 30)?  Probably at least another $50 million, conservatively?  As an observation, BB's $7 calls expiring in January 2023 traded at $1.91 on Friday and $0.95 back on Sept 30.  FFH's $6 calls expiring in November 2023 for 55 million shares are worth a fair bit these days...

 

 

SJ

 

I just listed the BB convertible debs on my spreadsheet with no value/change in value. Any increase in value in these should be added to the $1 billion. Is it correct the increase would fall in the ‘mark to market’ bucket?

 

 

Those particular securities are not traded, so they would need to be marked-to-model rather than marked-to-market.  I presume that they would be included in the "mark to market" bucket in the same way that the value of the CPI derivatives are adjusted every quarter based on their modelled value.  However, we probably wouldn't even notice a ~$50m mark for the debs when they are included with all of the other changes in the $30B fixed income portfolio....

 

 

SJ

 

Got it :-) Thanks

 

With the spreadsheet i am trying to group the equity holdings based on how changes in their value show up in Fairfax’s reporting:

1.) holdings where changes in stock price/value flows though to earnings and impacts BV each quarter

2.) holdings where changes in stock price/value do not directly impact BV each quarter

 

—————————

 

Could be a busy 5 weeks for Fairfax to finish 2020.

1.) Does BAL / Anchorage transaction close?

2.) Does Fairfax Africa / Helios transaction close?

3.) Does Fairfax purchase OMERS stake in Eurolife? (2019 AR said this would happen in 2020)

 

I also wonder if they do not monetize something large to realize some cash. Last year it was Riverstone and ICICI Lombard. Before that it was First Capital.

[Parsad]

Viking, what have you done with the BB convertible debs?  Just eye-balling the change in the BB stock price, I would guess that if the debs were marked-to-model that they would likely now trade at a premium over par value (they are not yet in the money, but clearly the conversion privilege is quite valuable and has become considerably more valuable since Sept 30)?  Probably at least another $50 million, conservatively?  As an observation, BB's $7 calls expiring in January 2023 traded at $1.91 on Friday and $0.95 back on Sept 30.  FFH's $6 calls expiring in November 2023 for 55 million shares are worth a fair bit these days...

 

 

SJ

 

I just listed the BB convertible debs on my spreadsheet with no value/change in value. Any increase in value in these should be added to the $1 billion. Is it correct the increase would fall in the ‘mark to market’ bucket?

 

 

Those particular securities are not traded, so they would need to be marked-to-model rather than marked-to-market.  I presume that they would be included in the "mark to market" bucket in the same way that the value of the CPI derivatives are adjusted every quarter based on their modelled value.  However, we probably wouldn't even notice a ~$50m mark for the debs when they are included with all of the other changes in the $30B fixed income portfolio....

 

 

SJ

 

Got it :-) Thanks

 

With the spreadsheet i am trying to group the equity holdings based on how changes in their value show up in Fairfax’s reporting:

1.) holdings where changes in stock price/value flows though to earnings and impacts BV each quarter

2.) holdings where changes in stock price/value do not directly impact BV each quarter

 

—————————

 

Could be a busy 5 weeks for Fairfax to finish 2020.

1.) Does BAL / Anchorage transaction close?

2.) Does Fairfax Africa / Helios transaction close?

3.) Does Fairfax purchase OMERS stake in Eurolife? (2019 AR said this would happen in 2020)

 

I also wonder if they do not monetize something large to realize some cash. Last year it was Riverstone and ICICI Lombard. Before that it was First Capital.

 

There is also talk about Chen selling Blackberry's telecommunication patents in the range of $350-500M...which if it happens, may push BB's price up further.  Cheers!

[Xerxes]

Great stuff Vikings.

I think that is good measure (proxy) of intrinsic value (if not accounting value) and it serves the purpose to showcase improvement.

 

From an accounting point of view, the difference on the biggest mover (Atlas's common shares) can be noticeable. Atlas' earning was $84 million in Q3 2020, take 40% of that which is attributable to FFH, and then remove the dividend paid to FFH by Atlas from that figure, to remove the dividend double-counting, and there you have the addition to FFH book value. A small figure. Doesn't bother me though, i find equity method accounting to be conservative this way as it takes out the mark to market gyration for large position. In fact, i think (though haven't verified) the collapse of Blackberry shares in the past two years had 'damaged' the book value, due to its mark to market accounting.

 

On a different note, I am going to go out on a limb and make an unfounded prediction that Prem Watsa will do some relatively big buybacks in Q4 and Q1. He knows that any market weakness due to the second wave will be his last opportunity to take out a slug of shares below book value and as capital allocator he probably cherishes that. He just has to manage that along with $300 million use of cash for the jumbo-dividend and potential asset sale, while jumping through multiple hoops. My perception of Q3 call was that he was extremely busy, wanted to get the call finish as soon as possible by giving out vague answers while playing everything close to chest as it will be a busy quarter.

 

[Viking]

Xerxes, i like your optimism on the share buyback but where does Prem get the $ from? Do they dip further into bank lines? My guess is no. They have been adding to debt total all year.

 

To your point, they also need $300 million for the US$10 dividend in January (nice 3% yield :-) if they maintain historic payout and timing.

 

They also may need to take out OMERS at Eurolife (they said this would happen in 2020 in 2019AR).

 

What all this tells me is it sure would be timely to monetize something big. Lets hope the vaccine trade continues as it is certainly benefitting Fairfax.

 

———————————

 

I was looking at Fairfax’s valuation the last couple of days. Despite increasing US$80 in 3 weeks (30%) FFH remains very cheap.

 

Here is a goofy kind of way to look at things; some mental gymnastics...

 

For interest i decided to look at how other insurance companies are trading. Most are now trading once again at levels similar to the end of 2019. Markel is a bit of a laggard trading today 10% below where it was trading at the end of 2019. Fairfax? It is still trading 27% below where it was trading end of 2019 (despite a 30% increase in the last 21 days).

 

So at the end of 2019 Fairfax had a market cap of US$12.36 billion. And it was not expensive then (trading close to BV then if memory serves my correctly). Today it has a market cap of $9.02 billion. It is down $3.34 billion.

 

1.) Its insurance operations are better positioned today than they were Dec 31. We are in an insurance hard market and premium growth is strong (double digits).

2.) the bond portfolio is mildly worse: The yield on the bond portfolio is shrinking but they were able to oportunistically able to buy a bunch of corporates back in March/April which helps. Bottom line the continued steep decline in the shares is likely not due to the bond portfolio.

3.) The equity portfolio is likely responsible for the majority of the current $3.34 billion decline in market cap (and underperformance versus peers).

 

The interesting thing is the equity portfolio is sitting today only about $1.5 billion below where it was trading Dec 31. So we still have a $1.8 billion market cap decline that is kind of unexplained ($3.34 - $1.5). My guess is this amount is a rough approximation of how much Mr. Market is still undervaluing Fairfax. 

 

Book value is currently US $442. So Fairfax trading at 0.9xBV is still cheap and discounting lots of bad things = $400.

 

With shares currently trading at $343 i think there is another easy 15% or so to be had in the near term (the next 2 months or so). Mr Market is being overly pessimistic with Fairfax.

 

And if we get more good news on the vaccine front (likely) and the trend to value stocks the past 2 weeks continues in the coming months (likely) then we should see Fairfax trade once again closer to BV sometime in 1H 2021. Amd BV will be growing again in Q4 and it could easily surpass $500 in 2021.

 

Looking to 2H 2021, at todays price Fairfax could provide investors a return of 50%. And the stock would still be cheap (still trading at BV)! RBC says given we are in a hard market Fairfax should likely trade closer to 1.2xBV. I don’t think this is a crazy multiple to pay for Fairfax shares in a hard market and with the wind at the back of their investment portfolio. Yes, there are risks. But in a zero interest rate world the risk return for Fairfax looks good to me.

 

PS: the equities Fairfax owns are not impaired (i.e. Seaspan is performing well etc) and as we exit the virus in 2021 the equities should perform quite well.

 

[petec]

Factual question: was accounting BV much different from fair value BV in the Q3 reporting? I seem to remember being surprised at how similar they were but maybe I misread.

 

Philosophical question: as rates fall the yield on the bond portfolio falls. This reduces Fairfax’s intrinsic value, all else equal. But in an efficient  market (ha ha) the earnings yield at which Fairfax’s stock is priced should also fall. Mathematically, do these two effects offset each other perfectly or imperfectly?

[Xerxes]

Xerxes, i like your optimism on the share buyback but where does Prem get the $ from? Do they dip further into bank lines? My guess is no. They have been adding to debt total all year.

 

To your point, they also need $300 million for the US$10 dividend in January (nice 3% yield :-) if they maintain historic payout and timing.

 

They also may need to take out OMERS at Eurolife (they said this would happen in 2020 in 2019AR).

 

What all this tells me is it sure would be timely to monetize something big. Lets hope the vaccine trade continues as it is certainly benefitting Fairfax.

 

Never underestimate a man who built a multi-billion dollar sprawling organization out of nothing. If he sees relative buyback value vs. alternative today he will find a way. The same dogged determination that makes him continuing to short technology names (to my anger), will make him find a way to do his buyback if he see relative value.

 

if needs be, he is going to put the buybacks on his credit card, then roll them over line of credit and then on equity line of credit before matching the liability via an asset sale. Of course i am joking here about credit card, but my point is that if needs be he is going to be jumping through hoops until he gets his asset sale so that he can dividend back to hold-co and get his slug of shares. When it happens it will come out as a surprise.

 

On a different note, on financial leverage, i am not sure if market value is used for calculation or book value, but i imagine an equity portfolio that has done relatively better than last quarter, should slightly tilt the D/E equation in FFH favour.

 

[Viking]

Factual question: was accounting BV much different from fair value BV in the Q3 reporting? I seem to remember being surprised at how similar they were but maybe I misread.

 

Philosophical question: as rates fall the yield on the bond portfolio falls. This reduces Fairfax’s intrinsic value, all else equal. But in an efficient  market (ha ha) the earnings yield at which Fairfax’s stock is priced should also fall. Mathematically, do these two effects offset each other perfectly or imperfectly?

 

On your factual question i remain sceptical about accounting BV at Fairfax. This is primarily due to what we have seen unfold over the past 7-8 years. People do not trust management; they have simply done and said too many dumb things for far too long. So it will take years for Fairfax to turn this around - and this will only happen if management consistently does the right thing and communicates effectively. And the jury is still out on this (from my perspective).

 

I see some positive moves the past couple of years but the hole Fairfax dug is so deep it will take another 24 months (or longer) to fully deal with many of the legacy issues. The fixes will likely involve a continuation in the write down in book value of the assets like we have seen the last 2 years: EXCO (bonds), Fairfax Africa, Altas Mara, Astarta are just a few that come to mind.

 

We also continue to see negative surprises like the big loss in Q3 on some mystery short position. These continuing issues are not small dollar amounts. They total hundreds of millions every year. And my guess is they will continue to occur in size for a few more years.  These ‘one time’ things happen all too frequently with Fairfax and act as an anchor slowing growth in earnings and book value.

 

The good news is Fairfax does appear to understand and they have slowly been ‘fixing’ the problem children. Moving APR to Atlas was a brilliant move (and look at how much Atlas has done to APR since the purchase). Despite brutal timing (not Fairfax’s fault) Dexterra’s reverse takeover of Horizon North could work out very well in the coming years. Merging Fairfax Africa into Helios looks good (needs to close first and even then will be too early to know). Fairfax does appear to understand when they have made a big mistake. And they have been creative in finding solutions. They do appear to be VERY focussed on putting the companies they own in a position to be successful (true for both non-insurance and insurance). That is very encouraging.

 

Of the large equity positions i prefer to use market value as a proxy (over carrying value).

 

                    Carrying value.  Market value.    Difference

- Atlas                $896              $1.059            + $163

- Eurobank      $1,137                $619.            - $518

- Quess              $552                $307.            - $245

 

Do i think 100% of Digit is worth $858 million because 10% was sold for $91 million? I am sceptical. (I like Digit very much; but i have seen this exercise done before by Fairfax to value assets at premium valuations... like Bangalore Airport.)

 

- Bangalore.    $1,383.              $684.            + $699

 

Do i think the airport is worth $1,383 million today? No. Is it worth more than $699? Probably.

 

So with the large equity positions i like to go with market price (if publicly traded) and if private i like to use a combination of purchase price and Fairfax value (usually applying a hair cut to Fairfax valuation if it looks frothy). 

 

Now having said all of the above i am completely ignoring all of the many examples of where Fairfax is doing good to exceptional things and building value for shareholders (particularly on the insurance side of things). Or where it owns companies that are doing very well. Often this ‘value’ is not captured in BV.

 

So weaving it sll together, i am likely not being fair to Fairfax in wanting to discount BV when coming up with a fair valuation. As time goes by and i learn more (informed by what the company does and says) i will revise my thinking accordingly :-)

[petec]

Thanks.

 

Out of interest what do you think Atlas has done to/with APR since purchase? As far as I can see they have

- cut costs.

- deployed assets on the short term Mexicali contract, but I think this was in place since they bought it.

 

I asked the same question of Parsad on the Atlas thread and he replied with a long extract from the q2 call. But apart from the cost cutting, everything they discussed on that call was either in place before they bought APR or was rather vague conjecture about future plans.

 

Assuming they have found genuine fat, cutting costs is very positive and frees up capital for reinvestment, so credit for that. But apart from that I don't think they have done anything with APR yet.

[petec]

More directly on the book value points:

 

1) How do you derive the market value of Bangalore?

 

2) The only bit of your reasoning I disagree with is Digit. If 10% sells for X, it is reasonable to think that a control stake might sell for >X. The world is paying amazing multiples for tech growth these days.

 

[drzola]

I was fortunate or unfortunate to be present in Bangalore airport when a group of us die hard Koolaid drinkin Fairfaxer's were dining in Jan 2018 and an employee not the CEO gave us a 1 min PowerPoint pitch of Digit and most were displeased with his foresight/insight's tho, I was extremely impressed ( he was very young as in a 20's aged digital imprinted  person and most likely knows his future customer's better then most their in my opinion ) but WTF do I even know here.

 

Stay Safe all whilst Covid 19 peak trough is being witnessed currently in NA maybe!

[StubbleJumper]

I don't want to create a jinx or anything, but Blackberry shares are trading at US$6.18 this morning.  The conversion privilege of the $330m debentures is at least temporarily in-the-money.  Lots of small pieces of good news over the past three weeks.

 

 

SJ

[Bryggen]

Unrelated question: was FFH ever part of the TSX 60 and recently removed?

Thanks

[ourkid8]

A quick google search would provide your answer.

 

https://www.theglobeandmail.com/globe-investor/investment-ideas/why-does-the-sptsx-60-exclude-some-of-canadas-biggest-stocks/article19057449/#:~:text=Twelve%20of%20the%2060%20biggest,company%20in%20the%20TSX%20composite.

 

Unrelated question: was FFH ever part of the TSX 60 and recently removed?

Thanks