Fairfax 2021

[Dazel]

 

 

I was joking kinda with posts I erased them so they are not taken out of context...because they were

Massive SPECULATION!

[Dazel]

 

Not that anyone really cares!lol.

[StubbleJumper]

 

 

I was joking kinda with posts I erased them so they are not taken out of context...because they were

Massive SPECULATION!

 

 

Okay, to be a modern investor, when you write posts with massive speculation, you should always include several rocket emojis at the end of the message, you should proclaim that you are "going full-out retard" and that you have diamond hands.

 

 

SJ

[Dazel]

 

 

LMAO! I can’t figure that out!

[petec]

No. The worst case is that it has recently been closed out. The best case is this spike gave them an oppy to increase their short and bail themselves out.

 

Would increasing the size of a short position go against Prem's "promise" to not short ever again? Or have you found him another loop hole to exploit? Prem speak knows no limits.....

 

My recollection is that he promised not to short indices, not stocks.

[doc75]

 

If they do not do anything there is one other possible reason: economic nationalism. Prem may feel Fairfax needs to nurture Blackberry for another couple of years until it completes its transformation. Few tech companies are based in Canada. Selling might be off the table (for now) because it is not a simple financial transaction (based on BB share prcice). Prem wants wait until Blackberry succeeds (to the benefit of Canada). Fairfax will get its payout perhaps in a few years when Blackberry has completed its transformation. I see a possible similar motive with other investments like AGT, Farmers Edge etc. Fairfax provides the seed money/environment/patience to create world class companies based in Canada. I may be completely off base with this comment. What they do with their BB shares and the reasons they supply will be instructive.

 

 

 

This is roughly my thinking, too --- that some mixture of economic nationalism (as you describe it) and vanity could lead to inaction with BB.  By "vanity" I'm referring to Prem's apparent desire to be seen as a genius contrarian.

 

Reminds me of this classic scene:

 

 

 

 

[bearprowler6]

No. The worst case is that it has recently been closed out. The best case is this spike gave them an oppy to increase their short and bail themselves out.

 

Would increasing the size of a short position go against Prem's "promise" to not short ever again? Or have you found him another loop hole to exploit? Prem speak knows no limits.....

 

My recollection is that he promised not to short indices, not stocks.

 

A portion of the transcript from the Q3 2020 conference call was posted a little earlier today by Wisowis. In that post Prem clearly states that no further shorting of either indices or individual stocks will be done. At least that is my read and understanding....however I am not an expert in "Prem speak" so please review yourself and let me know how you interpret Prem's word from the Q3 2020 conference call.

[Santayana]

Maybe someone already pointed this out, but none other than Steve Cohen is part of the GME short crowd. 

[gary17]

i guess they didn’t sell any BB

[Santayana]

Nothing to do with Blackberry, but they did file this yesterday, reflecting a transaction from 12/31/20.

 

https://www.sec.gov/Archives/edgar/data/915191/000110465921009510/tm214744d1_sc13g.htm

 

[Xerxes]

Last year on Jan 31, it announced the date for Q4 conference call which was in mid-Feb. So tomorrow there will be the date announcement for Q4 results but that is it i think. Not sure if there is black out period before which they cannot say more than that.

 

I am half glass full type of person, so i am thinking he is busy with the buybacks, so he cannot really announce anything on BB that would tip his hand, either way. :-)

 

Unrelated, i saw on the news that OMERS used the Reddit rally as an opportunity to exit on a shopping mall investment that was underwater. And said: "We’ve been a long-term investor with Macerich and throughout this relationship they have been a valued partner,” Dan Madge, a spokesman for the Teachers fund, said in a written statement. “Moving forward, we are focused on scaling and diversifying our global real estate platform, and growing our existing Canadian real estate business."

 

https://finance.yahoo.com/news/reddit-fever-ignites-mall-stock-020810263.html

 

It amazes me the reputation Prem has built, that given the current BB setup, there is significant doubt on whether he will capitalize on this situation.

 

Right on !

[Dazel]

https://www.cnbc.com/2021/01/30/gamestop-point72-founder-steve-cohen-leaves-twitter-after-family-receives-threats.html

[Dazel]

 

Blackberry could be $25 again next week. Who knows...

 

But Knowing Fairfax they would have exited BB financially (short hedge) with as little ripples as possible. This is not a time To be cocky about wins in the market or to hurt BB share price in anyway. Fairfax goal would be to show capital strength as the reasoning for a synthetic sale. They will likely have to announce this with earnings...because it will effect the share price which effects the buyback program. The blackout period will end for a time with the earnings announcement where they will have an opportunity to buyback a significant amount of shares. Right now they are on an automatic share purchase program (blackout period).

 

They also want the sale proceeds from Riverstone in the account so they can buy a significant amount of shares back well below book value. This would be huge for Fairfax....BB win was not even in my look at what Fairfax has coming...Farmers edge IPO...AGT...they could buy 10% of their shares back in the next few months if volumes are there and the share price cooperates (discount to book).

[Dazel]

https://theprint.in/india/disney-is-booming-in-india-and-could-become-its-largest-global-market/543276/

 

https://fortune.com/2021/01/30/disney-plus-india-cricket/

 

https://economictimes.indiatimes.com/tech/technology/hotstar-largest-contributor-to-disneys-q4-subscriber-growth-has-about-18-5m-paid-members/articleshow/79205495.cms?from=mdr

 

https://deadline.com/2020/12/disney-stock-all-time-high-streaming-investor-day-disney-plus-hulu-espn-1234653043/

 

Disney plus subscriber base  main driver is India...their other businesses are in the tank and India $ per subscriber I relatively low to other countries...so why do they get so much credit in their share price for the growth? Because it’s going to continue...

 

Fairfax Digit investment and others are not reflected in their perception and share price......there is a window to buy back shares here before it heads back to an all time high. The market will figure out where Fairfax is in this growth...C-19 was a big hiccup for that potential but as you can see from Disney India growth driving part of its share price...Fairfax upside as more of pure play on growth in India is potentially explosive.

[Xerxes]

They also want the sale proceeds from Riverstone in the account so they can buy a significant amount of shares back well below book value. This would be huge for Fairfax....BB win was not even in my look at what Fairfax has coming...Farmers edge IPO...AGT...they could buy 10% of their shares back in the next few months if volumes are there and the share price cooperates (discount to book).

 

When i am buying something that i really want, but that takes liquidity but has a limited-time deep discount, i use my line of credit, then pay it back a month later when the paycheck is coming. Cash flow management is nothing new.

 

Nothing stops FFH to do its buyback using its credit line and pay it back when the cash is received from Riverstone's sale, if buyback in Q1 is their intention. If it is not, then it is not.

 

In exactly 2 weeks time, FFH shares will either get really cheap (i.e. cheaper) (if perceived that management screwed up its diamond-hands when it came on BB) .... or FFH will soar a lot if perceived they put the right trade in place.

 

It is one thing for Prem Watsa adhering to deep value and not giving up on that framework ... it is entirely another thing for the same deep-value minded person choosing not lock-in profit in some fashion (partially at least). In my opinion, public investors while they can have an opinion, they cannot complain about Prem use of deep-value, after all, they can chose not to buy FFH shares, .... but if Prem would fails to lock in profit in some fashion, than i think public investors have a right to be really concerned. After all they all chose to come to FFH and get a seat in the Deep Value Church, and not the YOLO/#NeverSell Church.

 

 

[Daphne]

I can’t think of a single time when Prem has failed to take advantage of a presented opportunity. He’s proven to be one of the most opportunistic investors in the market. However because of his multidimensional thought processes, how he does it is most likely well beyond our single or at best two dimensional perspectives. 

[Parsad]

I can’t think of a single time when Prem has failed to take advantage of a presented opportunity. He’s proven to be one of the most opportunistic investors in the market. However because of his multidimensional thought processes, how he does it is most likely well beyond our single or at best two dimensional perspectives.

 

+1!  Totally agree! 

 

They always find a way to capitalize on these types of situations.  Usually in a way most shareholders don't expect.  It would be very surprising if they did not.  Cheers!

[petec]

Ha. I particularly liked the time when Prem took the opportunity to sell JNJ and short the entire stock market just before the biggest rally of all time.

 

Also when he bought Blackberry and not Microsoft.

 

He *never* misses an opportunity.

 

::)

 

Prem is well capable of missing an opportunity. He is human. But my personal, unprovable assessment is that he is unlikely to have missed it due to vanity or some misplaced nationalism. If he's missed it it's because he genuinely thinks BB at $20 offers a good risk/reward.

[drzola]

Fyi this maybe quite interesting.

 

https://www.fortuneindia.com/investing/budget-booster-for-insurance-sector/105116

 

[StubbleJumper]

Ha. I particularly liked the time when Prem took the opportunity to sell JNJ and short the entire stock market just before the biggest rally of all time.

 

Also when he bought Blackberry and not Microsoft.

 

He *never* misses an opportunity.

 

::)

 

Prem is well capable of missing an opportunity. He is human. But my personal, unprovable assessment is that he is unlikely to have missed it due to vanity or some misplaced nationalism. If he's missed it it's because he genuinely thinks BB at $20 offers a good risk/reward.

 

 

Agree with most of that. 

 

Everybody, including Prem, makes a great many "errors of omission" (eg, I should have bought Costco shares in 2009, but I sucked my thumb).  Prem also makes a great many moves which we have identified, ex post, as "errors of commission."  But, mostly those errors of commission were buying errors rather than selling errors.  We are frequently left to bitch and moan that Prem shouldn't have wasted capital on XYZ or ABC company, but rarely do we need to bitch and moan that he sold too early or too late.  As you noted, the pre-mature sale of the high-quality large-caps in the aftermath of the financial crisis is the one major selling error that comes to mind.  If Prem has failed to take advantage of the opportunity to dump BB shares, it would be a pretty unusual sort of error for him.

 

I would also note that we probably shouldn't be fixated on a US$20+ price for BB.  The opportunity to sell in that price range lasted only one trading session (so far).  I would not fault FFH for not blowing 47m shares out the door in a single trading session and magically time the top of the market.  That being said, there has been plenty of opportunity to basically sell as many shares as you'd want, spread over 3 or 4 sessions, and a weighted-average price of US$15 or $16 would have been easily achieved.  In my book, that price is already bat-shit crazy, but I'd love for somebody to show me that it's not!  I would be quite concerned with the notion that FFH actually believes that BB is worth more than that.

 

 

SJ

[petec]

Ha. I particularly liked the time when Prem took the opportunity to sell JNJ and short the entire stock market just before the biggest rally of all time.

 

Also when he bought Blackberry and not Microsoft.

 

He *never* misses an opportunity.

 

::)

 

Prem is well capable of missing an opportunity. He is human. But my personal, unprovable assessment is that he is unlikely to have missed it due to vanity or some misplaced nationalism. If he's missed it it's because he genuinely thinks BB at $20 offers a good risk/reward.

 

 

Agree with most of that. 

 

Everybody, including Prem, makes a great many "errors of omission" (eg, I should have bought Costco shares in 2009, but I sucked my thumb).  Prem also makes a great many moves which we have identified, ex post, as "errors of commission."  But, mostly those errors of commission were buying errors rather than selling errors.  We are frequently left to bitch and moan that Prem shouldn't have wasted capital on XYZ or ABC company, but rarely do we need to bitch and moan that he sold too early or too late.  As you noted, the pre-mature sale of the high-quality large-caps in the aftermath of the financial crisis is the one major selling error that comes to mind.  If Prem has failed to take advantage of the opportunity to dump BB shares, it would be a pretty unusual sort of error for him.

 

I would also note that we probably shouldn't be fixated on a US$20+ price for BB.  The opportunity to sell in that price range lasted only one trading session (so far).  I would not fault FFH for not blowing 47m shares out the door in a single trading session and magically time the top of the market.  That being said, there has been plenty of opportunity to basically sell as many shares as you'd want, spread over 3 or 4 sessions, and a weighted-average price of US$15 or $16 would have been easily achieved.  In my book, that price is already bat-shit crazy, but I'd love for somebody to show me that it's not!  I would be quite concerned with the notion that FFH actually believes that BB is worth more than that.

 

 

SJ

 

Per your first point, I half agree. I am tempted to say that RFP above $10 was a chance but when you hold a third of the stock maybe you just can't. But my bigger issue with your argument is that there simply haven't been that many great opportunities to sell Prem's equity holdings over the last few years, so how can we know?

 

Per your second, the bull case is obviously that QNX and/or IVY become subscription products, so that instead of earning say $5 per year on 30m cars manufactured, the company earns say $10 per year on the installed fleet. For example, if you assumed that BB could get subscription products into 20m cars a year from 2023 onwards, you'd have $1bn in very high margin incremental revenues by 2027 and all sorts of fancy theories about how that base could be further monetised. I can easily see this market paying $15 for that. The issue is this thesis requires so many things to go right and there is absolutely no hard evidence that it will happen.

[DooDiligence]

BB bull/bear writeup on reddit  ???

No really, an actual writeup.

 

www.reddit.com/r/wallstreetbets/comments/l4ehan/blackberry_dd/?utm_source=share&utm_medium=web2x&context=3

 

---

 

the post ended with a bazillion rocket ships which doesn't detract from the info presented.

[StubbleJumper]

BB bull/bear writeup on reddit  ???

No really, an actual writeup.

 

www.reddit.com/r/wallstreetbets/comments/l4ehan/blackberry_dd/?utm_source=share&utm_medium=web2x&context=3

 

---

 

the post ended with a bazillion rocket ships which don't detract from the info presented.

 

 

Thanks for linking that.  It was an interesting read, rocket ships aside.  The bull case is an interesting set of possibilities, but it is a bit of a shoe-string case.

 

 

SJ

[StubbleJumper]

Ha. I particularly liked the time when Prem took the opportunity to sell JNJ and short the entire stock market just before the biggest rally of all time.

 

Also when he bought Blackberry and not Microsoft.

 

He *never* misses an opportunity.

 

::)

 

Prem is well capable of missing an opportunity. He is human. But my personal, unprovable assessment is that he is unlikely to have missed it due to vanity or some misplaced nationalism. If he's missed it it's because he genuinely thinks BB at $20 offers a good risk/reward.

 

 

Agree with most of that. 

 

Everybody, including Prem, makes a great many "errors of omission" (eg, I should have bought Costco shares in 2009, but I sucked my thumb).  Prem also makes a great many moves which we have identified, ex post, as "errors of commission."  But, mostly those errors of commission were buying errors rather than selling errors.  We are frequently left to bitch and moan that Prem shouldn't have wasted capital on XYZ or ABC company, but rarely do we need to bitch and moan that he sold too early or too late.  As you noted, the pre-mature sale of the high-quality large-caps in the aftermath of the financial crisis is the one major selling error that comes to mind.  If Prem has failed to take advantage of the opportunity to dump BB shares, it would be a pretty unusual sort of error for him.

 

I would also note that we probably shouldn't be fixated on a US$20+ price for BB.  The opportunity to sell in that price range lasted only one trading session (so far).  I would not fault FFH for not blowing 47m shares out the door in a single trading session and magically time the top of the market.  That being said, there has been plenty of opportunity to basically sell as many shares as you'd want, spread over 3 or 4 sessions, and a weighted-average price of US$15 or $16 would have been easily achieved.  In my book, that price is already bat-shit crazy, but I'd love for somebody to show me that it's not!  I would be quite concerned with the notion that FFH actually believes that BB is worth more than that.

 

 

SJ

 

Per your first point, I half agree. I am tempted to say that RFP above $10 was a chance but when you hold a third of the stock maybe you just can't. But my bigger issue with your argument is that there simply haven't been that many great opportunities to sell Prem's equity holdings over the last few years, so how can we know?

 

Per your second, the bull case is obviously that QNX and/or IVY become subscription products, so that instead of earning say $5 per year on 30m cars manufactured, the company earns say $10 per year on the installed fleet. For example, if you assumed that BB could get subscription products into 20m cars a year from 2023 onwards, you'd have $1bn in very high margin incremental revenues by 2027 and all sorts of fancy theories about how that base could be further monetised. I can easily see this market paying $15 for that. The issue is this thesis requires so many things to go right and there is absolutely no hard evidence that it will happen.

 

 

To be fair, FFH's investing failures loom large in our mind, but the successes fade as time passes.  The repeated purchase and sale of bonds for large realised gains is all but forgotten, including the success of the put bonds and munis.  The successful cycling of equities drove considerable realised gains, but who remembers White Mountain, King Pharma, Old Republic, or the other successful purchases and sales.  We do remember the successful purchase and sale of credit default swaps, but even that is beginning to fade.  What sticks foremost in our minds are the more immediate failures with derivatives, of Torstar, and of Abititi Bowater, but those were principally buying errors, not selling.

 

Turning to the prospects for BB, I too can imagine the market paying $15/sh for the cashflows that you outlined, but that does not necessarily mean that BB will ultimately generate adequate cashflows for shareholders to justify the price.  The bull case seems to be that maybe in 5 years, BB might generate $1B of earnings, which if it were sustainable over a long period of time, would be adequate to justify a US$10B market-cap.  As you noted, a great many moons and stars need to align to achieve that $1B number to begin with, and then as we know, the history of the technology industry is littered with the carcasses of failed category leaders who dominated their niche for 5 years or a decade and then were supplanted by a competing product.  So meaningful cashflows won't likely begin to flow until four or five years have passed, and then who knows how long they will endure.  Perhaps I should make a note in my calendar for January 2036 to check how much cash BB transfers to its shareholders over the next 15 years and to see what remains of an investment made in 2021 (it might still be ticking along, or it might be long disappeared).  I guess for now I will remain in the camp that the market price is bat-shit crazy!

 

 

SJ

[petec]

I don’t disagree with any of your comments on BB, but they could apply to a large number of shares today!