drzola Posted February 12, 2021 Posted February 12, 2021 Nice to See Mastercraft in their Hodgepodge but no BRP which is right in their backyard here almost.
Viking Posted February 12, 2021 Posted February 12, 2021 After listening to the call here are a few thoughts/comments: - float is up 11% (over past year) to $927/ share - Ki - ‘doing very well’ - Digit - i need to re-listen to this... did he say they HAD or will be taking ownership up? - last short position was finally closed at year end. ‘Never short stock indices or individual names again.’ - investment returns ended 2020 +2.7% - called out Fairfax India and Atlas as being very undervalued at current prices - AR will be available March 15. They will be providing better disclosure of equity holdings and bucket them by type of holding. - investment in associates: + $712 million fair value in excess of carrying value at YE. Implying BV is understated. Q&A - FFH TRSwap is investment. For one year. Can be extended if they want. - why not instead just but shares? Need to be careful with cash. - Brit: why sell 14% in hard market vs tap debt markets? For flexibility. - IPO’s: more coming... i think he said watch Fairfax India? - BB: he basically kept saying ‘no comment’. But did he not say at the very end of the call something along the lines of ‘we will make disclosures only when we are done’? ———————— It will be VERY interesting to see what analysts have to say when they issue their Fairfax reports later today. So many moving parts. As Bearprowler noted, the steep decline in dividend and interest income may be a red flag (as it is one of the few things analysts can model somewhat accurately). The thesis for Fairfax revolves around their investment portfolio and insurance analysts typically struggle with incorporating this in their models... Bottom line, i don’t see how analysts do not raise their price target for FF given the significant jump in BV (and price targets are a multiple of BV). They could lower the multiple they apply to BV... but how do you do that when Fairfax’s investment portfolio is on fire 6 weeks into Q1 and we are in a hard market with net written premiums growing at double digits and CR improving?
petec Posted February 12, 2021 Posted February 12, 2021 My favourite bit so far: "the stocks we own...we think they are very undervalued...take that with a pinch of salt".
Parsad Posted February 12, 2021 Posted February 12, 2021 wow, which one of you just went off on Prem on the call? What was said? Rough version: Called in and told him he needed to step away, he wasn't paying attention anymore, and had lost his touch. Continued by saying that Prem didn't understand any of the companies he was investing in and wasn't doing any detailed analysis on microeconomics, his partners agreed but were Canadian so too nice to tell him, and the bankers were cowards not asking hard questions because Canada doesn't have enough good companies. Sounds like Sanjeev. Kidding!!! Ha ha!! I'm listening to the call now. Let me see who this twat was! Cheers! Don't know who it was, but you could tell that they have very little understanding about how much analysis goes on at Fairfax when selecting investments. I'm probably one of a very few handful of people who has actually seen the internal workings and spoken to all of the analysts, portfolio managers, core group in detail over the years, and does not work for the company. This guy has no idea what he is talking about! Cheers!
Parsad Posted February 12, 2021 Posted February 12, 2021 After listening to the call here are a few thoughts/comments: - float is up 11% (over past year) to $927/ share - Ki - ‘doing very well’ - Digit - i need to re-listen to this... did he say they HAD or will be taking ownership up? - last short position was finally closed at year end. ‘Never short stock indices or individual names again.’ - investment returns ended 2020 +2.7% - called out Fairfax India and Atlas as being very undervalued at current prices - AR will be available March 15. They will be providing better disclosure of equity holdings and bucket them by type of holding. - investment in associates: + $712 million fair value in excess of carrying value at YE. Implying BV is understated. Q&A - FFH TRSwap is investment. For one year. Can be extended if they want. - why not instead just but shares? Need to be careful with cash. - Brit: why sell 14% in hard market vs tap debt markets? For flexibility. - IPO’s: more coming... i think he said watch Fairfax India? - BB: he basically kept saying ‘no comment’. But did he not say at the very end of the call something along the lines of ‘we will make disclosures only when we are done’? ———————— It will be VERY interesting to see what analysts have to say when they issue their Fairfax reports later today. So many moving parts. As Bearprowler noted, the steep decline in dividend and interest income may be a red flag (as it is one of the few things analysts can model somewhat accurately). The thesis for Fairfax revolves around their investment portfolio and insurance analysts typically struggle with incorporating this in their models... Bottom line, i don’t see how analysts do not raise their price target for FF given the significant jump in BV (and price targets are a multiple of BV). Did you guys catch the bit on they are investing in mortgages? Did I hear that correctly? Was it mortgage or mortgage related bonds...? Low interest rates, are they looking for yield. Cheers!
petec Posted February 12, 2021 Posted February 12, 2021 After listening to the call here are a few thoughts/comments: - float is up 11% (over past year) to $927/ share - Ki - ‘doing very well’ - Digit - i need to re-listen to this... did he say they HAD or will be taking ownership up? - last short position was finally closed at year end. ‘Never short stock indices or individual names again.’ - investment returns ended 2020 +2.7% - called out Fairfax India and Atlas as being very undervalued at current prices - AR will be available March 15. They will be providing better disclosure of equity holdings and bucket them by type of holding. - investment in associates: + $712 million fair value in excess of carrying value at YE. Implying BV is understated. Q&A - FFH TRSwap is investment. For one year. Can be extended if they want. - why not instead just but shares? Need to be careful with cash. - Brit: why sell 14% in hard market vs tap debt markets? For flexibility. - IPO’s: more coming... i think he said watch Fairfax India? - BB: he basically kept saying ‘no comment’. But did he not say at the very end of the call something along the lines of ‘we will make disclosures only when we are done’? ———————— It will be VERY interesting to see what analysts have to say when they issue their Fairfax reports later today. So many moving parts. As Bearprowler noted, the steep decline in dividend and interest income may be a red flag (as it is one of the few things analysts can model somewhat accurately). The thesis for Fairfax revolves around their investment portfolio and insurance analysts typically struggle with incorporating this in their models... Bottom line, i don’t see how analysts do not raise their price target for FF given the significant jump in BV (and price targets are a multiple of BV). Did you guys catch the bit on they are investing in mortgages? Did I hear that correctly? Was it mortgage or mortgage related bonds...? Low interest rates, are they looking for yield. Cheers! Yes - I think this is the $2bn announced earlier with Kennedy Wilson.
petec Posted February 12, 2021 Posted February 12, 2021 wow, which one of you just went off on Prem on the call? What was said? Rough version: Called in and told him he needed to step away, he wasn't paying attention anymore, and had lost his touch. Continued by saying that Prem didn't understand any of the companies he was investing in and wasn't doing any detailed analysis on microeconomics, his partners agreed but were Canadian so too nice to tell him, and the bankers were cowards not asking hard questions because Canada doesn't have enough good companies. Sounds like Sanjeev. Kidding!!! Ha ha!! I'm listening to the call now. Let me see who this twat was! Cheers! Don't know who it was, but you could tell that they have very little understanding about how much analysis goes on at Fairfax when selecting investments. I'm probably one of a very few handful of people who has actually seen the internal workings and spoken to all of the analysts, portfolio managers, core group in detail over the years, and does not work for the company. This guy has no idea what he is talking about! Cheers! I have no doubt that you are right. Or more accurately I flipping hope you are right! But in fairness to the questioner, Prem's explanation of his investments is always highly simplistic, and usually revolves around people not microeconomics. We think John Chen is great!!! We believe in Blackberry!!! We bought Exxon on a 10% dividend yield!!! You can get away with that when you're knocking it out of the park, but you have to assume people will question your thinking when you're not. In my view it would do Prem no harm to adopt a more structured, numbers-based approach to explaining his investment theses.
drzola Posted February 12, 2021 Posted February 12, 2021 Yep, Sam sucked at Nat gas Industry in my opinion but whadda I know here living in Natgas world here and growing up with peyto people and the Edwards boys etc etc Lol!
drzola Posted February 12, 2021 Posted February 12, 2021 Frank Rose ran circles around Murray Edwards for quite some time on conventional oil/dry Natgas exploration/ development and then Peyto got lucky with Ensign snagging the Horizontal drilling technique on shallow fieldsites.
drzola Posted February 12, 2021 Posted February 12, 2021 my best day of 2021 so far and I wish all the best to the COBF tribe here as well today. P.S. We have Worldwide distribution capabilities of Covid Vaccines and some appear to Work Just Wow folks? Who knew! Orange Crush soon to maybe? ha. Cheers.
petec Posted February 12, 2021 Posted February 12, 2021 Am I missing something? I feel like we just changed the subject!!
drzola Posted February 12, 2021 Posted February 12, 2021 Sorry more then one complicated riddle's here Petec so, in the future I will simplify my narrative and numerical notation.
petec Posted February 12, 2021 Posted February 12, 2021 Not at all. Probably me being stupid and not seeing links. Plus I'm interested in natgas and Peyto so it's all good!
FairFacts Posted February 12, 2021 Posted February 12, 2021 Has anyone any idea what this is all about, here is an excerpt from the press release and Prem was questioned about it on the call..... “On closing the company expects to receive consideration of $730 million for its 60% joint venture in Riverstone Barbados and a contingent value instrument……. of up to $235.7 million…”. “Pursant to the agreement, prior to closing the company entered into an arrangement with RiverStone Barbados to purchase certain investments owned by Riverstone at a fixed price of approximately $1.2 billion to the end of 2022”.
drzola Posted February 12, 2021 Posted February 12, 2021 Petec, Darren Gee really knows his stuff and in the more profitable wet Natgas production especially fyi
StubbleJumper Posted February 12, 2021 Posted February 12, 2021 Has anyone any idea what this is all about, here is an excerpt from the press release and Prem was questioned about it on the call..... “On closing the company expects to receive consideration of $730 million for its 60% joint venture in Riverstone Barbados and a contingent value instrument……. of up to $235.7 million…”. “Pursant to the agreement, prior to closing the company entered into an arrangement with RiverStone Barbados to purchase certain investments owned by Riverstone at a fixed price of approximately $1.2 billion to the end of 2022”. We often say that FFH owns XX% of BB and YY% of ATCO, but what we really mean is that the ownership of those shares is scattered across the various insurance subs, including the run-off subs like Riverstone. As part of the Riverstone sale, either FFH wanted to retain those holdings, or the new buyers didn't want them, so FFH needs to figure out a way to transfer cash to Riverstone and extract the designated investments from Riverstone. This is of particular importance if some of those investments are not public (eg, Boat Rocker, etc). SJ
SafetyinNumbers Posted February 12, 2021 Posted February 12, 2021 Has anyone any idea what this is all about, here is an excerpt from the press release and Prem was questioned about it on the call..... “On closing the company expects to receive consideration of $730 million for its 60% joint venture in Riverstone Barbados and a contingent value instrument……. of up to $235.7 million…”. “Pursant to the agreement, prior to closing the company entered into an arrangement with RiverStone Barbados to purchase certain investments owned by Riverstone at a fixed price of approximately $1.2 billion to the end of 2022”. From what I could understand, FFH basically wrote a put on the public equity portfolio in order to derisk the Riverstone purchase for the buyer. Presumably if they sell positions before then, it reduces the size of the put.
petec Posted February 12, 2021 Posted February 12, 2021 Has anyone any idea what this is all about, here is an excerpt from the press release and Prem was questioned about it on the call..... “On closing the company expects to receive consideration of $730 million for its 60% joint venture in Riverstone Barbados and a contingent value instrument……. of up to $235.7 million…”. “Pursant to the agreement, prior to closing the company entered into an arrangement with RiverStone Barbados to purchase certain investments owned by Riverstone at a fixed price of approximately $1.2 billion to the end of 2022”. From what I could understand, FFH basically wrote a put on the public equity portfolio in order to derisk the Riverstone purchase for the buyer. Presumably if they sell positions before then, it reduces the size of the put. I'm not sure it is a put. That implies CVC has the right to choose whether to put the investments or not, which would imply FFH can't win. The wording implies to me that FFH have simply underwritten the value of these investments. FFH might lose, but also might win.
FairFacts Posted February 12, 2021 Posted February 12, 2021 Has anyone any idea what this is all about, here is an excerpt from the press release and Prem was questioned about it on the call..... “On closing the company expects to receive consideration of $730 million for its 60% joint venture in Riverstone Barbados and a contingent value instrument……. of up to $235.7 million…”. “Pursant to the agreement, prior to closing the company entered into an arrangement with RiverStone Barbados to purchase certain investments owned by Riverstone at a fixed price of approximately $1.2 billion to the end of 2022”. From what I could understand, FFH basically wrote a put on the public equity portfolio in order to derisk the Riverstone purchase for the buyer. Presumably if they sell positions before then, it reduces the size of the put. I'm not sure it is a put. That implies CVC has the right to choose whether to put the investments or not, which would imply FFH can't win. The wording implies to me that FFH have simply underwritten the value of these investments. FFH might lose, but also might win. So that would make 'the arrangement' a call option for Fairfax and a put option for Riverstone?
petec Posted February 12, 2021 Posted February 12, 2021 Well, I could be totally wrong, but the wording "entered into an arrangement with RiverStone Barbados to purchase certain investments owned by Riverstone at a fixed price" suggests to me that this is not an option. It's an agreement. It will happen.
FairFacts Posted February 12, 2021 Posted February 12, 2021 Finally, how much of the BB position is locked into this deal??
Cigarbutt Posted February 12, 2021 Posted February 12, 2021 ^The Contingent Value Instrument is likely tied to the liabilities component. In runoff transactions, there is typically a way to protect the buyer from adverse development and this can take many forms (indemnity reserve, CVR-type or other). When FFH bought GFIC in 2010 (and building a first-class global runoff operation), the acquisition was financed by a contingent note to the seller (which was decreased at time of closing due to interim unfavorable reserve development). The acquirer and acquired have to agree on the fair value (and possibly composition) of the portfolio of assets being acquired with the reserves. One of the goals of the transaction was liquidity and it may make sense to postpone cash movement (in exchange for non-cash assets) and keep ownership risk on some securities until then. AFAIK, there is no way to tell what was (is) exactly in the Riverstone UK portfolio but the acquirer may possibly be more interested in a more plain-vanilla variant than what FFH typically has.
colinwalt Posted February 12, 2021 Posted February 12, 2021 Actually, the way it works is that Fairfax pays a fee...usually Libor plus a negotiated rate. As Fairfax trades higher, the counterparty pays the difference between the strike price and market price. At the end of the swap time period, Fairfax gets the counterparty payments minus the Libor plus negotiated rate. It's not a buyback, but they benefit from it as if they bought those shares, paid a fee and reaped the gains. If Fairfax stock falls, then Fairfax pays the difference between the strike price and market price into the swap. Cheers! So theoretically, they can go out, borrow a bunch of money, do a massive buy-back, share price spikes and the counterparty has to pay them a small fortune ....
TwoCitiesCapital Posted February 12, 2021 Posted February 12, 2021 Actually, the way it works is that Fairfax pays a fee...usually Libor plus a negotiated rate. As Fairfax trades higher, the counterparty pays the difference between the strike price and market price. At the end of the swap time period, Fairfax gets the counterparty payments minus the Libor plus negotiated rate. It's not a buyback, but they benefit from it as if they bought those shares, paid a fee and reaped the gains. If Fairfax stock falls, then Fairfax pays the difference between the strike price and market price into the swap. Cheers! So theoretically, they can go out, borrow a bunch of money, do a massive buy-back, share price spikes and the counterparty has to pay them a small fortune .... theoretically, yes. But the reason they didn't so that to begin with is they can't just borrow a bunch of money because of covenants and leverage ratios. Also, there are other demands for that cash - capitalizing the subs in a hard market is one. Repurchase of securities from Riverstone is another. Pay down revolver is a third (not intended for long-term financing). So probably not going to happen as was structured this way precisely because it uses significantly less cash up front.
Parsad Posted February 12, 2021 Posted February 12, 2021 wow, which one of you just went off on Prem on the call? What was said? Rough version: Called in and told him he needed to step away, he wasn't paying attention anymore, and had lost his touch. Continued by saying that Prem didn't understand any of the companies he was investing in and wasn't doing any detailed analysis on microeconomics, his partners agreed but were Canadian so too nice to tell him, and the bankers were cowards not asking hard questions because Canada doesn't have enough good companies. Sounds like Sanjeev. Kidding!!! Ha ha!! I'm listening to the call now. Let me see who this twat was! Cheers! Don't know who it was, but you could tell that they have very little understanding about how much analysis goes on at Fairfax when selecting investments. I'm probably one of a very few handful of people who has actually seen the internal workings and spoken to all of the analysts, portfolio managers, core group in detail over the years, and does not work for the company. This guy has no idea what he is talking about! Cheers! I have no doubt that you are right. Or more accurately I flipping hope you are right! But in fairness to the questioner, Prem's explanation of his investments is always highly simplistic, and usually revolves around people not microeconomics. We think John Chen is great!!! We believe in Blackberry!!! We bought Exxon on a 10% dividend yield!!! You can get away with that when you're knocking it out of the park, but you have to assume people will question your thinking when you're not. In my view it would do Prem no harm to adopt a more structured, numbers-based approach to explaining his investment theses. 90% of people wouldn't understand. Buffett says he writes his letters in a way so that his sisters could understand what he's investing in. The other issue is that if you say TOO MUCH, then shareholders linger on every tiny word you've said. For example, Prem's said he won't short again...no matter how great the opportunity, or perhaps necessary to protect statutory surplus?! Investors would be jumping all over him again if he shorts. So it's a balancing act between enough information and not too much information. If people really want to know the depth of their analysis and thought process, come to our annual dinner in Toronto. They get very deep into it where they can, especially past holdings. Cheers!
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