Fairfax 2021

[petec]

39 minutes ago, FairFacts said:

Atlas announced that it is repaying $300mil to Fairfax on 8/23 (yesterday). I wonder where on the balance sheet this was and if it will filter through to holding co. cash.

 Unlikely. Almost certainly this bond was lent out of insurance float. 

[matthew2129]

BB pumping on heavy volume today....let's see if the investment Gods give FFH one more chance to dump this POS at $15+ in the coming days

[dartmonkey]

let's see if the investment Gods give FFH one more chance to dump this POS at $15+ in the coming days

 

I think it's become abundantly clear that they will not do this. If you own share of Fairfax, and you don't like the BB holding, then you should short BB and stop worrying about it. 

[Daphne]

My strictly gut feeling is that FFH wants to sell the company not just a handful of shares.

[petec]

1 hour ago, dartmonkey said:

let's see if the investment Gods give FFH one more chance to dump this POS at $15+ in the coming days

 

I think it's become abundantly clear that they will not do this. If you own share of Fairfax, and you don't like the BB holding, then you should short BB and stop worrying about it. 

I agree, but why do you say that? We know they were restricted for both prior spikes, so I’m not sure we can infer anything from those episodes. My agreement is just a gut instinct. 
 

[KFS]

30 minutes ago, petec said:

I agree, but why do you say that? We know they were restricted for both prior spikes, so I’m not sure we can infer anything from those episodes. My agreement is just a gut instinct. 
 

 

I know they were restricted during the first spike (Per Prem's comments during the call following that event), but was it ever really confirmed they were restricted during the second spike?

 

 

[petec]

1 hour ago, KFS said:

 

I know they were restricted during the first spike (Per Prem's comments during the call following that event), but was it ever really confirmed they were restricted during the second spike?

 

 

I thought it was - both on here and on the call - but I could be wrong. My recollection is that the spike happened just before BlackBerry reported, which is a quiet period. Someone on here pointed out that it might not be coincidence that the stock spikes when a major shareholder can’t sell. 

[cwericb]

I probably agree with Daphne in that Fairfax might well want to sell the company as a whole.

However, could there be a situation where Prem is aware of projects presently under development within Blackberry that in future could have a major impact on the value of the company? After all, this is a tech company with a lot of smart people working for them. Or is that just wishful thinking?

[StubbleJumper]

47 minutes ago, cwericb said:

I probably agree with Daphne in that Fairfax might well want to sell the company as a whole.

However, could there be a situation where Prem is aware of projects presently under development within Blackberry that in future could have a major impact on the value of the company? After all, this is a tech company with a lot of smart people working for them. Or is that just wishful thinking?

 

 

We've been wishing that for nearly a decade now.  To quote from the film Jerry Maguire, "Show me the money!."

 

 

SJ

[Viking]

Is cybersecurity a big deal? Are we in the late innings? 
 

Blackberry is in the sweet spot with a few of its core businesses. And it looks to me like we are still in the early innings with lots of runway ahead. And as been mentioned already, Fairfax likely has a pretty good view of the company / industry and where the business is going over the next 12 to 24 months. 
 

So i do understand why Fairfax is not in a panic to unload. 
 

However, i also understand why shareholders are banging the table for a sale (especially those who have owned shares for years). There is simply too much emotional baggage with this holding… SELL and make the pain go away  Emotionally, investors simply want to move on.

 

personally, i hope Blackberry gets bought out  

Edited August 26, 2021 by Viking

[Candyman1]

23 minutes ago, Viking said:

Is cybersecurity a big deal? Are we in the late innings? 
 

Blackberry is in the sweet spot with a few of its core businesses. And it looks to me like we are still in the early innings with lots of runway ahead. And as been mentioned already, Fairfax likely has a pretty good view of the company / industry and where the business is going over the next 12 to 24 months. 
 

So i do understand why Fairfax is not in a panic to unload. 
 

However, i also understand why shareholders are banging the table for a sale (especially those who have owned shares for years). There is simply too much emotional baggage with this holding… SELL and make the pain go away  Emotionally, investors simply want to move on.

 

personally, i hope Blackberry gets bought out  

 

Remember not too long ago Buffett mentioned weapons of mass destruction, pandemics and cyber crime in one sentence and said "we ain't seen nothing yet" when it comes to cyber crime. Same with CEO for Chubb. It was the interview in Munger's back yard, pretty recent.

Post the recent cyber crime events with Colonial Pipeline and JBS, I must assume many management's will start focusing on their vulnerability to cyber crime.

I saw a piece on the JBS situation and according to the journalist JBS still has a system running Windows 95 overseeing operations in their plants. Not sure if they got in that way, but that kinda tells you something.

Edited August 26, 2021 by Candyman1

[StubbleJumper]

23 minutes ago, Viking said:

 

However, i also understand why shareholders are banging the table for a sale (especially those who have owned shares for years). There is simply too much emotional baggage with this holding… SELL and make the pain go away  Emotionally, investors simply want to move on.

 

personally, i hope Blackberry gets bought out  

 

I'm not sure that it's emotional as much as rational.  What cashflows is FFH getting from BB and what is the market value of the shares?  At what point does BB start kicking down any meaningful cash to its investors (or at least racking up meaningful retained earnings)?  Seriously, you looked at their Q1, right?  Did you see anything at all in those financials that gave you the impression that things are improving?  Personally, I saw what I've been seeing chronically for years, which is unfavourable revenue comps, and once again negative cash from ops.

 

Sell that POS, take the US$1.2B of proceeds and invest it in something that has a more compelling prospect of providing an acceptable return.

 

 

SJ

[glider3834]

9 hours ago, petec said:

I thought it was - both on here and on the call - but I could be wrong. My recollection is that the spike happened just before BlackBerry reported, which is a quiet period. Someone on here pointed out that it might not be coincidence that the stock spikes when a major shareholder can’t sell. 

Yes I believe thats correct petec - under the short swing profit rule - explained here  https://www.investopedia.com/terms/s/shortswingprofitrule.asp as an insider (10%+ owner) they couldn't sell Blackberry shares with the first spike. 

 

With the second spike (up to around US$15 I believe), Blackberry had just entered the quiet period & they couldn't sell either.

 

I don't think they are going to sell under US$12 - because they have had opportunities (during non-quiet periods) but haven't sold any shares.

 

Which then leads to the next question - why are they holding?

 

I think SP is right - they are not going to cut & run - they want the optimum price for their BB position - they want the market to see the full earnings potential in the business.

 

They have invested a lot of R&D developing Blackberry Ivy their open data platform for cars & this is what is the key around valuation. What is its potential? What revenues could it generate?  There is a beta launch due Oct-21 & product launch due Feb-22. 

 

I think Prem & co. must be putting a big number on the value of Blackberry Ivy & that is only way I can rationalise why they are continuing to hold.

 

We will  see if they are right over 6-12 mths. Blackberry ivy is conceptually very exciting and but its the execution that we are most concerned about. 

 

Blackberry are also making equity investments in developers who are building apps on the Ivy platform - like a VC fund & I would expect there are a lot more investments to come - here are two they have made

 

Car iQ (turning car into mobile wallet) https://autobala.com/blackberry-turns-a-car-into-a-mobile-wallet-that-pays-for-fuel-tolls-etc/141126/

 

Electra vehicles (using AI to optimise car battery performance) https://blogs.blackberry.com/en/2021/06/blackberry-amps-up-blackberry-ivy-with-investment-in-electra-vehicles

 

 

 

 

 

 

 

 

Edited August 27, 2021 by glider3834

[cwericb]

I tend to agree with glider.

We can all make guesses about Blackberry and what they have under development. On the other hand, Prem Watsa is in a position to KNOW what BB has under development.

He may well believe that there are significant projects coming that have yet to be announced and that those developments could have an appreciable impact on share price and the value of the company.

Wishful thinking?

[nwoodman]

10 minutes ago, cwericb said:

I tend to agree with glider.

We can all make guesses about Blackberry and what they have under development. On the other hand, Prem Watsa is in a position to KNOW what BB has under development.

He may well believe that there are significant projects coming that have yet to be announced and that those developments could have an appreciable impact on share price and the value of the company.

Wishful thinking?

Don‘t underestimate ego and hubris in this position.  The underlying premise in this investment was the value of the patents.  That was tested earlier this year and was a  wash, sorry “undisclosed”. They need to move on.  

[racemize]

1 hour ago, nwoodman said:

Don‘t underestimate ego and hubris in this position.  The underlying premise in this investment was the value of the patents.  That was tested earlier this year and was a  wash, sorry “undisclosed”. They need to move on.  

If they were basing it on the patent value, I wish they had talked to me. That was peak wireless patent price when those previous transactions went down (nortel and motorola). Experts would have known that at the time.  
 

Also everyone out there saying “patent value” is a thesis (for virtually any stock) who isn’t in that specific patent space—don’t put too much weight on it. Patents are very tricky and fickle things. 

Edited August 27, 2021 by racemize
typo

[SharperDingaan]

It is pretty clear that the intent is to merge BB into someone else for stock. It wll eventually happen, but until then - welcome to the volatility.

 

SD

 

[Candyman1]

https://www.fairfax.ca/news/press-releases/press-release-details/2021/Fairfax-Announces-Successful-Completion-ofOMERS-Investment-in-Brit/default.aspx

 

 

[Spekulatius]

1 hour ago, Candyman1 said:

https://www.fairfax.ca/news/press-releases/press-release-details/2021/Fairfax-Announces-Successful-Completion-ofOMERS-Investment-in-Brit/default.aspx

 

 

Brit really has been a dog since they bought it. Brit's combined ratio averaged since 2015 is well over 100% on a quick look.

That said, why did they sell of a minority interest in this? Just to get some cash on the balance sheet of the holdco?

[petec]

48 minutes ago, Spekulatius said:

Brit really has been a dog since they bought it. Brit's combined ratio averaged since 2015 is well over 100% on a quick look.

That said, why did they sell of a minority interest in this? Just to get some cash on the balance sheet of the holdco?

I think it was a condition of the Riverstone sale - OMERS only agreed to sell their Riverstone stake if they could reinvest somewhere else.

[Parsad]

2 hours ago, Spekulatius said:

Brit really has been a dog since they bought it. Brit's combined ratio averaged since 2015 is well over 100% on a quick look.

That said, why did they sell of a minority interest in this? Just to get some cash on the balance sheet of the holdco?

 

They've written at better than 100% over the last decade:

 

Year
RoNTA1
%
Combined ratio
%
Attritional ratio
%
Investment return (net
of fees)
%
2020 (19.6) 112.6 52.6 1.0
2019 18.1 95.8 55.0 3.6
2018 (14.4) 103.3 57.2 (2.0)
2017 1.1 112.4 56.4 4.9
2016 11.8 96.4 55.5 2.6
2015 9.1 91.7 55.2 0.1
2014 20.7 89.5 51.0 2.9
2013 24.2 85.4 51.3 2.1
2012 18.7 93.2 51.8 2.9
2011 8.5 98.0 55.4 2.4
Note 1: Before FX and corporate activity costs

 

In 2017, they were hit by:

 

The net claims incurred by Brit from these events totalled
US$250.0m (Hurricane Harvey: US$51.5m; Hurricane Irma:
US$110.1m; Hurricane Maria: US$46.4m; Mexico earthquakes:
US$6.8m; California wildfires: US$35.2m), or 16.2pps on the
combined ratio (2016: US$68.4m/4.5pps). This was in line with
our expectations given the nature and scale of the events and
our market share.

 

In 2020, it was Covid.

 

I would imagine that with current premium growth and rates, they will once again be writing better than 100% for some time.  Currently, they hit a 94.6% combined ratio in the 1st half of 2021. 

 

Covid would have eaten up some of the excess capital European insurers had and long-term interest rates are near negative in Europe...thus you have to write good business and premiums will go up for a while. 

 

I don't think investors understand what a significant impact to earnings the current insurance market will provide to Fairfax...on a global basis too!  Even if they have very average investment returns, it will be more than made up for by their insurance profits.  Can you imagine what happens if they can allocate capital to some decent bonds or equities?! Cheers!

 

 

[Parsad]

Just look at the European yield curve and grasp what this means for insurers and premium pricing for the next 5-10 years:

 

https://ycharts.com/indicators/reports/euro_yield_curves

 

You have negative yields until you get to the European 15-year bonds.  

 

Insurers will have to write really good business, cut expenses and raise rates, since yield is scarce.  US insurers have a much more favorable yield curve.  I expect European insurers to write better business than North American insurers going forward to survive and remain competitive.  Cheers!

[glider3834]

Just saw this article 

 

https://www.investmentexecutive.com/newspaper_/focus-on-products/values-time-to-shine/

 

Within the past six months, Simpson bought shares in Fairfax Financial Holdings Ltd., a company with interests in insurance and investment management. Simpson said the company has a solid balance sheet, good execution capabilities and the potential for healthy growth. Further, its insurance business will benefit from higher prices.

 

 

Edited August 31, 2021 by glider3834

[nwoodman]

Apologies if this has already been posted, it was new to me.  Prem looks well.  I think the importance of the advocate cannot be understated.  If you don't get a seat at the table it doesn't matter how good you think you are.

 

 

Edited August 31, 2021 by nwoodman

[maplevalue]

1 Canadian Stock That’s So Cheap, it’s Embarrassing: https://www.fool.ca/2021/08/31/1-canadian-stock-thats-so-cheap-its-embarrassing/

 

Truly embarrassing!