Fairfax 2021

[Parsad]

Parsad

 

we are barely up with FFH and/or other value names, and now you are already expecting a 50% drop from here ! :-)

 

Yes, I'm expecting a broad market correction over the next year...probably towards the end of the year as the stimulus ends.  Undervalued stocks will fall less, but there are fewer and fewer undervalued stocks at the moment...almost all of my undervalued stocks are now at getting close to fair value other than ATCO, WFC and FFH.  I think Fairfax will be back up to book value by the AGM as the market recognizes the huge gains in Q1 and the hard market in insurance. 

 

You are seeing a massive rotation of capital into post-vaccine stocks, while you are seeing hyper movements in heavily shorted stocks.  I've never seen anything like this in my 25 years of investing...and surprisingly, that 25 years included the tech bubble, 9/11, the housing and financial crisis, Trump and a pandemic!  The closest that I could compare it to is 1999, but the capital flow and cycles are even more compressed...probably due to information moving faster and faster...not necessarily accurate information, just information and opinion. 

 

I see such massive bubbles in the market, debt, housing sectors, but significant denial from investors because interest rates are so low and they feel it is justified.  We've seen asset bubbles pop in deflationary environments or inflationary environments.  What is the likelihood that one or the other will happen...pretty good!  I've avoided macro investing since 2007 and just allocated capital to where assets were cheap, but I cannot find any cheap assets any more...other than a handful of stocks.  So macro becomes important again!

 

And if the shit hits the fan again, I cannot see escaping it this time without huge, huge consequences.  Governments are tapped out and investors while holding some cash, are exposed significantly to the markets and housing.  We are entering the bubble of all bubbles!  And at some point in time, the bubble will pop and those YOLO guys are going to start jumping off their margin balances to the ground below...see attached chart!  Cheers!

[Xerxes]

Thanks

While i agree with the view that when this happen correlation will go to 1 on any diversified portfolio, i think to your point value should fall less.

 

How likely it is that FFH, BRK and for that matter BAM or ONEX, will deploy their firepower in a potential prolonged 50% drop in the stock market. That is what i was expecting in the bear market in March 2020; i can understand now why that didn't happen given how the pandemic did/might affected their insurance and some operating businesses.

 

But a classical market crash with a prolonged bear market with a 40-50% drop is what these capital allocators live for ?  would you say equity allocation of say FFH's $40 billion will grew beyond a $4-5 billion that is today ?

[Parsad]

Thanks

While i agree with the view that when this happen correlation will go to 1 on any diversified portfolio, i think to your point value should fall less.

 

How likely it is that FFH, BRK and for that matter BAM or ONEX, will deploy their firepower in a potential prolonged 50% drop in the stock market. That is what i was expecting in the bear market in March 2020; i can understand now why that didn't happen given how the pandemic did/might affected their insurance and some operating businesses.

 

But a classical market crash with a prolonged bear market with a 40-50% drop is what these capital allocators live for ?  would you say equity allocation of say FFH's $40 billion will grew beyond a $4-5 billion that is today ?

 

If their market shorts and deflation swaps hit, and another $1.5B from BB sales...yeah, they could put more into equities in a market drop.  In the last month, I had to sell all of my ODP as Staples made a bid at $42, most of my M today at $21 and we've harvested some profits in BAC when it hit $33.  We're building up cash slowly whether we like it or not!  I hope Fairfax is doing the same, because just look at GME and AMC today...this shit is going to blow up real good one day!  Cheers!

[drzola]

I am flabbergasted in today's market so, CASH is King for me know Wow!

[TwoCitiesCapital]

Thanks

While i agree with the view that when this happen correlation will go to 1 on any diversified portfolio, i think to your point value should fall less.

 

How likely it is that FFH, BRK and for that matter BAM or ONEX, will deploy their firepower in a potential prolonged 50% drop in the stock market. That is what i was expecting in the bear market in March 2020; i can understand now why that didn't happen given how the pandemic did/might affected their insurance and some operating businesses.

 

But a classical market crash with a prolonged bear market with a 40-50% drop is what these capital allocators live for ?  would you say equity allocation of say FFH's $40 billion will grew beyond a $4-5 billion that is today ?

 

How likely to deploy in a prolonged bear market of 50+%? I'd say the odds are VERY high.

 

Not comparable to 2020 because 1-month of being down only 35% from the peak before a massive recovery despite incredible earnings and balance sheet damage hardly screams "deal of the century" to me.

 

But in a prolonged 50% draw down over 12-18 months, similar to 2008/2009 or 2000-2002? Yea, I think they have red the time to assess the outlook and who is cheap relative to that outlook, and put money to work.

[Viking]

It appears some analysts are starting to connect the dots for Fairfax and Blackberry. This could. Fuel the next move in Fairfax shares.

 

BlackBerry Revival Rewards Watsa’s Patience With Huge Gain

- https://finance.yahoo.com/news/blackberry-revival-rewards-watsa-faith-130443385.html

 

Bloomberg) -- Day traders have pushed BlackBerry Ltd.’s share price to levels not seen in more than nine years. They’ve also given a jolt to a Canadian investment company that got crushed in last spring’s market crash.

 

BlackBerry soared 13.9% to $21.55 as of 10:51 a.m. in New York on Wednesday, bringing its gain for the year to 225%. That is repaying the patience of Prem Watsa and his Fairfax Financial Holdings Ltd., which owns 8.3% of the software firm’s shares, according to data compiled by Bloomberg.

 

Once the toast of the mobile tech world, BlackBerry failed to keep pace with competitors including Apple Inc. and the stock lost most of its value in 2010 and 2011. Around that time, Watsa, a value investor who has tried to model Fairfax after Berkshire Hathaway Inc., began building a large stake, which also includes convertible debentures with a conversion price of $6 each that could be turned into 55 million shares.

 

The run-up in BlackBerry shares this year would drive a pretax gain of about $1.16 billion for Fairfax in the first quarter, Phil Hardie, a Toronto-based analyst at Bank of Nova Scotia, told clients in a note before markets opened on Tuesday. Hardie upgraded his recommendation on Fairfax’s shares to a buy-equivalent.

 

Fairfax closed at C$488.94 on Tuesday. With a 12.7% gain as of Tuesday’s close, it’s the best-performing financial stock in the S&P/TSX Composite Index this year after being one of the worst in 2020 with a 29% drop.

 

Scotiabank’s most bullish scenario for Fairfax “implies almost 50% upside and assumes that the stock sheds its valuation discount and trades at book value, with Fairfax locking in recent gains in BlackBerry through hedging or monetizing its position,” Hardie wrote. Fairfax didn’t respond to a request for comment.

[no_free_lunch]

Dear Prem,

 

Please sell all BB holdings.  See reddit/wsb if you are looking for a buyer.

 

Thanks,

Exuberant FAIRFAX shareholder

[bearprowler6]

Dear Prem,

 

Please sell all BB holdings.  See reddit/wsb if you are looking for a buyer.

 

Thanks,

Exuberant FAIRFAX shareholder

 

The famous scene from the  Big Short comes to mind...."We aren't giving out any lifeboats. I say when we sell. No one is acting responsible. We will wait, wait, wait until they feel the pain. I say when we sell". Is this scene playing out in the offices of Hamlyn Watsa as we speak?

[Xerxes]

Thunder strike twice for FFH

 

They missed to sell some on Monday .... Today is your day

[petec]

Thunder strike twice for FFH

 

They missed to sell some on Monday .... Today is your day

 

How do you know they missed on Monday?

[bearprowler6]

BB's price advance continues:

 

NYSE: $24.84 USD

 

TSX: $31.67 CAD

 

The run is not over yet. Need to stay strong and hold! Prem will know when to sell!

[Xerxes]

Thunder strike twice for FFH

 

They missed to sell some on Monday .... Today is your day

 

How do you know they missed on Monday?

 

apologies; typo

i meant to put "if they missed"

[bluedevil]

I noticed this language in the FFH press release about the convertible debt and what appears to be a six month standstill agreement.  Does anyone know what the terms of the standstill agreement are?  Please tell me it will not affect FFH's ability to sell its BB stock here.

 

In connection with the acquisition of the Purchased Debentures, Fairfax agreed to a “standstill” provision (the “Standstill”) as more particularly described in the early warning report to be filed by Fairfax.  Fairfax has acquired the Purchased Debentures for investment purposes, and in the future, it may discuss with management and/or the board of directors of BlackBerry any of the transactions listed in clauses (a) to (k) of item 5 of Form F1 of National Instrument 62-103 – The Early Warning System and Related Take-over Bid and Insider Reporting Issues and, subject to the Standstill, it may further purchase, hold, vote, trade, dispose or otherwise deal in the securities of BlackBerry, in such manner as it deems advisable to benefit from changes in market prices of BlackBerry securities, publicly disclosed changes in the operations of Blackberry, its business strategy or prospects or from a material transaction of BlackBerry.

[Xerxes]

Thanks

While i agree with the view that when this happen correlation will go to 1 on any diversified portfolio, i think to your point value should fall less.

 

How likely it is that FFH, BRK and for that matter BAM or ONEX, will deploy their firepower in a potential prolonged 50% drop in the stock market. That is what i was expecting in the bear market in March 2020; i can understand now why that didn't happen given how the pandemic did/might affected their insurance and some operating businesses.

 

But a classical market crash with a prolonged bear market with a 40-50% drop is what these capital allocators live for ?  would you say equity allocation of say FFH's $40 billion will grew beyond a $4-5 billion that is today ?

 

How likely to deploy in a prolonged bear market of 50+%? I'd say the odds are VERY high.

 

Not comparable to 2020 because 1-month of being down only 35% from the peak before a massive recovery despite incredible earnings and balance sheet damage hardly screams "deal of the century" to me.

 

But in a prolonged 50% draw down over 12-18 months, similar to 2008/2009 or 2000-2002? Yea, I think they have red the time to assess the outlook and who is cheap relative to that outlook, and put money to work.

 

And i think BRK/FFH shareholders would need to stomach 40-50% drop, but a sharp rebound if and when it deploys its fire power to fuel up on opportunities. But the market has to fall enough.

 

Just listened to RTX conference call, although their are bearish for Q1, for Q2, Q3 and Q4, they are seeing compounded 10% increase quarter over quarter in the Aftermarket. That tells me that at least for industrial the reflation trade is very real, eventhough some segment of the market has gone crazy.

[TwoCitiesCapital]

A few days ago I thought the best case outcome for BB was takeout by an industry player.

 

Who knew all you needed to do was give retail traders a ton of leverage and promise them "tendies" to improve upon that result.

[fareastwarriors]

BB's price advance continues:

 

NYSE: $24.84 USD

 

TSX: $31.67 CAD

 

The run is not over yet. Need to stay strong and hold! Prem will know when to sell!

 

HODL?!?

 

;D

[Xerxes]

HODL?!?

 

;D

 

Hold the Door, Hold the Door, Holdroor, Holdoor, Hold'or, Holder, Holdor

[petec]

I noticed this language in the FFH press release about the convertible debt and what appears to be a six month standstill agreement.  Does anyone know what the terms of the standstill agreement are?  Please tell me it will not affect FFH's ability to sell its BB stock here.

 

In connection with the acquisition of the Purchased Debentures, Fairfax agreed to a “standstill” provision (the “Standstill”) as more particularly described in the early warning report to be filed by Fairfax.  Fairfax has acquired the Purchased Debentures for investment purposes, and in the future, it may discuss with management and/or the board of directors of BlackBerry any of the transactions listed in clauses (a) to (k) of item 5 of Form F1 of National Instrument 62-103 – The Early Warning System and Related Take-over Bid and Insider Reporting Issues and, subject to the Standstill, it may further purchase, hold, vote, trade, dispose or otherwise deal in the securities of BlackBerry, in such manner as it deems advisable to benefit from changes in market prices of BlackBerry securities, publicly disclosed changes in the operations of Blackberry, its business strategy or prospects or from a material transaction of BlackBerry.

 

A quick skim of the early warning report suggests the standstill clause is largely about change of control and would not prevent Fairfax from selling.

[KFS]

BB's price advance continues:

 

NYSE: $24.84 USD

 

TSX: $31.67 CAD

 

The run is not over yet. Need to stay strong and hold! Prem will know when to sell!

 

HODL?!?

 

;D

 

Prem has diamond hands?  ;D ;D

 

[cwericb]

The Dow is down over 600 points today.

Blackberry is up nearly 40% today.

Blackberry has quadrupled since the first of the month.

 

Have I lost my mind or is this just a dream?

 

Will we soon be criticizing Prem if he sold BB a week ago for selling too soon?

 

Anyone else getting nervous?

 

[petec]

The Dow is down over 600 points today.

Blackberry is up nearly 40% today.

Blackberry has quadrupled since the first of the month.

 

Have I lost my mind or is this just a dream?

 

Will we soon be criticizing Prem if he sold BB a week ago for selling too soon?

 

Anyone else getting nervous?

 

Yes! Not sure what I’m nervous of though!

[StubbleJumper]

The Dow is down over 600 points today.

Blackberry is up nearly 40% today.

Blackberry has quadrupled since the first of the month.

 

Have I lost my mind or is this just a dream?

 

Will we soon be criticizing Prem if he sold BB a week ago for selling too soon?

 

Anyone else getting nervous?

 

 

I am nervous that after nearly a decade, Prem still doesn't have an exit-strategy for RIM.  The share price hit US$25 today, which makes it a market cap of ~US$15 billion.  Anyone want to take a crack at reverse-engineering how much net income, sales and market penetration that BB would need to justify a $15B market cap?

 

Prem almost certainly didn't sell a week ago because, as an insider, he is supposed to file within 5 days of making a trade.  But, if he did already find a way to dump the 47 million common shares at, say, US$12, I have absolutely no problem at all with that.  My bigger concern is that FFH will end up holding all the way up, and then all the way back down....

 

 

SJ

[StevieV]

If you are wondering whether it is possible to sell into the rally, AMC took the opportunity to shore up the balance sheet.  https://seekingalpha.com/pr/18167918-amc-completes-market-equity-program .  Wonder if they'll sell some more shares.

 

Anyway, clearly didn't kill the rally.

 

I remain very curious about how Fairfax is handling.  My guess is that they started to sell a portion of their stake on Monday and have continued to sell at a measured pace into the rally.  If they didn't start selling Monday, then they had to have today.  If not today, what could their sell price possibly be?  $40, $50?  I don't think it's that high.

 

[cwericb]

The Dow is down over 600 points today.

Blackberry is up nearly 40% today.

Blackberry has quadrupled since the first of the month.

 

Have I lost my mind or is this just a dream?

 

Will we soon be criticizing Prem if he sold BB a week ago for selling too soon?

 

Anyone else getting nervous?

 

Yes! Not sure what I’m nervous of though!

 

I feel exactly the same way.

 

Surely to heavens Prem is selling portions daily as this rally goes on.

[bluedevil]

Barring a restraint, I think there is virtually no chance FFH has not sold out much of its common stock over the last three days.  Just a gut feel from following this company for a long time.  They don't wait for the last dollar when something is "growing to the sky", as Prem likes to say.

 

But why no press release announcing the conversion of the note.  :-\