Fairfax 2023

[Junior R]

Quote

Fairfax Announces Early Redemption of Fairfax (US) Inc. Senior Notes Due August 13, 2024

https://www.fairfax.ca/press-releases/fairfax-announces-early-redemption-of-fairfax-us-inc-senior-notes-due-august-13-2024-2023-12-28/

[KPO]

1 minute ago, juniorr said:

https://www.fairfax.ca/press-releases/fairfax-announces-early-redemption-of-fairfax-us-inc-senior-notes-due-august-13-2024-2023-12-28/

Why would they redeem 4.875% notes 8 months early only three weeks after issuing 6.0% notes? Odd. 

[Junior R]

3 minutes ago, KPO said:

Why would they redeem 4.875% notes 8 months early only three weeks after issuing 6.0% notes? Odd. 

The issuing of debt 3 weeks ago was probably to pay back this and extend the duration 

 

Quote

Fairfax intends to use substantially all of the net proceeds of this offering to repay outstanding indebtedness of Fairfax or its subsidiaries with upcoming maturities and use any remainder for general corporate purposes.

 

[KPO]

5 minutes ago, juniorr said:

The issuing of debt 3 weeks ago was probably to pay back this and extend the duration 

 

 

It seems kind of strange in an environment where rates are likely to decline from here plus their credit profile should continue to improve leading to a lower premium over the risk free rate. Oh well, I guess they can’t get everything right. 

[dealraker]

Interestingly my decision in the 1990's to invest with Prem Watsa and Fairfax was somewhat based on valuation but mostly all about reading about the people and the business.  I had Berkshire and Markel as the models of course, otherwise nothing would have made much sense or been seen as attractive for investment.

 

Through the years I've thought a little, but not a lot, about some of what Fairfax was doing investment wise and it wasn't something I was interested in nor thought was much of a good idea.  But I never lost faith that it would end up all being ok so I stuck around.  I do like the long tail insurance business but I don't want a whole bunch of money in it.

 

In the last three years I've steadily added to the position, including last week.  But for me, while I read all posted here, I'm just a believer regardless.  As I mentioned before, the fact that I got to invest in Hub (the broker) because being a shareholder made me aware of it, was such a massive jolt for me financially--- it simply makes the names Prem/Fairfax something I'm a "lifer" to hold.  Nothing but positive association in my head.  

[StubbleJumper]

1 hour ago, KPO said:

Why would they redeem 4.875% notes 8 months early only three weeks after issuing 6.0% notes? Odd. 

 

 

Well, you don't necessarily want to wait until the last minute.  I was a bit surprised that FFH was even able to float debt at 6% when you could instead lend money to the Government of the United States for ~5%, so in some respects, it was a good time for them to seek credit.  In fact, they probably ought to have borrowed a bit more so the holdco could improve its balances of actual cash (not the imaginary cash outlined in Note 5 of the financials).

 

SJ

[Viking]

What was the change in the value of Fairfax’s equity portfolio in Q4, 2023?

 

Fairfax’s equity portfolio (that I track) has a total value of about $17.5 billion at December 31, 2023. This is an increase of about $901 million (pre-tax) or 5.4% from September 30. The increase in the quarter works out to about $39/share.

 

Currency, which has been a headwind for the past couple of years turned into a tailwind in Q4.

 

Please note, I include holdings like the FFH-TRS position in the mark to market bucket and at its notional value. I also include debentures and warrants in this bucket.

 

To state the obvious, my tracker portfolio is not an exact match to Fairfax’s actual holdings. It also does not capture changes in the value of private holdings – which are significant. It also does not capture changes Fairfax has made to its portfolio during the quarter that are not reported. As a result, my tracker portfolio is useful only as a tool to understand the likely directional movement in Fairfax’s equity portfolio (and not the precise change).

  

 

Split of total holdings by accounting treatment

 

About 49% of Fairfax’s equity holdings are mark to market - this includes 'A.) Mark to Market' and 'D.) Other Holdings' - and will fluctuate each quarter with changes in equity markets. The other 51% are Associate and Consolidated holdings.

 

 

Split of total gains by accounting treatment

 

The total change is an increase of $901 million = $39/share

The mark to market change is increase of $237 million = $10/share. Only changes in this bucket of holdings will show up in ‘net gains (losses) on investments’ (along with changes in the value of the fixed income portfolio) when Fairfax reports results each quarter.

 

 

What were the big movers in the equity portfolio in Q4?

• Eurobank was up $273 million and is now Fairfax’s largest equity holding - a $2.1 billion position for Fairfax. The shares still look like they are dirt cheap, closing the year at €1.61. This holding looks primed to have another good year in 2024. 
• The FFH-TRS was up $200 million. This position is up a total of $1.07 billion over the last 3 years, which is a gain of almost 150%. Simply an amazing investment.
• Stelco was a strong performer, up $134 million. It will be interesting to see if we get more consolidation in the North American steel industry in 2024. 
• Fairfax India (finally) got some love from investors in Q4 and was up $126 million. This high quality holding continues to fly under the radar of most investors. 
• International holdings - Thomas Cook India, Quess and Commercial Industrial Bank – all had strong gains in Q4
• Blackberry was the biggest under-performer, down $55 million. In Q4, Fairfax significantly reduced the size of its investment in Blackberry by reducing the debenture position from $365 to $150 million. The stock position is worth a total of $165 million. 

 

 

Excess of fair value over carrying value (not captured in book value)

 

For Associate and Consolidated holdings, the excess of fair value to carrying value is about $1.0 billion or $45/share (pre-tax). Book value at Fairfax is understated by about this amount (less the tax impact). What is the split?

• Associates:       $668 million = $29/share
• Consolidated:   $348 million = $15/share

Below is a copy of my Excel spreadsheet (next 2 pages) if you want a closer look.

 

Equity Tracker Spreadsheet explained:

 

The summary below attempts to track all equity holdings at Fairfax. Each quarter the spreadsheet is updated to capture any ‘new news:’ purchases and sales. 

 

We have separated holdings by accounting treatment:

• Mark to market
• Associates – Equity accounted
• Consolidated
• Other Holdings (also mark to market) – derivatives (total return swaps), debentures and warrants

We come up with the value of each holding by multiplying the share price by the number of shares. Are holdings are tracked in US$, so non-US holdings have their values adjusted for currency. 

 

Important: the list is not complete. Some information we only get once per year when Fairfax published their annual report. Fairfax also makes changes to their portfolio each quarter. 

 

 

Fairfax Dec 31 2023.xlsx

Edited December 30, 2023 by Viking

[gary17]

On 2/17/2023 at 12:16 PM, gary17 said:

i get confused with if people are using CAD and USD in their messages.  I think this company should be around $1500 cad- $2000 per share 

 

 

Somebody posted in the FFH new all time high what price to sell.  This was my thought about 18 months ago.  I have therefore trimmed my ownership.