Fairfax 2024

[Junior R]

2 minutes ago, gfp said:

CNBC has video 

https://www.cnbc.com/video/2024/02/08/muddy-waters-carson-block-on-why-hes-shorting-fairfax-financial.html

good find

[Luke]

Damn

[Gregmal]

Whats funny is a lot of what he's s saying WAS true, and the stuff I used to bitch about here all the time. What he's missing(or purposely omitting) is that these issues have largely dissipated over the past 3 years, or simply become irrelevant in their size. But I think it tells you everything when some jackass needs to "make an announcement" let alone go on TV to bash a company. Its as deliberate an attempt to move the share price as it gets. I would be shocked if he wasnt actively transacting in the stock in the coming days. 

[MMM20]

This is where the tyranny of the book value people gets ridiculous. I can personally come up with twice his 18% number in fair value over carrying value and show that book value is at least 18% understated. He ignores the fact that cash flow has exploded 3-4x structurally higher over the past few years and that the stock is now trading at 6-8x those cash flows. All of the historical transactions can be explained by the fact that they were short on cash for a few years... but they're not anymore. The irony is he nailed the GE comparison... in the Danaher / Culp era. Decentralization, quality upgrades, massive turnaround, and now a well-run cash machine. 

 

Edited February 8, 2024 by MMM20

[gfp]

Well he would be smart to exit before the annual report comes out, that's for sure.  I suspect his best exit opportunity in the shares was to exit on this morning's open but I assume he expressed this "short" in the credit default swap market so who knows how those spreads look (not me).

 

Fairfax has no options and trades in in Canada and OTC - this isn't a very good "short and distort" candidate to get others on the bandwagon.

[Junior R]

I think what FFH really needs to do is get rid of the swaps at $1300 to $1400 and not over leverage on there own stock

[hasilp89]

5 minutes ago, MMM20 said:

This is where the tyranny of the book value people gets ridiculous. I can personally come up with twice his 18% number in fair value over carrying value and show that book value is at least 18% understated.

well said.

[Junior R]

Quote

Earlier today, Muddy Waters Research issued a report regarding Fairfax Financial Holdings Limited (“Fairfax”) (TSX: FFH and FFH.U) suggesting that the book value of Fairfax was overstated. Fairfax disagrees with the allegations and insinuations contained in the report, and would like to assure all shareholders that Fairfax has prepared its financial statements and reporting in accordance with all applicable accounting principles.

Through the first nine months of 2023, Fairfax has achieved record earnings driven by record operating income. Fairfax will release its fourth quarter and year-end financial results next Thursday, February 15, 2024, and a conference call will follow on the morning of Friday, February 16, 2024, and the management of the company is pleased to address any questions relating to those results or the report issued today at that time.

Fairfax is a holding company which, through its subsidiaries, is primarily engaged in property and casualty insurance and reinsurance and the associated investment management.

For further information contact: John Varnell, Vice President, Corporate Development at (416) 367-4941

 

[gfp]

What good are record earnings when Farmers Edge is bleeding millions!!!?

[nwoodman]

9 minutes ago, MMM20 said:

This is where the tyranny of the book value people gets ridiculous. I can personally come up with twice his 18% number in fair value over carrying value and show that book value is at least 18% understated. He ignores the fact that cash flow has exploded 3-4x structurally higher over the past few years and that the stock is now trading at 6-8x those cash flows. All of the historical transactions can be explained by the fact that they were short on cash for a few years... but they're not anymore. The irony is he nailed the GE comparison... in the Danaher / Culp era. Decentralization, quality upgrades, massive turnaround, and now a well-run cash machine. 

 

Quite true. Looking through the report on +/- basis it just looks like a bunch of minor round downs.   Yeah some of their marks are a little funky at times, but then you get a pet insurer sold out of nowhere.  

 

If this is the extent of any short thesis then I am sleeping easy. 

 

 

[TwoCitiesCapital]

24 minutes ago, gfp said:

Well he would be smart to exit before the annual report comes out, that's for sure.  I suspect his best exit opportunity in the shares was to exit on this morning's open but I assume he expressed this "short" in the credit default swap market so who knows how those spreads look (not me).

 

Fairfax has no options and trades in in Canada and OTC - this isn't a very good "short and distort" candidate to get others on the bandwagon.

 

Yea, I dunno about how he expressed the short, but I tend to agree with Greg's take here. 

 

I'd prefer Fairfax without all of the inter-related transactions, paper gains, etc. because it definitely muddies the waters  

 

That being said, the transactions that are the most questionable are tiny, the transactions he points at that are off-balance sheet debt have already been identified as such here and were obvious done to raise liquidity and stay compliant with bond covenants amongst other things, and ultimately I would argue it's probably a good thing Fairfax has these relationships and avenues for recognizing value when the market won't give it to him given the regulatory importance of book value and liquidity for underwriting.

 

Just glad I got to pick up more shares before what is likely to be an absolute smasher of Q4 earnings. Looking at $1+ billion just in fixed income gains/coupons - not even touching equities or insurance which we know also did strongly. 

Edited February 8, 2024 by TwoCitiesCapital

[thowed]

People seem to be reading/watching & reacting - after bounce back to 1300, now seems to be gradually drifting down.  

[Intelligent_Investor]

Most short sellers are frauds themselves is what I've found.

[Luke]

Fun times, IMO short report misses the forest for the trees...market does seem to be a bit concerned though, short sellers really are the sleaziest of em all...remember the PDD report that came out...they want to create fear and panic and suck the blood out of unknowing investors. Especially if the short thesis is just weak as it is here...

[Luke]

I mean really, how ridiculous is the short thesis considering the cash coming in but i guess he is desperate. Nvidia shorts not working...

[Gregmal]

2 minutes ago, Luca said:

Fun times, IMO short report misses the forest for the trees...market does seem to be a bit concerned though, short sellers really are the sleaziest of em all...remember the PDD report that came out...they want to create fear and panic and suck the blood out of unknowing investors. Especially if the short thesis is just weak as it is here...

How about the bald weasel's Super Micro hit piece LMFAO?

[Hektor]

7 minutes ago, TwoCitiesCapital said:

it definitely muddies the waters  

[vinod1]

Take this as: God loves you and want you to be rich

[Hektor]

IF the share price tanks, what is the impact on (of) TRS?

[Luke]

1 minute ago, Gregmal said:

How about the bald weasel's Super Micro hit piece LMFAO?

"After our intense research and FORENSIC accounting (LOL)" we discovered HUGE problems yadda yadda yadda....then lots of technical words, make it confusing and long with many numbers so investor is overwhelmed and rethinks himself...they really are a sad pathetic ghost. 

 

Also how they have to make these huge announcements...WE ARE SHORT!!!!

 

Just short in disguise, id respect that but not with a big parade, gaslighting and deceptive fireworks

[Gregmal]

1 minute ago, Luca said:

"After our intense research and FORENSIC accounting (LOL)" we discovered HUGE problems yadda yadda yadda....then lots of technical words, make it confusing and long with many numbers so investor is overwhelmed and rethinks himself...they really are a sad pathetic ghost. 

 

Also how they have to make these huge announcements...WE ARE SHORT!!!!

 

Just short in disguise, id respect that but not with a big parade, gaslighting and deceptive fireworks

Yea I totally respect someone like Steve Eisman and the way he goes about it, but these bullshit artists who basically do nothing but take positions and then rant and rave on social media and TV....total scumbags. 

[Spooky]

picked up a handful of extra shares

[ander]

51 minutes ago, gfp said:

CNBC has video 

https://www.cnbc.com/video/2024/02/08/muddy-waters-carson-block-on-why-hes-shorting-fairfax-financial.html

Read the presentation. Nothing stands out as material. He's not saying there is fraud but rather the accounting practices are aggressive in some cases.

 

1) In the interview on CNBC, he did mention x-head of PWC (the auditor) being on the board. R. William McFarland. Carson suggested this board member might be keeping the auditor less independent than otherwise would be. His bio is at the bottom. Seems like he's involved as a director at a number of their businesses. I do not necessarily like the connection if he was the former auditor for Fairfax but nothing sinister in itself. He may know the businesses better than others and can possibly add more value and is appropriate to be on the board. Anyone have a view on Bill?

 

2) In the interview on CNBC, Becky asked where he would cover. Carson did not answer. Said if book value should be 20% lower and should trade lower than book value at 0.8x or so instead of premium because they are manipulating book value.

 

Overall, I find the short case to be extremely weak!! Guess it is an opportunity for investors / Fairfax to buy additional shares lower.

 

 

Mr. McFarland is the Chairman of the Board of Directors of AGT Food and Ingredients Inc. and a director of our publicly traded subsidiaries, Dexterra Group Inc., Farmers Edge Inc. and Fairfax India Holdings Corporation. Mr. McFarland previously served as Chair of the Board of Directors of The Conference Board of Canada. Mr. McFarland was the Chief Executive Officer and Senior Partner of PricewaterhouseCoopers LLP (Canada) from 2011 to 2018. Prior to that, Mr. McFarland was a member of the executive team at PricewaterhouseCoopers LLP (Canada) from 2005 to 2011, having been admitted to the partnership in 1992 and having led the Greater Toronto Area audit practice from 2002 to 2005. Mr. McFarland is a Chartered Professional Accountant and a fellow of the Chartered Professional Accountants of Ontario.

[TwoCitiesCapital]

17 minutes ago, Hektor said:

IF the share price tanks, what is the impact on (of) TRS?

 

Cash would flow out of Fairfax to the counterparty. But this dip so far only takes us back to where we were in January, so nothing to be concerned with on Q1 at this point as it's just reversing cash that would have been due to Fairfax. 

 

Plus, we've got blowout earnings coming in a week that may take us right back up. 

 

TRS is only concerning when the economy actually tips IMO. Then you'll likely have falling asset values AND falling liquidity as it drains cash from Fairfax's coffers.

Edited February 8, 2024 by TwoCitiesCapital

[Ghost]

I would be curious to here what Viking has to say on the MW report