Fairfax 2024

[nwoodman]

1 hour ago, glider3834 said:

Fairfax buybacks  ~ 130K shares during March &  ~151K shares during April 

 

 

 

 

 

 

 

Yep, hard to believe they squared away ~0.65% outstanding in April.  They REALLY liked it <$CAD1500

 

https://ceo.ca/api/sedi/?symbol=FFH&amount=&transaction=&insider=

 

 

Shares outstanding as of March 31, 2024

Buyback percentage = 151,625 ÷ 22,974,000 = 0.66%

Edited May 9 by nwoodman

[Hoodlum]

11 minutes ago, nwoodman said:

Yep, hard to believe they squared away ~0.75% outstanding in April.  They REALLY liked it <$CAD1500

 

https://ceo.ca/api/sedi/?symbol=FFH&amount=&transaction=&insider=

 

 

At that rate the buybacks would add $20US/qtr to the book value per share. 

[backtothebeach]

6 hours ago, Hoodlum said:

At that rate the buybacks would add $20US/qtr to the book value per share. 

Without doing the math, but I don’t think that’s true. Buybacks above book value actually slightly lower book value.

[treasurehunt]

On 5/7/2024 at 10:32 AM, MMM20 said:

 

I'm confused by the question b/c, at least as far as I understand it, it's just arithmetic - obviously absent some regime change or long-term distortion in supply/demand factors. And Japan is typically the exception that proves all sorts of rules so I'm not sure I'd look there for evidence of anything other than the power of a cohesive society (and the psychological impact of a stock market derating from like 100x to 5x p/e over a few decades).

 

 

I don't see how it's just arithmetic, since there is no free flow of goods and labor across national boundaries and the prices of goods and services at market exchange rates vary widely across countries. Can you explain your thinking?

 

Also, how about Canada for another counterexample, albeit not as dramatic as Japan? In the 15 years from May 8, 2009 to May 8, 2024 the Loonie has depreciated from 0.87 USD to 0.73 USD. But inflation in Canada was slightly less than in the US (39% vs 46% according to ChatGPT).

[Hoodlum]

1 hour ago, backtothebeach said:

Without doing the math, but I don’t think that’s true. Buybacks above book value actually slightly lower book value.

You are correct.  

[MMM20]

5 hours ago, treasurehunt said:

I don't see how it's just arithmetic

 

Let's say Country X's currency trades 1 for 1 with Country Y's. If Country X's inflation over the next 20 years is ~5-6%, then in the end that 1 unit = 3. If Country Y's inflation is 0, then 20 years later that 1 unit still = 1. So all else equal, the fair exchange rate would change from 1:1 to 3:1 over that time period.

 

I guess I would expect evidence to be mixed b/c in the real world, nothing is held constant. But maybe it's more useful as a starting point than ignoring the issue or a finger in the wind or w/e.

 

Edited May 9 by MMM20

[gfp]

Here's some news:

https://www.fairfax.ca/press-releases/fairfax-announces-purchase-of-275000-subordinate-voting-shares-for-cancellation-from-chairman-and-ceo-prem-watsa/?utm_source=press-release&utm_medium=email&utm_term=Mon+May+13+2024&utm_campaign=Fairfax+Announces+Purchase+of+275+000+Subordinate+Voting+Shares+for+Cancellation+from+Chairman+and+CEO+Prem+Watsa

Edited May 13 by gfp

[nwoodman]

5 minutes ago, gfp said:

Here's some news:

https://news.fairfax.ca/emails/webview/238951/121216754890311147

Go Prem. A well deserved payday and an efficient way to retire a chunk of shares.  Given the ramp in insider sales (not just Prem) I would argue that we were approaching IV except the TRS position suggests otherwise.  

[giulio]

almost a 4x in 5 years...I hope he's buying a Gulfstream or a big yacht 

620K+ shares repurchased ytd, that's the important one to me! 

[juniorr]

seems like the buybacks are just getting started...DIGI IPO should push this above $1600

[gary17]

makes sense before the new capital gain inclusion rate taking effect later in June

[nwoodman]

9 minutes ago, gary17 said:

makes sense before the new capital gain inclusion rate taking effect later in June

That’s quite the hike

 

“In a bid to make rich individuals and corporations pay more taxes, the federal Liberals said they will increase the capital gains inclusion rate(opens in a new tab) — the share of capital gains that is taxed — from 50 per cent to 67 per cent. The change will apply to those with more than $250,000 in capital gains in a year as of June 25. All corporations and trusts will also have to pay taxes on a bigger portion of their gains.”

 

https://www.ctvnews.ca/canada/what-is-changing-about-canada-s-capital-gains-tax-and-how-does-it-impact-me-1.6860457#:~:text=Canadians must report taxable capital,capital gains in a year.

[Xerxes]

275K shares … either locked up in Prem’ vault or bought & cancelled by the company. 
 

Either way no impact on the float. 
 

so just optics. 

[gfp]

2 minutes ago, Xerxes said:

275K shares … either locked up in Prem’ vault or bought & cancelled by the company. 
 

Either way no impact on the float. 
 

so just optics. 

 

Huh.. That's a hot take.  As an example, if the market cap of the company halved but the freely traded float stayed the same would that also be just optics or at some point does the share count of the company matter to you?

[Xerxes]

16 minutes ago, gfp said:

 

Huh.. That's a hot take.  As an example, if the market cap of the company halved but the freely traded float stayed the same would that also be just optics or at some point does the share count of the company matter to you?

 

hmmm dwell on this I must ….

 

 

I guess I should be happy that as an owner, the EPS that would have passed through 275K shares in Prem’ vault is now spread like butter over a slightly fewer total remaining shares and the would-have-been cash dividends on the 275K shares is saved up on behalf of remaining shareholders. 

[StubbleJumper]

44 minutes ago, nwoodman said:

Go Prem. A well deserved payday and an efficient way to retire a chunk of shares.  Given the ramp in insider sales (not just Prem) I would argue that we were approaching IV except the TRS position suggests otherwise.  

 

The valuation gap as defined by P/BV or pretty much any other widely used valuation measure has definitely narrowed over the past year, and as you suggested, it might be that certain insiders finally have a reasonable opportunity to trim their position.  I'm not sure that this is the case for Prem.  Back when he bought the US$150m of shares two years ago, I posed the question on this forum of where he sourced the cash to do so?  Did he have US$150m just sitting in his savings account, did he dig it out of the cushions of his chesterfield, or did he borrow the lion's share of that cash?  Based on this sale, my guess is that he probably borrowed the cash to buy those shares and the carry on that borrowing has caught up a little bit with the share price growth expectation (ie, if he borrowed that money, has the interest rate that he's paying grown to 7% or 7.5% ?).

 

15 minutes ago, nwoodman said:

That’s quite the hike

 

“In a bid to make rich individuals and corporations pay more taxes, the federal Liberals said they will increase the capital gains inclusion rate(opens in a new tab) — the share of capital gains that is taxed — from 50 per cent to 67 per cent. The change will apply to those with more than $250,000 in capital gains in a year as of June 25. All corporations and trusts will also have to pay taxes on a bigger portion of their gains.”

 

 

Without a doubt, there are many FFH shareholders who would pay the higher capital gains rate if they liquidate their position next year.  But, I can tell you that I wouldn't let the tail wag the dog in this particular case.  The higher inclusion rate gives the appearance of an enormous tax hike, but keep it in context.  The highest marginal tax rate in Ontario is 53.5%.  With a 50% inclusion rate, you pay 26.75% tax on your capital gains, and now with the 67% inclusion you'd pay 35.7% tax on your capital gains.  So, the difference in tax paid on gains in the highest marginal bracket is like ~9%.  It's considerable, but if you believe that FFH is still a shade undervalued and that its underwriting growth still has legs, you would look forward 1, 2, or 3 years and conclude that share price will likely be strong enough to make it irrational to let the tax tail wag the dog.  

 

 

22 minutes ago, Xerxes said:

275K shares … either locked up in Prem’ vault or bought & cancelled by the company. 
 

Either way no impact on the float. 
 

so just optics. 

 

The value of my personal shares is independent of the size of the float.  My portion of FFH's future cash flows is X/total shares outstanding.  So, when 250k shares are retired, my portion of FFH's future cash flows goes up.   That part is not optics.  The part that might make it mostly optics is the price paid.  Continuing shareholders are only better off after a repurchase if the shares were repurchased at a price that is less than intrinsic value.  When FFH conducted the SIB a couple of years ago and bought back a boat-load at US$500, it was quite obviously the case that those repurchases were undertaken at a price lower than IV.  But, a repurchase price of US$1,100 is probably much closer to IV and the benefit to continuing shareholders is much more limited.  As an example if IV is actually US$1300 or $1400, we continuing shareholders collectively benefit benefit by 275k*US$200 or 300...less than five bucks a share?).  It's not nothing, but it doesn't move the needle all that much.

 

 

SJ

[MMM20]

I understand the logic but I’m 1) really not a fan of management selling shares to the company and 2) still hugely overweight FFH - and so I’m taking this as a cue to sell a chunk of my own shares too over the next couple months. 

 

Edited May 13 by MMM20

[Xerxes]

5 minutes ago, MMM20 said:

I understand the logic but I’m 1) really not a fan of management selling shares to the company and 2) still hugely overweight FFH and so I’m taking this as a cue to sell a chunk of my own shares too over the next couple months.

 

weren’t you the person with $3,000 projection on the share price in a not to too distant future. 
 

Prem selling some shares for liquidity shouldn’t a reason for you to trim, unless you were in search of a reason 

[MMM20]

4 hours ago, Xerxes said:

weren’t you the person with $3,000 projection on the share price in a not to too distant future. 
 

Prem selling some shares for liquidity shouldn’t a reason for you to trim, unless you were in search of a reason 

Yes. This is still my biggest position by a lot. It has gotten up to about half my retirement accounts. I’m talking about taking it down to 30-40%, still my biggest by ~2x. Still think it’s easily worth $2-3K and I would not sell if this were close to a normal core position.
 

I wonder if others with big positions since 2020-21 are looking at this similarly. I don’t think it’s fair to completely dismiss the fact that he’s selling, even if it’s a relatively small sale and for a logical reason. Sure it’s for liquidity and tax planning - I get that - but would he be selling if the stock still traded at 0.7x p/b? I personally have a really hard time believing that. 
 

But since (I think?) you asked… yeah I guess I’m looking for capital to add a bunch to HIFS - which I’m convinced is a similar setup at this point, a top quality, well run, 30+ year compounder now trading around book and ~6-8x normalized earnings in large part due to an almost certainly temporary situation in interest rates (in HIFS case, ongoing yield curve inversion). An attractively skewed ~2x type of expected return over a couple years - like the current setup in FFH IMHO!
 

Edited May 13 by MMM20

[Xerxes]

BB went up 12% this morning. 

They must be thinking Prem is buying BB on his PA using funds that newly released 

[Xerxes]

26 minutes ago, MMM20 said:

Yes. This is still my biggest position by a lot. It has gotten up to about half my retirement accounts. I’m talking about taking it down to 30-40%, still my biggest by 2x. Still think it’s easily worth $2-3K and I would not sell if this were close to a normal core position.
 

I wonder if others with big positions since 2020-21 are looking at this similarly. I don’t think it’s fair to completely dismiss the fact that he’s selling, even if it’s a relatively small sale and for a logical reason. 
 

But since (I think?) you asked… yeah I guess I’m looking for capital to add a bunch to HIFS - which I’m convinced is a similar setup at this point, a top quality, well run, 30+ year compounder trading around book and ~6-8x normalized earnings in large part due to an almost certainly temporary situation in interest rates (in HIFS case, ongoing yield curve inversion). IMHO an attractively skewed ~2x type of expected return over a couple years - similar to FFH’s e(r) in my mind.
 

thank you 

[juniorr]

3 minutes ago, Xerxes said:

BB went up 12% this morning. 

They must be thinking Prem is buying BB on his PA using funds that newly released 

MEME STOCKS are back GME

[Luca]

23 minutes ago, juniorr said:

MEME STOCKS are back GME

 

You guys are totally wrong, Prem sold FFH and bought GME, that's why GME is up...1+1->2. Its a no-brainer. 

 

@MMM20 @juniorr @Xerxes

[juniorr]

24 minutes ago, Luca said:

 

You guys are totally wrong, Prem sold FFH and bought GME, that's why GME is up...1+1->2. Its a no-brainer. 

 

@MMM20 @juniorr @Xerxes

If $BB can run back above $10 USD will like to see FFH off load it lol

[Hektor]

29 minutes ago, Luca said:

You guys are totally wrong, Prem sold FFH and bought GME, that's why GME is up...1+1->2. Its a no-brainer.