CIBC says Fairfax is likely to be added to the S&P/TSX 60 in December 2024 - sell decisions

[SafetyinNumbers]

1 hour ago, Hoodlum said:

Those analysts who recently lowered their targets for Fairfax were certainly caught off guard. 

The analysts are a reflection of their clients.

[SafetyinNumbers]

1 hour ago, MarioP said:

I never said that. I think that there will be an impact but less important than some think. The ETF has to own it on dec 22 and I told that they will not buy a lot on that day and post a Grok text explaining why. 
 

I totally adhere to the line on thinking of @SafetyinNumbers about the longterm impact of beeing in an index. And I still try to figure out what will happen to the market as index investing grow at 2% clip

per year. Index investing doesn’t care about value. And I believe that will bring a disaster some day. 

Each addition is idiosyncratic based on prepositioning. Expectations weren’t high this quarter for addition and many institutions were rotating out of FFH because of insurance and non-CAD exposure. 

[cwericb]

Putting things in perspective, FFH shares dropped 2.6% just yesterday and has been bouncing back and forth erratically for the past few months and for the most part, staying $100 or so below its early October high of $2500. Seems to be a bit of unusual volatility for FFH. Or, perhaps the fairly steady uptrend of the stock price of the last few years has spoiled me. As has been said, Monday will be interesting.   

[djokovic1]

8 minutes ago, SafetyinNumbers said:

Each addition is idiosyncratic based on prepositioning

 

100%.

 

Take a look at Carvana for example. It was just announced to be added to the S&P 500.

It went up 35% last week due to pre-positioning. And now that it is added to the index, is up another 10% pre-market.

[SafetyinNumbers]

41 minutes ago, djokovic1 said:

 

100%.

 

Take a look at Carvana for example. It was just announced to be added to the S&P 500.

It went up 35% last week due to pre-positioning. And now that it is added to the index, is up another 10% pre-market.

S&P/TSX 60 demand is estimated at 3% of the float and S&P 500 is closer to 10% plus CVNA has a high short interest so a bigger move also makes sense from that perspective. 

 

Any guesses on where it closes on Dec 19?

[MMM20]

8 minutes ago, SafetyinNumbers said:

Any guesses on where it closes on Dec 19?

FRFHF $2000.01 incoming 

 

Edited December 6, 2025 by MMM20

[djokovic1]

1 hour ago, SafetyinNumbers said:

S&P/TSX 60 demand is estimated at 3% of the float and S&P 500 is closer to 10% plus CVNA has a high short interest so a bigger move also makes sense from that perspective. 

Yes but on the other hand Carvana is much more liquid. It trades ~10x as much daily volume each day relative to Fairfax. Carvana trades ~2% of its market cap each day. Fairfax trades around 0.2% of its market cap each day. So any incremental buying should have a bigger impact on Fairfax relative to CVNA.

 

I don't think Fairfax will have a similar sharp moves as Carvana, Carvana has a lot more speculative trading involved too, so much more volatile moves. Fairfax n Dec 19th, I would hazard a guess ~10-15% higher? could be more.  What do you think?

Edited December 6, 2025 by djokovic1

[villainx]

Fairfax has enough shares outstanding to have decent liquidity?  

 

 

[cwericb]

All I want for Xmas is a stock split.

I know. Not gonna happen. 

[djokovic1]

19 minutes ago, villainx said:

Fairfax has enough shares outstanding to have decent liquidity?  

 

 

 

Using the numbers from above: For fairfax, the index addition creates 3% of incremental free float purchase, and only 0.2% of free float trades on average. That's an incremental 15 days of avg. daily volume created by passive buys due to addition.

 

Similarly, for CVNA, if the index addition creates 10% of incremental free float purchase, and 2% of free float trades on average. That's an incremental 5 days of avg daily volume created by passive buys due to addition.

Of course, above is not a science, given there are other factors i.e pre-positioning, short interest etc that will impact moves post announcement. 

[Thrifty3000]

According to AI a 4% to 8% sustainable price jump this week would be consistent with the price action of other recent additions to the TSX 60.

 

I had a celebratory steak dinner last night because I like to count chickens before they hatch.

[villainx]

9 minutes ago, Thrifty3000 said:

I had a celebratory steak dinner last night

 

Home made or steak house?

 

[Thrifty3000]

2 minutes ago, villainx said:

 

Home made or steak house?

 

Steak house. Never as good as the ones I make on my Green Egg, and 5x more expensive. But I was ridin’ high on that wealth effect wave, baby!

[villainx]

1 minute ago, Thrifty3000 said:

Steak house. Never as good as the ones I make on my Green Egg, and 5x more expensive. But I was ridin’ high on that wealth effect wave, baby!

 

After nailing down home made steaks, it's too good.  The sides and apps are the hard part, so much more time consuming.

 

[Thrifty3000]

2 minutes ago, villainx said:

 

After nailing down home made steaks, it's too good.  The sides and apps are the hard part, so much more time consuming.

 

Amen

[villainx]

I spent 5 minutes trying to do my own homework on google, but couldn't find answer.

 

Is Fairfax as liquid as the average SP/TSX 60 company?  I hold FRFHF so that's a bit of a pain to buy, but on the Canadian exchange, I assume it's easier.

 

 

[TwoCitiesCapital]

Re: the debate of authorized participants - it is true they don't have to buy/sell physical shares of Fairfax to create/redeem the units...if they already owned the shares of Fairfax. 

 

Seeing as Fairfax still has its TRS - that the banks are net short of shares on - I'm guessing the banks aren't "net long" Fairfax even if they have counterparties taking the other side of the trade. 

 

There will be some expected buying from APs as a result and ongoing collection of flows that are secularly beneficial even if it doesn't mean Fairfax is purchased/accumulated every individual day. 

 

Not sure what the price bump will be - but I expect it to be durable. 

[SafetyinNumbers]

1 hour ago, djokovic1 said:

 

Using the numbers from above: For fairfax, the index addition creates 3% of incremental free float purchase, and only 0.2% of free float trades on average. That's an incremental 15 days of avg. daily volume created by passive buys due to addition.

 

Similarly, for CVNA, if the index addition creates 10% of incremental free float purchase, and 2% of free float trades on average. That's an incremental 5 days of avg daily volume created by passive buys due to addition.

Of course, above is not a science, given there are other factors i.e pre-positioning, short interest etc that will impact moves post announcement. 

It’s a bit more liquid than it looks when all of the ATS are included. Maybe 0.35%. This is a real test for how strong the hands are in the retail shareholder base. As has been discussed often, investors like Parsad think the stock is fairly valued or maybe even expensive so they might sell into a big move wanting to avoid the next drawdown. 

 

 

 

[SafetyinNumbers]

25 minutes ago, TwoCitiesCapital said:

Re: the debate of authorized participants - it is true they don't have to buy/sell physical shares of Fairfax to create/redeem the units...if they already owned the shares of Fairfax. 

 

Seeing as Fairfax still has its TRS - that the banks are net short of shares on - I'm guessing the banks aren't "net long" Fairfax even if they have counterparties taking the other side of the trade. 

 

There will be some expected buying from APs as a result and ongoing collection of flows that are secularly beneficial even if it doesn't mean Fairfax is purchased/accumulated every individual day. 

 

Not sure what the price bump will be - but I expect it to be durable. 

My guess is the banks are fully hedged on the TRS. The buying will start on Monday as the APs begin to accumulate to prepare to cross the shares into the ETFs. The wildcards are how much closet indexers buy and who is left to sell. Fairfax has bought 8m shares plus in the last 8 years if we include the TRS so the most valuation sensitive holders are already out. 
 

How do you guys make sell decisions? Is it based on valuation, weight in your portfolio or something else?

[TwoCitiesCapital]

3 minutes ago, SafetyinNumbers said:

How do you guys make sell decisions? Is it based on valuation, weight in your portfolio or something else?

 

Both. 

 

I have a strict 10% of my net-worth cap on positions. 

 

I also have relative-valuation trading in my tax-free tax-deferred accounts. If something has gone up majorly (20-30%) for no apparent reason while something else languishing (-20+%), I'll often trim the strong position and add to the weaker one. 

 

Lastly - I'll exit positions when they reach a valuation I no longer have confidence in OR when there is a better relative opportunity. For instance, recently sold CPRI for a tax-loss and rolled the proceeds into BBWI after their dump. 

 

 

[SafetyinNumbers]

26 minutes ago, TwoCitiesCapital said:

 

Both. 

 

I have a strict 10% of my net-worth cap on positions. 

 

I also have relative-valuation trading in my tax-free tax-deferred accounts. If something has gone up majorly (20-30%) for no apparent reason while something else languishing (-20+%), I'll often trim the strong position and add to the weaker one. 

 

Lastly - I'll exit positions when they reach a valuation I no longer have confidence in OR when there is a better relative opportunity. For instance, recently sold CPRI for a tax-loss and rolled the proceeds into BBWI after their dump. 

 

 

Is Fairfax any different?

[TwoCitiesCapital]

11 minutes ago, SafetyinNumbers said:

Is Fairfax any different?

 

No. The 10% limit forced me to trim my Fairfax in 2022 when it was grinding higher and everything else in my portfolio was going lower.

 

I haven't done the comparative analysis to know if I was advantaged/disadvantaged by the trims, as some of the names I bought with the proceeds rose substantially over the last 3-years while others have been flat. 

 

But ultimately bought all of those shares back at a later date on opportunistic pullbacks (like the Muddy Waters reports) where I wasn't exceeding my limit due to the whole portfolio rising as well. 

Edited December 6, 2025 by TwoCitiesCapital

[dartmonkey]

3 hours ago, djokovic1 said:

Using the numbers from above: For fairfax, the index addition creates 3% of incremental free float purchase, and only 0.2% of free float trades on average. That's an incremental 15 days of avg. daily volume created by passive buys due to addition.

 

Similarly, for CVNA, if the index addition creates 10% of incremental free float purchase, and 2% of free float trades on average. That's an incremental 5 days of avg daily volume created by passive buys due to addition.

I think it is likely that Carvana’s 8% short interest (I was once in this unfortunate position too) and short covering have more to do with the steep share price rise than the buying by indexers. By contrast, only 0.5% of Fairfax ‘s shares are sold short (hopefully including Muddy Waters…) and so the scramble to buy is likely to be much less hectic. 

[villainx]

32 minutes ago, dartmonkey said:

and so the scramble to buy is likely to be much less hectic. 

 

so pullback and buying opportunity?

 

 

[MMM20]

1 hour ago, SafetyinNumbers said:

how much closet indexers buy

+1, there’s a whole lot of this