Author Topic: Fairfax 2018  (Read 104388 times)

petec

  • Hero Member
  • *****
  • Posts: 1469
Re: Fairfax 2018
« Reply #420 on: July 27, 2018, 07:08:21 AM »
thoughts on Seaspan?

It's ending a capex programme so FCF is exploding. It's got a decent capital allocator at the helm and if he can't find any opportunities just reducing debt will be very good for the equity. It's at a good point in the capital cycle (new supply at multiyear lows). It's on c.5x FCF. Looks good to me.

The bear case is one of explosive leverage?  Is there anything else?

From what I understand, Seaspan looks to clean up the balance sheet then pick up the pieces in the next downturn occurs in the shipping industry?

I don’t think the leverage is an issue now given a) equity issuances, b) massive contracted cash flows, and c) virtually no capex.

From a strategy point of view they’ve identified that they might be able to consolidate what is a very fragmented industry with several distressed players. They’ve also said they expect over time to deploy capital into other industries when prices are right. That is a cause for alarm or optimism depending on what you think of Sokol, who I think will oversee capital allocation. His record at Midamerican was extraordinary and he was a serious contender for the next CEO of Berkshire before the insider trading scandal, which tells you how much Buffett thought of his skills. I think this is his next “project”, as it were, and he’s said “the next ten years will be a lot of fun”. So I’m summary you’re paying 5x free cash flow to buy into a fairly lousy industry at a fairly good point in the cycle (both the industry’s capital cycle and the company’s free cash cycle) with a free option that a (flawed) genius does something clever with the cash flow. Not a dumb thing for Fairfax to have option - levered exposure to.


wondering

  • Jr. Member
  • **
  • Posts: 81
Re: Fairfax 2018
« Reply #421 on: August 01, 2018, 07:04:52 AM »
https://ca.finance.yahoo.com/news/canadas-fairfax-set-19-percent-093200572.html

I thought Prem had indicated that Fairfax wouldn't be doing insurance company purchases for a while (perhaps he meant large insurance company purchases).  I assume that the feeling was that the price is right on this conversion.

StubbleJumper

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 975
Re: Fairfax 2018
« Reply #422 on: August 01, 2018, 07:33:49 AM »
https://ca.finance.yahoo.com/news/canadas-fairfax-set-19-percent-093200572.html

I thought Prem had indicated that Fairfax wouldn't be doing insurance company purchases for a while (perhaps he meant large insurance company purchases).  I assume that the feeling was that the price is right on this conversion.


Thanks for posting that article.  I had no recollection of ~US$80m being invested in a convertible instrument in the Irish insurance sector -- either I never knew about it or I had forgotten entirely.

As I opined earlier this year in the buy-back discussion, I would be very surprised if Prem's past behaviour of being a serial-acquirer ever changes.  Adding an Irish insurer to the mix would seem to fit right into FFH's operations.   The remaining 80% of this one looks like it could be added for <US$500m, so it wouldn't constitute much more than a light snack for FFH!


SJ

petec

  • Hero Member
  • *****
  • Posts: 1469
Re: Fairfax 2018
« Reply #423 on: August 01, 2018, 07:37:39 AM »
https://ca.finance.yahoo.com/news/canadas-fairfax-set-19-percent-093200572.html

I thought Prem had indicated that Fairfax wouldn't be doing insurance company purchases for a while (perhaps he meant large insurance company purchases).  I assume that the feeling was that the price is right on this conversion.

This isn't a purchase. He bailed them out in 2015 and the convertible is now in the money. It would be pretty stupid not to convert!

wondering

  • Jr. Member
  • **
  • Posts: 81
Re: Fairfax 2018
« Reply #424 on: August 01, 2018, 10:28:33 AM »
Thanks for clarifying.  :)

petec

  • Hero Member
  • *****
  • Posts: 1469
Re: Fairfax 2018
« Reply #425 on: August 02, 2018, 09:25:44 AM »
Not a bad day to own a third of RFP!

StubbleJumper

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 975
Re: Fairfax 2018
« Reply #426 on: August 02, 2018, 10:12:16 AM »
Not a bad day to own a third of RFP!



Yep, it's nice to have days like this.  I wish we would have more of them!


SJ

chrispy

  • Full Member
  • ***
  • Posts: 196
Re: Fairfax 2018
« Reply #427 on: August 11, 2018, 10:30:23 PM »
A nice write-up that mashs together the 2017 and 2018 COBF Fairfax threads:

Fairfax Financial Offers Unique Exposure At Attractive Prices https://seekingalpha.com/article/4196979?source=ansh $FRFHF, $CIBEY, $EGFEY, $FFXDF, $FFXXF, $GRVVF

John Hjorth

  • Hero Member
  • *****
  • Posts: 1836
Re: Fairfax 2018
« Reply #428 on: August 12, 2018, 03:39:05 AM »
Yes, indeed, a very nice FFH trailer/teaser/bird perspective write-up by Ben Comston, chrispy,

Thank you for sharing it.
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

Cigarbutt

  • Hero Member
  • *****
  • Posts: 1030
Re: Fairfax 2018
« Reply #429 on: August 12, 2018, 06:10:17 AM »
Thank you also.

The report illustrates very well the valuation challenge (based on closely following the company for over twenty years) associated with a tendency for uncorrelated and lumpy results.

Often the earning power appears to be underestimated by the market and looking for reversion to the mean (like now) but somehow, to jump in, one has to agree with or have full confidence in their "seer" capability, a topic that has been discussed in another FFH thread (Ericopoly and others) before.