Author Topic: Fairfax 2018  (Read 109824 times)

Value^2

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Re: Fairfax 2018
« Reply #390 on: May 07, 2018, 04:24:13 AM »
is fairax still perceived as a market hedge?
Maybe it's my imagination, but it's usually down when the markets up and vice versa.
I would say so.... They stayed fully hedged most part of this bull-market.


Cigarbutt

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Re: Fairfax 2018
« Reply #391 on: May 07, 2018, 04:46:23 AM »
1- I suppose you can say it independently more than verifies the carrying values, but I would like to see a higher level of recurrent earnings, which of course is held back by investment performance.

2- I also wonder about the Allied World deal. Please bear in mind I live in Australia where we have our own special global insurance take on lousy investing, crazed acquisition, under reserving and perennial earnings disappointment called QBE which trades at 1.8x TBV.   

For item 1,
-One can argue that the long term thinking associated with lumpiness of earnings is a positive. Do you agree?
-Another differentiator has been the "investment performance". IMO, to invest in FFH now, you need to factor in a macro component or you need to rely on their investment team to make the calls. That may be one of the reasons explaining the relative confusion about their current status as a market hedge. I am slowly coming to the conclusion that they just modified their hedge to a less costly one. Are you saying that FFH would carry a higher valuation if it would become more traditional in terms of investment style?

For item 2,
The last insurance acquisitions have been significant and quite satisfactory IMO. I have come to the conclusion, at this point, that 2017 Q3 and Q4 results are not significant enough to think that AWH was a bad acquisition. What makes you wonder about the Allied deal?

Cigarbutt

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Re: Fairfax 2018
« Reply #392 on: May 14, 2018, 08:22:11 PM »
Taking a long term view with a market share perspective listing relevant competitors (N.A. 2017).
There is still ample room to grow float.

http://www.naic.org/documents/web_market_share_170301_2016_property_lob.pdf
https://www.insurancejournal.com/research/app/uploads/2018/05/2017-NAIC-Market-Share-Data-Workers-Compensation.pdf

globalfinancepartners

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Re: Fairfax 2018
« Reply #393 on: May 22, 2018, 09:20:56 AM »
Was there a catalyst I am missing for today's rise in FFH share price?  Another insurer's results? Fairfax announcement / filing?

Valuehalla

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Re: Fairfax 2018
« Reply #394 on: May 23, 2018, 10:17:24 AM »
Fairfax Financial increased its holding of CenturyLink CTL in Q1 by 29 %.
It is now the 7th largest position in the portfolio of FFH with 2,3% of the portfolio.

I would like call your attention on the CTL section of the forum, where i publish a lot about CTL:

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/ctl-centurylink/200/

Although the price went up already from its low of 13,16 to 19 $ now, i think its still cheap and a great valueinvestment, flanked by a 11,7 % dividend yield.

Free Cash Flow of CTL is expected around 3,15 to 3,35 B in 2018 and the marketcap is just 20,5 B today

« Last Edit: May 23, 2018, 10:37:36 AM by Valuehalla »
BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM

wondering

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Re: Fairfax 2018
« Reply #395 on: May 25, 2018, 06:22:45 AM »
Apparently, Prem is on BNN Bloomberg interviewed by Amanda Lang at 1pm Toronto time.  I am not sure if I will have time to watch it, hopefully I can watch it online at a later time.

alpha

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Re: Fairfax 2018
« Reply #396 on: May 25, 2018, 11:10:26 AM »

I feel like although he is right he may be shooting himself in the foot long term by commenting on China's political system.

https://www.bloomberg.com//news/articles/2018-05-25/watsa-shuns-china-as-fairfax-looks-for-investment-in-india-u-s

chrispy

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Re: Fairfax 2018
« Reply #397 on: May 25, 2018, 03:12:26 PM »
Prem stated that the recent toys r us Canadian locations were more successful than the US locations. Does anyone on the board have recent experience with the toys r us stores in Canada?

wisowis

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Cigarbutt

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Re: Fairfax 2018
« Reply #399 on: May 26, 2018, 09:19:15 AM »
Thoughts on the fixed income side of the portfolios.

Short version:

Fixed income spreads are very low along the spectrum in the context of a high supply of debt but a stronger appetite for spread, in still a low risk-free rate environment.

IMO, insurance companies are reaching for yield and FFH is well positioned to benefit.

Longer version:

http://www.naic.org/capital_markets_archive/171221.htm
http://www.naic.org/capital_markets_archive/180313.htm

The first link is about the junk exposure. Insurance firms have increased exposure to high yield debt and the comparison year used in the references should be 2008 and not 2009. In 2008, high yield debt issue dried up and the reasons why high yield exposures increased in 2009 were: 1-many issues were downgraded with investment grade issues becoming junk on the books and 2-despite the widely publicized issues with AIG, financial guarantee insurance firms and mortgage-backed securities, the high yield debt market recovered remarkably well despite the relative severity of the recession and liquidity issues in certain areas. P+C firms’ exposure in high yield debt is skewed to lower quality along the spectrum and has a significant component in leveraged loans which IMO now reflects higher risk as most of these loans are covenant-lite and comparatively probably riskier than the typical high yield security. Exposure is diversified and 2017 was a “good” year but, cyclically, widening spreads tend to be periodically strongly correlated (unlike the spike limited to oil and gas in 2015-6). Interesting to note that, in the high yield space, Fairfax has become involved with Toys“R”Us only after chapter 11.

The second link describes a significant exposure to the lower end of investment grade. Most of it is corporate. The authors don’t seem to be concerned but the exposure has increased considerably as we go through quite an unusually benign (and levered) period.

In terms of sentiment, which is kind of hard to assess, I just finished reading the 2017 annual report of Unico. Unico (UNAM) is a very small P+C insurer. I am a minority shareholder holding 1 share :) but some here may be interested to know that Bigliari (through The Lion Fund) owns 9,9% of shares outstanding. The reason I bring this up is that the company used to run investment portfolios in-house, based on a very very conservative profile. Starting this year, investment guidelines allow to reach for yield.

I think that the increased exposure to high yield debt (and high yield debt to be) is significant in the P+C insurance industry. This may go on for a while but reaching for yield is pro-cyclical. I very much like how Fairfax positioned the cash and fixed income side of their portfolios. I also happen to think that long exposure to credit default swaps especially to high yield debt at this point would make sense given that premiums now are very low and given potential time-weighted scenarios where spreads could widen considerably and in a correlated manner.

« Last Edit: May 26, 2018, 09:22:42 AM by Cigarbutt »