Author Topic: Fairfax 2018  (Read 100361 times)




StubbleJumper

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Re: Fairfax 2018
« Reply #402 on: May 31, 2018, 06:36:27 AM »
https://www.bloomberg.com/news/articles/2018-05-31/fairfax-is-said-to-prep-new-500-million-investment-in-seaspan

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SJ

StubbleJumper

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Re: Fairfax 2018
« Reply #403 on: May 31, 2018, 06:50:57 AM »
This is encouraging.  The Seaspan debt is still performing, and now FFH is up ~US$200m by exercising the warrants and they get another batch of warrants with an intrinsic value of ~US$25m.  That's a tidy profit in a relatively short time-frame.

So, with US$500m of debt and a commitment for ~US$700m market value of common shares, how much more should FFH invest in Seaspan?  What's an appropriate position size?  I'd say it's about as large as you'd want to see for that type of investment.  Happily, the additional 25 million warrants have a 7 year expiry, so there's no rush to sink more capital into seaspan than the US$1B that's already been committed.


SJ

Saluki

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Re: Fairfax 2018
« Reply #404 on: June 07, 2018, 08:51:10 AM »
at $500mm, it looks like its now their second biggest equity position (a few million behind Blackberry).

I think the Sokol presentation at the investing presentation the day before the Fairfax annual event was very informative and impressive.  They've announced a willingness to invest more in infrastructure like ports (Vancouver, I believe) which seems more promising that the shipping part.

As far as the shipping goes, with their recent merger and newer fleet I think it bodes well if the industry is consolidating.  After the Hanjin fiasco I think people will be more likely to look towards well financed operations with newer fleets (lower fuel costs, and no one was eager to lend money to Hanjin when the collateral they had was a fleet of rust buckets). So the growth prospects look good over the next few years if we avoid a trade war and global recession.
If it's important, do it every day. If it's not important, don't do it at all.  -Dan Gable

StubbleJumper

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Re: Fairfax 2018
« Reply #405 on: June 07, 2018, 02:09:37 PM »
at $500mm, it looks like its now their second biggest equity position (a few million behind Blackberry).

I think the Sokol presentation at the investing presentation the day before the Fairfax annual event was very informative and impressive.  They've announced a willingness to invest more in infrastructure like ports (Vancouver, I believe) which seems more promising that the shipping part.

As far as the shipping goes, with their recent merger and newer fleet I think it bodes well if the industry is consolidating.  After the Hanjin fiasco I think people will be more likely to look towards well financed operations with newer fleets (lower fuel costs, and no one was eager to lend money to Hanjin when the collateral they had was a fleet of rust buckets). So the growth prospects look good over the next few years if we avoid a trade war and global recession.


Well, as I understand it, the book value of the investment currently sits at US$500m in debt and now US$500m in equity for a total of US$1B.  Market value should be ~$500m for the debt and now ~$700m for the equity plus the new warrants that have been granted are worth ~$25m.  So, FFH has dedicated $1b of shareholders' capital to Seaspan and that investment now has a market value of ~US$1.225b.  That's a pretty good short-term return.

But, returning to the question of position sizing, the current market value of the Seaspan position is getting pretty close to the amount that was invested in BlackBerry and it's pretty close to the position size of the Bank of Ireland before FFH trimmed it.  My take is that they've put about as much capital into Seaspan as would be wise and that they should think hard before adding more (other than a couple hundred mil to exercise their new warrants in seven years).



obtuse_investor

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Re: Fairfax 2018
« Reply #406 on: June 07, 2018, 02:52:43 PM »
I try to avoid anchoring on the 1B price tag.

The RIM/Blackberry position was made many years ago when the balance sheet was substantially smaller. I suspect as a percentage of assets, the Seaspan deal is in line with their previous large positions.
Value Investor who manages his personal portfolio with a 25-45 year time horizon | @obtuse_investor

StubbleJumper

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Re: Fairfax 2018
« Reply #407 on: June 07, 2018, 03:09:04 PM »
I try to avoid anchoring on the 1B price tag.

The RIM/Blackberry position was made many years ago when the balance sheet was substantially smaller. I suspect as a percentage of assets, the Seaspan deal is in line with their previous large positions.


Okay.  From a risk management perspective, do you have a view point about the appropriate position size?  I have certainly made my views clear about the difference between ploughing $1b into RIM vs ploughing $1B into JNJ....as well as the difference between investing $500m in Bank of Ireland and having it grow to $1B+ vs investing increasing amounts of capital into a posiiton.  So, does $1b in seaspan make sense, or should they bump it to $2B (basically full ownership)?  Is this a prudent investment at its current sizing and does it ever become imprudent?


SJ

chrispy

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Re: Fairfax 2018
« Reply #408 on: June 08, 2018, 05:15:32 AM »
Share price of nearly all holdings has gone up since the previous quarter's filings.  I put this together pretty quickly and do NOT have great confidence in the number of shares owned by FFH.  Either way, it is a good trend.  Sorry for the poor formatting too...

Amount and Increase in BV in millions:

Ticker   Shares   3/31/2018   6/8/2018   Amount   % increase   Increase in BV
BB   9.67E+07   $10.72   $12.25   $1,184.58   14.27%          $147.95
RFP   3.05E+07   $8.40   $10.65   $325.34   26.79%          $68.73
EGFEY   -          $0.44           $0.53      -            20.40%           -
KW   1.33E+07   $17.50   $20.60   $274.43   17.71%          $41.30
IPI   1.67E+07   $3.47   $4.65   $77.50   34.01%          $19.67
USG   1.53E+06   $39.40   $41.32   $63.24   4.87%          $2.94
CTL   1.85E+06   $16.29   $17.62   $32.55   8.16%          $2.46
                                                              Sum          $283.04
« Last Edit: June 08, 2018, 05:18:43 AM by chrispy »

Dazel

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Re: Fairfax 2018
« Reply #409 on: June 12, 2018, 05:08:02 AM »

I am assuming everyone likes Prem again?
Kidding best of luck to all.

Dazel