Author Topic: Fairfax 2018  (Read 94389 times)

Spekulatius

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Re: Fairfax 2018
« Reply #410 on: June 16, 2018, 05:15:56 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.

The positions that FFH takes are no slam dunks and have significant risk, as well as considerable upside. I think they should be sized accordingly, such that even 2 of them blowing up should not impair the company.
To be a realist, one has to believe in miracles.


petec

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Re: Fairfax 2018
« Reply #411 on: July 02, 2018, 06:17:29 AM »
I think the Sokol presentation at the investing presentation the day before the Fairfax annual event was very informative and impressive. 

Does anyone have notes or a copy of the presentation?

petec

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Re: Fairfax 2018
« Reply #412 on: July 02, 2018, 06:23:16 AM »
https://www.bloomberg.com/news/articles/2018-05-31/fairfax-is-said-to-prep-new-500-million-investment-in-seaspan

The gravy is at the bottom of the article - not only do they get a quick gain on the warrants but they get gifted another 25m warrants at $8.05 - massively in the money - for exercising the first batch early. Sokol must be on the FFH payroll!

Saluki

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Re: Fairfax 2018
« Reply #413 on: July 02, 2018, 06:41:30 AM »
I think the Sokol presentation at the investing presentation the day before the Fairfax annual event was very informative and impressive. 

Does anyone have notes or a copy of the presentation?

A copy of the powerpoint is here if you scroll down:

https://www.ivey.uwo.ca/bengrahaminvesting/events/2018/04/2018-value-investing-conference/

It doesn't look like they posted the talk though. 
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petec

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Re: Fairfax 2018
« Reply #414 on: July 02, 2018, 10:24:32 AM »
Many thanks.

petec

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Re: Fairfax 2018
« Reply #415 on: July 03, 2018, 05:22:17 AM »
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

To me the structure is more important than the size. They have $1bn in Blackberry with full equity upside, but $500m of that has practically no downside (company is net cash and will generate FCF from this year, bond matures in 3 years). So, you're massively levered to anything positive happening but downside is 4% of shareholder's equity (andf 1.25% of the whole portfolio, which overall is very conservatively invested).

Seaspan is structured the same way (and I would argue there is very little risk in the bonds, despite the headline leverage, due to the phenomenal amount of contracted free cash flow the company will generate now that is has no capex).

The other thing that has changed is that Fairfax is a much bigger company due to both equity issues and realisation of value via asset sales. So while Blackberry might have been too big when it was made, I don't think either is now.