Author Topic: Fairfax 2020  (Read 129989 times)

roberts1001

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Re: Fairfax 2020
« Reply #680 on: November 12, 2020, 07:54:45 PM »
Thank you to all for your helpful input.


petec

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Re: Fairfax 2020
« Reply #681 on: November 12, 2020, 11:02:42 PM »
Viking that’s a superb summary.
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cwericb

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Re: Fairfax 2020
« Reply #682 on: November 13, 2020, 06:35:05 AM »
Thanks Viking for putting things in perspective. Fairfax is complicated, it helps to have an overview like this. I will probably check back to this post from time to time.
Politicians and diapers must be changed often, and for the same reason. - Mark Twain

Viking

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Re: Fairfax 2020
« Reply #683 on: November 21, 2020, 10:09:14 AM »
Here is another update of Fairfax's equity positions Sept 30-Nov 20. In aggregate my math says total equity positions are now tracking up over $1 billion (+26.4%). Big move in 7 weeks. The good news is the increase is broad based (all holdings are up except CIB). I've attached my excel spreadsheet; please let me know if you see any big errors :-)

Yes, most of the gains do not flow through to earnings. However, as the gap between 'fair value' and 'carried value' for Investments in Associates closes this makes reported book value more meaningful (shrinking the discount to BV shares trade at).   

- Stocks                                             + $104 million (mark to market)
- Atlas warrants                                    + $71 (mark to market, I think)
- Associated and Consolidated equities + $827   
- Total                                            + $1.001 billion

Biggest individual movers:
- Atlas shares =  +$254 million
- Atlas warants =  +$71
- Fairfax India = +$133
- Recipe =          +$117
- Eurobank =      +$109
- Thomas Cook =  +$72
- Blackberry =      +$55
- Stelco =             +$43
- Quess =             +$32
« Last Edit: November 21, 2020, 10:12:00 AM by Viking »

StubbleJumper

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Re: Fairfax 2020
« Reply #684 on: November 21, 2020, 11:59:03 AM »
Viking, what have you done with the BB convertible debs?  Just eye-balling the change in the BB stock price, I would guess that if the debs were marked-to-model that they would likely now trade at a premium over par value (they are not yet in the money, but clearly the conversion privilege is quite valuable and has become considerably more valuable since Sept 30)?  Probably at least another $50 million, conservatively?  As an observation, BB's $7 calls expiring in January 2023 traded at $1.91 on Friday and $0.95 back on Sept 30.   FFH's $6 calls expiring in November 2023 for 55 million shares are worth a fair bit these days...


SJ

Viking

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Re: Fairfax 2020
« Reply #685 on: November 21, 2020, 12:56:36 PM »
Viking, what have you done with the BB convertible debs?  Just eye-balling the change in the BB stock price, I would guess that if the debs were marked-to-model that they would likely now trade at a premium over par value (they are not yet in the money, but clearly the conversion privilege is quite valuable and has become considerably more valuable since Sept 30)?  Probably at least another $50 million, conservatively?  As an observation, BB's $7 calls expiring in January 2023 traded at $1.91 on Friday and $0.95 back on Sept 30.   FFH's $6 calls expiring in November 2023 for 55 million shares are worth a fair bit these days...


SJ

I just listed the BB convertible debs on my spreadsheet with no value/change in value. Any increase in value in these should be added to the $1 billion. Is it correct the increase would fall in the ‘mark to market’ bucket?

StubbleJumper

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Re: Fairfax 2020
« Reply #686 on: November 21, 2020, 01:19:28 PM »
Viking, what have you done with the BB convertible debs?  Just eye-balling the change in the BB stock price, I would guess that if the debs were marked-to-model that they would likely now trade at a premium over par value (they are not yet in the money, but clearly the conversion privilege is quite valuable and has become considerably more valuable since Sept 30)?  Probably at least another $50 million, conservatively?  As an observation, BB's $7 calls expiring in January 2023 traded at $1.91 on Friday and $0.95 back on Sept 30.   FFH's $6 calls expiring in November 2023 for 55 million shares are worth a fair bit these days...


SJ

I just listed the BB convertible debs on my spreadsheet with no value/change in value. Any increase in value in these should be added to the $1 billion. Is it correct the increase would fall in the ‘mark to market’ bucket?


Those particular securities are not traded, so they would need to be marked-to-model rather than marked-to-market.  I presume that they would be included in the "mark to market" bucket in the same way that the value of the CPI derivatives are adjusted every quarter based on their modelled value.  However, we probably wouldn't even notice a ~$50m mark for the debs when they are included with all of the other changes in the $30B fixed income portfolio....


SJ

Viking

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Re: Fairfax 2020
« Reply #687 on: November 21, 2020, 02:01:58 PM »
Viking, what have you done with the BB convertible debs?  Just eye-balling the change in the BB stock price, I would guess that if the debs were marked-to-model that they would likely now trade at a premium over par value (they are not yet in the money, but clearly the conversion privilege is quite valuable and has become considerably more valuable since Sept 30)?  Probably at least another $50 million, conservatively?  As an observation, BB's $7 calls expiring in January 2023 traded at $1.91 on Friday and $0.95 back on Sept 30.   FFH's $6 calls expiring in November 2023 for 55 million shares are worth a fair bit these days...


SJ

I just listed the BB convertible debs on my spreadsheet with no value/change in value. Any increase in value in these should be added to the $1 billion. Is it correct the increase would fall in the ‘mark to market’ bucket?


Those particular securities are not traded, so they would need to be marked-to-model rather than marked-to-market.  I presume that they would be included in the "mark to market" bucket in the same way that the value of the CPI derivatives are adjusted every quarter based on their modelled value.  However, we probably wouldn't even notice a ~$50m mark for the debs when they are included with all of the other changes in the $30B fixed income portfolio....


SJ

Got it :-) Thanks

With the spreadsheet i am trying to group the equity holdings based on how changes in their value show up in Fairfax’s reporting:
1.) holdings where changes in stock price/value flows though to earnings and impacts BV each quarter
2.) holdings where changes in stock price/value do not directly impact BV each quarter

—————————

Could be a busy 5 weeks for Fairfax to finish 2020.
1.) Does BAL / Anchorage transaction close?
2.) Does Fairfax Africa / Helios transaction close?
3.) Does Fairfax purchase OMERS stake in Eurolife? (2019 AR said this would happen in 2020)

I also wonder if they do not monetize something large to realize some cash. Last year it was Riverstone and ICICI Lombard. Before that it was First Capital.

Parsad

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Re: Fairfax 2020
« Reply #688 on: November 21, 2020, 06:35:35 PM »
Viking, what have you done with the BB convertible debs?  Just eye-balling the change in the BB stock price, I would guess that if the debs were marked-to-model that they would likely now trade at a premium over par value (they are not yet in the money, but clearly the conversion privilege is quite valuable and has become considerably more valuable since Sept 30)?  Probably at least another $50 million, conservatively?  As an observation, BB's $7 calls expiring in January 2023 traded at $1.91 on Friday and $0.95 back on Sept 30.   FFH's $6 calls expiring in November 2023 for 55 million shares are worth a fair bit these days...


SJ

I just listed the BB convertible debs on my spreadsheet with no value/change in value. Any increase in value in these should be added to the $1 billion. Is it correct the increase would fall in the ‘mark to market’ bucket?


Those particular securities are not traded, so they would need to be marked-to-model rather than marked-to-market.  I presume that they would be included in the "mark to market" bucket in the same way that the value of the CPI derivatives are adjusted every quarter based on their modelled value.  However, we probably wouldn't even notice a ~$50m mark for the debs when they are included with all of the other changes in the $30B fixed income portfolio....


SJ

Got it :-) Thanks

With the spreadsheet i am trying to group the equity holdings based on how changes in their value show up in Fairfax’s reporting:
1.) holdings where changes in stock price/value flows though to earnings and impacts BV each quarter
2.) holdings where changes in stock price/value do not directly impact BV each quarter

—————————

Could be a busy 5 weeks for Fairfax to finish 2020.
1.) Does BAL / Anchorage transaction close?
2.) Does Fairfax Africa / Helios transaction close?
3.) Does Fairfax purchase OMERS stake in Eurolife? (2019 AR said this would happen in 2020)

I also wonder if they do not monetize something large to realize some cash. Last year it was Riverstone and ICICI Lombard. Before that it was First Capital.

There is also talk about Chen selling Blackberry's telecommunication patents in the range of $350-500M...which if it happens, may push BB's price up further.  Cheers!
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Xerxes

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Re: Fairfax 2020
« Reply #689 on: November 21, 2020, 07:22:34 PM »
Great stuff Vikings.
I think that is good measure (proxy) of intrinsic value (if not accounting value) and it serves the purpose to showcase improvement.

From an accounting point of view, the difference on the biggest mover (Atlas's common shares) can be noticeable. Atlas' earning was $84 million in Q3 2020, take 40% of that which is attributable to FFH, and then remove the dividend paid to FFH by Atlas from that figure, to remove the dividend double-counting, and there you have the addition to FFH book value. A small figure. Doesn't bother me though, i find equity method accounting to be conservative this way as it takes out the mark to market gyration for large position. In fact, i think (though haven't verified) the collapse of Blackberry shares in the past two years had 'damaged' the book value, due to its mark to market accounting.

On a different note, I am going to go out on a limb and make an unfounded prediction that Prem Watsa will do some relatively big buybacks in Q4 and Q1. He knows that any market weakness due to the second wave will be his last opportunity to take out a slug of shares below book value and as capital allocator he probably cherishes that. He just has to manage that along with $300 million use of cash for the jumbo-dividend and potential asset sale, while jumping through multiple hoops. My perception of Q3 call was that he was extremely busy, wanted to get the call finish as soon as possible by giving out vague answers while playing everything close to chest as it will be a busy quarter.