Corner of Berkshire & Fairfax Message Board

General Category => Fairfax Financial => Topic started by: petec on January 13, 2019, 01:50:02 PM

Title: Fairfax stock positions
Post by: petec on January 13, 2019, 01:50:02 PM
There's been a lot of commentary about how Fairfax buy junk rather than owning great businesses for the long term. I decided to do a quick review to see whether the current holdings fit that assumption and also to see how they stack up. I did this for myself but I'm sharing it in case it is useful. It's not deeply researched and I have probably missed some important ones, but in rough order of size here the ones I have looked at are:

Eurobank/Grivalia. I'll deal with these together since they will soon merge. Eurobank is one of the last 4 banks standing in Greece. This could become a very profitable oligopoly when Greece exits its depression, which it seems to be doing: GDP is growing, the fiscal and current accounts are in good shape, labour has regained competitiveness, unemployment is falling, and real estate prices are finally rising. Eurobank's nonperforming loans are fairly fully covered by provisions and collateral and the bank is profitable and generating capital every quarter. Grivalia is a leading Greek real estate company which has been picking up top assets at the bottom of the cycle. Postmerger (which also involves spinning a lot of the nonperformers out to shareholders as a bond) the bank will be well capitalised, profitable and trading on under 50% of book value. It won't pay taxes for years. There's a decent chance this is a major winner over the next few years.

Recipe. Canadian casual dining restaurant chain created by Fairfax, who hand-picked management and look to be long term owners. There's debate about the quality of some of the brands but the business of franchising restaurant brands is a sound one and the stock's not expensive. The last couple of years have been spent building and professionalising the management platform and it will be interesting to see what they can do with it over time. M&A is a goal.

ICICI Lombard. Fairfax cofounded this business with ICICI in the early 2000's and it has been a huge winner. They bought more as regulation allowed but then decided to sell down when ICICI decided on an IPO: ICICI still wanted control, and you have to list 20%, and Fairfax wanted a greater stake than would have been possible. They're now at 9.9%, the largest stake they can have and still control another insurer. That other insurer is Digit, a startup they expect to grow rapidly.

Fairfax India. Holding company created by Fairfax to buy and build businesses in India. Fairfax will hold it forever. Buys, on balance, high quality franchises with great growth prospects (Bangalore Airport).

Quess. Fairfax initially bought this fast-growing staffing company through Thomas Cook India and it has been a hugely successful investment. TCIL will spin it out in 2019 so it will become a direct investment. It continues to grow rapidly.

Seaspan. Container ship leasing company of which FFH could eventually own 40%, purchased via warrants at crazy attractive prices. The first stock on the list that clearly isn't a high quality business, in the sense that it's in a cyclical industry with no barriers to entry and a reputation for capital ill-discipline. But it is cheap, on a c.30% free cash flow yield and the supply side of the industry is the best it's been in decades. Also, there's a new management team who are proven hard-asset capital allocators. FD: I am long Seaspan and expect to do very well from Sokol's decisions over the next decade.

Blackberry. This can't be thought of as anything other than a mistake but for better or for worse Fairfax have stuck with it. They hand-picked the CEO who has done a good job of getting the company back to growth and FCF generation. Might be a winner in automated cars and the recent acquisition of Cylance may be a positive too (see most recent BB call for some breathless comments from an analyst). Hard to know but if I had to guess I'd say this was past the worst and the valuation is starting to look vaguely reasonable (at least on EV/EBITDA). FFH have huge leverage to the upside if this works soon: their stake basically doubles when the stock goes through $10 due to a $500m convert due 2020.

Thomas Cook India. India's leading travel agency. Fairfax has controlled it since 2012 and has used it to buy a number of related businesses from Kuoni. One gets the sense they're building a long term platform here in a growing and profitable industry.

Commercial International Bank of Egypt. High quality bank in an incredibly underbanked country. Consistently earns 30% nominal ROEs and Fairfax commentary suggests to me they will hold for a long time. Political risk is meaningful.

Resolute Forest Products. The worst on the list, for me. Fairfax have been involved for 11 years and haven't done well.

Kennedy Wilson is an active real estate manager which invests its own money alongside third party money wherever it finds value, and recycles capital regularly. Fairfax has owned shares since 2010. Growth for the next few years should come from completing developments and growing third party AUM (the company has $2bn in third party AUM and aims to add $1bn a year for the next several years). As of early 2019 the share price is $19 and JPM estimate the NAV is $26 going to $30 in 2020. The dividend is 4.4% and rising, and a buyback is in place. The founder/CEO owns 9% and Stanley Zax (Zenith) and Richie Boucher (BKIR) are on the board. As well as owning shares Fairfax have invested $700m alongside KW since 2010 and done well. (As an aside the annual letters say FFH initially bought 11.5m shares at an average price of $11.90, mainly through convertible prefs; this stake went to 12.2m at an average cost of $11.37; and then 12.3m at an average cost of $11.10. This implies a cost of $2.66 for the second purchase and a negative cost for the third, yet the shares never traded below $16. Either there's an error or FFH had a bizarrely juicy option, or they're doing something naughty like subtracting the dividend from the cost.)

Fairfax Africa Holdings. Holding company created by Fairfax to buy and build businesses in Africa. Fairfax will hold it forever. Has made a slow start but has some promising investments.

IIFL Holdings. Long term holding in a fast-growing financial services provider. FFH holds a direct stake as well as one through Fairfax India. Has been a huge winner.

Stelco. Recent (and comically poorly timed) investment in Canadian steel company recently out of bankruptcy. Not a good industry but stock is unencumbered and very cheap on near term cash flows. It also has real estate optionality and management who claim to be countercyclical capital allocators and who want to build a much bigger company when asset prices are cheap.

---

For me a few common themes seem apparent:

1) Fairfax are long term, patient value investors. Beyond that they are not easy to characterise. Sometimes that value is in cheap junk (Stelco). Sometimes it's in quality growth (Quess).

2) Many of these holdings are long term M&A platforms. Fairfax like partnering with (what they see as) good management to build businesses over decades. I suspect in some cases this will last for decades (Recipe, FIH, FAH, TCIL, maybe SSW). In many cases they build the platforms and pick the managers.

3) Fairfax take huge positions. On the downside this means they can't exit losers (RFP, BB, Eurobank). Even if they they eventually turn a profit, it's hard to see how they earn a good IRR. On the upside, when it works they end up with big stakes in huge winners (ICICI Lombard, Quess, IIFL).

4) Fairfax often get good terms for their shares (e.g. the SSW, KW, and BB converts, and the FIH/FAH fee structures) which skews the risk/reward in their favour.

5) On balance, I am inclined to think there is a lot of value in the portfolio currently.
Title: Re: Fairfax stock positions
Post by: StubbleJumper on January 13, 2019, 02:16:21 PM
Pete,

Thanks for taking the time to put together such a thoughtful post.  I would offer a couple of pieces (of shit) that you might add to your list:


1) Torstar

2) Churchill Railway

3) Toys R US (is this a POS or not, time will tell)


The three above don't cause me too much consternation as only the first was a meaningful portion of FFH's capital when it was acquired.  I don't think I need to talk about position sizing or exit strategies in this post.   ;D


SJ
Title: Re: Fairfax stock positions
Post by: petec on January 13, 2019, 02:32:51 PM
Pete,

Thanks for taking the time to put together such a thoughtful post.  I would offer a couple of pieces (of shit) that you might add to your list:


1) Torstar

2) Churchill Railway

3) Toys R US (is this a POS or not, time will tell)


The three above don't cause me too much consternation as only the first was a meaningful portion of FFH's capital when it was acquired.  I don't think I need to talk about position sizing or exit strategies in this post.   ;D


SJ

I was aiming for the big public positions. These are either small (now) or private. I always think it’s pretty tough to analyse the private ones given we seldom know the deal terms or postdeal performance.
Title: Re: Fairfax stock positions
Post by: StubbleJumper on January 13, 2019, 03:13:10 PM
Pete,

Thanks for taking the time to put together such a thoughtful post.  I would offer a couple of pieces (of shit) that you might add to your list:


1) Torstar

2) Churchill Railway

3) Toys R US (is this a POS or not, time will tell)


The three above don't cause me too much consternation as only the first was a meaningful portion of FFH's capital when it was acquired.  I don't think I need to talk about position sizing or exit strategies in this post.   ;D


SJ

I was aiming for the big public positions. These are either small (now) or private. I always think it’s pretty tough to analyse the private ones given we seldom know the deal terms or postdeal performance.


Well, Torstar is public and it used to be a big position.   ::)  Seriously, I don't have the historical cost handy, but the position was acquired in several tranches of ~$10m each, and appear to own about 41% of the non-voting shares.  It looks like the investment thesis was ill-conceived and I have doubts about whether FFH will ever be able to repatriate that capital.  In the context of today's capital level, it's small-change.  But, tack on some sort of reasonable return and a "good" investment of that magnitude *should*  have been worth several hundred million.

Error of commission, but they weren't the only people who mis-estimated the future of newspapers (and Harlequin books!).


SJ
Title: Re: Fairfax stock positions
Post by: FairFacts on January 13, 2019, 06:31:59 PM
Don’t forget Kennedy Wilson Holdings....
Title: Re: Fairfax stock positions
Post by: petec on January 13, 2019, 09:38:17 PM


Well, Torstar is public and it used to be a big position.   ::)  Seriously, I don't have the historical cost handy, but the position was acquired in several tranches of ~$10m each, and appear to own about 41% of the non-voting shares.  It looks like the investment thesis was ill-conceived and I have doubts about whether FFH will ever be able to repatriate that capital.  In the context of today's capital level, it's small-change.  But, tack on some sort of reasonable return and a "good" investment of that magnitude *should*  have been worth several hundred million.

Error of commission, but they weren't the only people who mis-estimated the future of newspapers (and Harlequin books!).


SJ

Agreed! I just didn’t want to end up looking at every investment they’d ever made so I limited myself to current needle-movers!
Title: Re: Fairfax stock positions
Post by: petec on January 14, 2019, 01:27:55 AM
Don’t forget Kennedy Wilson Holdings....

Good point. I haven't read much on it for a while. Will do so and revert.

I've also reordered the stocks to reflect current size. In total this lot adds up to about $5.4bn (I may have some of the share counts wrong given how they are spread across subsidiaries).
Title: Re: Fairfax stock positions
Post by: wachtwoord on January 14, 2019, 05:25:33 AM
Thanks for sharing!
Title: Re: Fairfax stock positions
Post by: wondering on January 14, 2019, 09:25:27 AM
I would like to know more about the Digit investment.  I realize that they are probably years from profitability, but I would like to know how revenues are growing.

I guess I will have my chance to ask at the AGM.
Title: Re: Fairfax stock positions
Post by: petec on January 14, 2019, 09:33:09 AM
I would like to know more about the Digit investment.  I realize that they are probably years from profitability, but I would like to know how revenues are growing.

I guess I will have my chance to ask at the AGM.

Please feed back if you get an answer.

The CEO there has a very impressive background. As I have said elsewhere FFH does seem to be able to attract real talent to its projects.
Title: Re: Fairfax stock positions
Post by: petec on January 15, 2019, 02:48:03 AM
Don’t forget Kennedy Wilson Holdings....

Good point. I haven't read much on it for a while. Will do so and revert.

I've also reordered the stocks to reflect current size. In total this lot adds up to about $5.4bn (I may have some of the share counts wrong given how they are spread across subsidiaries).

Edited for KW and with an additional observation at the bottom.
Title: Re: Fairfax stock positions
Post by: Dazel on January 19, 2019, 05:02:13 AM
https://ca.finance.yahoo.com/news/seaspan-announces-closing-second-500-000000115.html

This has been very profitable so far and has increased the investment portfolio’s yield on a billion dollars. I would imagine “any” sort of trade deal would be material to Seaspan and this investment.
Title: Re: Fairfax stock positions
Post by: petec on January 19, 2019, 06:15:02 AM
https://ca.finance.yahoo.com/news/seaspan-announces-closing-second-500-000000115.html

This has been very profitable so far and has increased the investment portfolio’s yield on a billion dollars. I would imagine “any” sort of trade deal would be material to Seaspan and this investment.

Trade deal?

Yes, the options were at phenomenal prices.
Title: Re: Fairfax stock positions
Post by: petec on March 29, 2019, 01:22:32 PM
Fairfax’s two biggest positions - Eurobank (proforma for the merger) and BlackBerry (assuming conversion) are on a tear this year. Eurobank produced good results with an excellent outlook; BlackBerry produced excellent results today.
Title: Re: Fairfax stock positions
Post by: investmd on March 31, 2019, 03:59:35 PM
Fairfax’s two biggest positions - Eurobank (proforma for the merger) and BlackBerry (assuming conversion) are on a tear this year. Eurobank produced good results with an excellent outlook; BlackBerry produced excellent results today.

Petec,
Thank you very much for sharing this analysis. Over past 5 years, insurance business operating results appear solid  but there has been essentially little change in market value of FFH. Going forward, hopefully Eurobank, Seaspan and Blackberry can drive equity investments results upwards and reflect in a substantial increase in market value. My expected outcome for investing is that FFH market value should increase AT LEAST 50% over MOST 5 year periods without including dividend payouts.

Doesn't seem like hope for significant stock buybacks will come to fruition. However, with good combo of insurance business and equity results, FFH should be in a position to deliver.
Title: Re: Fairfax stock positions
Post by: obtuse_investor on April 02, 2019, 02:08:21 PM
Just to normalize, 50% over a 5 year period is 8.44% annualized return.

I don't think anyone who owns FFH is expecting annual returns less than 10%. Maybe that is because of the 15% anchoring management has been doing.

Title: Re: Fairfax stock positions
Post by: shalab on April 02, 2019, 05:50:51 PM
People holding FRFHF have been very happy so far - it has essentially been flat for the past five years with a dividend yield of 2%/annum. As Biglari has shown, it is not the returns that matter, it is the ability to sell a story that does.

Just to normalize, 50% over a 5 year period is 8.44% annualized return.

I don't think anyone who owns FFH is expecting annual returns less than 10%. Maybe that is because of the 15% anchoring management has been doing.
Title: Re: Fairfax stock positions
Post by: petec on April 16, 2019, 05:46:37 AM
By my maths the top 4 positions are now:

$1bn Eurobank/Grivalia, which could have a long way yet to run.
$930m Blackberry (including the convertible at par) which seems to be gaining operating momentum.
$820m Seaspan (not including $500m of debt, but including the profit on the exercise of the third tranche of options, which are in the money).
$700m ICICI Lombard which has had a terrific run and which I suspect they might sell.
Title: Re: Fairfax stock positions
Post by: petec on April 27, 2019, 02:15:34 PM
Brief update on Resolute, which has slowly been sorting out its balance sheet:

FY18 ebitda: $570m.
FY18 FCF: $280m.
YE18 net debt: $340m.
Market cap: $700m.
FY19/20 consensus ebitda: $400m (ev/ebitda: 2.5x).
FY19/20 consensus FCF: $170m (FCF yield: 24%).

The glitch is that the pension liability is $1.25bn - if you include that the forecasted ev/ebitda is 5.5x.

Horrible industry and consensus is clearly forecasting that 2018's operating performance can't be sustained, but it feels like last year's $136m special dividend might not be a one-off. Fairfax owns an eyewatering 33.5%, worth $240m, and their share of the special was $45m.
Title: Re: Fairfax stock positions
Post by: petec on May 31, 2019, 08:41:37 AM
Eurobank (including Grivalia) is off to the races. $1.2bn position now and still very cheap.
Title: Re: Fairfax stock positions
Post by: petec on July 12, 2019, 11:14:22 PM
Quess just issued 9% of itself to Amazon at 676/share. The stock has been very weak this year and looks very cheap. It closed up 9% on the day at 480.

Also a pro-market won Greece’s general election last week, scoring an absolute majority in Parliament over the incumbent left-wing government.
Title: Re: Fairfax stock positions
Post by: wondering on July 15, 2019, 06:35:58 AM
petec, thanks for the continued updates on the FFH investments.  Sometimes, the investments that are outside of North American are harder to follow unless I make a conscious effect.
Title: Re: Fairfax stock positions
Post by: petec on August 22, 2019, 02:50:08 AM
Is anyone following Thomas Cook? I can't find a recent thread on it but it has halved over the last couple of months and was down 20% yesterday. Seems odd, even with the weakness in Quess.
Title: Re: Fairfax stock positions
Post by: wisdom on August 22, 2019, 04:34:06 PM
https://www.thomascook.in/press-release/statement-from-mr.-madhavan-menon-chairman-managing-director-of-thomas-cook-india-ltd./109
This may be a reason. Thomas cook plc going into bankruptcy.

Another Indian company king & Cox is also struggling in the travel industry.
Title: Re: Fairfax stock positions
Post by: cwericb on August 26, 2019, 11:42:30 AM
At least somebody still likes FFH...

https://seekingalpha.com/article/4287873-fairfax-market-yet-recognize-potential?dr=1
Title: Re: Fairfax stock positions
Post by: petec on August 27, 2019, 12:35:21 AM
https://www.thomascook.in/press-release/statement-from-mr.-madhavan-menon-chairman-managing-director-of-thomas-cook-india-ltd./109
This may be a reason. Thomas cook plc going into bankruptcy.

Shouldn't be. The two are unrelated apart from the use of the name. In fact the original TC going bankrupt might give TCIL the chance to buy the rights to use the name in India in perppetuity, which would be good.

Title: Re: Fairfax stock positions
Post by: wisdom on September 26, 2019, 08:01:24 PM
https://www.business-standard.com/article/companies/fairfax-financial-holdings-sells-5-in-icici-lombard-for-rs-2-562-crore-119092700048_1.html

$500 mil
Title: Re: Fairfax stock positions
Post by: JEast on October 18, 2019, 07:50:44 AM
Sold the last remaining 4.91% stake of ICICI Lombard for a slightly better price than the previous block.

https://www.business-standard.com/article/companies/fairfax-offloads-4-9-stake-in-icici-lombard-for-rs-2-627-crore-119101700048_1.html
Title: Re: Fairfax stock positions
Post by: bearprowler6 on October 18, 2019, 08:43:25 AM
Sold the last remaining 4.91% stake of ICICI Lombard for a slightly better price than the previous block.

https://www.business-standard.com/article/companies/fairfax-offloads-4-9-stake-in-icici-lombard-for-rs-2-627-crore-119101700048_1.html

JEast---any chance the team at Fairfax uses this to buy back their stock at its current levels? It would seem that a lasting benefit to all long suffering shareholders could be attained if the funds from the sale are used in this way?
Title: Re: Fairfax stock positions
Post by: JEast on October 18, 2019, 09:12:21 AM
Based on the recent short form notice, they have bought 65k since June 30.  Not anything like that have indicated that they would buy though, but with the caveat being that they needed the capital to buy more Brit/Allied.
Title: Re: Fairfax stock positions
Post by: valueinvesting101 on October 18, 2019, 11:01:55 AM
As per Fairfax India or Fairfax Financial annual report, Prem had indicated IIFL pre-demerger were trading at attractive valuation and now de-merged companies are even cheaper.  CSB Bank has also indicated that it is filing for IPO next month and some of the existing investors are also selling their holding in CSB.
Title: Re: Fairfax stock positions
Post by: investmd on October 19, 2019, 04:20:46 PM
By my maths the top 4 positions are now:

$1bn Eurobank/Grivalia, which could have a long way yet to run.
$930m Blackberry (including the convertible at par) which seems to be gaining operating momentum.
$820m Seaspan (not including $500m of debt, but including the profit on the exercise of the third tranche of options, which are in the money).
$700m ICICI Lombard which has had a terrific run and which I suspect they might sell.

Following up on results 6 months after this post on top 4 FFH positions:
Eurobank - UP 17%
Blackberry - DOWN 44%
Seaspan - UP 10%
ICICI Lombard - UP 16% (& recent FFH exit)

FFH share price over last 6 months - DOWN 11%

All of us are likely keen to see result of if/how FFH uses large cash position from recent ICICI Lombard sale to drive value for FFH.
Title: Re: Fairfax stock positions
Post by: Sombunall on October 20, 2019, 05:20:51 AM
Thanks for the summary. And yes, definitely keen to see what they'll do with the proceeds... I think anything less than more buybacks at this price would be a disappointment for most. We will see!
Title: Re: Fairfax stock positions
Post by: Viking on October 20, 2019, 11:53:19 PM
Thanks for the summary. And yes, definitely keen to see what they'll do with the proceeds... I think anything less than more buybacks at this price would be a disappointment for most. We will see!

I just listened to the WR Berkley Q2 call and Rob Berkely stated they feel pricing is firming. Fairfax said on the Q2 call that growing the business at their operations is a priority (to take advantage of the hard market that is developing) and you can see this in the growth they are posting. Fairfax also mentioned they are required to take out minority stakes in Brit and Eurolife in 2019. They also need to take out OMERS and their minority stake at Allied World at some point and this will be a big use of cash. So i am not expecting aggressive share repurchases until we get more clarity on how much new business they can write in the hard market and timing and cost on the minority buyouts.

They also appear focussed on harvesting some gains (ICICI Lombard) and also exiting some positions (Reitmans). If they do more of this then perhaps they will get more aggressive with share buybacks.
Title: Re: Fairfax stock positions
Post by: petec on October 21, 2019, 12:56:58 AM
Thanks for the summary. And yes, definitely keen to see what they'll do with the proceeds... I think anything less than more buybacks at this price would be a disappointment for most. We will see!

I just listened to the WR Berkley Q2 call and Rob Berkely stated they feel pricing is firming. Fairfax said on the Q2 call that growing the business at their operations is a priority (to take advantage of the hard market that is developing) and you can see this in the growth they are posting. Fairfax also mentioned they are required to take out minority stakes in Brit and Eurolife in 2019. They also need to take out OMERS and their minority stake at Allied World at some point and this will be a big use of cash. So i am not expecting aggressive share repurchases until we get more clarity on how much new business they can write in the hard market and timing and cost on the minority buyouts.


Exactly right, in my view. Pity.
Title: Re: Fairfax stock positions
Post by: Viking on November 03, 2019, 08:29:16 PM
Does anyone have an opinion of what positions Fairfax is looking to monetize next (stock holdings, affiliates etc)? This has the potential to be a nice short term catalyst for the shares. Here is what the company had to say on the Q3 conference call.

Paul Holden (CIBC): "...you referred to monetizations and process. I was wondering if we can kind of get a status update on that monetization and process and just a characterization of how far you think you're along in that process. Is there still a lot to potentially do there?"

Paul Rivett (Fairfax): "...So we're quite far along in the process. There -- we've got the whole Hamblin Watsa team from Prem right through working with us. A number of these things are close to fruition. A few that are more at the earlier stages. But as you can imagine, we can't give you specifics on it, but we're very happy that we're close to being able to get a few things across the line in the fourth quarter. ICICI Lombard was part of that. So you saw that we can act fairly quickly. But also, it's a -- we want to get best price and best execution, right? So we're working to -- we're getting -- we're working to do that for our shareholders."
Title: Re: Fairfax stock positions
Post by: petec on November 04, 2019, 02:42:09 AM
Does anyone have an opinion of what positions Fairfax is looking to monetize next (stock holdings, affiliates etc)? This has the potential to be a nice short term catalyst for the shares. Here is what the company had to say on the Q3 conference call.

Paul Holden (CIBC): "...you referred to monetizations and process. I was wondering if we can kind of get a status update on that monetization and process and just a characterization of how far you think you're along in that process. Is there still a lot to potentially do there?"

Paul Rivett (Fairfax): "...So we're quite far along in the process. There -- we've got the whole Hamblin Watsa team from Prem right through working with us. A number of these things are close to fruition. A few that are more at the earlier stages. But as you can imagine, we can't give you specifics on it, but we're very happy that we're close to being able to get a few things across the line in the fourth quarter. ICICI Lombard was part of that. So you saw that we can act fairly quickly. But also, it's a -- we want to get best price and best execution, right? So we're working to -- we're getting -- we're working to do that for our shareholders."

What I thought was even more interesting was the commentary later on about wanting a more diverse, more liquid portfolio, albeit still with a value/opportunistic bent. They were also quite explicit about not wanting positions over $1bn (although that would mean reducing Eurobank which I think is unlikely and a mistake at this point).

Short answer to your question is I have no idea what they will sell but the changes might go some way towards addressing a lot of the concerns raised here over the years.
Title: Re: Fairfax stock positions
Post by: bearprowler6 on November 04, 2019, 05:55:00 AM
Does anyone have an opinion of what positions Fairfax is looking to monetize next (stock holdings, affiliates etc)? This has the potential to be a nice short term catalyst for the shares. Here is what the company had to say on the Q3 conference call.

Paul Holden (CIBC): "...you referred to monetizations and process. I was wondering if we can kind of get a status update on that monetization and process and just a characterization of how far you think you're along in that process. Is there still a lot to potentially do there?"

Paul Rivett (Fairfax): "...So we're quite far along in the process. There -- we've got the whole Hamblin Watsa team from Prem right through working with us. A number of these things are close to fruition. A few that are more at the earlier stages. But as you can imagine, we can't give you specifics on it, but we're very happy that we're close to being able to get a few things across the line in the fourth quarter. ICICI Lombard was part of that. So you saw that we can act fairly quickly. But also, it's a -- we want to get best price and best execution, right? So we're working to -- we're getting -- we're working to do that for our shareholders."

What I thought was even more interesting was the commentary later on about wanting a more diverse, more liquid portfolio, albeit still with a value/opportunistic bent. They were also quite explicit about not wanting positions over $1bn (although that would mean reducing Eurobank which I think is unlikely and a mistake at this point).

Short answer to your question is I have no idea what they will sell but the changes might go some way towards addressing a lot of the concerns raised here over the years.

Given the comments made on the call related to a more liquid portfolio it would seem a number of existing private investments would be the initial candidates for monitization. The would also be consistent with the comment mae by Prem in his march/2019 letter to shareholders:

"We expect to monetize some of our remaining investments in private companies with similar results!"

Therefore the likely candidates would inlcude the following:

- APR Energy
-Davos
-Peak Performance (formerly Performance Sports)
-Farmers Edge
-Toys R US (land value which they continually say is the value of the investment made)
-Boat Rocker
-Sporting Life/Golf Town

Monitization could take several forms including IPOs and/or sale of a part  or whole of these investments to a private equity buyer.

The following from their public holdings are also possibilities:

-CIB (Egypt)
-Sterling Resorts (held through Thomas Cook)
-Thomas Cook itself
-Resolute Forest (take the hit and move on)


Title: Re: Fairfax stock positions
Post by: petec on November 04, 2019, 07:40:59 AM
    Does anyone have an opinion of what positions Fairfax is looking to monetize next (stock holdings, affiliates etc)? This has the potential to be a nice short term catalyst for the shares. Here is what the company had to say on the Q3 conference call.

    Paul Holden (CIBC): "...you referred to monetizations and process. I was wondering if we can kind of get a status update on that monetization and process and just a characterization of how far you think you're along in that process. Is there still a lot to potentially do there?"

    Paul Rivett (Fairfax): "...So we're quite far along in the process. There -- we've got the whole Hamblin Watsa team from Prem right through working with us. A number of these things are close to fruition. A few that are more at the earlier stages. But as you can imagine, we can't give you specifics on it, but we're very happy that we're close to being able to get a few things across the line in the fourth quarter. ICICI Lombard was part of that. So you saw that we can act fairly quickly. But also, it's a -- we want to get best price and best execution, right? So we're working to -- we're getting -- we're working to do that for our shareholders."

    What I thought was even more interesting was the commentary later on about wanting a more diverse, more liquid portfolio, albeit still with a value/opportunistic bent. They were also quite explicit about not wanting positions over $1bn (although that would mean reducing Eurobank which I think is unlikely and a mistake at this point).

    Short answer to your question is I have no idea what they will sell but the changes might go some way towards addressing a lot of the concerns raised here over the years.

    Given the comments made on the call related to a more liquid portfolio it would seem a number of existing private investments would be the initial candidates for monitization. The would also be consistent with the comment mae by Prem in his march/2019 letter to shareholders:

    "We expect to monetize some of our remaining investments in private companies with similar results!"

    Therefore the likely candidates would inlcude the following:

    - APR Energy
    -Davos
    -Peak Performance (formerly Performance Sports)
    -Farmers Edge
    -Toys R US (land value which they continually say is the value of the investment made)
    -Boat Rocker
    -Sporting Life/Golf Town

    Monitization could take several forms including IPOs and/or sale of a part  or whole of these investments to a private equity buyer.

    The following from their public holdings are also possibilities:

    -CIB (Egypt)
    -Sterling Resorts (held through Thomas Cook)
    -Thomas Cook itself
    -Resolute Forest (take the hit and move on)



    I believe they were considering Quess a while ago but I can't believe they would sell it at this price.

    I think CIB may be a very long term position given how profitable it is and how underbanked Egypt is. Maybe they'll merge it with ATMA one day ;)[/list]
    Title: Re: Fairfax stock positions
    Post by: Viking on November 06, 2019, 09:55:48 PM
    Petec, thanks again for getting this thread started and posting your summary :-) I have spend a couple of days of my life trying to figure out what the actual size of each of the various positions are (in $US). So I can understand magnitude and compare positions. I also want to be able to track them to understand how they will impact FFH results at quarter end. I have tried to determine the actual amount of shares Fairfax currently holds, what the share price is (local currency), total value of holding, currency conversion to $US etc. For those who like detail look at the attached Excel spreadsheet; hopefully it is not too confusing :-) Please let me know if you see and errors; for starters I am not sure if I have calculated Fairfax India and Africa correctly given what is reported on the Balance Sheet. And feel free to copy and use the spreadsheet to fit your needs. My plan is to try and get position sizes for as many holdings as possible, including private holdings (Toys 'R Us etc) so stay tuned. 

    Value (in millions) of Stock Holdings as of Nov 6 (all in $US). Percent = share of listed 15 holdings.
    1.) Eurobank =         $1,156  = 22% (C = common stock on balance sheet)
    2.) Seaspan =             $873  = 17% (A) (not including 25 million $8.06 warrants)
    3.) Blackberry =          $259  =   5% (C) (not including convert; it would be top 3 if included)
    4.) Recipe =                $467  =   9% (A = investment in associates)
    5.) Fairfax India =        $451  =   9% (A)
    6.) Thomas Cook India = $441 = 9% (A)
    7.) CIBank - Egypt =   $402  =    8%(C)
    8.) Quess =                $346  =    7% (A)
    9.) Kennedy Wilson =  $308  =    6% (C)
    10.) Fairfax Africa =     $155  =   3% (A)
    11.) Resolute =           $123  =    2% (A)
    12.) Stelco =                $99  =    2% (C)
    13.) IIFL Wealth =         $80  =    1% (A)
    14.) IIFL Finance =        $50  =    1% (A)
    15.) IIFL Securities =     $11  =    0% (A)             

    Total 15 positions =    $5,504 =  100%

    Some takeaways:
    - the big 3: Eurobank, Seaspan and Blackberry. All 3 have interesting stories with significant upside potential.
    - the India positions have been crushed over the past year (TCI, Quess, IIFL, FIH). If they are half as undervalued as FFH thinks there is big upside potential.
    - given its very small size we can put a pitchfork in Resolute = 2.4%. Bad purchase (happens). Time to move on
    - surprised with size of CIB; looks to be very well run. Chug chug holding (solid grower).
    - KW: another chug, chug holding (solid grower)
    Title: Re: Fairfax stock positions
    Post by: petec on November 07, 2019, 01:19:11 AM
    Thanks, Viking. This tallies with my version and you caught some CIB shares I had missed.

    Couple of thoughts:
    1) You're double counting Quess - it hasn't spun off from TCIL yet.
    2) I think you ought to subtract the cost of exercising the SSW warrants ($8.05 per share). So the value of the warrants is 25*(11.32-8.05).

    I see Exco has relisted. The stake is worth $10m. Another epic win :(
    Title: Re: Fairfax stock positions
    Post by: petec on November 07, 2019, 01:34:07 AM
    Incidentally I see that Recipe recently bought a decent chunk of its shares from FFH, who slightly more bought from the family; the net result is FFH owns slightly more shares and has an additional 4% of the equity, getting them to 48%. Recipe has also been adding to its stake in The Keg Income Fund and now have 29%.
    Title: Re: Fairfax stock positions
    Post by: petec on November 07, 2019, 11:10:28 PM
    Good set of results from SSW overnight. Accounting earnings were below expectations but operating results were superb (highest ever utilisation, costs down etc.) and cash flows continue to track towards $500m FCF to common excluding the big one off in q2. That puts the stock on a free cash flow yield of over 20%. Cash flows are growing as they pay down high cost debt/prefs and the company is highly liquid given the new debt facility they announced in q2, so expect them to ramp up acquisitions as they find targets that meet their requirements. Market remains tight and shipping rate commentary is positive.
    Title: Re: Fairfax stock positions
    Post by: thrifty on November 09, 2019, 12:41:03 PM
    Pete this thread is so useful. Thank you so much.

    Do you have more comments in SSW? What's their NAV for example in your calculation and what's your reason(s) to make it your biggest holding? How does it compare to cheaper names such as GSL in your opinion?

    Thanks again.
    Title: Re: Fairfax stock positions
    Post by: petec on November 18, 2019, 01:20:48 AM
    Pete this thread is so useful. Thank you so much.

    Pleasure, and glad you find it helpful.

    Do you have more comments in SSW? What's their NAV for example in your calculation and what's your reason(s) to make it your biggest holding? How does it compare to cheaper names such as GSL in your opinion?

    SSW isn't my biggest position and never had been, but it's a decent size. I've discussed it in some detail on the SSW thread but in short, what interests me is that I can buy 20c of free cash flow for every $1 I spend on the shares, and that FCF sits in the hands of an outstanding capital allocator. Clearly in an operationally and financially levered business, cash flows can be volatile. Two things give me some confidence here: the industry's record-low order book, and SSW's contracts, although I expect these to shorten over time. I don't look so much at NAV for various reasons and I haven't compared SSW to peers because I regard the management element as central to the thesis.

    I did lighten up the position at about $11.50, and would add to it if it fell sharply on e.g. macro concerns. They are running the business beautifully (safety rates, occupancy, innovative financing and contract structures - all matter because the customer base has consolidated and they want high quality providers). I think they have a great opportunity to consolidate their industry accretively and branch out into related industries. As a result the capacity to compound value per share at an attractive rate is immense, but the share price won't be a smooth ride and I hope to add rather than detract value by flexing the position size over time.


    Title: Re: Fairfax stock positions
    Post by: petec on November 18, 2019, 01:54:49 PM
    Fairfax appears to be reducing Eurobank. Bloomberg says that in an emailed statement the bank announced Fairfax’s voting rights had fallen below one third, to 1.160m. I assume that means they’re selling shares.
    Title: Re: Fairfax stock positions
    Post by: TwoCitiesCapital on November 18, 2019, 06:14:54 PM
    Fairfax appears to be reducing Eurobank. Bloomberg says that in an emailed statement the bank announced Fairfax’s voting rights had fallen below one third, to 1.160m. I assume that means they’re selling shares.

    Held for years. Diluted to Oblivion. Re-upped their capital commitment. Held for more years. And then they reduce right before the real money seems it's going to be made?

    Seems odd.
    Title: Re: Fairfax stock positions
    Post by: petec on November 18, 2019, 11:36:38 PM
    Fairfax appears to be reducing Eurobank. Bloomberg says that in an emailed statement the bank announced Fairfax’s voting rights had fallen below one third, to 1.160m. I assume that means they’re selling shares.

    Held for years. Diluted to Oblivion. Re-upped their capital commitment. Held for more years. And then they reduce right before the real money seems it's going to be made?

    Seems odd.

    It does. In reality it’s a tiny reduction but I agree it feels like they’re leaving a lot on the table.
    Title: Re: Fairfax stock positions
    Post by: petec on November 24, 2019, 12:07:20 AM
    For those not watching the Seaspan thread, Fairfax have sold their private holding APR to Seaspan. APR owns and leases rapid-deployment power generation units so this gives Seaspan an entirely new vertical. It also increases Fairfax's position in Seaspan still further. The deal appears to be done at Fairfax's current carrying value for APR (67.9% stake * $425m equity value = $298m APR valuation at YE18) so no gain for Fairfax, but it does boost dividend income (I don't think APR paid a divi as it needed all its cash flows to reduce debt; Seaspan shares do pay a dividend). I have not yet listened to the Seaspan investor day which was held on Friday but I believe they said they bought APR for less than 5x ebitda and gave reasons for why it would do better under Seaspan than Fairfax.

    Seaspan will convert to a holding company (Atlas) and aims to continue diversifying in hard asset asset management under Sokol. I think Seaspan, Recipe, FIH, and FIH can all be viewed as long term Fairfax partnerships in their respective niches.
    Title: Re: Fairfax stock positions
    Post by: petec on December 04, 2019, 08:00:52 AM
    I had a feeling this might happen: with Thomas Cook in bankruptcy, Thomas Cook India has bought the rights to the brand for about $2m. Previously their right to use the brand was set to expire in a few years.

    EDIT: Actually I think they only bought it in certain countries. They didn't buy it in India - someone else paid $13m, which suggests TCIL don't think the brand is very valuable.
    Title: Re: Fairfax stock positions
    Post by: gary17 on December 04, 2019, 08:11:48 AM
    SSW is doing well.
     8)
    Title: Re: Fairfax stock positions
    Post by: petec on December 05, 2019, 10:06:29 AM
    SSW is doing well.
     8)

    And I felt so smart (briefly) for lightening up at $11.50!

    Thankfully I still have most of my position. Seaspan is the next Brookfield*. You heard it here first.

    *This is a joke. Sort of.
    Title: Re: Fairfax stock positions
    Post by: FFHWatcher on December 06, 2019, 05:23:58 AM
    SSW is doing well.
     8)

    And I felt so smart (briefly) for lightening up at $11.50!

    Thankfully I still have most of my position. Seaspan is the next Brookfield*. You heard it here first.

    *This is a joke. Sort of.

    I heard it here 2nd...
       
    ieb4
    Comments288 | + Follow
    i am not in disbelief, management has been saying for some time that they will be diversifying the business while at the same time maintaining dominance in container space and expanding there as well. was the Swiber deal not a hint that this was a path forward? also, it is not as if they are abandoning shipping (witness their two deals in last few months to expand fleet).
    but it is clear they want a higher multiple for the stock, going the asset manager route is certainly one way if they execute and make smart, accretive acquisitions. i again point to brookfield asset management and brookfield infrastructure as entities for comparison (although brookfields are not maritime, more railroads, toll roads, data-center, communications etc)
    definite fork in the road here...i'm choosing to stay the course and go with management's vision of future, not selling any shares and reinvesting all dividends.
    good luck to all who sell.
    Title: Re: Fairfax stock positions
    Post by: petec on December 06, 2019, 06:11:09 AM
    Ha - where’s that from?
    Title: Re: Fairfax stock positions
    Post by: FFHWatcher on December 06, 2019, 07:34:15 AM
    Ha - where’s that from?

    It's from Seeking Alpha.  SA has quite a few SSW followers. J Mintzmyer is a contributor at SA and he seems to spend all or most of his time analyzing the shipping sector.  He seems to be a good resource and knows his stuff.
    Title: Re: Fairfax stock positions
    Post by: ValuePadawan on December 06, 2019, 02:00:29 PM
    I like Mintzmyer I like his sector analysis but he seems to have a bit of man with a hammer syndrome and when he talks about Seaspan he doesn't see the value in the new direction the management team is taking.
    Title: Re: Fairfax stock positions
    Post by: steph on December 09, 2019, 01:47:38 AM
    Thomas Cook was down 50% last week. Is that related to spin off of Guess?
    Title: Re: Fairfax stock positions
    Post by: petec on December 09, 2019, 03:00:23 AM
    Thomas Cook was down 50% last week. Is that related to spin off of Guess?

    Yes. Adjusted for that I believe it was actually up quite a bit, although I haven’t double checked that.
    Title: Re: Fairfax stock positions
    Post by: steph on December 09, 2019, 03:28:09 AM
    Thomas Cook was down 50% last week. Is that related to spin off of Guess?

    Yes. Adjusted for that I believe it was actually up quite a bit, although I haven’t double checked that.

    Thx! Momentum seems positive recently on some important positions
    Title: Re: Fairfax stock positions
    Post by: Viking on December 11, 2019, 05:17:18 PM
    Here is an article discussing Quess demerger from Thomas Cook India (written Dec 5) and what TC India looks like moving forward.

    After demerger of Quess Corp, the standalone business of Thomas Cook India looks interesting with a reasonable valuation- https://www.freepressjournal.in/business/thomas-cook-india-is-the-noise-hiding-an-undervalued-gem

    “What exactly is happening with Thomas Cook India? Thomas Cook India holds about 50% stake in Quess Corp. In order to simplify the corporate structure, the management decided to demerge the company’s holding in Quess Corp. Essentially, shareholders of Thomas Cook will receive shares of Quess after about 2 weeks. The ratio, which was announced about a year ago, stands such that for every 100 shares of Thomas Cook, shareholders will receive 18.89 shares of Quess Corp.
    Title: Re: Fairfax stock positions
    Post by: Viking on December 12, 2019, 10:30:33 AM
    Fairfax’s second largest investment is Eurobank. The recent election of a pro-business government (and the fact they secured a majority) is a big deal. For Eurobank, positive that ‘Hercules’ plan is moving forward (will remove a large chunk of non-performing loans from balance sheet of banks). Real estate prices are up 7% year over year; expected to increase at faster rate over next year; also very positive for banks (their main form of colateral). While Greece continues to have its share of issues, it does look to be improving with an improving outlook and this bodes well for Eurobank stock in the coming years.

    Dec.09 -- Alex Patelis, chief economic adviser to Greek Prime Minister Kyriakos Mitsotakis, discusses his expectations for Greece's economy and the Hercules plan. He speaks on "Bloomberg Markets: European Close."
    - https://www.msn.com/en-us/money/videos/greece-could-cut-np-stock-by-half-with-hercules-scheme-patelis-says/vi-BBY0t8W
    Title: Re: Fairfax stock positions
    Post by: Viking on December 16, 2019, 03:09:17 PM
    Here is an update of Fairfax’s Seaspan investment as of today:
    1.) $500 million / $6.50 per share = 77 million shares
    - $14 (share price today) - $6.50 (cost) = $7.50 = $578 million
    - investment was made in two stages; 1/2 in early 2018 and 1/2 in early 2019
    2.) 25 million warrants: $14 - $8.05 (exercise price) = $5.95 x 25 mill shares = $149 million
    - awarded early 2019
    - not sure how FFH values these as i dont think they have been exercised

    3.) APR Energy: $300 mill / $11.10 per share = 27 million shares
    - $14 (share price today) - $11.10 (cost) = $2.90 x 27 million shares = $78 million
    - my estimate of what FFH will get when deal closes in Q1 2020 (deal was announced Nov 2019)

    Bottom line, as of today FFH is up on its Seaspan investment (since inception) $578 + $149 + $78 = $805 million. Yes, it is a paper gain as Seaspan looks to be a long term hold. It does demonstrate how FFH swings for the fences when it invests. And when it connects the returns can be very good (in thiscase 24 months later).

    4.) senior notes 2023 = $500 million at 5.5% = $27.5 million interest income each year

    This part of their investment is icing on the cake.

    On Sept 30 Seaspan was trading at $10.63. Trading at about $14 today stock is up 32% in past 10 weeks.
    Title: Re: Fairfax stock positions
    Post by: petec on December 17, 2019, 12:41:01 AM
    Here is an update of Fairfax’s Seaspan investment as of today:
    1.) $500 million / $6.50 per share = 77 million shares
    - $14 (share price today) - $6.50 (cost) = $7.50 = $578 million
    - investment was made in two stages; 1/2 in early 2018 and 1/2 in early 2019
    2.) 25 million warrants: $14 - $8.05 (exercise price) = $5.95 x 25 mill shares = $149 million
    - awarded early 2019
    - not sure how FFH values these as i dont think they have been exercised

    3.) APR Energy: $300 mill / $11.10 per share = 27 million shares
    - $14 (share price today) - $11.10 (cost) = $2.90 x 27 million shares = $78 million
    - my estimate of what FFH will get when deal closes in Q1 2020 (deal was announced Nov 2019)

    Bottom line, as of today FFH is up on its Seaspan investment (since inception) $578 + $149 + $78 = $805 million. Yes, it is a paper gain as Seaspan looks to be a long term hold. It does demonstrate how FFH swings for the fences when it invests. And when it connects the returns can be very good (in thiscase 24 months later).

    4.) senior notes 2023 = $500 million at 5.5% = $27.5 million interest income each year

    This part of their investment is icing on the cake.

    On Sept 30 Seaspan was trading at $10.63. Trading at about $14 today stock is up 32% in past 10 weeks.

    It's been a spectacular investment.

    I posted an updated valuation on the SSW thread yesterday, if that's of interest.
    Title: Re: Fairfax stock positions
    Post by: Xerxes on January 06, 2020, 08:19:36 PM
    Howdy folks,
    My new year resolution has been to join this board and stop being cheap (the $29 fee) and start to contribute to a great forum that I have been over-learning from.
    So I joined:

    I will add this company as well to this list of FFH's holding: AGT Food and Ingredients.
    It was taken private a while back. Here is an article from earlier this year on how the likes of Beyond Meat are creating more demand for AGT Foods. Unrelated to peas, the podcast talks also about how their (AGT/FFH) control of railway to the Port of Churchill present them with a nice long-term play real option (as Arctic recedes) as that is the only major railway heading that way, and IIRC Churchill is the only Arctic port on the Canadian side .. vs .. several or so on the Russian side.

    https://business.financialpost.com/commodities/agriculture/peas

    Here is the CEO on podcast with the Canadian Club of Toronto that I had found to be super interesting. You will find many other interesting podcasts well.
     
    https://player.fm/series/series-2416203/murad-al-katib-president-and-ceo-agt-food-and-ingredients-inc

    Title: Re: Fairfax stock positions
    Post by: Sombunall on January 07, 2020, 04:59:35 AM
    Welcome Xerxes. And thank you for this. I look forward to your future contributions!