It is a bizarre pick for Muddy Waters (MW), in that it is fairly large, is VERY cheap (5X earnings, cheap also compared to book value) and the short position is actually very small (0.7% in Canada, 0.42% in the US). Also MW says it is worth 18% less than market price, which is not really an aggressive short target. The stock can see that type of drawdown in any bad market anyway. MW goes through various acquisitions of FFH and picks each apart for various reasons, some valid, some less so. FFH is not perfect. But it usually (not every year) generates substantial cash flow, and cash cannot be easily managed or 'manipulated'. It has a strong record of dividends. It has a very strong record of profitability. As a 'deal maker' and a value investor, not all of its buys are going to work. Its insurance operations do have variability. But, all of this is reflected in its very low valution. FFH has already responded, with, essentially, 'whatever. We're good. We have record earnings and investors can ask questions next week on our quarterly conference call'. We like this response. It plans on letting the numbers do the talking. The short report is 72 pages long so we some more time on all of it, but nothing we see really looks to concerning to us, for a company that has a pretty solid long term history of growth and cash flow. We would be fine accumulating a bit into today's panic.
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