Investment Q&A

Q: Fairfax is off 5 per cent on earnings. What do you think?

Q: Hi Peter, Can you please suggest me 5 names based on today's price which I will hold until 2030 and those will have a good growing dividend? Does Fairfax financial qualify? I just mentioned FFH as I am looking for those names that will predictably increase book value and dividend on a 15% CAGR basis for next 15 years. Just want to mention that the changes 5i made to the site is very effective. Great service!!

Q: Hi Peter, I know the question I am asking is very hard to predict/answer. Although I would appreciate if you give it a shot.

I currently have your growth portfolio and some stocks from your balance portfolio on a margin account. I have some US growth stocks too(like AGN, CERN, BIDU). I have enough cushion but I do have 30% of my portfolio on margin. I would appreciate if you just do not advice me not to use margin(like other financial professionals).

My question is do you think considering all current turmoil and risks looming(US election, oil price, global recession), should I be better off taking some profit off the table? I was reading Prem Watsa's 2016 letter and he was very negative things to say regarding current valuation. Basically what do you think Canadian/US market would be at year end? Do you think there might be some opportunity(like last August or October or like Feb 2016)? I would really appreciate your insight. What would you do in this situation if you are in my shoes?

Q: Hi,

I am considering buying a FFH bond. I do have some bond ETF's but I like the certainty of a known maturity date when I get my original investment back and the ability to select the company. I have never owned a bond directly and would like your advice. Two concerns: 1) trading fees from BMO investorline seem quite high at 1% plus there is no bid/offer spread so they probably gouge me on that too. 2) Specific to FFH the +3% yield seems high compared to other names which I presume implies it is riskier. I understand FFH have a lot of equity hedges to protect against deflation so wouldn't that mitigate risk? Am I crazy to start down this path and am I missing something wrt to FFH in particular?

Q: Although FFH is known to have hedges in the case of a Black Swan event, the long term chart still looks good. Is this basically a "no-brainer" where you can buy the stock and see it appreciate in both bear and bull markets?

Q: Hello to all at 5i!!! Fair fax seems to have had a good run in the past. Is it still a worth while investment for a 5-10 year hold? It has a hefty price tag. If you think not, could you give me a suitable stock alternative of a similar nature. Thank you, Tamara

Q: Do you know how one would go about purchasing Fairfax "7.375% Senior Notes due April 15, 2018" (they don't seem to be listed in TD's quote system)? Also, could you please explain what "Senior Notes" are and what level of risk they have i.e. riskier than equity, preferred's etc. Thank you.

Q: I know you generally recommend that anyone who is worried about the market move to cash, but I am curious as to how a professional hedges. When Prem Watsa says that Fairfax is 100% hedged what does that mean? If Fairfax’s market holdings drop 30% does it mean that their hedge will earn them the equivalent amount so that the net will be neutral? Does it work the same if their holdings increase in value? (i.e. any gains would be offset by losses in the hedge) What investment vehicle would Prem Watsa likely be using to hedge and what would the cost likely be in terms of percentage of total holdings?

Q: Whats your view on the recent commentary by Fairfax CEO Prem Watsa on stocks being very risky still.

Q: Good day,
I have been considering trimming if not selling my insurance exposure out right because of falling interest rates. With more and more Central Banks experimenting with negative rates it is possible that eventually Canada and the USA try out negative rates. Would there be any merit in selling GWO,MFC,SLF to buy FFH? My rationale is I could maintain some insurance exposure but if the whole system implodes (this is why they are considering negative rates to begin with because traditional monetary stimulus isn't working), clearly there must be some risks of a black swan event out there. Like you, I don't like to go zero weight any sector so this way I could maintain insurance exposure but also have down side protection? Or should I keep it simple and simply reduce my insurance weight.. Thanks.

Q: Not really a question, more a reminisce and comment on the shorts.I recall years ago a short attack on Fairfax Financial, I think it came shortly after they listed in the U.S. The stock was driven down into the $70 dollar range. The innuendo was that Fairfax management was using off-shore companies in a less than kosher way. I just looked at my FFH this morning and it is at $650, high earlier this year $739.
Best defense against shorts (the mudslinging variety) is to know the company and have faith in your investment analysis and the management (and of course one particularly un-conflicted investment web site).
Many thanks to the 5i staff.
Mike

Q: Hi Guys,

I have a large loss with a Fairfax Financial preferred (FFH.PR.I).

I was thinking of selling it and then purchasing FFH.PR.G. I would be in almost the same position as if I kept the original preferred but I would have a large tax loss to use. I would lose 29 basis points on the new rate and the reset would be a couple of months earlier but I would gain on the selling of FFH.PR.I ($15 bid) and purchase of FFH.PR.G ($13.70 ask).

Your comments would be most appreciated on this move.

Regards
John

Q: Can you please comment on FFH series C Pref. The last 2 dividend payments the Pref. paid out was less than the previous 20 dividend payments dating back to Dec. 2009. I did not see any news release stating the Board of Directors voted to reduce the dividend. If their was a news release would management have stated WHY they cut the dividend ? Would we have received something in the mail ? The share price closed at $19.40 today,down significantly from the $25 issue price. I thought the dividends on prefs are pretty much a safe thing.

Q: Hi Team,

I just noticed a headline (http://business.financialpost.com/news/fp-street/fairfax-financial-holdings-ltd-says-insider-trading-probe-of-prem-watsa-tied-to-fibrek-inc) about possible insider trading at FFH. It seems this is not "new" news. Do you have any comments on the implications for holding stock in this company?

Many thanks.

Michael

Q: Hi Peter and Team,

Would you consider Fairfax Financial Holdings a good buy at today's price? I has been down in recent weeks. Would it be better to wait a bit longer in case the downward trend continues? The company reports on April 30th.

Thanks, as always, for your insight.

Michel

Q: What is your opinion of this company? It's PE ratio looks attractive and it has been able to deliver consistent results over time. Is my first impression accurate? Does it deserve a second look?

Thanks a million...Alastair Allan

Q: Hello, I would like to have your thoughts on Fairfax preferred share issue. The 4.75% yield seems appealing. What is the major risk ? If rates go up could I be stock with a capital loss and not be able to sell the shares in 5 years at par ? I think that is what stopped me from buying preferred in the past. The reset rate seems appealing to me.

http://www.fairfax.ca/news/press-releases/press-release-details/2015/Fairfax-Announces-Preferred-Share-Issue/default.aspx

I also saw a TRP issue at a yield of 3.8%. Can you please comment on this one as well.

I am considering buying a good position of FFH and some TRAP for the fixed incomre portion of my portfolio. Thank you.

Q: I own the above reference rate reset preferred shares,. All of the share were bought at the issue price of 25.00 and all are now underwater. It appears that recent rate reductions by the Bank of Canada have pushed their value further down. My question ,are these shares permanently impaired or if the five year rate were to increase, significantly, in five plus years would they return to their 25 dollar value. Is there in effect a type of " option" not reflected in the current price. Thanks

Q: Hello Peter,
Fairfax has been on a roll lately. The fundamentals are good from PE and ROE, but the technical now are over bought (RSI). Any reason why the stock continues upward? I do not see any news other than Fairfax india IPO and potential Blackberry takeover (as Fairfax owns 10% of the company). Any comments. Also, to de-risk my portfolio, if I am to put more money in Fairfax, is it better to add to FFH or use those proceeds to invest in FIH (Fairfax india ) once the IPO stables (as you had indicated in prior replies about potential of fee covering of 8% from brokers etc from IPO). I have seen your replies on Knight Therapeutics that is a sector and management bet. When it comes to companies like these, does one simply go on technical charts to buy and sell as there is not much in terms of fundamentals to base the buying decision (what price to pick it up at). Also, BioSyent has been referenced as the next potential Paladin Labs. If so, can you see a potential of Knight buying BioSyent? Thanks again and appreciate the detailed replies you provide.

Q: What do you think of buying a 5% position in FFH as a hedge against shocks to the market? It seems to be negatively correlated with the general market. Also what do you make of its recent significant rise?
Thank you for your advice.