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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Greetings Team 5i,
With it looking like an increase in interest rates coming soon, and understanding that insurance companies appreciate higher interest rates, I would like to add to my holdings in that sector. I realize you like Sun Life SLF and I'm thinking of taking a position but I'm also interested in Fairfax Financial FFH. I would appreciate your opinion of FFH and the wisdom of taking a position in it at this time.
As always, thanks for your guidance.
Read Answer Asked by Les on September 16, 2014
Q: Hi Peter- This question is about Fairfax Financial Rate Reset Preferred Shares. FFH.C can be called in Dec./2014. Between now and then you will get 8 dividend payments totalling $2.88. It currently trades at $25.87. There will be a loss of 87 cents meaning that your profit is $2.01 share or 3.9% over 2 years.
FFH.G gets called in Sept/2015. There will be 11 payments totalling 3.44. It is trading at $24.70, so add a 30 cent gain for a profit of $3.74 a share or 5.5% per year over 2.75 years.
The one that seems to be too good to be true is the FFH.PR.E which expires in between these two in March 2015. It trades currently at only $23.11. A gain of $1.89. With 9 payments totalling $2.67, you have a total gain of $4.56 on an investment of $23.11 or an amazing 8.8% average annual return over 2.25 years. What am I missing? You have 3 pref issues with a relatively close annual dividend and relatively close call date but with extremely different market values. Same company. All Rate Reset. Is FFH.E a buy?
Read Answer Asked by RANDY on January 09, 2013