Angela Barnes of the Globe and Mail reports on Fairfax Financial (FFH/NYSE) potentially booking big gains on its holdings of credit default swaps (CDS):
Stephen Boland, who follows the Toronto-based firm for CIBC World
Markets Inc., said in a recent report that he believes the market value
of Fairfax's CDS positions, which soared in July, will continue to
increase and that Fairfax could realize an even higher gain through the
next quarter as credit conditions in the United States deteriorate.
And Mark Dwelle, an analyst with Ferris Baker Watts Inc., also has
suggested that Fairfax could realize some upside from its derivative
positions beyond the $23.50 a share he estimates the firm will earn
this year.
"It could be a blowout quarter," Mr. MacKinnon said in a report
yesterday. "We see lots of potential [earnings per share] upside for
Fairfax - nearly $25 per share - if credit default swap spreads hold
their current levels through" to the end of September, he added.
If you're a regular reader of Controlled Greed.com -- or just a longtime investor in Fairfax stock -- you know the company's shares are subject to significant price swings. That's because there's relatively little float and a lot of short interest.
And should the analysts prove correct about the company's credit default swaps, we'll see another big swing. To the upside.
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