PVF - Partners Value Investments LP

[rkbabang]

Anyone else own PVF and hold it in their Fidelity account?  My account still shows my shares, but I can't get a quote from Fidelity anymore (last few months or so) and for the hell of it I tried clicking on "trade" to see what would happen and I get "PVF_U:CA is an unknown symbol. Please try again, or click Find Symbol for help."  I think I'm going to have to call Fidelity to ask them what is going on, but I thought someone here might know.

 

BTW, I'm surprised this topic didn't yet exist on this board.  PVF holds a ton of BAM stock, is thinly traded, and regularly trades below book value.  You can get good prices with limit orders and some patience.

 

http://www.pvii.ca/

 

[Broeb22]

They also own shares in an insurance subsidiary, Trisura Group, that BAM spun off, which I own stock in, and believe could be an interesting vehicle, and has received praise from Bruce Flatt in the 4Q2016 letter.

 

 

 

[klipbaai]

Partners Value Investments Inc was reorganized some time ago. If you owned it prior to the reorganization, you now own Partners Value Investments LP, some Prefs and some warrants. See SEDAR for details. The trading symbols have changed.

[rkbabang]

Partners Value Investments Inc was reorganized some time ago. If you owned it prior to the reorganization, you now own Partners Value Investments LP, some Prefs and some warrants. See SEDAR for details. The trading symbols have changed.

 

No that was in the summer of 2016, I did all of my buying in early 2017 Jan-March.  I can't find anything that has changed since then.

 

[klipbaai]

Different platforms seem to use different conventions for trading symbols for securities that are not 'vanilla' equities. You might try PVF.UN and other variations thereof. Or try comparing to Fidelity's listing for BPY.UN (Brookfield Property Partners) for an example of an LP that trades in much higher volumes and hopefully should be easier to find on their platform.

 

Since 'Inc.' was the predecessor to the now-listed LP, it might avoid some confusion for others if you were to retitle the thread accordingly.

[rkbabang]

Different platforms seem to use different conventions for trading symbols for securities that are not 'vanilla' equities. You might try PVF.UN and other variations thereof. Or try comparing to Fidelity's listing for BPY.UN (Brookfield Property Partners) for an example of an LP that trades in much higher volumes and hopefully should be easier to find on their platform.

 

Since 'Inc.' was the predecessor to the now-listed LP, it might avoid some confusion for others if you were to retitle the thread accordingly.

 

I just got off the phone with them and they said since it is such a thinly traded stock (8 trades since August) it isn't available for online trading on their platform anymore. If I want to buy or sell I'll need to call them to place the order.  That is why my account lists my shares but doesn't list pricing information for it.  I don't know why it was available on their online platform earlier in the year, but not now.  I plan on holding anyway.  So if anyone wants to buy this at Fidelity you will need to call the international trading dept to place the order.

 

[EricSchleien]

I had some issues with this security too via IB. Often the bid/ask spread was too high for "market rules" and I'd have to call IB trading desk directly to get permission to make a bid.

[EricSchleien]

Bought some more recently. Trading at a pretty large discount to NAV and much higher than their historical discount.

[rtvinvest]

Bought some more recently. Trading at a pretty large discount to NAV and much higher than their historical discount.

 

Hi Eric,

 

what's your estimate for the discount? Also, are there any tax considerations if PVF decides to liquidate shares?

 

Thannks

[EricSchleien]

Bought some more recently. Trading at a pretty large discount to NAV and much higher than their historical discount.

 

Hi Eric,

 

what's your estimate for the discount? Also, are there any tax considerations if PVF decides to liquidate shares?

 

Thannks

 

 

They aren't going to liquidate shares. David Clare, the VP of the company and the person who handles investor relations (even though I doubt he really ever gets emails or calls) has made it very clear to me that the reason for the existence of PVI was to create a vehicle for management. He told me that 90% of the float is controlled by Bruce Flatt and other BAM management. So they aren't going to liquidate their shares.

 

As for the discount -- just to avoid being asked what the discount is all the time, it's very simple calculation. Go their financials. Take their BAM stake (which is the majority of their book value) - and get a NAV of the price. Then you can take off the other numbers from their balance sheet. The only thing you won't know is their exact value of their other portfolio holdings. However, you'll still be in the ballpark of NAV.

 

Make a spreadsheet and keep track. The partnership has on average traded at 10% discount to NAV. I've added when discount gets to around 20%.

 

However, if you are a believer in the future of BAM and like the valuation here (which I personally do), then PVI will do better than BAM over time due to leverage.

 

At this point if I had to choose BAM and PVI, I'd take PVI as I believe in 10 years from now PVI will be worth more than BAM.

 

If you are using IB, you may have to call them because often the bid/ask is above the price cap. Also with IB, you can only buy this through the app and not through the web trader. Not all brokers will let you buy this either.

 

I personally had to once call IB and then they had to call the exchange to get permission for me to purchase shares since my order was above the price cap (at one point I was nearly 100% of the trading volume for a few months). So just be mindful of that if you decide to buy units.

 

Also please take none of this as stock advice.

 

[petec]

 

However, if you are a believer in the future of BAM and like the valuation here (which I personally do), then PVI will do better than BAM over time due to leverage.

 

 

Did this actually happen with PVI's predecessor? I seem to recall checking several years ago and finding that reality had not matched theory in this regard!

[EricSchleien]

If you have further questions, please contact the VP, David Clare. He can be reached here: dclare@pvii.ca

 

 

[John Hjorth]

 

However, if you are a believer in the future of BAM and like the valuation here (which I personally do), then PVI will do better than BAM over time due to leverage.

 

 

Did this actually happen with PVI's predecessor? I seem to recall checking several years ago and finding that reality had not matched theory in this regard!

 

Hi Pete,

 

PVI's predecessor actually still exists, as I understand things. It's the primary sub [an Inc., if I remember correctly] of PVI.UN, basically holding the BAM shares as primary activity, that gives the BAM partners an actual controlling interest in BAM.

 

So the LP basically introduced yet another layer of leverage.

[EricSchleien]

I would add that I find it interesting how many small value guys won't touch this due to lack of liquidity. Blew my mind.

 

“Liquidity should be avoided. It comes at a heavy price in the

shape of lower returns.”

 

David Swensen

[racemize]

It looks interesting to me, but I think it has a lot of not great tax implications for U.S. investors.  Anyone chime in?

[Maple Fun]

I would add that I find it interesting how many small value guys won't touch this due to lack of liquidity. Blew my mind.

 

“Liquidity should be avoided. It comes at a heavy price in the

shape of lower returns.”

 

David Swensen

 

I feel a discount may be granted here. Have you considered the dilution effect of outstanding warrants as you calculated the discount?

[EricSchleien]

Yes and they already do that when they announce their quarterly results:

 

http://www.pvii.ca/content/news/partners_value_investments_lp_announces_2017_third-44789.html

 

 

"The basic weighted average number of Equity Limited Partnership (“Equity LP”) units outstanding during the three and nine months ended September 30, 2017 was 73,541,131 and 73,541,210 respectively. The diluted weighted average number of Equity Limited Partnership (“Equity LP”) units available and outstanding during the three and nine months ended September 30, 2017 was 88,249,897 and 88,249,976 respectively; this includes the 14,708,766 Equity LP units issued through the exercise of all outstanding warrants."

[John Hjorth]

Bumping Joels post here.

 

It looks interesting to me, but I think it has a lot of not great tax implications for U.S. investors. Anyone chime in?

 

Eric,

 

I recall that you have rolled out of BAM into PVF.UN, but not when. Is 2017 your first year with owning these LP units? What is your experience with regard to tax reporting so far? -Thank you in advance.

 

- - - o 0 o - - -

 

[Never too late to learn something new.]

[EricSchleien]

I'm cautious to share anything that could be even construed as tax advice so I'm just going to link you to their tax information page: http://pvii.ca/content/investor_centre/tax_information-44325.html

 

 

[chrispy]

It also looks like they hold 9% of trisura group, the Brookfield insurance spin-off. Any views on that? I have only briefly read about it...

[John Hjorth]

I think TSU discussion should go to a separate topic in the Investment Ideas forum, chrispy.

[EricSchleien]

It also looks like they hold 9% of trisura group, the Brookfield insurance spin-off. Any views on that? I have only briefly read about it...

 

Yep and I believe they are the largest shareholders in Trisura. No view on that. I do know they plan to hold onto the shares.

 

Again, for me it's more about a leveraged bet on Brookfield. Brookfield Asset Management is probably my favorite equity over the next several decades. To be able to have that exposure with leverage and no margin call risk was why I invested. Currently PVI is about a 10% position for both myself and my investors.

[bizaro86]

I have a question on this. How is everyone thinking about the stock vs warrants. There are rather a lot of warrants, so I don't think you can reasonably say that all the NAV belongs to the common.

 

My basic thought is that the combination of a share and warrant should be worth NAV. After all when they split the shares into units and warrants, that didn't increase intrinsic value of the enterprise.

 

I really like this, mainly for cheap non recourse leverage to a great company. But I'm not sure how to think about the effect of the warrants here.

[Rod]

I have a question on this. How is everyone thinking about the stock vs warrants. There are rather a lot of warrants, so I don't think you can reasonably say that all the NAV belongs to the common.

 

My basic thought is that the combination of a share and warrant should be worth NAV. After all when they split the shares into units and warrants, that didn't increase intrinsic value of the enterprise.

 

I really like this, mainly for cheap non recourse leverage to a great company. But I'm not sure how to think about the effect of the warrants here.

 

When you buy a warrant (or 4 warrants I think) you get the right to buy one share in 9 years at a certain price. The advantage over buying the share now is that you don't have to put up all the money today--you delay it. So you can think of it as a loan. And then you can calculate the interest rate of the loan. When I did that calculation a few months ago the implied interest rate of the warrant was over 7%, which I thought was too high. I can borrow money myself a lot cheaper and just buy the stock.

 

The other advantage of the warrant over the stock is that you have some downside protection. But given that the warrant doesn't expire for 9 years, the chance that the downside protection will be worth anything is low. I believe that the stock is already above the warrant's strike price.

[bizaro86]

Yes, I understand the cost of leverage component for considering an option vs the stock.

 

However, in this case the options are warrants, and are quite dilutive. I think valuing the company is pretty simple (use NAV, adjust for changes since last Q) but I'm unsure how to divide up the value between common and warrants.

 

The common would be worth more if the warrants didn't exist, because some upside goes to the warrant holders, and a pie isn't bigger because you cut it in two pieces.

 

In this case, do you just assume they will exercise, and add cash and increase shares outstanding?