New OTC stock vs FFH.TO

[Tommm50]

I note that the new OTC stock FRFHF.PK is down 2% today while FFH.TO is down 0.25%. This appears to be more than simply the currency conversion. Are the two stocks actually trading differently?

 

If so, I'm thinking I need to switch to FFH.TO.

 

??

[Nnejad]

Calm . . . down.

[Tommm50]

I'll ... try.

[nodnub]

pink sheets stocks can be illiquid.  On some days the closing price will not be exactly the same as FFH.TO -- you can look at many other unsponsored ADRs on the pink sheets and see the same thing.

 

If you are not trading in and out it doesn't matter at all. If you want to trade frequently then a low volume environment might not work out very well.

[valuecfa]

I note that the new OTC stock FRFHF.PK is down 2% today while FFH.TO is down 0.25%. This appears to be more than simply the currency conversion. Are the two stocks actually trading differently?

 

If so, I'm thinking I need to switch to FFH.TO.

 

??

 

No worries. Arbitrage will ensure a fairly tight value range with the FFH.TO listed security (adjusted for currency exchange). Liquidity isn't that bad thus far at about 1/4 of the volume of FFH.TO. This slightly lower liquidity and slightly large spread may at times cause a small discount (and at times, perhaps a small premium) from the Toronto listed security, but i would not expect any wide discrepancies. Institutional investors can convert their shares from ordinary to ADR and back in seconds with the click of a button, should one market become more liquid than the other or should one have a very temporary price discrepancy. The cost to convert ADRs to ordinary shares is down to about 1 or 2 cents a share through systems like ADR Navigator or ADR Max.

[Tommm50]

Thanks for the information.

[gaf63]

At Scottrade , one of the consiquences of FFH being transfered to the pink sheets is that the value of FRFHF shares are not allowable for margin

purchases.  Do other brokers follow same rules? Has been this way since the switch but finally inquired today.  I Use margin so I can purchase shares before money is in account, which is not often.  So am mainly curious.

Thanks , GAF

[SmallCap]

I am in the US, If I am looking to pick up a small number of shares of Fairfax and holding them long term would I be better off purchasing the FRFHF.PK or the FFH.TO shares and how does the difference in currency affect these two different shares. my inclination is to go with the FRFHF.PK because of the small number of shares I would be picking up and having no plans to sell them. what are your thoughts?

 

Smallcap

[Guest swf83]

I think I would agree with you. I am in the same boat as you and thinking about picking up some FRFHF shares for the long haul. Anyone else have an opinion?

[Uccmal]

I am on the opposite side of the situation.  I have had a US margin account in addition to my Canadian margin account since I started investing on my own 13 years ago  (I am Canadian to clarify).  At times I have held alot of US stock.  I am of the opinion that the Canadian dollar is more or less at the higher end of its range when it is around parity.  So around parity I move cash into my US account.  When the Cdn dollar backs off I move the money back.  It is not accurate or precise but it works in my favour most of the time.  This week I made $2000.  I have done this repeatedly so if I get stung one day I will have had a good run.

 

Now there is a downside to this whole thing.  When Brk was sub 40 g in the late 90s the Canadian dollar was as low as .63.  With inflation etc.  one who bought BRK from Canada back then would have broken even about now.  

 

Currency fluctuation is just something we get used to and put to our advantage.  

 

Round about way of saying that perhaps opening accounts with various currency exposures and buying the stock in the home currency may be lucrative.  

 

All that being said I have an impossible time once two currencies become involved such as buying an ADR from the US.