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Fairfax Financial slides on investments in Greek bank, retailer

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(Bloomberg) — Fairfax Financial Holdings Ltd., the Canadian insurer with investments in a Greek bank and retailer, posted its biggest decline in almost a month after the European country shut its banks as talks for a debt deal broke down.

Fairfax sank as much as 3.3 percent to C$620.10, the lowest since June 5, and was down 1.4 percent to C$632 at 12:40 p.m. in Toronto trading. The stock has slumped almost 4 percent in four days, paring its advance for the year to 3.4 percent.

“The fact it’s trading down would have to correspond with its investments in Greece specifically,” Paul Holden, financials analyst at CIBC World Markets, said in a phone interview from Toronto. “Normally in a down market Fairfax trades up as it’s viewed as a hedge in a volatile market.”

Fairfax is the second-largest investor in Eurobank Ergasias SA, one of Greece’s four largest banks, with an 8.8 percent stake, according to data compiled by Bloomberg. Fairfax led a group of investors including WL Ross & Co.’s Wilbur Ross, Fidelity Investments and Mackenzie Investments to purchase a 1.3 billion euro ($1.48 billion) investment in Eurobank in April 2014, according to March 6 shareholder letter from Fairfax Chief Executive Officer Prem Watsa. The Greek stock exchange was closed Monday, though a U.S. exchange-traded fund that tracks the Greek market plunged 15 percent.

Fairfax also holds 42 percent of Grivalia Properties REIC AE, making it the largest stakeholder, the data show. Grivalia has a portfolio of commercial properties in Greece. Toronto- based Fairfax also has stakes in Mytilineos Holdings SA, a commodities producer focused on energy and base metals production, as well as home improvement retailer Praktiker Greece.

Long Term

“While our total Greek investments are below cost today, we expect them to do well over the long term,” Watsa said in the letter.

Requests for comment from Watsa and Paul Rivett, president of Fairfax, weren’t returned.

While Holden hasn’t spoken with Fairfax executives recently, it’s unlikely that the firm’s view on Greece has changed enough for them to sell their holdings, Holden said.

“When they take these deep-value, contrarian-type bets, they tend to show commitment to their trade ideas,” he said. “So I wouldn’t expect just because things aren’t working out in the near term they’ll necessarily rush to the exits unless their view of Greece truly has changed.”

Fairfax has two buys, two holds and one sell rating according to a summary of analysts’ recommendations, with a consensus 12-month price target of C$679.37, implying an 7.7 percent gain.

Separately, Eldorado Gold Corp., another Canadian company with investments in Greece, said it will be able to sustain operations and pay workers even as the nation imposes capital controls.

The Vancouver-based gold producer, whose assets include the Stratoni mine and three projects in Northern Greece, said operations are not affected by the government’s measures, according to Eduardo Moura, vice president and general manager for Greece.