I have one relatively substantial portfolio change that I telegraphed to you last week, and which has been spurred by a recent dip in one stock and good news from another.

I have sold about two thirds of my position in AIG 2021 Warrants following the trigger of a stop loss in that position (because AIG dropped by about 10% in the past month, and has been unable to get out of its own way). This is one I’ve hemmed and hawed about for a while, because AIG does still have some potential IF the new management can get the company growing again, and my tendency has been to hold the shares because of the upside represented by the (still) long term left on those warrants… but because I’m so heavily allocated to the insurance sector already, I decided to let that stop loss trigger for the majority of the position and make it a smaller speculation on AIG regaining that growth glory over the next few years.

That’s because I want to put more money into another insurance name, and it’s easier to do that if I cut my exposure to that sector elsewhere — I noted last week that Fairfax Financial (FFH.TO, FRFHF) was the most appealing stock to me at the time, though I didn’t buy last week, and it became a bit more appealing this week… so I did take some of that AIG money and boost my Fairfax position by about 20%. Fairfax was trading at very close to my cost basis anyway, so there’s no real change to that — just a bigger allocation now.

What happened? Well, Fairfax is not as cheap as it was a week ago — but that’s for good reason, they made a deal with Mitsui Sumitomo this week that looks really appealing to me, and it also should immediately boost Fairfax’s book value per share. This, combined with the transformational nature of their large Allied World acquisition that’s not yet reflected in the share price, makes Fairfax a more compelling buy. The Allied World deal closed in early July, after the most recent quarter ended, and the incremental positive change in Fairfax’s balance sheet and increase in size of their investment portfolio on a per-share basis from the acquisition will take some time to have an impact, but the small book value boost should hit ...