Leaderboard

I use three methods to triangulate intrinsic value for Fairfax. 1. 15x earnings which is a fair market multiple for above average ROE which is north of US$3000 on trailing EPS. 2. 2.5x BV which is reasonable for a business with a history of compounding BVPS in the high teens for 40 years. This is also north of US$3000 on current book value. 3. Float + book value which is what I call the Buffett method. The idea here is that float for a high quality insurance company is always growing and thus represents an asset to equity holders and not a liability. For Fairfax, in particular, I think they are very conservative with reserving. Excess reserves are just liabilities waiting to be converted into equity. That also gives a value north of US$3000/sh. My view is that there is plenty of margin of safety when buying at a > 40% discount to these measures.