kodiak

My estimates of intrinsic value and where this will trade in 36 or even 60 months do not assume any major buybacks from the company. It is possible that Fairfax takes the share count from the current 23 million shares to 18 or even 15 million depending on how much cash the insurance business generates once premium growth starts to slow down. In a world of zero premium growth and respectable combined ratios, Fairfax will not be required to keep injecting capital into these businesses, as they have over the last few years to fund the growth in premiums. Once premiums stop growing, these same insurance subsidiaries will begin to send capital back to the parent. The uses of this capital will include the buying back of all the remaining insurance stubs from OMERS. I would also expect them to take a couple more public companies private and finally, buyback shares below 120% of book value. If they earn $150 per year for three years, that generates over $11 billion in capital. That capital is going to go somewhere. After the minority cleanups, we might see some meaningful repurchases. Those are not in my projections. If they happen, the chances of a $2,000 or $2,500 Fairfax share price in less than 5 years grows considerably. At the current price of $730, this stock is simply too cheap and I would argue a better deal at $730 than $500 one year ago. People selling at $730 today simply aren't doing the work to calculate the earnings power of Fairfax or must be finding other stocks to own. I would love to know what they are buying to justify selling Fairfax. They have to be fantastically cheap stocks with a wonderful margin of safety. I am selling other things in my portfolio to currently buy shares of NextNAV, a $300 million market cap failed SPAC that owns a portfolio of 2.4 billion POPs of nationwide spectrum in the 900 MHz band. This spectrum is worth between $1.5 and $2.5 billion and should be monetized over the next 24 months. The stock is $2.67 and I expect the shares to be worth easily north of $10 each in 24 months. They also have a cutting edge alternative to GPS which you get for free and could be worth $10 or $15 in 3-5 years. Finally, the corporate governance is fantastic, with heavy inside ownership, very smart spectrum folks on the Board and a history of making money for investors. Even with all that potential upside, I am not going to sell Fairfax to fund the purchase of NN shares. NextNav investor presentation.pdf

Intrinsic Value Estimate Book value is around $800 today. It will be close to $1,300 in three years as we earn $150 per share over the next three years. We earn $50 per share from bond portfolio, $50 from underwriting and $50 from equity gains. In 36 months, book is $1,300 and shares have to be at least 120% of book at that time. Hence $1,560 per share USD in 36 months. In my model, current price of $730 is nuts. We could easily be trading at 120% of book today and that number would be $960 USD right now. That would be a reasonable value today. If you paid $960 today and the stock was worth $1,560 in 36 months, the annual return would be north of 15% annually. That seems about right to me. If they execute on this 3-year plan, the price to book should move closer to 150% of book. So in 5 years if the company continues to execute, you might get closer to book value of $1,600 and then at 150% of book, the stock has a shot at trading for around $2,400. This may seem crazy, but if they execute, these are reasonable targets.

I thought the 1st quarter earnings were just as good, if not better, than the 4th quarter 2022 earnings. These are fantastic results and the future earnings potential of the company has never been better. We are locked on bond portfolio, the underwriting results in this hard market should be fine and the results from the equity portfolio are icing on the cake. I was very disappointed the market did not give us instant gratification on Friday. I added to my already oversized Fairfax position. I simply think Fairfax stock price will double over the next 3 years. The math looks pretty simple. The book is $800 and we are sell for less than $700. We are going to add $150 per year for three years from earnings. Book value in 36 months would therefore be around $1,250 per share. The extra $450 per share in earnings should generate another 10%+ on equity, so earnings in year 4 could be closer to $200 per share. If the shares trade for $1,400 each in 36 months, they will be trading at 112% of book value and the company will be looking at a return on equity on that book value of about 16%. That does not include any good news from Digit, Anchorage, extraordinary buybacks at Fairfax or anything else. If people have easier to understand set up than Fairfax for the next 3 years, please tell us. This elevator pitch took one long paragraph. Maybe 150 words. Plus it is happening right now. No turnaround necessary. No special potion or magic trick. It is all in front of us. We can think about things that will derail this story, but the basic story is so simply that being contrary may just end up costing folks money. This is the fat pitch that Ted Williams and Buffett talk about all the time. Investing is about probability. Doesn't mean it has to happen. This set-up has high probability for excellent outcomes. My investment is Pathward (CASH) has the same risk/reward type set-up. Wish I really had more of these.