petec Posted February 10, 2021 Share Posted February 10, 2021 Interested to know how people view this! Link to comment Share on other sites More sharing options...
Xerxes Posted February 10, 2021 Share Posted February 10, 2021 Needs to compound 14% per annum to get to that. At a minimum he needs to get there with all the tailwinds that we talked about, theoretically. If he cannot go over 15% in the next few years to make up for the last few years, the long term growth rate will never average around 15%. the first few years ought to be easy, given that he is starting off a low base. Link to comment Share on other sites More sharing options...
petec Posted February 10, 2021 Author Share Posted February 10, 2021 Sure but it trades at a discount to book today. So in very rough maths, and assuming BV is c.$500 today, they need to: - earn a 10% ROE to get pre-dividend BV to $800 - pay $50 in dividends over 5 years. - trade at 1x. Link to comment Share on other sites More sharing options...
Viking Posted February 10, 2021 Share Posted February 10, 2021 My vote was 50-75% (but closer to the 50% than 75%). If Fairfax gets its investing mojo back i could see it trading at a 1.1 or 1.2 x BV multiple (so lets say 1.15). For stock to trade at US $750 = $650 BV (1.15 multiple) BV Sept 30, 2020 was US $442. If they hit on BB, Farmers Edge, AGT in 2021 then BV could easily be north of $500 by end of 2021. Over next 5 years: - Digit should drive $1 billion increase in BV all by itself (perhaps $400 million in Q1?). This is close to $40/share pre-tax. - Atlas should drive $1 billion increase in BV. - remaining equity holdings should drive + $1 billion increase in BV - operating earnings (underwriting + interest and dividend income) at insurance units should drive BV growth each year of +$20/share ————————— The challenge with modelling Fairfax today is we are viewing it currently through the pandemic lense. So we are likely too pessimistic (too anchored on Fairfax’s most recent, depressed, 12 month results). What will its many businesses look like post pandemic? What will they earn? How much cash will get dividended up to Fairfax? How does the current hard market play out? Monetizations? Link to comment Share on other sites More sharing options...
Parsad Posted February 10, 2021 Share Posted February 10, 2021 Barring a market crash, it will trade over $750 before the end of 2022. And I'm being conservative. Cheers! Link to comment Share on other sites More sharing options...
petec Posted February 10, 2021 Author Share Posted February 10, 2021 Love it. Can I sell you my stock for $750 at the end of ‘22? ;) Link to comment Share on other sites More sharing options...
StubbleJumper Posted February 10, 2021 Share Posted February 10, 2021 Barring a market crash, it will trade over $750 before the end of 2022. And I'm being conservative. Cheers! Sanj, You did not place a currency indicator in front of the dollar sign. FFH trading at CAD$750 is not so exciting because that is only US$600. Book value for Q4 will be what, maybe US$460? BV should be nicely over US$500 by Dec 2021, unless FFH's BB gains are as ephemeral as many of us fear. If you did actually mean that it will trade at US$750 within the next 23 months, I would suggest that is perhaps a shade ambitious. I'd love for that to happen, but... SJ Link to comment Share on other sites More sharing options...
FairFacts Posted February 10, 2021 Share Posted February 10, 2021 Very high indeed, we’re starting at a low base BV of $442/sh at 9/30 coming out of the pandemic. Hard mkt for the insurance cos (tempered by low interest rates), too many possible home runs BB, ATCO, EuroBank, Digit, FDGE, India... I agree mostly with Parsad on this one $750 within 24 months..... Link to comment Share on other sites More sharing options...
Parsad Posted February 10, 2021 Share Posted February 10, 2021 Barring a market crash, it will trade over $750 before the end of 2022. And I'm being conservative. Cheers! Sanj, You did not place a currency indicator in front of the dollar sign. FFH trading at CAD$750 is not so exciting because that is only US$600. Book value for Q4 will be what, maybe US$460? BV should be nicely over US$500 by Dec 2021, unless FFH's BB gains are as ephemeral as many of us fear. If you did actually mean that it will trade at US$750 within the next 23 months, I would suggest that is perhaps a shade ambitious. I'd love for that to happen, but... SJ Sorry! When I talk about FFH, I'm always talking in CDN dollars other than their financials...I'm still pissed over the NYSE listing! :o Yeah, for sure $750 CDN before 2022. I think they've got a 60-70% chance of hitting $750 USD before the end of 2022. Why? Assume book value is at $500 USD now...in this market, 1.2 times book is already $600 USD or $750 CDN. I've been saying that insurance was heating up before Covid, and it took a stellar leap after Covid in terms of premium pricing. They are going to write at 95% or better for the next 2 years. Add a simple 4% return on the portfolio and increase in book value should be roughly $40-60 USD a year. That means book value would be closer to $600 USD near the end of 2022...1.2 times book would be $750 USD or around $930 CDN. Mark my words! Cheers! Link to comment Share on other sites More sharing options...
Xerxes Posted February 11, 2021 Share Posted February 11, 2021 Parsad Interestingly, the cure to the valuation gap could be new listing in NYSE. FFH is no longer the minnow that it was during the hedge fund bear raid, so it might very well benefit from it. Prem might not want to do it due to the history but once all is said and done with the asset monetization, and restructuring and buybacks ... if the discount doesnt narrow to zero considerably that could be the bitter pill to swallow that could fix the discount. PS: we need to bring in the Americans to close the gap. Always can count on them with their animal spirits unleashed. But before that, it needs to get ready. Link to comment Share on other sites More sharing options...
no_free_lunch Posted February 11, 2021 Share Posted February 11, 2021 Very possible but oddly enough it may require high tech valuations to continue. Digit, farmers edge, blackberry plus their other tech startups all have some real potential. If the hard market stays um hard, I could see a significant rerating. It's really out of our hands but I see a double as a distinct possibility and I could see it in 3 years even. Maybe, maybe even within 2 years. I like that even if that doesn't pan out you are not paying up and downside seems reasonable. My main focus with ffh is the very high, imo, chance of a 20%+ move over the next 6 months. Link to comment Share on other sites More sharing options...
petec Posted February 12, 2021 Author Share Posted February 12, 2021 I feel like I ought to run this poll again after the 4q numbers... Link to comment Share on other sites More sharing options...
Xerxes Posted February 19, 2021 Share Posted February 19, 2021 This is a great clip that was posted elsewhere. Just watched it now. Somehow 6 months of discussion in this forum were condensed into 1 hour and delivered superbly. I think it belongs here. https://moiglobal.com/jeffrey-stacey-202101/ Link to comment Share on other sites More sharing options...
FairFacts Posted February 20, 2021 Share Posted February 20, 2021 I’ll revise my earlier answer, the chances of a US $750 price within 5 years should be a forgone conclusion YES! it will. A better question is what are the chances within 24 months. 1. Y/e reported book value was $477 per share. 2. Stated long-term objective is to achieve 15% BV growth. 3. BV of $477 compounded at 15% for two years gets to $630 4. Reversion to mean multiple on BV of 1.2 gets you to a share price of $756! With all of the tailwinds discussed this should be a ‘mid-point’ estimate (the $750) it could easily by higher. If not questions must be asked....I’m optimistic..... Three IPO’s in the hopper already, bring it on. Link to comment Share on other sites More sharing options...
MMM20 Posted August 23, 2023 Share Posted August 23, 2023 On 2/10/2021 at 8:32 PM, Xerxes said: Parsad Interestingly, the cure to the valuation gap could be new listing in NYSE. FFH is no longer the minnow that it was during the hedge fund bear raid, so it might very well benefit from it. Prem might not want to do it due to the history but once all is said and done with the asset monetization, and restructuring and buybacks ... if the discount doesnt narrow to zero considerably that could be the bitter pill to swallow that could fix the discount. PS: we need to bring in the Americans to close the gap. Always can count on them with their animal spirits unleashed. But before that, it needs to get ready. So... time to list on NYSE? Link to comment Share on other sites More sharing options...
cwericb Posted August 23, 2023 Share Posted August 23, 2023 7 minutes ago, MMM20 said: So... time to list on NYSE? Given past history one would think this would be unlikely. Been there, done that. Link to comment Share on other sites More sharing options...
Parsad Posted August 23, 2023 Share Posted August 23, 2023 51 minutes ago, cwericb said: Given past history one would think this would be unlikely. Been there, done that. +1! Just no need to list on there. If markets don't narrow the value gap because they are TSX listed and not NYSE listed, who gives a damn. It will just give FFH a reason to keep buying back stock and enrich their loyal investor base. Why would you want to bring on board investors who would sell out as fast as they got in by listing on the NYSE. Just take excess cash and keep reducing the shares outstanding! And then you also limit your exposure to short attacks or unnecessary scrutiny/regulation. Cheers! Link to comment Share on other sites More sharing options...
MMM20 Posted August 24, 2023 Share Posted August 24, 2023 18 hours ago, Parsad said: +1! Just no need to list on there. If markets don't narrow the value gap because they are TSX listed and not NYSE listed, who gives a damn. It will just give FFH a reason to keep buying back stock and enrich their loyal investor base. Why would you want to bring on board investors who would sell out as fast as they got in by listing on the NYSE. Just take excess cash and keep reducing the shares outstanding! And then you also limit your exposure to short attacks or unnecessary scrutiny/regulation. Cheers! Yeah, I actually agree. It was a bad attempt at being facetious. The share price will take care of itself over time. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted August 24, 2023 Share Posted August 24, 2023 3 hours ago, MMM20 said: Yeah, I actually agree. It was a bad attempt at being facetious. The share price will take care of itself over time. The one advantage of trading on the NYSE is that it would increase liquidity which means we might get options listed. All of these things require inventory which means more demand for the shares at the same time index huggers are trying to buy the stock. I know people prefer buybacks but I rather issue shares at 3x book value vs buy them back at 1x any day. It’s way more accretive to BVPS. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted August 24, 2023 Share Posted August 24, 2023 21 minutes ago, SafetyinNumbers said: The one advantage of trading on the NYSE is that it would increase liquidity which means we might get options listed. All of these things require inventory which means more demand for the shares at the same time index huggers are trying to buy the stock. I know people prefer buybacks but I rather issue shares at 3x book value vs buy them back at 1x any day. It’s way more accretive to BVPS. More accretive? Yes. But I'm not sticking around to benefit it trades at 3x BV because it's probably way more accretive for me to sell and put the cash elsewhere as demonstrated by history. Would much rather they buy back below 1 BV so I can be there to benefit from it than gambling to hold on past 3X BV that any issuance will put a floor under my shares. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted August 24, 2023 Share Posted August 24, 2023 (edited) 38 minutes ago, TwoCitiesCapital said: More accretive? Yes. But I'm not sticking around to benefit it trades at 3x BV because it's probably way more accretive for me to sell and put the cash elsewhere as demonstrated by history. Would much rather they buy back below 1 BV so I can be there to benefit from it than gambling to hold on past 3X BV that any issuance will put a floor under my shares. It’s not gambling, it’s just being open to the possibility given how underowned it is by Canadian funds. At the beginning of 1995, I probably would have sold at 1.5x BV and missed the 6x in 4 years as the multiple expanded to 3x while the ROE was “only” 20%/year. History may not repeat but it could rhyme. I prefer them make more equity investments vs buybacks above 1x book as it would make the company more durable which provides another reason for investors to be comfortable with a higher multiple. Edited August 24, 2023 by SafetyinNumbers Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted August 24, 2023 Share Posted August 24, 2023 27 minutes ago, SafetyinNumbers said: It’s not gambling, it’s just being open to the possibility given how underowned it is by Canadian funds. At the beginning of 1995, I probably would have sold at 1.5x BV and missed the 6x in 4 years as the multiple expanded to 3x while the ROE was “only” 20%/year. History may not repeat but it could rhyme. I prefer them make more equity investments vs buybacks above 1x book as it would make the company more durable which provides another reason for investors to be comfortable with a higher multiple. Sure. I get that, but those weren't the options presented. I'd also prefer they stop buybacks somewhere between 1-1.25x BV to internally reinvest. But between issuing at 3x and buying back below 1x, I prefer the latter because I'll be there to benefit from it. I wouldn't be in the former. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted August 24, 2023 Share Posted August 24, 2023 1 hour ago, TwoCitiesCapital said: Sure. I get that, but those weren't the options presented. I'd also prefer they stop buybacks somewhere between 1-1.25x BV to internally reinvest. But between issuing at 3x and buying back below 1x, I prefer the latter because I'll be there to benefit from it. I wouldn't be in the former. The options were buying at or greater than book value or internally reinvesting. Issuing at 3x BV was what becomes available if the stock is made as accessible as possible to the largest group of investors since supply is limited. I know you will have sold by then but it’s still probably leads to better long term returns for the remaining shareholders. I certainly won’t be buying over 1.5x book but it technically could have a relatively high probability of getting to 3x given the set up. It’s all just speculation until it happens or doesn’t happen. Link to comment Share on other sites More sharing options...
UK Posted August 25, 2023 Share Posted August 25, 2023 (edited) 19 hours ago, SafetyinNumbers said: It’s not gambling, it’s just being open to the possibility given how underowned it is by Canadian funds. At the beginning of 1995, I probably would have sold at 1.5x BV and missed the 6x in 4 years as the multiple expanded to 3x while the ROE was “only” 20%/year. History may not repeat but it could rhyme. Who knows, given FFH liquidity...maybe also if we somehow move all good information available here to reddit forums:))) Edited August 25, 2023 by UK Link to comment Share on other sites More sharing options...
Xerxes Posted August 25, 2023 Share Posted August 25, 2023 The argument about moving to NYSE to get a “rich valuation” assumes that management is willing to trade its high quality long term shareholders (who might flip if trades at a very rich P/B) with lower quality shareholders (con) and ability to issue stock (pro) at premium one one time shot. (If ever it shoots up). I am not sure that is a good trade off for FFH management. As they will already get plenty of capital back to the holding company as opportunity to re-invest in premium growth tapers down. So why trade its shareholder base … for more SEC scrutiny, more exposure to over excited hedge funds all for maybe there is an opportunity to issue stock at 3x book Link to comment Share on other sites More sharing options...
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