Fairfax book value or share price will touch US $ 2000 before 2027 end.

[UK]

6 hours ago, Haryana said:

but still cannot even about double in 4 years

 

I am not against big ambitions, but just to highlight, 2x in 4 years is a 19 CAGR...would not use the words such as "cannot even" to describe such returns myself:)

[steph]

I would vote ‘Yes’ even though I realise it would be an amazing outcome.  I totally agree with what is written here about book value around 1500 by the end of 2027.  What surprises me is this ‘anchoring’ about valuation.  I have been in this business now for over 30 years and the biggest or one of the biggest opportunities is when a certain valuation starts to seem like totally normal, but people forget that there have been periods with very different valuations.  My believe is that if and that’s a big ‘if’, FFH continues executing as they have been doing lately AND investing in quality assets, they will get a rerating.  For a company doing between 10 and 15% CAGR with quality assets and quality management I would think that the market could easily pay 1,5 times book.  Even though insurance companies are historically not expensive today, you can find many with way higher P/B ratios.  There will most certainly be a time when FFH will be priced at 1,5 to 2 times book and only then will people start to find that a very reasonable valuation.  By then, 1 or 1,2 times book will be seen as extremely cheap and the opportunity of a lifetime. 

[cwericb]

Putting things in perspective, here is a 20 year chart of Fairfax share price verses the Toronto Stock Exchange for the past 20 years. Factor in FFH yearly dividends and the company has done pretty well for long term  shareholders over the years  compared to the Canadian market in general.

 

[Hektor]

12 hours ago, Parsad said:

Keynes was wrong and Milton Friedman was proven somewhat correct.

@Parsad Could you explain this? My understanding is that Keynes was a proponent of government stepping in and spending aggressively when everyone else pulls back. And this is what seems to me to have happened with QE.

 

Asking to understand. Thanks,

[Parsad]

Friedman suggested that inflation could be controlled by the use of monetary and fiscal policy and the amount of cash flowing in the system.  He indicated that if the flood gates had been opened in 1929, the Great Depression would not have lasted as long, because lack of liquidity was the main cause of exacerbating the Depression. 

 

Bernanke and Geithner's experiment with quantitative easing proved that Friedman was correct.  I've never really been a Friedman fan, but so far it's proven correct both on quantitative easing and tightening.  I never imagined the soft landings we've witnessed.  That's why many investors like Prem, Seth Klarman, etc got it wrong and were in such a defensive position.  Cheers!  

[Xerxes]

3 hours ago, Hektor said:

@Parsad Could you explain this? My understanding is that Keynes was a proponent of government stepping in and spending aggressively when everyone else pulls back. And this is what seems to me to have happened with QE.

 

Asking to understand. Thanks,

My view:

 

Keynesian is all about government spending, but that is not what happened in 2008-10.  
 

The QE and the money firehose simply inflated asset prices. And the value went to the asset owners at large. And not spread into Main Street. 
 

In 2020-21, in contrast the dollars went into to the pockets of Main Street that spend it. And actually unleashed inflation for a change (and not just asset inflation) 

[gfp]

2 minutes ago, Parsad said:

Friedman suggested that inflation could be controlled by the use of monetary and fiscal policy and the amount of cash flowing in the system.  He indicated that if the flood gates had been opened in 1929, the Great Depression would not have lasted as long, because lack of liquidity was the main cause of exacerbating the Depression. 

 

Bernanke and Geithner's experiment with quantitative easing proved that Friedman was correct.  I've never really been a Friedman fan, but so far it's proven correct both on quantitative easing and tightening.  I never imagined the soft landings we've witnessed.  That's why many investors like Prem, Seth Klarman, etc got it wrong and were in such a defensive position.  Cheers!  

We'll just have to agree to disagree on the effectiveness of QE / QT.  I couldn't disagree more!

[Parsad]

1 minute ago, gfp said:

We'll just have to agree to disagree on the effectiveness of QE / QT.  I couldn't disagree more!

 

Proof is in the pudding as they say...it worked!    Cheers!

[gfp]

Just now, Parsad said:

 

Proof is in the pudding as they say...it worked!    Cheers!

 

Ha!  Well, something happened - assigning causation accurately isn't quite that simple.  How do excess bank reserves impact the real economy when bank lending is not even close to being constrained by the level of bank reserves?  Neutered money only useful as tokens between the largest mega banks.  And QE removes highly useful, interest paying,  pristine collateral that can be transformed into virtually anything and/or leveraged!

[Hektor]

16 minutes ago, Parsad said:

Friedman suggested that inflation could be controlled by the use of monetary and fiscal policy and the amount of cash flowing in the system.  He indicated that if the flood gates had been opened in 1929, the Great Depression would not have lasted as long, because lack of liquidity was the main cause of exacerbating the Depression. 

 

Bernanke and Geithner's experiment with quantitative easing proved that Friedman was correct.  I've never really been a Friedman fan, but so far it's proven correct both on quantitative easing and tightening.  I never imagined the soft landings we've witnessed.  That's why many investors like Prem, Seth Klarman, etc got it wrong and were in such a defensive position.  Cheers!  

Thanks @Parsad. 

[Hektor]

15 minutes ago, Xerxes said:

My view:

 

Keynesian is all about government spending, but that is not what happened in 2008-10.  
 

The QE and the money firehose simply inflated asset prices. And the value went to the asset owners at large. And not spread into Main Street. 
 

In 2020-21, in contrast the dollars went into to the pockets of Main Street that spend it. And actually unleashed inflation for a change (and not just asset inflation) 

Thanks @Xerxes

[Intelligent_Investor]

On 8/7/2024 at 2:26 PM, Xerxes said:

My view:

 

Keynesian is all about government spending, but that is not what happened in 2008-10.  
 

The QE and the money firehose simply inflated asset prices. And the value went to the asset owners at large. And not spread into Main Street. 
 

In 2020-21, in contrast the dollars went into to the pockets of Main Street that spend it. And actually unleashed inflation for a change (and not just asset inflation) 

Agreed on that. Fiscal policy generates more "real" inflation than monetary policy at least for main street. 

[Haryana]

On 8/6/2024 at 9:31 PM, UK said:

 

I am not against big ambitions, but just to highlight, 2x in 4 years is a 19 CAGR...would not use the words such as "cannot even" to describe such returns myself:)

 

Not about ambition. This is about expecting them to be extraordinary. 

 

They already doing 19% CAGR since inception. Now is the period when they are coiled to outperform.  

 

No guarantees, of course. 

 

[Haryana]

A school boy report on Fairfax:

Final.pdf

[gfp]

Is this a report you made Haryana?

[Haryana]

My doppelgänger did it. 

 

I can answer on his behalf if any questions.

 

 

[dartmonkey]

On 12/26/2023 at 3:57 PM, Thrifty3000 said:

I voted no, but mostly because $2,000 would require a slightly more optimistic outlook than I’m comfortable with. I’m assuming BV will be around $1,500 per share by the end of 2027, and I believe 1.2x BV ($1,800) is a reasonably conservative multiple for FFH.

 

I didn't vote, but I would say the over and the under are about equal; in other words, I think $2000 sounds really optimistic for the price in 3 1/2 years, going from $1150, but it's the $1150 that is off, not the $2000.

 

We have 3 1/2 years of very likely $4b earnings, so $14b, on top of the current book value of $22.5b, taking us to $36.5b. If we stay at 23m shares (i.e. no repurchases), that would be a book value of about $1543, so we would need a price:book of about 1.3 to get to $2000, up from a multiple of 1.1 right now. Seems reasonable, if the recent performance continues and there are no major new problems (like much lower interest rates, a severe recession, or a series of bad megacaps).

 

An interesting twist is what happens if they are able to repurchase a substantial number of shares. Fairfax has repurchased 17% of its outstanding shares from 2020 to 2023, so another 20%, with the cash flooding in, seems doable if the share price stays below fair value. I won't bore people with the calculations, but share repurchases above book value actually decrease book value, and the effect on P/B would be about 11%, if there is no change in the share price. Of course, in reality, the market price will tend to track earnings per share as these increase, not book value, at least in the long term. So if share repurchases really are accretive to fair value per share, the book value multiple would have to gradually rise by to just over 1.2x book, without any change in valuation. If we repurchases 20% of shares, to hit the $2000/sh target price, we would actually need to get to a price:book of about 1.45, not 1.3.

 

I think this is actually more likely to happen with the repurchases than if we didn't repurchase any shares. It would be just one more solid achievement under Fairfax's belt, and if shares are still trading at 5.5 times earnings in 3 years, I would be quite surprised. I guess I shouldn't be disappointed, because it would mean even more opportunities for repurchases, but someday, I would like to reduce this Fairfax stake to something more, euh, traditional.

[Haryana]

On 8/21/2024 at 8:23 AM, dartmonkey said:

 

I didn't vote, but I would say the over and the under are about equal; ...

 

 

That is the beauty of this poll, with equal number of votes on each side.