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

[gfp]

Is this a report you made Haryana?

[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.