Fairfax 2025

[hardcorevalue]

I like FFH because it is the 1% of companies that think long term. 

I hope the shareholder base here doesn't devolve into the stock split crowd over time. 

[dartmonkey]

4 minutes ago, hardcorevalue said:

I like FFH because it is the 1% of companies that think long term. 

I hope the shareholder base here doesn't devolve into the stock split crowd over time. 

Agree with both points, but there are many other good reasons to own Fairfax. I don't feel I am part of the 'stock split crowd', and I agree that the high share price does put Fairfax in some pretty good company, but I can easily live without this feature.

[Hoodlum]

Does anyone know what Stephen Boland is referring to with the below statement. 
 

The company has an abundance of excess capital (approximately $6-billion by our estimates)

[gfp]

13 minutes ago, Hoodlum said:

Does anyone know what Stephen Boland is referring to with the below statement. 
 

The company has an abundance of excess capital (approximately $6-billion by our estimates)

 

I would imagine the analyst is referring to the approximate amount of "excess capital" the insurance subsidiaries could do without yet still maintain their current volume of business.  As in, what is available to be distributed to the holding company and used for shareholder stuff like share repurchases and dividends.

 

Not sure the analyst is factoring in things like buying in minority interests in subsidiaries.

 

If the insurance subsidiaries remain profitable and stop growing quickly, there will be "excess capital" that can be distributed out

 

Edited July 7, 2025 by gfp

[Hoodlum]

1 hour ago, gfp said:

 

I would imagine the analyst is referring to the approximate amount of "excess capital" the insurance subsidiaries could do without yet still maintain their current volume of business.  As in, what is available to be distributed to the holding company and used for shareholder stuff like share repurchases and dividends.

 

Not sure the analyst is factoring in things like buying in minority interests in subsidiaries.

 

If the insurance subsidiaries remain profitable and stop growing quickly, there will be "excess capital" that can be distributed out

 

 

Thanks @gfp that does make sense now.  Maybe they are also including the 2.5B+ of Cash/short-term securities at the holding company to come up with the $6B.

Edited July 7, 2025 by Hoodlum

[gfp]

7 minutes ago, Hoodlum said:

 

Thanks @gfp that does make sense now.  Maybe they are also including the 2.5B+ of Cash/short-term securities at the holding company to come up with the $6B.

 

That is possible.  I was just thinking they were factoring in the passage of time.  The screenshot from the annual report was from year-end.  Time marches on and capital accumulates!

[SafetyinNumbers]

2 hours ago, dartmonkey said:

Agree with both points, but there are many other good reasons to own Fairfax. I don't feel I am part of the 'stock split crowd', and I agree that the high share price does put Fairfax in some pretty good company, but I can easily live without this feature.

Stock split will really help with multiple expansion as dealers require inventory and there are quite a few ETFs and individual investors that like covered call writing. 

[netcash1]

How did the split go for E-L Financial? Long term holders still are not selling.  We get the investors we deserve - long term compounders.

[Hoodlum]

17 minutes ago, SafetyinNumbers said:

Stock split will really help with multiple expansion as dealers require inventory and there are quite a few ETFs and individual investors that like covered call writing. 

I would consider loaning out my share for the right price.  I would not turn down the extra income, even if it creates some share price volatility.   

 

Edited July 7, 2025 by Hoodlum

[SafetyinNumbers]

47 minutes ago, netcash1 said:

How did the split go for E-L Financial? Long term holders still are not selling.  We get the investors we deserve - long term compounders.

Different story as it’s not liquid enough or the float big enough for the Composite yet so no listed options. The hope is some investors use it, instead of ETFs and given the increased liquidity, trade it more often too. If playing musical chairs with market exposure, it’s somewhat safer to do at a big discount to liquidation value. 

[Intelligent_Investor]

21 hours ago, hardcorevalue said:

I like FFH because it is the 1% of companies that think long term. 

I hope the shareholder base here doesn't devolve into the stock split crowd over time. 

Did you sell BRK when they did the B shares?

[Parsad]

22 hours ago, hardcorevalue said:

I sell everything if they ever split the stock

 

22 hours ago, dartmonkey said:

Why?

 

I agree it would be largely pointless, but what harm would it do to split it 25:1 and have a share price of about C$100

 

No need for another split for another 10 years or so, even with 25% annual share price gains, making us all financially independent? (Except maybe you, because you don't like them doing something that at least 99% of other companies do?)

 

Prem will never split the stock.  No point...extra cost...why?  He has no plans to ever sell the company...so who cares about multiple expansion.  Fairfax shareholders know when the stock is cheap and will buy it.  

 

Now what happens after Prem...less control there...but I doubt Ben and Christine would let the board split the stock.  And since they will control the multiple voting stock...not likely to happen in our lifetimes.  Cheers!

[Marco Van Basten]

2 minutes ago, Parsad said:

 

 

Prem will never split the stock.  No point...extra cost...why?  He has no plans to ever sell the company...so who cares about multiple expansion.  Fairfax shareholders know when the stock is cheap and will buy it.  

 

Now what happens after Prem...less control there...but I doubt Ben and Christine would let the board split the stock.  And since they will control the multiple voting stock...not likely to happen in our lifetimes.  Cheers!

Actually, if Prem never plans to sell, then he does not want a high multiple since it will cost him more to buy back stock

[Parsad]

14 minutes ago, dealraker said:

Two things that make COBF a forum of higher level thinking are almost but not quite no discussions of stock splits or dividend yield.

 

That would be the other reason for no split.  Buffett put in a Class B share structure because he planned on no dividend, and that was forcing long-term shareholders to sell their A shares, or move to funds that were buying up tons of A shares and had smaller unit prices for gift giving, estate planning, etc.

 

Fairfax unlike Berkshire, Prem thought about this ahead of time, since his own income and estate planning depended on it...so he instituted the originally unheralded Fairfax dividend.  Which today, seems to make a ton of sense from both a compensation structure and ability to distribute income for estate planning purposes without having to sell your Fairfax shares.

 

Cheers!

[villainx]

36 minutes ago, Parsad said:

Fairfax unlike Berkshire, Prem thought about this ahead of time, since his own income and estate planning depended on it...so he instituted the originally unheralded Fairfax dividend. 

 

so is it too late for Berkshire to do same?

 

[Parsad]

46 minutes ago, villainx said:

 

so is it too late for Berkshire to do same?

 

 

No, they went the other route.  A dividend would essentially be pointless other than to distribute excess capital.  You can convert your A shares to B shares if you want a dividend or for estate planning.  Cheers!

[Junior R]

FFH bought 5000 shares back in June 2025

 

[netcash1]

That's great.  Disciplined and slow and steady.  

[netcash1]

[SafetyinNumbers]

4 hours ago, netcash1 said:

Pretty amazing they can expect a 16% ROE and think that 8x earnings is the right multiple. Of course, that has been Fairfax’s story too.

[cwericb]

Contrary to what one certain certain analyst may think, let's just call him "No Moat", we are starting to see more analysts who do seem to understand Fairfax. One has to wonder how many analysts actually follow this board. One might suspect that some of our members are also among them.

 

 

Raymond James analyst Stephen Boland predicts a “stellar” quarter for Fairfax Financial Holdings Ltd.’s  investment portfolio.

“Many of Fairfax’s largest equity investments (e.g. Eurobank, Fairfax TRS, Digit) have seen considerable share price gains since the close of 2Q55, and while some of these are equity-accounted (and thus market gains excluded from book value), we estimate the fair value gain on Fairfax’s known public equity positions is $2.4 billion for the quarter,” he said. “We also believe the gap between the carrying value and book value for these investments has widened to $2.5 billion as of 2Q25, up from $1.4 billion at the end of 2Q25 and equivalent to 9 per cent of reported book value.

However, Mr. Boland also thinks “the market is well aware of this dynamic,” noting Fairfax shares are up 21.5 per cent in 2Q25, and his revised estimates “suggest the company is well on track to deliver a 20-per-cent-plus ROE this year.”

“To be clear, the shares still screen inexpensive; if we adjust our 2026 book value estimate for the current gap between reported and investment fair values, Fairfax is trading at 1.2 times 2026E book value – 36 per cent off our chosen peer group despite a superior (and we argue, more reliable) ROE outlook,“ he said. ”Recall this is a company that continues to execute across all facets of the business – solid underwriting performance, exceptional equity returns, and a low-risk, $2.5 billion+ interest/dividend revenue stream that we view as effectively locked-in for the next 3 years."

Retaining his “outperform” rating for Fairfax shares, Mr. Boland raised his target to $2,900 from $2,600. The average is $2,680.31.

“Unsurprisingly, Fairfax remains our top insurance pick and among our top picks overall,” he said. “The company has an abundance of excess capital (approximately $6-billion by our estimates), continues to buy back shares at attractive prices, and looks a reformed business since ending its shorting/hedging program in 2020. With the other insurers trading close to peak multiples following several years of hard market conditions, Fairfax remains the cheapest insurer in our coverage, notwithstanding a more diversified business mix that leaves it arguably less exposed to a softer North American P&C cycle. We are moving our BVPS and GAAP EPS estimates higher to reflect the strong quarterly investment gains, while increasing our target to $2,900 (from $2,600).”

Edited July 10, 2025 by cwericb

[Viking]

49 minutes ago, cwericb said:

Contrary to what one certain certain analyst may think, let's just call him "No Moat", we are starting to see more analysts who do seem to understand Fairfax. One has to wonder how many analysts actually follow this board. One might suspect that some of our members are also among them.

 

 

Raymond James analyst Stephen Boland predicts a “stellar” quarter for Fairfax Financial Holdings Ltd.’s  investment portfolio.

“Many of Fairfax’s largest equity investments (e.g. Eurobank, Fairfax TRS, Digit) have seen considerable share price gains since the close of 2Q55, and while some of these are equity-accounted (and thus market gains excluded from book value), we estimate the fair value gain on Fairfax’s known public equity positions is $2.4 billion for the quarter,” he said. “We also believe the gap between the carrying value and book value for these investments has widened to $2.5 billion as of 2Q25, up from $1.4 billion at the end of 2Q25 and equivalent to 9 per cent of reported book value.

However, Mr. Boland also thinks “the market is well aware of this dynamic,” noting Fairfax shares are up 21.5 per cent in 2Q25, and his revised estimates “suggest the company is well on track to deliver a 20-per-cent-plus ROE this year.”

“To be clear, the shares still screen inexpensive; if we adjust our 2026 book value estimate for the current gap between reported and investment fair values, Fairfax is trading at 1.2 times 2026E book value – 36 per cent off our chosen peer group despite a superior (and we argue, more reliable) ROE outlook,“ he said. ”Recall this is a company that continues to execute across all facets of the business – solid underwriting performance, exceptional equity returns, and a low-risk, $2.5 billion+ interest/dividend revenue stream that we view as effectively locked-in for the next 3 years."

Retaining his “outperform” rating for Fairfax shares, Mr. Boland raised his target to $2,900 from $2,600. The average is $2,680.31.

“Unsurprisingly, Fairfax remains our top insurance pick and among our top picks overall,” he said. “The company has an abundance of excess capital (approximately $6-billion by our estimates), continues to buy back shares at attractive prices, and looks a reformed business since ending its shorting/hedging program in 2020. With the other insurers trading close to peak multiples following several years of hard market conditions, Fairfax remains the cheapest insurer in our coverage, notwithstanding a more diversified business mix that leaves it arguably less exposed to a softer North American P&C cycle. We are moving our BVPS and GAAP EPS estimates higher to reflect the strong quarterly investment gains, while increasing our target to $2,900 (from $2,600).”

So Fairfax is on track to deliver a 20% ROE in 2025. This does not include the increase of $1.1 billion in excess of FV over CV of associate and consolidated holdings. Eurobank is up quite a bit to start Q3… It looks like economic value is increasing much more than accounting value. Is Fairfax contracting BRK disease? Where BV loses its relevance as a valuation measure for investors?

[SafetyinNumbers]

9 minutes ago, Viking said:

So Fairfax is on track to deliver a 20% ROE in 2025. This does not include the increase of $1.1 billion in excess of FV over CV of associate and consolidated holdings. Eurobank is up quite a bit to start Q3… It looks like economic value is increasing much more than accounting value. Is Fairfax contracting BRK disease? Where BV loses its relevance as a valuation measure for investors?

I think when Buffett talks about book value not being relevant he is saying that a P/B multiple of 1 is not a good representation of intrinsic value. If the value of the assets are higher than book value and they earn a good return than it should show up through a higher ROE like we are seeing. Historically, there is an exponential relationship between ROE and P/B which makes sense given the compounding effects of a high ROE. 

[Crip1]

3 hours ago, SafetyinNumbers said:

I think when Buffett talks about book value not being relevant he is saying that a P/B multiple of 1 is not a good representation of intrinsic value. If the value of the assets are higher than book value and they earn a good return than it should show up through a higher ROE like we are seeing. Historically, there is an exponential relationship between ROE and P/B which makes sense given the compounding effects of a high ROE. 

The references to book value I recall from Buffett were:

• Berkshire’s intrinsic value changes year by year were roughly (my emphasis) in line with changes in book value.
• As Berkshire became more of an operating company than an insurance company, book value became increasingly less representative of intrinsic value.

 

Combining these two (and over-simplifying) is that, in a given year, book value may increase by 12% but intrinsic value may have increased by 10%-14% or thereabouts. The next year may see a BV increase of 15% with IV increasing by 13%-17%. So, year over year change in BV is reasonable to assess the increase in value of the company for that year. This was especially true when Insurance was such a huge portion of Berkshire’s revenue/earnings. More often than not the change in IV was in excess of the change in BV and, as the years go by, that mismatch would grow…the longer the timeframe, the more it grew. Trying to put a number on this year after year is hugely tedious, and inexact. Over the past 5-10 years (really starting in 2016 with the removal of the hedges), Fairfax has been similar.

 

Right now, as has been pointed out, BV is understated considering the excess of FV over CV. Furthermore, that BV is earning is earning a helluva return. I’d love to put a number on it, but that’s beyond my analytical skill. But it looks to me like the company is worth at least what it’s selling for, and likely more. This compels one to think of the Buffett quote: "It is better to be approximately right than precisely wrong". Approximately, it’s worth more than it’s selling for.

 

-Crip

[Viking]

I am not an accountant. So please feel free to correct my errors. But it looks to me like 'issue' that Fairfax is having is different from that of Berkshire Hathaway. By issue, I mean the increase in economic value that is not being captured in accounting value.

 

For BRK, I think the 'problem' was primarily with the consolidated holdings. For Fairfax the 'problem' today is primarily with the associate holdings. (Although I think Fairfax may have an emerging 'problem' with its consolidated holdings.) The interesting things is for Fairfax we can see the size of the problem, because Fairfax reports excess of fair value over carrying value (and we can actually do the calculation ourselves).

 

The problem Fairfax has is the CV for many of its associate holdings is criminally low. Eurobank is the poster child. But there are other examples (like Thomas Cook India and Dexterra). We can see the size of the problem for Fairfax's publicly traded companies. As their share prices rip higher, the excess of FV over CV is spiking higher. 

 

The continuous, significant value creation that has been happening for years with many of Fairfax's equity holdings has not been captured in any of the accounting results like EPS, BV or ROE. What this means is Fairfax's stellar reported results of the past 4 or 5 years are materially understated - Fairfax's economic results have been even better than the reported accounting results.

 

It's like all of this 'hidden' value creation is getting put into a large and growing off- balance sheet bucket. Over time, Fairfax will find a way to monetize this off-balance sheet asset. Like the sale of Sigma in Q1 (a small holding for Fairfax), which resulted in a 'surprise' realized gain of $178.7 million. When this happens it will juice EPS, BV and ROE. 

 

And for Fairfax, excess of FV over CV is just one of many examples of where value is hidden. There are many others. Other P/C insurance companies do not have this same set-up (billions in value creation that has already happened but has not yet been captured in accounting results... that is just sitting there waiting to be monetized).

 

Don't get me wrong.. I am not complaining. I love it. Fairfax today is playing like Scottie Scheffler on the PGA tour - and at the same time, with all the value that is growing/hiding on their balance sheet, it's like they are also now being given a couple of mulligans for future events (that will allow them to post better future results). It's just not fair (to the other players). Nuts. 

Edited July 10, 2025 by Viking