Fairfax 2025

[glider3834]

~123K repurchases in Sep-25

 

for Jul-Sep-25 period - ~285K shares repurchased 

 

[SafetyinNumbers]

47 minutes ago, TwoCitiesCapital said:

 

+1

 

 

What were the risks of going to 0 in 2016 and staying there until 2022? 

 

It's no coincidence Fairfax stock did terribly over this period and was very slow to recover post-covid. 

 

Which provided the opportunity for me to re-enter in size, but I don't want that opportunity to come by again because of 6-years of going back to zero. 

 

We can all debate the next decade will be different, that rates will be secularly higher, etc. I'm sympathetic to that view, but people were making that argument in 2010...and took a decade to maybe be right. I'd rather them drop swinging for the fences with the duration calls - match their liabilities (maybe +/- 0.5 years based on their view for rates), and provide some stability to interest income. They can always make the spread on credit when the opportunities present themselves for the alpha. 

Have you calculated what the impact was on ROE based on the duration decisions? Do you also think they should own corporates while ignoring the spread?

[nwoodman]

FWIW I see their Greek holdings as a quasi $5bn Inflation protected Eurobond.  It’s obviously not a bond in a regulatory sense, but it behaves like one economically.

There is even the remote possibility under both OSFI’s LICAT and Solvency II internal models, that they can petition to assign lower equity stress factors to holdings that have:

• 5 + years of stable, audited dividends,
• Low correlation with public-market indices, and
• Strategic / long-term intent (no trading)

Far preferable to US Treasuries IMHO.  While it doesn’t completely offset a cut in yields on a $50bn bond portfolio, along with some of their other positions, just give it time

 

Edited October 10, 2025 by nwoodman

[Viking]

2 hours ago, TwoCitiesCapital said:

 

+1

 

 

What were the risks of going to 0 in 2016 and staying there until 2022? 

 

It's no coincidence Fairfax stock did terribly over this period and was very slow to recover post-covid. 

 

Which provided the opportunity for me to re-enter in size, but I don't want that opportunity to come by again because of 6-years of going back to zero. 

 

We can all debate the next decade will be different, that rates will be secularly higher, etc. I'm sympathetic to that view, but people were making that argument in 2010...and took a decade to maybe be right. I'd rather them drop swinging for the fences with the duration calls - match their liabilities (maybe +/- 0.5 years based on their view for rates), and provide some stability to interest income. They can always make the spread on credit when the opportunities present themselves for the alpha. 

Fairfax’s stock did terribly from 2010 to 2020 for one big reason: the equity hedges. The short positions were a second smaller factor. Everything after this pales in comparison - I.E. excluding these two factors, Fairfax’s performance would have likely been ok (including lower interest income from how defensive they were with the duration of their fixed income portfolio beginning at the end of 2016).

 

Fairfax booked about $250 million in realized gains when they sold off their corporate bond portfolio in 2021 (at a yield of 1%). And in 2002/03, Fairfax avoided billions in losses in their fixed income portfolio because of how defensive they were positioned. And because they were so short duration, in 2022/23 the earn through from much higher rates (much higher interest income) was very quick.
 

When you add up all the puts and takes, Fairfax likely did very well with the total return they earned on their fixed income portfolio from late 2016 to 2023. 

Edited October 10, 2025 by Viking

[Viking]

13 hours ago, glider3834 said:

~123K repurchases in Sep-25

 

for Jul-Sep-25 period - ~285K shares repurchased 

 

@glider3834, this is super interesting. Thanks for posting. 

Size: repurchasing 132,000 shares in one month is meaningful (0.6% of effective shares outstanding). 285,000 in the quarter = 1.3%. 

 

Value: Fairfax appears to have paid about US$1,740/share (rough guess) for the repurchases in September. This strongly suggests they see good value in their shares at this price level. 

Edited October 10, 2025 by Viking

[adventurer]

2 hours ago, Viking said:

@glider3834, this is super interesting. Thanks for posting. 

Size: repurchasing 132,000 shares in one month is meaningful (0.55% of effective shares outstanding). 285,000 in the quarter = 1.3%. 

 

Value: Fairfax appears to have paid about US$1,740/share (rough guess) for the repurchases in September. This strongly suggests they see good value in their shares at this price level. 

I lost track of the outstanding shares. Do you have a rough estimate as to where we are right now? My last count was 22.8 Mil. 

[djokovic1]

9 hours ago, vinod1 said:

The argument is they can build a ladder of 1 year to 5/6 year ladder that roughly matches liabilities. That is it. If interest rates are say, below 2%, it is fine to say, no that is too low and I am not taking any risk. 

 

You are just balancing reinvestment risk with this approach. 

 

100% agree.

[djokovic1]

Separately, I did this quick analysis as it came up in a recent discussion ->Why FFH over Markel?

 

Last 5 year ROE (have just taken from CapitalIQ), no adjustments made:

 

 

But if you look at current valuation:

FFH at 9x 2025E EPS and Markel at 20x 2025 EPS

[glider3834]

1 hour ago, adventurer said:

I lost track of the outstanding shares. Do you have a rough estimate as to where we are right now? My last count was 22.8 Mil. 

• At June 30, 2025 there were 21,591,832 common shares effectively outstanding (December 31, 2024 – 21,668,466).

[adventurer]

30 minutes ago, glider3834 said:

• At June 30, 2025 there were 21,591,832 common shares effectively outstanding (December 31, 2024 – 21,668,466).

Ah sorry, thanks!

[Hamburg Investor]

2 hours ago, djokovic1 said:

Separately, I did this quick analysis as it came up in a recent discussion ->Why FFH over Markel?

 

Last 5 year ROE (have just taken from CapitalIQ), no adjustments made:

 

 

But if you look at current valuation:

FFH at 9x 2025E EPS and Markel at 20x 2025 EPS

Thank you, @djokovic1, that is an interesting comparison!

The valuation of Markel (and Berkshire) in comparison to FFH was one reason, why I shifted my shares from 2020 onwards. Today, my portfolio looks like this: 45% FFH, 9% MKL, 12% BRK, 9% Protector Forsikring. So 75% of my portfolio is in insurance companies, with Brookfield (BN/BAM) accounting for another 7% and Fairfax India over 1%; both also have insurance shares, which would bring the total "insurance-related" part to 81%.
 

Purely from a pricing perspective, I would like to focus even more on FFH (and on Protector) and reduce MKL and BRK. The problem is that I would lose about 25% of the MKL and BRK volume sold in a switch process (due to taxes in Germany, spread, trading costs; BRK and MKL have multiplied, so that almost only profits remain and we pay over 26% tax on stock related profits here in Germany).

And I would also like to be diversified to a certain extent.

And I have found that luck can change between MKL, FFH and BRK. FFH was the big winner in the financial crisis, but not in the following Voldemort years. Markel performed very well for a long time, but that has now changed. However, I still see MKL as an outperformer in the market in the long term and the risk is different from that of Fairfax. MKL has also achieved a 15% ROE over 35+ years; not bad in my eyes and I trust management. And Berkshire? It has also had its good times since 2007, but of course it no longer comes close to its historical returns looking forward. But it is no longer really an insurance company. Which, given my high concentration in this business of 75%/81%, is perhaps not such a bad thing. I see BRK almost more as a diversified holding company. And Protector is hopefully simply what the other three mentioned were in their early stages. In any case, the past 20 years of Protector look good and I don't see them changing the strategy, risk profile etc.

I am always thinking about balancing the risk (and award) in the right way. But it just gets hard, when you are relatively concentrated from the start and one hits the ball out of the park. Watering the weeds and harvesting the flowers is not a good strategy as we all know. But what do you do when you have some nice flowers and others that are even more beautiful? At least, that's how it feels right now. (Any suggestions welcome!).

 

[Junior R]

my question is what happens when they get the share count down 10m to 15m lol...this is my biggest question has nothing to do with anything just a question lol

Edited October 10, 2025 by Junior R

[dartmonkey]

These are my favourite days, for some reason - yes, Fairfax and Fairfax India are down a bit (about 0.4-0.5% as I write), but the S&P 500 is down 2%, and the S&P 50 (XLG) is down 2.2%. We've had so few of these days in the last couple of years, we forget that FFH is poorly correlated with the general market.

 

A few more days like this, and the stuff I want to buy will become more reasonably priced, and the stuff I'll sell to buy it with (FFH) will hopefully have held most of its value, as it is not particularly bothered by AI or tariffs or whatever the worry du jour might happen to be.

 

 

[MungerWunger]

8 minutes ago, dartmonkey said:

These are my favourite days, for some reason - yes, Fairfax and Fairfax India are down a bit (about 0.4-0.5% as I write), but the S&P 500 is down 2%, and the S&P 50 (XLG) is down 2.2%. We've had so few of these days in the last couple of years, we forget that FFH is poorly correlated with the general market.

 

A few more days like this, and the stuff I want to buy will become more reasonably priced, and the stuff I'll sell to buy it with (FFH) will hopefully have held most of its value, as it is not particularly bothered by AI or tariffs or whatever the worry du jour might happen to be.

 

 

agreed

[TwoCitiesCapital]

5 hours ago, Junior R said:

my question is what happens when they get the share count down 10m to 15m lol...this is my biggest question has nothing to do with anything just a question lol

 

Share price goes up.

[Junior R]

Just now, TwoCitiesCapital said:

 

Share price goes up.

Does COBF then own 40% of all outstanding shares lol

[Viking]

Listening to Baker Mayfield in the Q&A reminded me of the journey that Fairfax has been on in recent years. Understanding narrative is an important part of investing. Narrative follows results/stock price (it doesn't lead). I always thought it was the other way around.

 

'Just gotta be yourself...' Nice description of how Fairfax operates.

 

 

Here is a short clip of the Q&A.

 

 

Edited October 11, 2025 by Viking

[mengan]

On 10/9/2025 at 9:32 PM, Viking said:

The yield on the US 10 year treasury is 4.15% today. When it comes to 10 year US bonds… are you getting paid an appropriate amount to take duration? The 2 year has a yield of 3.6%.

 

 

I would almost bet Brad is thinking along this line. If the yield curve would be steeper, there would be a larger incentive to increase duration.

[johannes]

[sholland]

My west coast philosopher friend asked me about my investment thesis in Fairfax. I wrote something up last weekend and it occurred to me that people on this board might possibly be interested.  Huge thanks to @Viking and others for their contributions to this board. Much of this writeup is inspired/plagiarized from them. 

 

https://docs.google.com/document/d/1cFtEu-cW4kVN21Q4_o3Kk-USHgWUpmVBVGwkafcXTz4/edit?usp=drivesdk

[Junior R]

interesting yesterday on US side people where selling this down $30 and cad market its up $45

[djokovic1]

Met Ben Watsa at a Europe value investor conference. Asked him why Fairfax was short duration at high rates. Mostly comes down to protecting the downside as they see potential for an inflationary spike.

[dartmonkey]

9 minutes ago, djokovic1 said:

Asked him why Fairfax was short duration at high rates. Mostly comes down to protecting the downside as they see potential for an inflationary spike.

Great, thanks. I guess that settles the question about whether the duration changes are a macro bet or not.

 

The really amazing thing is that long rates are not already higher. With signs of lingering inflation, record deficit spending in North America and Europe, and a US president pushing for lower rates despite this, it seems like a reasonable bet, unless one thinks we are heading for a recession. But it is hard to argue that it is not a macro bet.

[bluedevil]

I think the caution on inflation is prudent.  As Dalio explains, the US government spends 7 trillion each year; and brings in only five.  $ 1 trillion goes to interest expense, and that is pushing up relentlessly as the government keeps spending more than it brings in.

Only realistic path out seems to be to debase the dollar; which will feed inflation.

I suspect that in a nutshell is why Fairfax is shy about taking duration risk, especially when they are getting paid ok to remain short. 

 

[SafetyinNumbers]

1 hour ago, dartmonkey said:

Great, thanks. I guess that settles the question about whether the duration changes are a macro bet or not.

 

The really amazing thing is that long rates are not already higher. With signs of lingering inflation, record deficit spending in North America and Europe, and a US president pushing for lower rates despite this, it seems like a reasonable bet, unless one thinks we are heading for a recession. But it is hard to argue that it is not a macro bet.

I don’t think of it as a macro bet because that implies that matching duration is the default. I think they are just applying expected value investing to the fixed income portfolio. There is optionality in staying short duration especially if everyone else is long duration. The foregone interest income is the premium for the option and being in a strong capital position in order to grow fast in hard market is the payoff if long rates do move higher.