Fairfax 2025

[Parsad]

20 minutes ago, Viking said:

Attached below is an update to my earnings estimate for Fairfax for 2025 and 2026.

• 2025 = $195/diluted share (economic EPS = $233/share)
• 2026 = $190/diluted share (economic EPS = $200/share)

Bottom line, Fairfax's fundamentals continue to improve, so my estimates for both years have increased. At the bottom I have also included the change in excess of FV over CV for associate and consolidated holdings. This is additional economic value that is being created that is not being captured in the accounting results. Adding reported EPS with this number provides a conservative estimate for the increase in economic earnings for the year. This estimate is conservative because it does not capture all the value creation that is happening under the hood at Fairfax. 

 

For 2026, I am being conservative with investment gains, given the size of gains we are likely to see in 2025. Bottom line, Fairfax is generating economic earnings of about $200/share. I think this is a reasonable number to use as a normalized number. I think it is conservative given my low estimate for investment gains. 

 

With the shares trading at $1,600, that puts the PE at about 8x. That looks pretty cheap to me for a company of Fairfax's quality. 

 

Let me know what you think.

 

 

But Viking...this is a no moat company!  Cheers!

[SafetyinNumbers]

2 hours ago, giulio said:

Buying back insurance minorities should add approximately $20 per shares in earnings... 

 

Another way, FFH understates earnings is by giving the preferred return shareholders who purchase the minority interest so many rights that they are deemed common shares by the accountants which understates operating earnings until they are brought back in. The issuance Ki made in 2022 as noted above are also these types of common shares. The preferred return is 8% and they get paid back in cash on the IPO at the IPO price. It’s why FFH’s economic interest in Ki is closer to 40% vs 20% as it appears.

[Viking]

1 hour ago, Parsad said:

 

But Viking...this is a no moat company!  Cheers!

@Parsad when it comes to estimating earnings for Fairfax, the really interesting thing to me is how estimates have consistently been too low. And that includes me.

 

Why have EPS estimates for Fairfax been consistently wrong (too low) every year for 5 years straight? 
 

Answer: Investors (including me) do not yet fully understand or appreciate Fairfax (the business and management).
 

What is it we are missing? 
 

My guess is its a couple of things:

1.) We are grossly underestimating the amount of ‘hidden value’ that is residing in the company. And how much it is growing.

2.) The impact of reinvestment of current year earnings on future returns.

3.) The impact of compounding on future returns. 
 

What do other board members think?
 

Why have we been so bad for so long at estimating Fairfax’s business results? 

Edited November 12, 2025 by Viking

[Junior R]

I would like to see share count down to 15m in 3 years and a 2% div yield on the price once it gets to 15m

[Parsad]

3 minutes ago, Viking said:

@Parsad when it comes to estimating earnings for Fairfax, the really interesting thing to me is how estimates have consistently been too low. And that includes me.

 

Why have EPS estimates for Fairfax been consistently wrong (too low) every year for 5 years straight? 
 

Answer: Investors (including me) do not yet fully understand or appreciate Fairfax (the business and the team).
 

What is it we are missing? 
 

My guess is its a couple of things:

1.) We are grossly underestimating the amount of ‘hidden value’ that is residing in the company. And how much it is growing.

2.) The impact of reinvestment on future returns.

3.) The impact of compounding on future returns. 
 

What do other board members think?
 

Why have we been so bad for so long at estimating Fairfax’s business results? 

 

Maybe a no moat company has other attributes that aren't quantifiable...like quality of management?  You cannot put a number on that.  Cheers!

[Parsad]

2 minutes ago, Junior R said:

I would like to see share count down to 15m in 3 years and a 2% div yield on the price once it gets to 15m

 

I don't think that is possible.  They would have to retire 6M shares at say $2,500 per share, which would come to $15B over three years.  Essentially 90% of their earnings would go just to buybacks.  Not likely as they are still going to be buying back companies they don't own 100% of.

 

What would be feasible is probably getting it down to 18M shares and that 2% dividend.  That would be 3M shares at $2,500 which would be $7.5B.  

 

And I would only want them to buy back shares if it is fully accretive to intrinsic value, revenues and earnings.  I don't want them overpaying for buybacks.  They are better off using that capital for dividends or investments elsewhere.  Cheers!

[Hoodlum]

1 hour ago, Viking said:

Attached below is an update to my earnings estimate for Fairfax for 2025 and 2026.

• 2025 = $195/diluted share (economic EPS = $233/share)
• 2026 = $190/diluted share (economic EPS = $200/share)

Bottom line, Fairfax's fundamentals continue to improve, so my estimates for both years have increased. At the bottom I have also included the change in excess of FV over CV for associate and consolidated holdings. This is additional economic value that is being created that is not being captured in the accounting results. Adding reported EPS with this number provides a conservative estimate for the increase in economic earnings for the year. This estimate is conservative because it does not capture all the value creation that is happening under the hood at Fairfax. 

 

For 2026, I am being conservative with investment gains, given the size of gains we are likely to see in 2025. Bottom line, Fairfax is generating economic earnings of about $200/share. I think this is a reasonable number to use as a normalized number. I think it is conservative given my low estimate for investment gains. 

 

With the shares trading at $1,600, that puts the PE at about 8x. P/BV - 1.3 and the company is delivering an average ROE in the high teens. That looks pretty cheap to me for a high quality company with an outstanding long term track record that is very well positioned, well managed and very shareholder friendly. 

 

Let me know what you think.

 

 

 

Thanks @Viking  I presume you are not including any Reserve Release for Q4.   While there is no way to predict what this could be, we have seen increasing releases from 2023 to 2024 due to the hard market from ~4 years prior.  While there is no guarantee, I would not be surprise to see us match or exceed 2024's Reserve Release of $500M+.   That would push us well over $200/diluted share.

 

Edited November 12, 2025 by Hoodlum

[Junior R]

4 minutes ago, Parsad said:

 

I don't think that is possible.  They would have to retire 6M shares at say $2,500 per share, which would come to $15B over three years.  Essentially 90% of their earnings would go just to buybacks.  Not likely as they are still going to be buying back companies they don't own 100% of.

 

What would be feasible is probably getting it down to 18M shares and that 2% dividend.  That would be 3M shares at $2,500 which would be $7.5B.  

 

And I would only want them to buy back shares if it is fully accretive to intrinsic value, revenues and earnings.  I don't want them overpaying for buybacks.  They are better off using that capital for dividends or investments elsewhere.  Cheers!

good point...the 2% div would give this a higher multiple (as much as it sounds stupid)...TSX Investors are highly weighed towards Dividends

[roundball100]

22 minutes ago, Viking said:

What do other board members think? 

 

I think I would like to nominate Viking as stock-board member of the year for all of his hard work.

That's what I think. 

[sholland]

1 hour ago, Viking said:

Attached below is an update to my earnings estimate for Fairfax for 2025 and 2026.

• 2025 = $195/diluted share (economic EPS = $233/share)
• 2026 = $190/diluted share (economic EPS = $200/share)

Bottom line, Fairfax's fundamentals continue to improve, so my estimates for both years have increased. At the bottom I have also included the change in excess of FV over CV for associate and consolidated holdings. This is additional economic value that is being created that is not being captured in the accounting results. Adding reported EPS with this number provides a conservative estimate for the increase in economic earnings for the year. This estimate is conservative because it does not capture all the value creation that is happening under the hood at Fairfax. 

 

For 2026, I am being conservative with investment gains, given the size of gains we are likely to see in 2025. Bottom line, Fairfax is generating economic earnings of about $200/share. I think this is a reasonable number to use as a normalized number. I think it is conservative given my low estimate for investment gains. 

 

With the shares trading at $1,600, that puts the PE at about 8x. P/BV - 1.3 and the company is delivering an average ROE in the high teens. That looks pretty cheap to me for a high quality company with an outstanding long term track record that is very well positioned, well managed and very shareholder friendly. 

 

Let me know what you think.

 

 

Thanks @Viking for sharing your work. I thought it would be interesting to compare your work against Fairfax’s outlook.  (I 2nd @roundball100 ‘s nomination)

Edited November 12, 2025 by sholland

[Txvestor]

This, if correct is an example of why earnings are understated for what they really are. 
Does anyone know how to reconcile that $4.2B reported as non controlling interests with the $1.8B or so other posters are calculating? Heck their TRS position alone can easily fund that. 

[TwoCitiesCapital]

59 minutes ago, Viking said:

@Parsad when it comes to estimating earnings for Fairfax, the really interesting thing to me is how estimates have consistently been too low. And that includes me.

 

Why have EPS estimates for Fairfax been consistently wrong (too low) every year for 5 years straight? 
 

Answer: Investors (including me) do not yet fully understand or appreciate Fairfax (the business and the team).
 

What is it we are missing? 
 

My guess is its a couple of things:

1.) We are grossly underestimating the amount of ‘hidden value’ that is residing in the company. And how much it is growing.

2.) The impact of reinvestment of current year earnings on future returns.

3.) The impact of compounding on future returns. 
 

What do other board members think?
 

Why have we been so bad for so long at estimating Fairfax’s business results? 

 

Perhaps it's just volatility. For instance, did anyone expect Eurobank to double this year after a long stretch of already good returns? Did anyone expect CLF to drop by 50+% after buying Stelco? A good chunk of the variability is just natural variability in interest rates, equity values, and catastrophes (or lack thereof). 

 

When I think about earnings, I'm often "averaging" out or "smoothing" over a longer time frame and could be dramatically off on any one quarter. 

[Txvestor]

8 hours ago, SafetyinNumbers said:

i have about the same as you @giulio. If we are right @Txvestor, FFH just got $100/sh cheaper for you. 

 

Yes, but the good thing about Fairfax is they do trade in and out of securities based on valuations. They have done it often enough that I think how they think about investments. They are patients but if they get a good price they will exit. Many of their recent exits RFP, Pet insurance, Stelco and now Eurolife were done at very favorable prices. Although not a consistent steam of earnings, averaged out over a decade or so, it's a meaningful return. 

Edited November 12, 2025 by Txvestor

[gfp]

12 minutes ago, Txvestor said:

This, if correct is an example of why earnings are understated for what they really are. 
Does anyone know how to reconcile that $4.2B reported as non controlling interests with the $1.8B or so other posters are calculating? Heck their TRS position alone can easily fund that. 

 

Aren't you guys mixing up non-controlling interests for just their insurance subsidiaries with non-controlling interests for those insurance subsidiaries plus all the other consolidated companies they have a 50.1%->99.9% ownership interest in?

[Parsad]

52 minutes ago, roundball100 said:

 

I think I would like to nominate Viking as stock-board member of the year for all of his hard work.

That's what I think. 

 

Sure.  That's a great idea!  Cheers!

[Viking]

14 minutes ago, TwoCitiesCapital said:

 

Perhaps it's just volatility. For instance, did anyone expect Eurobank to double this year after a long stretch of already good returns? Did anyone expect CLF to drop by 50+% after buying Stelco? A good chunk of the variability is just natural variability in interest rates, equity values, and catastrophes (or lack thereof). 

 

When I think about earnings, I'm often "averaging" out or "smoothing" over a longer time frame and could be dramatically off on any one quarter. 

@TwoCitiesCapital, I am not following you. Each of the 4 items that make up operating earnings is going up. As a result operating earnings has been growing nicely. 
 

With Fairfax’s equity holdings, company fundamentals pretty much across the board are improving. That tells me the companies are increasing in value (that is very different than volatility). 
 

Buying back minority interests (Brit) and continuing share buybacks are helping. 

 

[djokovic1]

2 hours ago, Viking said:

Attached below is an update to my earnings estimate for Fairfax for 2025 and 2026.

• 2025 = $195/diluted share (economic EPS = $233/share)
• 2026 = $190/diluted share (economic EPS = $200/share)

Hi @Viking I am very similar for 2026 but higher for 2025 ~$210 (ie implied higher for Q4 2025). Given they have done $156 already for 9M and I think another $50+ quarter is not a stretch in Q4 given the reserve releases they allude to between the lines.

Also in support of Viking for stock board member of the year . The meticulous analysis you do and compile in one place was really an amazing help  to get me up to speed last year.

 

57 minutes ago, sholland said:

I thought it would be interesting to compare your work against Fairfax’s outlook.

I would correct that and say it is not Fairfax's outlook. Because you are not giving full credit to the + sign. I.e neglecting the full effect of compounding that will likely increase these numbers over time by 15%+ a year on a per share basis.

Secondly, we should not put a 0 on equity gains and losses just because they are volatile. We know over the long term they will create value. So for each year an average return expectation should be added to the estimates to be accurate.

 

But it's likely what the analysts do. 1) ignore the effect of compounding 2) do not give credit for forward investment gains 3) not fully giving credit for the additional value that is not captured by accounting EPS. And thats where the alpha lies for us. Additionally and maybe more importantly also not giving enough credit for the culture, management strength and capital allocation discipline at Fairfax which is a more long term aspect.

 

Edited November 12, 2025 by djokovic1

[Viking]

2 hours ago, Viking said:

@Parsad when it comes to estimating earnings for Fairfax, the really interesting thing to me is how estimates have consistently been too low. And that includes me.

 

Why have EPS estimates for Fairfax been consistently wrong (too low) every year for 5 years straight? 
 

Answer: Investors (including me) do not yet fully understand or appreciate Fairfax (the business and management).
 

What is it we are missing? 
 

My guess is its a couple of things:

1.) We are grossly underestimating the amount of ‘hidden value’ that is residing in the company. And how much it is growing.

2.) The impact of reinvestment of current year earnings on future returns.

3.) The impact of compounding on future returns. 
 

What do other board members think?
 

Why have we been so bad for so long at estimating Fairfax’s business results? 

Here is another way to ask the question. Go with me on this one… 

 

Warren Buffett bought Coke in 1987. What made Coke such a good investment? Let’s ignore Buffett’s purchase price. At a very high level, what is it that happened at Coke after Buffett bought it (the subsequent 5 to 10 years) that made it such a good investment?

 

And what was it that investors at the time were missing? Buffett got it. Most everyone else did not. (That might help us understand what we might be missing with Fairfax today.)

 

Here is a start:

• A turnaround play?
• Management?
• Operations?
• Capital allocation?
• Reinvestment opportunities?

Does anything rhyme? Obviously Coke in the late 1980’s and Fairfax today are completely different animals  

Edited November 12, 2025 by Viking

[Marco Van Basten]

1 hour ago, Viking said:

Here is another way to ask the question. Go with me on this one… 

 

Warren Buffett bought Coke in 1987. What made Coke such a good investment? Let’s ignore Buffett’s purchase price. At a very high level, what is it that happened at Coke after Buffett bought it (the subsequent 5 to 10 years) that made it such a good investment?

 

And what was it that investors at the time were missing? Buffett got it. Most everyone else did not. (That might help us understand what we might be missing with Fairfax today.)

 

Here is a start:

• A turnaround play?
• Management?
• Operations?
• Capital allocation?
• Reinvestment opportunities?

Does anything rhyme? Obviously Coke in the late 1980’s and Fairfax today are completely different animals  

The opening of China and the Eastern bloc

[dartmonkey]

4 hours ago, Viking said:

What is it we are missing? 
 

My guess is its a couple of things:

1.) We are grossly underestimating the amount of ‘hidden value’ that is residing in the company. And how much it is growing.

2.) The impact of reinvestment of current year earnings on future returns.

3.) The impact of compounding on future returns. 
 

What do other board members think?

I vote 3). If you assume $200m in earnings for 2026, as far as I can tell you  have no line in your table for earnings from whatever Fairfax will hve bought with that $200m, potentially bumping up 2027 eanings from $200m to $225m, if all else remains the same. 

[Crip1]

6 hours ago, Viking said:

 

What is it we are missing? 
 

My guess is its a couple of things:

1.) We are grossly underestimating the amount of ‘hidden value’ that is residing in the company. And how much it is growing.

2.) The impact of reinvestment of current year earnings on future returns.

3.) The impact of compounding on future returns. 
 

What do other board members think?

I'd offer a couple of thoughts:

• All large companies are complex, and I'd suggest that Fairfax is more complex than others. With multiple moving parts, getting things right is hugely difficult. 

 

• Value investors have a tendency to work in a margin of safety in their analyses. 

 

Combine these two to the inherent difficulty in estimating earnings for ANY company and, yeah, accuracy will be fleeting. And, honestly, it makes a difference if FFH earns $50 or $55/share to the company, but if Q3 earnings would have only been $47 instead of $52, the value proposition would be pretty similiar.

 

-Crip

[Hoodlum]

We will need to wait for confirmation but apparently Prem confirmed to David Thomas in the book, The Fairfax Way, that his son Ben would become chairman when he decides steps down.  
 

https://m.economictimes.com/news/international/business/at-fairfax-ben-watsa-to-be-chair-after-father/amp_articleshow/125283014.cms

 

Indian-Canadian billionaire Prem Watsa’s son, Ben, is slated to succeed his father in future as the chairman of Fairfax Financial Holdings, according to a book titled The Fairfax Way, a draft of which was shared with ET prior to release.

Edited November 13, 2025 by Hoodlum

[Hoodlum]

16 minutes ago, Haryana said:

How is this new information ? 

I don’t believe Prem has publicly stated it before. 

[Viking]

50 minutes ago, Haryana said:

The #2 and #3 are the same? 

No, I don’t think they are the same. But they are complementary/synergistic. But I might not have explained it well. 
 

2.) Reinvestment is key for a company like Fairfax today. They are generating an enormous amount of excess capital. They can reinvest in a way that delivers below average, average or above average rates of return (in aggregate). 
 

My guess is most investors are not thinking deeply about reinvestment at Fairfax. Let alone how good Fairfax is at it. 
 

Reinvestment at Fairfax deserves its own long post. Suffice to say, Fairfax has many good options, they are skilled and they are generating above average returns (in aggregate).
 

3.) So what? This is where compounding comes in to play. My view is people can define compounding but they don’t really get it. Human brains can think linearly but not exponentially. This is probably what leads them to sell compounding machines when they own them - they simply underestimate the power of compounding and time. 
 

So some investors who understand #2 (the importance of reinvestment at above average rates of return) will still not invest (or sell a position prematurely) because they don’t really understand #3 (compounding).

 

Smart people have said Buffett’s greatest strength is his patience. He understands compounding/exponential growth. Patience ensures you do not interrupt exponential growth. 
 

Getting both #2 and #3 right is really hard. 
 

This is perhaps part of the reason why Philip Fisher said you NEVER sell a compounding machine when they when you have found one - regardless of what the valuation is. 

 

Edited November 13, 2025 by Viking

[Viking]

19 minutes ago, Viking said:

No, I don’t think they are the same. But they are complementary/synergistic. But I might not have explained it well. 
 

2.) Reinvestment is key for a company like Fairfax today. They are generating an enormous amount of excess capital. They can reinvest in a way that delivers below average, average or above average rates of return (in aggregate). 
 

My guess is most investors are not thinking deeply about reinvestment at Fairfax. Let alone how good Fairfax is at it. 
 

Reinvestment at Fairfax deserves its own long post. Suffice to say, Fairfax has many good options, they are skilled and they are generating above average returns (in aggregate).
 

3.) So what? This is where compounding comes in to play. My view is people can define compounding but they don’t really get it. Human brains can think linearly but not exponentially. This is probably what leads them to sell compounding machines when they own them - they simply underestimate the power of compounding and time. 
 

So some investors who understand #2 (the importance of reinvestment at above average rates of return) will still not invest (or sell a position prematurely) because they don’t really understand #3 (compounding).

 

Smart people have said Buffett’s greatest strength is his patience. He understands compounding/exponential growth. Patience ensures you do not interrupt exponential growth. 
 

Getting both #2 and #3 right is really hard. 
 

This is perhaps part of the reason why Philip Fisher said you NEVER sell a compounding machine when they when you have found one - regardless of what the valuation is. 

 

And to frame it another way, if investors/analysts really do understand #2 (reinvestment) and #3 (compounding) how is it possible Fairfax can trade today at US$1,600/share? 

Edited November 13, 2025 by Viking