Fairfax 2025

[Parsad]

5 minutes ago, SafetyinNumbers said:

How do you get to $180-200 per share in earnings? 

 

They are doing around $50 per quarter and that is without any significant catastrophe loss.  So I'm just assuming that investment gains offset catastrophe losses and they continue to do what they are doing.  Cheers!

[SafetyinNumbers]

1 minute ago, Parsad said:

 

They are doing around $50 per quarter and that is without any significant catastrophe loss.  So I'm just assuming that investment gains offset catastrophe losses and they continue to do what they are doing.  Cheers!

 

Thanks.

 

I thought maybe you had a range of assumptions for premiums, combined ratio and investment returns. I like the below model for quick analysis to get to an expected ROE range. As @Vikinghas pointed out the economic returns have been higher than the accounting returns so that should give you more comfort in the assumption that gains can offset higher than expected cat losses as they come into earnings over time.
 

[Parsad]

2 minutes ago, SafetyinNumbers said:

 

Thanks.

 

I thought maybe you had a range of assumptions for premiums, combined ratio and investment returns. I like the below model for quick analysis to get to an expected ROE range. As @Vikinghas pointed out the economic returns have been higher than the accounting returns so that should give you more comfort in the assumption that gains can offset higher than expected cat losses as they come into earnings over time.
 

 

Nope...doesn't have to be even remotely that complicated!  If you understand the business, it's pretty straight forward in coming to a simple way to evaluate it and maintain a margin of safety.  It's very easy to tell when it is cheap and when it is not.  Most analysis of stocks is far more complicated than it has to be.  Cheers!

[villainx]

Wow, market really likes the MW Eat news!

 

[dartmonkey]

17 minutes ago, SafetyinNumbers said:

 

Thanks.

 

I thought maybe you had a range of assumptions for premiums, combined ratio and investment returns. I like the below model for quick analysis to get to an expected ROE range. As @Vikinghas pointed out the economic returns have been higher than the accounting returns so that should give you more comfort in the assumption that gains can offset higher than expected cat losses as they come into earnings over time.
 

I also love this table and the analysis.

 

Even if you plug in a more conservative 95% CR (not for this year, but for an average year), so 5.5% from underwriting, and the same 7% investment return (which they will way exceed this year with their asset sales), with the same cost of debt and tax rate, you get an ROE of 16.4%, and with an equity of about 1200 right now, that would give us $196. This year will be better because of a CR<95 and better investment returns. And one of the nice things about trading at 7x earnings is that the accumulation of the next year's earnings will increase the equity base by 15%, so staying at around the $200 earnings level will not even require such a good CR or such good investment returns. 

 

Safety, do you have a variation of this model that breaks down that investment yield into fixed income and equity investments? This table must have gotten the 7% by adding the 2, and it seems like an important enough detail to break that one line into 3.

[SafetyinNumbers]

1 minute ago, dartmonkey said:

Safety, do you have a variation of this model that breaks down that investment yield into fixed income and equity investments? This table must have gotten the 7% by adding the 2, and it seems like an important enough detail to break that one line into 3.

I don’t but I assume 5% for fixed income given they tell us the average coupon and then play with different equity portfolio returns weighting fixed income at two thirds and non-fixed income at one third. 
 

As I discussed in this substack back in February, expectations for the equity portfolio look especially low after factoring in returns on the biggest positions which are equity accounted for a flow into EPS. 

 

https://open.substack.com/pub/berczyparkcapital/p/fairfax-financial-a-generational?r=ecc87&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false

[SafetyinNumbers]

29 minutes ago, Parsad said:

 

Nope...doesn't have to be even remotely that complicated!  If you understand the business, it's pretty straight forward in coming to a simple way to evaluate it and maintain a margin of safety.  It's very easy to tell when it is cheap and when it is not.  Most analysis of stocks is far more complicated than it has to be.  Cheers!

You are annualizing quarterly earnings which is conservative and since you already own it, it doesn’t matter that the right tail might be a lot higher than you are willing to give credit for. On your own numbers < 10x earnings is cheap for most investors but not for you. 

[Viking]

56 minutes ago, Parsad said:

 

Nope...doesn't have to be even remotely that complicated!  If you understand the business, it's pretty straight forward in coming to a simple way to evaluate it and maintain a margin of safety.  It's very easy to tell when it is cheap and when it is not.  Most analysis of stocks is far more complicated than it has to be.  Cheers!

 

@Parsad, I agree that simplicity is super important to being able to analyze an investment properly. But a deep understanding of the investment is required first - this is what allows the simplicity to happen.

 

Having a deep understanding also allows for conviction. And conviction does two things. It allows an investor to:

1. Manage through and exploit volatility - not panic when it sells off.
2. Get the right position size - how much to concentrate.

My view is to be successful over the long term with concentrated positions an investor needs to be able to toggle between the two: simple and deep understanding.

[Santayana]

36 minutes ago, SafetyinNumbers said:

You are annualizing quarterly earnings which is conservative and since you already own it, it doesn’t matter that the right tail might be a lot higher than you are willing to give credit for. On your own numbers < 10x earnings is cheap for most investors but not for you. 

You say it's conservative because it doesn't account for the quarterly earnings compounding?

Edited November 25, 2025 by Santayana

[SafetyinNumbers]

1 minute ago, Santayana said:

You say it's conservative because it doesn't account for the quarterly earnings compounding?

It doesn’t account for the range of possibilities including compounding.

[thowed]

2 hours ago, villainx said:

Wow, market really likes the MW Eat news!

 

 

Wow, thanks - had missed this.

 

Interesting acquisition - not an obvious thing, but I can see an angle.  They got two single-location higher-end Indian restaurants, plus a small budget chain, all in London.  None of them are particularly buzzy.  Family-owned.

 

My guess is that they are thinking of the success of the newer Indian chains in London (i.e. Dishoom and the JKS stable like Gymkhana) which are now expanding overseas - to NYC, and to Vegas notably.  I don't know if it will last, but there's currently a buzz about them - US tourists love coming to them in London at the moment, so it makes sense.  I can't see the point otherwise.

 

[djokovic1]

I agree with @Parsad starting point of $180-$200. But the one big place I differ is that 5 years later that $180-$200 will likely by closer to $360-$400 due to compounding. I.e all the cash flows they generate each year are reinvested to grow EPS and bookvalue, organically, inorganically and with buybacks.  My confidence comes from the fact that they have locked in great yields for a few years amongst other things. 

And Prem would not be doing buybacks (and TRS) today if he didn't see a great margin of safety in Fairfax today.

 

But if I remember correctly its a big part of your portfolio in anycase, so it makes sense you wouldn't add more here especially with the run-up in the context of the last 25 years.

 

 

[Parsad]

4 hours ago, SafetyinNumbers said:

You are annualizing quarterly earnings which is conservative and since you already own it, it doesn’t matter that the right tail might be a lot higher than you are willing to give credit for. On your own numbers < 10x earnings is cheap for most investors but not for you. 

 

Yes, you are probably right.  So when it does trade at a price I find cheap...like $2,150 two weeks ago when I nibbled again...it must be conservatively calculated.  Cheers!

[Parsad]

3 hours ago, Viking said:

 

@Parsad, I agree that simplicity is super important to being able to analyze an investment properly. But a deep understanding of the investment is required first - this is what allows the simplicity to happen.

 

Having a deep understanding also allows for conviction. And conviction does two things. It allows an investor to:

1. Manage through and exploit volatility - not panic when it sells off.
2. Get the right position size - how much to concentrate.

My view is to be successful over the long term with concentrated positions an investor needs to be able to toggle between the two: simple and deep understanding.

 

I've followed Fairfax for 25 years...same with Berkshire.  I know the companies inside out.  I know management inside out.  So I have extreme comfort with my simple analysis on them now.  I can do that for about 250-300 companies with some degree of simplicity...that's what a circle of competence is. 

 

When you have level of circle of competence with a portfolio of companies, you know when it is cheap and when it isn't without having to get into the nitty gritty.  I think too many investors over think their own analysis and it creates paralysis.  They lack conviction often even if they've done extensive analysis on the company...that is a psychological issue, not one of having enough information.

 

If Fairfax is $1,800 CDN today...does anyone truly need to run an analysis and decide if that is cheap or not?  If GOOGL is $150 USD, do you really need to run an analysis?  Not me, I back the friggin' truck and load up!  Cheers!

[Parsad]

3 hours ago, Santayana said:

You say it's conservative because it doesn't account for the quarterly earnings compounding?

 

3 hours ago, SafetyinNumbers said:

It doesn’t account for the range of possibilities including compounding.

 

Yes, you are both right.  That's the built in conservative margin.  

 

As per Buffett...if you know the bridge can hold 4500 pounds...do you drive over it with 4400 pounds?  At 3,000 pounds I know that there is nearly a zero chance of the bridge collapsing.

 

Cheers!

[Parsad]

55 minutes ago, djokovic1 said:

I agree with @Parsad starting point of $180-$200. But the one big place I differ is that 5 years later that $180-$200 will likely by closer to $360-$400 due to compounding. I.e all the cash flows they generate each year are reinvested to grow EPS and bookvalue, organically, inorganically and with buybacks.  My confidence comes from the fact that they have locked in great yields for a few years amongst other things. 

And Prem would not be doing buybacks (and TRS) today if he didn't see a great margin of safety in Fairfax today.

 

But if I remember correctly its a big part of your portfolio in anycase, so it makes sense you wouldn't add more here especially with the run-up in the context of the last 25 years.

 

 

 

The earnings number changes every year...so you run a quick analysis each year and come up with the number you would be willing to buy below.  My point is it just doesn't have to be as complicated as people make it.

 

When it was at $450 CDN, I was pounding the table, screaming it was a buy.  I had zero hesitation loading up half of my portfolio in FFH stock...even before Prem bought his $150M and clearly sent a message to everyone to buy.  I didn't do any extensive analysis...just the same quick one I do every year.

 

Yet, there were very smart people out there, including many of the analysts who cover Fairfax...their targets did not move...they did not load up.  A once in 20 year opportunity with Fairfax stock...nope, they did not take advantage of it! 

 

Don't allocate to a portfolio solely on the premise that management is buying.  It is an indicator, but should not be one relied upon.  I still would have loaded up whether Prem bought the $150M or not, as well as the TRS.  Cheers!

[Viking]

53 minutes ago, Parsad said:

 

I've followed Fairfax for 25 years...same with Berkshire.  I know the companies inside out.  I know management inside out.  So I have extreme comfort with my simple analysis on them now.  I can do that for about 250-300 companies with some degree of simplicity...that's what a circle of competence is. 

 

When you have level of circle of competence with a portfolio of companies, you know when it is cheap and when it isn't without having to get into the nitty gritty.  I think too many investors over think their own analysis and it creates paralysis.  They lack conviction often even if they've done extensive analysis on the company...that is a psychological issue, not one of having enough information.

 

If Fairfax is $1,800 CDN today...does anyone truly need to run an analysis and decide if that is cheap or not?  If GOOGL is $150 USD, do you really need to run an analysis?  Not me, I back the friggin' truck and load up!  Cheers!

+1

[73 Reds]

12 hours ago, Parsad said:

 

I've followed Fairfax for 25 years...same with Berkshire.  I know the companies inside out.  I know management inside out.  So I have extreme comfort with my simple analysis on them now.  I can do that for about 250-300 companies with some degree of simplicity...that's what a circle of competence is. 

 

When you have level of circle of competence with a portfolio of companies, you know when it is cheap and when it isn't without having to get into the nitty gritty.  I think too many investors over think their own analysis and it creates paralysis.  They lack conviction often even if they've done extensive analysis on the company...that is a psychological issue, not one of having enough information.

 

If Fairfax is $1,800 CDN today...does anyone truly need to run an analysis and decide if that is cheap or not?  If GOOGL is $150 USD, do you really need to run an analysis?  Not me, I back the friggin' truck and load up!  Cheers!

Very much agree with that!  Find something you're good at, whether it be a sector, series of reliably profitable companies or investments, or even a money-making activity and use your knowledge and experience to your advantage.  Not comparing myself in any way to Buffett but he could evaluate a deal for Berkshire in less than an hour or less.  Most of my deals are made in similar time.  Leaves a lot of time for other things.

[investmd]

18 hours ago, Parsad said:

 

$180-200 USD per share in earnings...add it to book value every year...multiple of 1.25.  Buy below that, you are good.  Buy well below that...you have a nice margin of safety.  Cheers!

@Parsad: Book value today is approximately US$1,200/share - if we take a multiple of 1.25 and convert to C$ = approx C$2,100. With FFH trading today at C$2,400/share, I presume you are saying that FFH is at best trading at fair market value and does not necessarily provide a margin of safety for buyers at this level?  

[SafetyinNumbers]

13 hours ago, Parsad said:

 

Yes, you are probably right.  So when it does trade at a price I find cheap...like $2,150 two weeks ago when I nibbled again...it must be conservatively calculated.  Cheers!

How do you decide when to sell?

[Whensthepaintdry?]

I thought he said he would add next years earning of 200ish then multiply by 1.25 book

[mengan]

https://www.easterneye.biz/fairfax-financial-acquires-veeraswamy-owner/

[dartmonkey]

21 minutes ago, mengan said:

https://www.easterneye.biz/fairfax-financial-acquires-veeraswamy-owner/

The owner of Britain's oldest Indian restaurant has been acquired by a Canadian private equity house as it seeks to expand internationally, amid an ongoing legal battle over the historic venue's future.

MW Eat, which operates the Michelin-starred Veeraswamy alongside restaurant chains including Chutney Mary, Amaya and Masala Zone, has been bought by Toronto-based Fairfax Financial Holdings for an undisclosed sum.

 

Funny description of Fairfax, I didn't know they were a private equity house but I like it.

[thowed]

Yeah, the general UK media don't really know about Fairfax!

 

I am still slightly mystified by this purchase - London restaurants are CUTTHROAT (NYC equivalent) & if I was going to buy one, it would be one with a halo brand like JKS, Dishoom (for South Asian food) or Hawksmoor.

 

The company they've bought is not bad, but really quite old-fashioned.  Would be fascinated to hear more about the reasoning for the purchase.

[Parsad]

5 hours ago, investmd said:

@Parsad: Book value today is approximately US$1,200/share - if we take a multiple of 1.25 and convert to C$ = approx C$2,100. With FFH trading today at C$2,400/share, I presume you are saying that FFH is at best trading at fair market value and does not necessarily provide a margin of safety for buyers at this level?  

 

Yes.  I think it's exactly where it should be for now.  As earnings continue to grow and more capital is retained, that number will increase over time.  Cheers!