Fairfax 2025

[Viking]

I saw the 2 Twitter posts below from Everyday Capitalist. With Fairfax crossing C$2,500 (US$1,807) today it resonated with me.

 

"The bear case is easy. The bull case is hard. Always has been, always will be." This has been especially true for Fairfax and its improbable run over the past 5 years. And it continues to be true today. Investors beware.

 

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Edited June 24, 2025 by Viking

[SafetyinNumbers]

3 hours ago, Viking said:

 

This is a really interesting and important topic. My guess is if Fairfax's BV is understated it should make it easier for the company to deliver higher than expected ROE in the coming years. 

 

Part of the challenge with Fairfax is they only have a few years of +15% ROE under their belt. Lots of investors likely expect reversion to the mean (at a minimum, for it to come back down to its historic average).

 

If Fairfax continues to deliver a +15% ROE for 6 or 7 or 8 straight years (on average)... well, at some point my guess is it will be recognized/rewarded in the multiple and, therefore, in the price of the stock. I think some of this is what we have been seeing play out over the past year. 

 

The question is 'How high a quality company is Fairfax?' We will only know with certainly after the fact (we will only be able to connect the dots looking back). We won't know prospectively (before the fact). And, of course, that is what makes investing such an interesting exercise/discipline.  

Every time they buy back shares they increase future ROE because the current assets have the same/growing earnings power and buybacks over BVPS reduces BVPS making the numerator all else being equal. 

[anxon]

Anyone has a realisitc B/P ratio for FFH. TO as of yesterday's closing ? The surge in market price is quite something within just 2 months. I wonder whether to lower the monthly DCA amount or to pause for now.

[Parsad]

9 hours ago, Hoodlum said:

 

Maybe it is time for an update from Mr Horn.

 

Nah...who cares what he thinks.  If he was managing a portfolio, he would be wiped out right now just from his analysis of FFH.  It's up 300% from the original price target he had.  If he had taken a miniscule short position, his losses would have wiped him out now or at least knocked off like 50% of his portfolio.  Cheers!

[Parsad]

14 minutes ago, anxon said:

Anyone has a realisitc B/P ratio for FFH. TO as of yesterday's closing ? The surge in market price is quite something within just 2 months. I wonder whether to lower the monthly DCA amount or to pause for now.

 

If you believe those that suggest FFH deserves a higher multiple akin to MKL, BRK, etc, then it is trading at around 1.6 times 2nd Q 2025 book.  On an earnings basis, it doesn't seem expensive still at about 10.6 times earnings.  And that doesn't include an adjustment to unrealized gains to book...any investment gains to earnings. 

 

Compare that to the rest of the global market and it's still somewhat cheap, and if you buy the theory P/B should be of higher quality, it is around fair value based on current IFRS book value and P/E.  I wouldn't be adding, but I'm certainly not selling either!  

 

Cheers!

[Parsad]

Just now, Parsad said:

 

If you believe those that suggest FFH deserves a higher multiple akin to MKL, BRK, etc, then it is trading at around 1.6 times 2nd Q 2025 book.  On an earnings basis, it doesn't seem expensive still at about 10.6 times earnings.  And that doesn't include an adjustment to unrealized gains to book...any investment gains to earnings. 

 

Compare that to the rest of the global market and it's still somewhat cheap, and if you buy the theory P/B should be of higher quality, it is around fair value based on current IFRS book value and P/E.  I wouldn't be adding, but I'm certainly not selling either!  

 

Cheers!

 

Also, I would add that for the next two years, they don't have to do anything and will still add about $140-160 USD a year to book.  So if book is somewhere around $1,500 USD at the end of 2027...at current price to book and exchange rate, it would be trading around $3,200 - 3,300 CDN.  That's 14-15% annualized without them doing anything!  If they make historical returns on the investment portfolio, the return would be closer to 18-20% annualized.  I'm eyeballing it so take my analysis with a grain of salt...Viking can give you an estimate down to the dollar!  Cheers!

[Hamburg Investor]

On 6/25/2025 at 7:28 AM, Parsad said:

 

Also, I would add that for the next two years, they don't have to do anything and will still add about $140-160 USD a year to book.  So if book is somewhere around $1,500 USD at the end of 2027...at current price to book and exchange rate, it would be trading around $3,200 - 3,300 CDN.  That's 14-15% annualized without them doing anything!  If they make historical returns on the investment portfolio, the return would be closer to 18-20% annualized.  I'm eyeballing it so take my analysis with a grain of salt...Viking can give you an estimate down to the dollar!  Cheers!

Like that view.

 

Like to look at any stock from different perspectives.

 

My base case, like a ground layer, is the following. I like to keep it simple. Viking and others have made tremendous work here; but than I beam me out and look at it from a meta perspective: If FFH gets a roe of 15% over the veeeery longterm, having the ability to reinvest everything (which is wrong, but nearly true with a payout ratio of aroubd 10%) at that rate, than you have that business at a pe ratio of a bit above 10 today (1.6 pb ratio at a roe of 15% is a pe ratio of 10.x). There‘s a lot of margin of safety in that view, as a. I don‘t think Prem would pin a roe of 15% on the wall, if he didn’t expect to reach more in normal circumstances (and - as said above - following the discussions here closely I don’t see, why I shouldn’t trust Prem) b. there‘s a lot (!) of hidden assets and value within the company and c. as a pe ratio of 10 for a business producing a roe of 15% is cheap, so buybacks obviously give a roe above 15% to shareholders. And there‘s a lot of repurchases happening.

 

Okay, and I just have written it: A pe ratio of 10 for any business with roe of 15% is cheap. Try to find that on the market. Especially outside of insurance. The S&P500 (which is wrong, but in my view the best easy-to-find comparison out there, as it is bigger than the TSX and NA too) has a pe ratio of 29. So it‘s valued three times FFH AND the average S&P500 business is giving maybe 10% to 12% roe over the longterm - in any case less than 15%. So in my view the S&P500 is valued maybe 4+ times FFH.

 

As I am happy with an overall return of 15% (in other words, using the rule of 72, a double every 5 years), and I think on top of that the gap between the market and FFHs valuation has to close somewhere along the line (but maybe part of the story might be, that S&P gets cheaper, anyway), to me FFH seems an excellent investment at todays price. And I wouldn‘t be surprised, if FFH would give a cagr return of 18% or above over the next 10 years; so 4 (at a cagr of 15%)  to 8 (cagr of 23%) times todays price. 

Edited June 26, 2025 by Hamburg Investor

[nwoodman]

1 hour ago, Hamburg Investor said:

And I wouldn‘t be surprised, if FFH would give a cagr return of 18% or above over the next 10 years; so 4 (at a cagr of 15%)  to 8 (cagr above 20%) times todays price. 

+1.  What we have witnessed is the regression to the mean phase.  I say that a bit tongue in cheek because that was my view at the start of 2024 .  If I wasn’t loaded to the gills this is still a better idea than most.  It is intriguing that the share price is holding up coming into CAT season, so this feels more like a re-rating. FWIW still my best idea but it’s fun exploring other ideas but the benchmark is Fairfax.

[gfp]

Fairfax Financial putting out a press release welcoming new senior advisor Amitabh Kant in India

 

https://www.fairfax.ca/press-releases/fairfax-welcomes-mr-amitabh-kant-as-senior-advisor-2025-06-26/

[nwoodman]

3 hours ago, gfp said:

Fairfax Financial putting out a press release welcoming new senior advisor Amitabh Kant in India

 

https://www.fairfax.ca/press-releases/fairfax-welcomes-mr-amitabh-kant-as-senior-advisor-2025-06-26/

Impressive appointment, some notes attached.

 

TLDR

 

“Who is Amitabh Kant?

 

• Former CEO of NITI Aayog – India’s top policy think tank.
• G20 Sherpa during India’s 2023 presidency – led global negotiations.
• Architect of “Make in India”, “Startup India”, and Aspirational Districts Programme.
• Boosted India’s Ease of Doing Business rank by 79 places.
• Known for executing large-scale public-private development reforms.

 

Why This Matters to Fairfax India

 

• Policy Insight: Deep understanding of India’s regulatory, industrial, and investment landscape.
• Deal Access: Strong government and private sector networks can open new investment doors.
• Strategic Alignment: His priorities match Fairfax India’s focus on infrastructure, finance, and logistics.
• Public-Private Catalyst: Experienced in structuring initiatives that align private capital with national development goals.

 

India’s 2047 Vision (“Viksit Bharat”)

 

• India targets becoming a $30+ trillion economy by 2047 (from ~$4T now).
• Major growth areas: infrastructure, urbanization, manufacturing, clean energy, and financial services.
• Kant helped shape this vision—his appointment positions Fairfax India to ride this wave early and intelligently.

 

Bottom Line

 

Kant’s appointment gives Fairfax India a trusted guide with insider knowledge and strategic foresight to capitalize on India’s long-term growth and reform agenda. It’s a high-conviction signal of Fairfax’s deepening commitment to India.”

 

Amitabh Kant’s Appointment as Senior Advisor to Fairfax India- Strategic….pdf

Edited June 26, 2025 by nwoodman

[SafetyinNumbers]

1 minute ago, nwoodman said:

Impressive appointment, some notes attached.

Amitabh Kant’s Appointment as Senior Advisor to Fairfax India- Strategic….pdf 64.12 kB · 1 download

Mr. Kant spoke to the group that went on the Fairfax India trip and I found him to be very impressive. Hopefully his influence and contacts will help move things like the Anchorage IPO along which will boost FFH and FIH book values meaningfully.

[gfp]

Nice summary nwoodman - do you use AI for some/most of this?

 

"

For example, Fairfax India’s portfolio includes stakes in Kempegowda International Airport (Bengaluru’s airport

infrastructure) and Go Digit General Insurance (a digital insurer) "

 

[nwoodman]

4 minutes ago, SafetyinNumbers said:

Mr. Kant spoke to the group that went on the Fairfax India trip and I found him to be very impressive. Hopefully his influence and contacts will help move things like the Anchorage IPO along which will boost FFH and FIH book values meaningfully.

Sounds like that trip was so insightful.  Fairfax certainly creates all the opportunities to allow investors to “get it” if they are willing to put in the time.  Your willingness to take them up on their offer is a credit to you.

[nwoodman]

33 minutes ago, gfp said:

Nice summary nwoodman - do you use AI for some/most of this?

 

"

For example, Fairfax India’s portfolio includes stakes in Kempegowda International Airport (Bengaluru’s airport

infrastructure) and Go Digit General Insurance (a digital insurer) "

 

For sure, hence notes. As you point out there is a redundancy for this audience but there is also a frictional cost of editing that isn’t warranted.  Provides a starter/primer and the hit miss ratio is still too high to consider them anymore than a starting point.  However the framing I find helpful, so figure this might be of value to the CoBF community.   Caveat Emptor as they say. 
 

Having said all that, what I find helpful is that even in the notes it gives me around 10 things to chase down that I hadn’t even considered.  After all for better or worse we are all becoming prompt engineers.

 

Edit:  I think it is a courtesy to carve out these sorts things  as a PDF  rather than clogging up the thread.  It allows discretion of download but also provides a discrete document that members can run their own queries/gross error  check with minimal friction

Edited June 26, 2025 by nwoodman

[gfp]

16 minutes ago, nwoodman said:

For sure, hence notes. As you point out there is a redundancy for this audience but there is also a frictional cost of editing that isn’t warranted.  Provides a starter/primer and the hit miss ratio is still too high to consider them anymore than a starting point.  However the framing I find helpful, so figure this might be of value to the CoBF community.   Caveat Emptor as they say. 
 

Having said all that, what I find helpful is that even in the notes it gives me around 10 things to chase down that I hadn’t even considered.  After all for better or worse we are all becoming prompt engineers.

 

Edit:  I think it is a courtesy to carve out these sorts things  as a PDF  rather than clogging up the thread.  It allows discretion of download but also provides a discrete document that members can run their own queries/gross error  check with minimal friction

 

Thanks for providing it and I agree with your assessment.  Perhaps it would be helpful to all if you clearly disclosed that it was AI generated since the phrase "notes" does not convey that on its own.  It helps to know if I am reading something from Nigel or something from an LLM before I read it. 

[nwoodman]

1 hour ago, gfp said:

 

Thanks for providing it and I agree with your assessment.  Perhaps it would be helpful to all if you clearly disclosed that it was AI generated since the phrase "notes" does not convey that on its own.  It helps to know if I am reading something from Nigel or something from an LLM before I read it. 

Agree, this likely becomes forum standard over time. I’ve been using the term notes and posts in quotes to signal when something isn’t entirely original thinking. The latest post clearly falls into the quick-and-dirty LLM category, born out of convenience and  hence the PDF format. But to be fair, some of my other posts are hybrids, part AI-generated, part me, and some are bottom-up builds. Not always easy to draw a clean line. However always PDF.

 

That said, the PDF format has utility. It lets others gross error check discreetly without cluttering the thread. And if it helps me map Fairfax’s sprawl of subsidiaries, maybe it helps someone else. They’re backgrounders, not gospel.

 

We’re all trying to figure out what Fairfax’s current streak means. To me, it feels like the Russian doll of value opportunities, layers within layers. We all reach our own IV  estimates through different lenses. For my part, the key is avoiding getting shaken out by a blunt metric like P/B.  Conversely I don’t want to get anchored to this is a forever hold.  I want to know that there is a margin of safety even small so I can hold this for a long time.

Edited June 26, 2025 by nwoodman

[gfp]

Berkshire was a $40 Billion market cap company in the mid-1990's and had around $6 Billion of insurance float leverage at the time.  If Fairfax can continue to execute on their model with the leverage from float that they have (float is waaaay higher and consequently leverage is way higher), I think it will be a mistake to sell the stock.

 

The best thing that can happen for investors like me is to own enough of it at low basis in taxable accounts that it becomes very difficult to sell any and, in that way, a not-like-dealraker shareholder can become closer-to-dealraker.

[Junior R]

28 minutes ago, gfp said:

Berkshire was a $40 Billion market cap company in the mid-1990's and had around $6 Billion of insurance float leverage at the time.  If Fairfax can continue to execute on their model with the leverage from float that they have (float is waaaay higher and consequently leverage is way higher), I think it will be a mistake to sell the stock.

 

The best thing that can happen for investors like me is to own enough of it at low basis in taxable accounts that it becomes very difficult to sell any and, in that way, a not-like-dealraker shareholder can become closer-to-dealraker.

the one benefit to FFH is it pays some dividend (so those who need income can hold on) 

[nwoodman]

33 minutes ago, gfp said:

Berkshire was a $40 Billion market cap company in the mid-1990's and had around $6 Billion of insurance float leverage at the time.  If Fairfax can continue to execute on their model with the leverage from float that they have (float is waaaay higher and consequently leverage is way higher), I think it will be a mistake to sell the stock.

 

The best thing that can happen for investors like me is to own enough of it at low basis in taxable accounts that it becomes very difficult to sell any and, in that way, a not-like-dealraker shareholder can become closer-to-dealraker.

+1, @dealraker is the model once you find those elusive multi decade compounders.  Kids there is a “smallish” legacy in your future.

Edited June 26, 2025 by nwoodman

[Viking]

3 hours ago, nwoodman said:

For sure, hence notes. As you point out there is a redundancy for this audience but there is also a frictional cost of editing that isn’t warranted.  Provides a starter/primer and the hit miss ratio is still too high to consider them anymore than a starting point.  However the framing I find helpful, so figure this might be of value to the CoBF community.   Caveat Emptor as they say. 
 

Having said all that, what I find helpful is that even in the notes it gives me around 10 things to chase down that I hadn’t even considered.  After all for better or worse we are all becoming prompt engineers.

 

Edit:  I think it is a courtesy to carve out these sorts things  as a PDF  rather than clogging up the thread.  It allows discretion of download but also provides a discrete document that members can run their own queries/gross error  check with minimal friction

Great discussion. @nwoodman, I find your posts/PDF’s to be very valuable/useful. Please keep them coming  

Edited June 26, 2025 by Viking

[Viking]

1 hour ago, gfp said:

Berkshire was a $40 Billion market cap company in the mid-1990's and had around $6 Billion of insurance float leverage at the time.  If Fairfax can continue to execute on their model with the leverage from float that they have (float is waaaay higher and consequently leverage is way higher), I think it will be a mistake to sell the stock.

 

The best thing that can happen for investors like me is to own enough of it at low basis in taxable accounts that it becomes very difficult to sell any and, in that way, a not-like-dealraker shareholder can become closer-to-dealraker.

@gfp, thanks for clarifying the amount of float leverage that BRK had in the mid 1990’s. That is very instructive/interesting. 
 

I agree with your assessment on Fairfax. One of the reasons, which is rarely discussed, is the high likelihood of Fairfax delivering material upside surprises (in the coming years). 
 

Over the past 5 years Fairfax has been consistently delivering upside surprises pretty much every year (of some kind). Wonderful businesses do this (i.e. BRK in the 1980’s and 1990’s). And we know that these types of businesses are exceedingly rare. That is why they should never be sold. Especially if you understand it well (that circle of competence thing). Even if they appear overvalued at times (and I wouldn’t call Fairfax overvalued today). 
 

‘Is Fairfax a high quality company?’ The reason  I keep asking this question is the answer informs the ‘When to sell?’ question. At least it does for me.

Edited June 26, 2025 by Viking

[nwoodman]

10 minutes ago, Viking said:

Great discussion. @nwoodman, I find your posts/PDF’s to be very valuable/useful. Please keep them coming  

Thanks @Viking, a minuscule contribution but appreciate the call-out.  Intellectually and financially do you think this has been one of your favourite problems to solve?  

[dealraker]

1 hour ago, nwoodman said:

+1, @dealraker is the model once you find those elusive multi decade compounders.  Kids there is a “smallish” legacy in your future.

I often think back to when I was considering Fairfax as an investment, actually I sort of jumped in quite fast with a bit more than just normal excitement.  But in this era I had joined the Lexington Investors Club which was sort of a legendary small town thing where some noteworthy men had started it in 1954 - and the club had done very-very well as to performance.  You had to wait for a death to get in and a lot of people wanted in.

 

So I'm all excited and whatnot trying to get these guys to buy things like Brown and Brown (Poe and Brown back then) and Fairfax  --- and the members are both not comprehending and even further absolutely not wanting to comprehend anything of the odd-ball stuff that Iittle me is obsessed with.  So of course over the years I remind them of their decisions to ignore me and...

 

...one by one all these guys who could have cared less what the young whipper-snapper (that was me being by far the youngest in the club) was saying are intermittently dying (most lived very long and happy lives) and all producing estates of many-many millions  -----  because they owned the Pfizer's and Merck's, GE's... and such ---- on-and-on there were a bunch of those successful companies.

 

And the guy I most tried to convince GE was a terrible investment in the late 1990's has the best record and biggest net worth from investing of all - and he still lives today never selling a share of GE!  He probably now doesn't even remember the god-awful "short" 20 plus years.

 

Long live Prem Watsa and businesses like Fairfax.  I owned in in the 1990's when it got to 4 times book...and never sold a share.  Not a good decision but in the end not a bad one either.  

 

[Munger_Disciple]

I don't want to rain on the parade here but @gfp don't you think higher leverage relative to BRK cuts both ways?

[gfp]

6 minutes ago, Munger_Disciple said:

I don't want to rain on the parade here but @gfp don't you think higher leverage relative to BRK cuts both ways?

 

Yes, definitely!  And there are important differences in the duration and structure of the float as well.  Berkshire is very focused on long lived float even if they expect it to be approximately break-even.  But Fairfax has been a much bigger investor in fixed income and fixed-income-adjacent securities, helping to balance out the risks of higher leverage.

 

But you definitely need to trust that they aren't going to incinerate money on the investment side.  

 

 

edit: I should add that my comparison to Berkshire in 1996 wasn't meant to be some huge endorsement of either - Berkshire shares have only appreciated by 11 or 12% percent a year from '96 I believe.  Just fine, but not the returns people assume when they hear "the next Berkshire Hathaway!"  lol

Edited June 26, 2025 by gfp