Fairfax 2026

[giulio]

4 hours ago, Parsad said:

 

It's only 18% if you assume that it is at fair value right now at $2,200 CAD or so.  But if fair value is between $2,500 CAD and $2,800 CAD...CAGR would only be 12-15%...which is at or below their stated goal.  

 

My assumption is that it is almost certain to be trading at fair value within 5 years...I can't predict what will happen in any given year...two years...three years...but generally within 5 years, it will trade at some point at or above fair value.  So market price might compound at an 18% CAGR, but that is irrelevant to book value which may only compound at 12-15% CAGR.  

 

Cheers!

 

[Viking]

2 hours ago, djokovic1 said:

Pretty nonsensical move as others on the board have pointed out. I find it surprising because there were no surprises in the earnings, they were in line with my expectations. If anything the premium growth was a positive surprise.
 

Well, markets are not efficient in the short term. At these prices I expect the buyback to progress at 1% a month pace similar to March.

 

From my perspective, the most significant development in the first quarter for Fairfax and its results/valuation was the sale of ~50% of Poseidon and the massive increase in the market value of the asset. An asset that Fairfax was carrying on the books at $2B was revealed to be worth $3.7B. 

• +$1.7B over CV
• +$1.1B over MV 

This sale will result in a massive investment gain in Q2. And provides us with a useful update of what the remaining stake is worth (and another big gain will likely be coming in the future). 

 

Many of the analysts call this source of earnings 'low quality', which of course is rubbish. (It is 'low quality' because it cannot be accurately forecasted in their models each quarter.) So they largely exclude it from their models, communication, valuation and evaluation of management/results. That, of course, is also nuts. 

 

Investment gains is one of Fairfax's most important sources of earnings. Look at their history. Pretending it isn't (or worse, that is shouldn't be) is stupid. Fairfax should be evaluated for what it is - not what an analyst thinks it should be.  

 

This is really important because Fairfax is sitting on an enormous amount of "hidden value". And it has been rapidly growing in size over the past 5 years. "Hidden value" is simply a code word for future earnings for Fairfax  - most analysts just haven't figured it out yet (a few have). Poseidon is just the latest example. Many more will be coming in future years.

 

Investment gains is quite predictable when viewed through a three year time horizon (rolling average). Tough for analysts. Easy for investors. 

 

The value creation from the sale of 50% of Poseidon - all by itself - made Fairfax's Q1 an outstanding quarter. Does it matter that the gain is not showing up until Q2? Really?   

 

The Poseidon sale provides a great demonstration of how misunderstood Fairfax continues to be. Especially when it comes to the investment gains bucket. In turn this often causes the stock to be undervalued. And this provides a wonderful opportunity for investors who are able to think for themselves and do basic math.

 

I have followed Fairfax closely for 23 years. This is not something new.

 

Edited May 1 by Viking

[Hoodlum]

I thought these comments from Peter at the end of the call were interesting. It looks like they are anticipating CR to continue dropping for their international business, helping to partially offset the softening insurance lines.

 

And then our international operations, where they're not seeing the price decreases as much, more attractive business, we would hope that, that the combined ratio will drop over time. Gulf, for example, they're still running a little bit above 95%. But historically, they've run in the below 95% low 90s. So I think we'll see that combined ratio for the international group continue to go down as well, helping the overall mix of business. We write about $33 billion now, and we benefit from that greatly. Like I said, 80% is still with our larger companies, but that 20% of international business, it's about $6.5 billion of premium, and that's quite significant, and it gives us the scale and diversity to manage these cycles.

[djokovic1]

8 hours ago, Viking said:

From my perspective, the most significant development in the first quarter for Fairfax and its results/valuation was the sale of ~50% of Poseidon and the massive increase in the market value of the asset. An asset that Fairfax was carrying on the books at $2B was revealed to be worth $3.7B. 

• +$1.7B over CV
• +$1.1B over MV 

This sale will result in a massive investment gain in Q2. And provides us with a useful update of what the remaining stake is worth (and another big gain will likely be coming in the future). 

 

Yes completely agree Viking. I was commenting on the Q1 earnings w.r.t the irrationality of yesterday's price move, which arguably the Poseidon sale doesn't impact. 
 

From the point of view of the stock price move after Q1 earnings the facts about the Poseidon sale were known before the Q1 earnings, ie it should already be reflected in the FFH price before earnings (although reality is much more messy).

 

All short term stuff, but never boring to see how markets behave.
 

[Jaygo]

This year the AGM and the amazing dinner the night before just solidified my confidence in the company. The flat year leading up to it helped soften the edges where the previous 3 years had a lot of exuberance that can be unhelpful when making an investment decision. 

 

What I saw was a really level headed crew full of very smart people who know they are not infallible and more importantly immortal. I like the open transition from the old to the young going on with everyone to see (something BRK failed at) 

and the new people seem like the same smart level headed type. 

 

Yesterdays drop was my single largest one day account drop and I laughed it off and was calling out to my wife like the score in a ball game. 28k! 20K 40K 50K 60K 74K!!!!   She really didn't like it! ( thankfully she doesn't know about West Red lake gold eh!!)

 

Like others I would have loved to trade around the drop but wasn't able to. By next week they will be buying back shares and if even if we have another year or two of depressed results the future seams bright. 

 

I am a happy long term owner here.

 

 

[coffeecaninvestor]

Sorry fellas as a new owner of Fairfax it’s only natural for it to tank after I decided to make it a large position. I’ll be cheering on the sidelines for share repurchases since I cannot average down at the moment. 

Edited May 2 by coffeecaninvestor

[mengan]

Market extrapolates revenue and EPS to derive terminal value. A small change in growth rate and EPS has a big influence on asset value.

 

Expect next quarter results to result in a large upswing.

[backtothebeach]

1 hour ago, coffeecaninvestor said:

Sorry fellas as a new owner of Fairfax it’s only natural for it to tank after I decided to make it a large position. I’ll be cheering on the sidelines for share repurchases since I cannot average down at the moment. 

Thanks for taking responsibility.

[gary17]

On 5/1/2026 at 6:35 AM, Maverick47 said:

Note 17 in the annual report indicates that this apparent difference is likely explained by an increase in the number of shares expected to be issued under share based compensation awards.  If I understand this correctly, these are shares that on a rolling basis are awarded to certain employees with a five year vesting period.

 

As the company grows and as employees perform well, it would make sense to me that performance based share grants to them, which will be earned over the coming five years, would also grow over time.

 

We can see each year when shares are actually vested and issued out of Treasury shares for this purpose.  
 

I would assume that the company is opportunistic in purchasing shares on the open market to add to the Treasury shares.  In any given year there can be a mismatch, meaning that the change in the number of shares promised to employees may be different from the change in the number of shares that the company holds in the Treasury.

 

Most likely, quarter 1 of each year would be when changes in shares granted to employees which will vest over the next five years would be the greatest.  I think that is what we’re seeing here.

 

 

 

I wonder if the total return swaps on its shares plays an impact too.   That in accounting they need to assume shares that need to be issued due to theoretical settlement of the derivative contracts.

 

Seems like EPS took a hit on investment losses -  including related to TRS as share price in Q1 has been lower than Q4.

[Crip1]

6 hours ago, Jaygo said:

This year the AGM and the amazing dinner the night before just solidified my confidence in the company. The flat year leading up to it helped soften the edges where the previous 3 years had a lot of exuberance that can be unhelpful when making an investment decision. 

 

What I saw was a really level headed crew full of very smart people who know they are not infallible and more importantly immortal. I like the open transition from the old to the young going on with everyone to see (something BRK failed at) 

and the new people seem like the same smart level headed type. 

 

Yesterdays drop was my single largest one day account drop and I laughed it off and was calling out to my wife like the score in a ball game. 28k! 20K 40K 50K 60K 74K!!!!   She really didn't like it! ( thankfully she doesn't know about West Red lake gold eh!!)

 

Like others I would have loved to trade around the drop but wasn't able to. By next week they will be buying back shares and if even if we have another year or two of depressed results the future seams bright. 

 

I am a happy long term owner here.

 

 

Same here in terms of single largest one day account drop in dollar terms. I was not able to "laugh" it off, but was not only able to shrug it off, but raised my already elevated position by more than 10%..being a little greedy when others were fearful. I like the idea of flagging this post to follow up in a year to see how my logic worked out.

 

There is one other aspect to the decline yesterday, and the significant decline since the all time high in December, that may not apply to everyone else, but definitely applies to me. When Fairfax was selling at more than 1.5x book and a P/E of over 10, I wasn't tempted to sell, but I did theorize that a 20-30% bump in price from there might tempt me. Now, a 20-30% bump would not tempt me to sell in the slightest. When the stock is perpetually undervalued, it helps to save one from one's self. So, in a way, I kinda like it, not to mention that FFH buying back it's own stock is an attractive capital allocation option. (I would also love to see them buy out minority partners). 

 

-Crip

[mengan]

1 hour ago, gary17 said:

I wonder if the total return swaps on its shares plays an impact too.   That in accounting they need to assume shares that need to be issued due to theoretical settlement of the derivative contracts.

 

Seems like EPS took a hit on investment losses -  including related to TRS as share price in Q1 has been lower than Q4.

Yes, it's a self-fulfilling prophecy.

 

As the share price declines, the TRS losses add up lowering EPS. As the EPS get lower, the share price declines.

[SafetyinNumbers]

4 minutes ago, mengan said:

Yes, it's a self-fulfilling prophecy.

 

As the share price declines, the TRS losses add up lowering EPS. As the EPS get lower, the share price declines.

Super helpful when buying back stock

[KPO]

32 minutes ago, mengan said:

Yes, it's a self-fulfilling prophecy.

 

As the share price declines, the TRS losses add up lowering EPS. As the EPS get lower, the share price declines.

This is why I’d like to see these wound down. It could create a significant headwind under certain circumstances, which is an unnecessary risk to expose the shareholders to.  

[ourkid8]

9 minutes ago, KPO said:

This is why I’d like to see these wound down. It could create a significant headwind under certain circumstances, which is an unnecessary risk to expose the shareholders to.  

Unnecessary risk or opportunity? I look at it as an opportunity!
 

I was able to increase my already very large position and management can repurchase shares - Win/win for long term shareholders! 

[mengan]

It should not have any effect on operating results or on cash flow. It increases volatility of the stock, i.e. "beta".

[RichardGibbons]

18 minutes ago, mengan said:

It should not have any effect on operating results or on cash flow. It increases volatility of the stock, i.e. "beta".

 

It does impact cash flow. Periodically, they are marked-to-market, and the difference is paid in cash. i.e. If Fairfax stock goes down, when they're marked to market, Fairfax will have to pay out cash.

[mengan]

29 minutes ago, RichardGibbons said:

 

It does impact cash flow. Periodically, they are marked-to-market, and the difference is paid in cash. i.e. If Fairfax stock goes down, when they're marked to market, Fairfax will have to pay out cash.

Are you sure? I have not seen any clear cash movement tied to the open TRS positions in Fairfax’s financial statements so far. My understanding is that mark-to-market runs through earnings each quarter, while the gain or loss is only actually realized in cash when FFH or the counterparty closes, resets, or terminates the position.
 

[SafetyinNumbers]

1 hour ago, KPO said:

This is why I’d like to see these wound down. It could create a significant headwind under certain circumstances, which is an unnecessary risk to expose the shareholders to.  

It’s not a real risk given the size and available liquidity.

 

i think a better framing is to think of the TRS as borrowing for a deferred buyback. The price was locked in a long time ago and the size of the loan goes up and down with the stock price. It provides a lot of flexibility for share buybacks if valuation gets to high for the NCIB which is important to stay close to target leverage.

[KPO]

23 minutes ago, SafetyinNumbers said:

It’s not a real risk given the size and available liquidity.

 

i think a better framing is to think of the TRS as borrowing for a deferred buyback. The price was locked in a long time ago and the size of the loan goes up and down with the stock price. It provides a lot of flexibility for share buybacks if valuation gets to high for the NCIB which is important to stay close to target leverage.

So you don’t think it exposes the company to a potential negative feedback loop? It was a great call when they did it, but with the stock up ~4X since then I feel like it’s time to unwind it. Facts below:

1. The Mechanics of the Swap

In a TRS, the company (the "Equity Receiver") enters an agreement with a bank (the "Equity Payer").

• The Bank pays: The total return of the stock (price appreciation + dividends).

• The Company pays: A floating interest rate (usually SOFR + a spread).

If the stock price goes up, the bank pays the company. If the stock price falls, the company must pay the bank the difference in value.

---

2. Risk During a Market Correction

When a market correction occurs and the company's share price drops significantly, the TRS shifts from an asset to a major liability:

• Cash Outflows: Unlike owning physical Treasury shares (where a price drop is just an unrealized accounting entry), a TRS often requires periodic cash settlements. If the stock drops 20%, the company must write a check to the bank for that 20% loss to "square up" the swap.

[SafetyinNumbers]

5 minutes ago, KPO said:

So you don’t think it exposes the company to a potential negative feedback loop? It was a great call when they did it, but with the stock up ~4X since then I feel like it’s time to unwind it. Facts below:

 

1. The Mechanics of the Swap

In a TRS, the company (the "Equity Receiver") enters an agreement with a bank (the "Equity Payer").

• The Bank pays: The total return of the stock (price appreciation + dividends).

• The Company pays: A floating interest rate (usually SOFR + a spread).

If the stock price goes up, the bank pays the company. If the stock price falls, the company must pay the bank the difference in value.

---

2. Risk During a Market Correction

When a market correction occurs and the company's share price drops significantly, the TRS shifts from an asset to a major liability:

• Cash Outflows: Unlike owning physical Treasury shares (where a price drop is just an unrealized accounting entry), a TRS often requires periodic cash settlements. If the stock drops 20%, the company must write a check to the bank for that 20% loss to "square up" the swap.

It’s a risk sure but the odds of it causing a liquidity problem are very small. If investors want to sell the stock because the stock is down (basically the market structure currently) then more power to them. FFH has over $2b to spend on buybacks this year. If you think they should take off swaps you might be against buybacks too so that’s probably not comforting to you. 

[73 Reds]

11 minutes ago, KPO said:

So you don’t think it exposes the company to a potential negative feedback loop? It was a great call when they did it, but with the stock up ~4X since then I feel like it’s time to unwind it. Facts below:

 

1. The Mechanics of the Swap

In a TRS, the company (the "Equity Receiver") enters an agreement with a bank (the "Equity Payer").

• The Bank pays: The total return of the stock (price appreciation + dividends).

• The Company pays: A floating interest rate (usually SOFR + a spread).

If the stock price goes up, the bank pays the company. If the stock price falls, the company must pay the bank the difference in value.

---

2. Risk During a Market Correction

When a market correction occurs and the company's share price drops significantly, the TRS shifts from an asset to a major liability:

• Cash Outflows: Unlike owning physical Treasury shares (where a price drop is just an unrealized accounting entry), a TRS often requires periodic cash settlements. If the stock drops 20%, the company must write a check to the bank for that 20% loss to "square up" the swap.

As another poster alluded to previously, doesn't some of the risk depend on when, and how often payments must be made?  If the stock price drops precipitously and Fairfax has available cash for buybacks, wouldn't that stem the tide of the TRS while also providing a good investment opportunity?

[mengan]

3 minutes ago, 73 Reds said:

Cash Outflows: Unlike owning physical Treasury shares (where a price drop is just an unrealized accounting entry), a TRS often requires periodic cash settlements. If the stock drops 20%, the company must write a check to the bank for that 20% loss to "square up" the swap.

 

I would like to see the source of such arrangement exists for fairfax's TRS.

[KPO]

2 minutes ago, 73 Reds said:

As another poster alluded to previously, doesn't some of the risk depend on when, and how often payments must be made?  If the stock price drops precipitously and Fairfax has available cash for buybacks, wouldn't that stem the tide of the TRS while also providing a good investment opportunity?

Sure, but when things go sideways it’s amazing how correlated everything becomes. At least that was one of my GFC takeaways. Like I said, it was a brilliant move at the time, but it’s less obvious if it’s brilliant to keep the position open. I just think a gradual exit would be prudent. 

[73 Reds]

Just now, KPO said:

Sure, but when things go sideways it’s amazing how correlated everything becomes. At least that was one of my GFC takeaways. Like I said, it was a brilliant move at the time, but it’s less obvious if it’s brilliant to keep the position open. I just think a gradual exit would be prudent. 

Yes, as valuation ( as opposed to price) rises, the TRS becomes more risky.  But by having available cash for buybacks, the company can absorb a lot of selling and minimize the downside.  That, of course assumes that buybacks make sense and there isn't a legitimate reason for the price drop, in which event TRS exposure would likely be called in or eliminated altogether by management, which has a front-row seat to any such issues prior to the market in general.  

[Munger_Disciple]

15 minutes ago, KPO said:

Sure, but when things go sideways it’s amazing how correlated everything becomes. At least that was one of my GFC takeaways. Like I said, it was a brilliant move at the time, but it’s less obvious if it’s brilliant to keep the position open. I just think a gradual exit would be prudent.