Fairfax 2026

[73 Reds]

4 minutes ago, bearprowler6 said:

I appreciate this question. I do believe that Fairfax is in a better position today than probably at any time in its history however more work needs to be done. The core team is aging and although a good bench has been developing behind them we do not know how they will perform when the core team is no longer there. I mentioned earlier that I believe the soft market is behind much of Fairfax's weak share price this year. This issue is largely out of their control. Yes they can position their book to not take on foolish risks in a soft pricing environment however that will not insulate the company entirely from market conditions. The TRS on their own shares is also troublesome. Many posters on here were pounding the table almost begging them to reduce this holding worried about exactly what has taken place. Its a self fulfilling accelerating downward spiral when the share price starts to drop. Many of their legacy  investments have been cleaned up but others are still on their books. I view Fairfax as having a weak sell discipline when it comes to cutting their losses. I hope that changes going forward. And Fairfax India.. its the airport... the rest is irrelevant and should be disposed of. This issue was discussed a few months back so no need to rehash here. Governance issues also persist with Prem's kids on the Board? Are  these the best available candidates? I would also like debt levels to come down. Hard to do in a soft market and with having to buy back the minority positions of several of their insurance holdings (e.g., Allied World). I could go on however this should give you a sense of my concerns. There is a reason the market is unwilling to reward Fairfax with  high price to book multiple and it has nothing to do with the market not knowing about the company or not understanding its business model. 

If that's the bear case, glad I own the stock.

[LC]

@SafetyinNumbersI think your question is essentially, how does BV (ie earnings) not grow?

 

What would we see? An "imperfect storm" of: 

1) CRs approaching 100 depending on the extent of a softening market, i.e. if the global insurance market across lines softens holistically, plus if Fairfax gets hit with cats which they are not able to reprice. 

2) Equity investments: if we see the large investment gains retreat (eg losses at Eurobank, for instance) and/or write offs on some of their recent investments (sleep country)

3) Poorly times fixed income: essentially if Brian Bradstreet is shown to be human after all, i.e. locks in duration today and we see some spike in rates ; or if rates drop and the FI portfolio nor the equity portfolio respond as expected.

 

IMO these are the 3 big buckets of potential earnings - so in order to have lean years we would need to see weakness across all these. 

[dealraker]

I spent years long ago preparing my wife for investing vs fear/greed "getting out" and "not going down" thinking.  I'm quite proud of her.   She has over 150 stocks and has never sold a single one...and won't let me sell a single one under any circumstances.  She has a slew of stock symbols that she doesn't even know what co's they represent.  Her return has been about 11-12% and that's unbelievable in the long term

 

Angela looks at her account a few times a year typically, but some years she doesn't look at the balance ever...not once the entire year.  Angela reads about 80 books a year and runs book festivals, that's her focus.

 

Now THAT holding period for her is investing!  

[SafetyinNumbers]

4 minutes ago, bearprowler6 said:

I appreciate this question. I do believe that Fairfax is in a better position today than probably at any time in its history however more work needs to be done. The core team is aging and although a good bench has been developing behind them we do not know how they will perform when the core team is no longer there. I mentioned earlier that I believe the soft market is behind much of Fairfax's weak share price this year. This issue is largely out of their control. Yes they can position their book to not take on foolish risks in a soft pricing environment however that will not insulate the company entirely from market conditions. The TRS on their own shares is also troublesome. Many posters on here were pounding the table almost begging them to reduce this holding worried about exactly what has taken place. Its a self fulfilling accelerating downward spiral when the share price starts to drop. Many of their legacy  investments have been cleaned up but others are still on their books. I view Fairfax as having a weak sell discipline when it comes to cutting their losses. I hope that changes going forward. And Fairfax India.. its the airport... the rest is irrelevant and should be disposed of. This issue was discussed a few months back so no need to rehash here. Governance issues also persist with Prem's kids on the Board? Are  these the best available candidates? I would also like debt levels to come down. Hard to do in a soft market and with having to buy back the minority positions of several of their insurance holdings (e.g., Allied World). I could go on however this should give you a sense of my concerns. There is a reason the market is unwilling to reward Fairfax with  high price to book multiple and it has nothing to do with the market not knowing about the company or not understanding its business model. 

The only thing I agree with here is that the soft market is why the stock is down but that’s just reduced the multiple and has had no impact on BVPS growth or the change in fair value over market value for the holdings.

 

Everything else is fairly common hand waving nonsense that has nothing to do with intrinsic value. 

[SafetyinNumbers]

1 minute ago, LC said:

1) CRs approaching 100 depending on the extent of a softening market, i.e. if the global insurance market across lines softens holistically, plus if Fairfax gets hit with cats which they are not able to reprice. 

This assumes no underwriting discipline and ignores they have a boat load of reserves. It also ignores that if CR’s go to a 100, the market will harden and they will see multiple expansion. 
 

3 minutes ago, LC said:

2) Equity investments: if we see the large investment gains retreat (eg losses at Eurobank, for instance) and/or write offs on some of their recent investments (sleep country)

We can see that the equity portfolio is likely marked a third under fair value so losses have to be incredibly big before we see impairment. Odds are low. 

 

4 minutes ago, LC said:

3) Poorly times fixed income: essentially if Brian Bradstreet is shown to be human after all, i.e. locks in duration today and we see some spike in rates ; or if rates drop and the FI portfolio nor the equity portfolio respond as expected.

They are currently positioned well for an increase or decrease in rates. Plus it would take years before it impacts BVPS growth. Good things could also happen like credit spreads widen. 
 

More hand waving. 

[73 Reds]

6 minutes ago, dealraker said:

I spent years long ago preparing my wife for investing vs fear/greed "getting out" and "not going down" thinking.  I'm quite proud of her.   She has over 150 stocks and has never sold a single one...and won't let me sell a single one under any circumstances.  She has a slew of stock symbols that she doesn't even know what co's they represent.  Her return has been about 11-12% and that's unbelievable in the long term

 

Angela looks at her account a few times a year typically, but some years she doesn't look at the balance ever...not once the entire year.  Angela reads about 80 books a year and runs book festivals, that's her focus.

 

Now THAT holding period for her is investing!  

Gives new meaning to "diversification".

[Viking]

4 hours ago, bearprowler6 said:

Fairfax has never been loved by the market. The reasons have been discussed numerous times on this board by you and others. I believe the main reason for the downturn in Fairfax's share price is due to the soft market. No one know when that will change. No one, predicted what has happened to Fairfax share price this year. No one. So my question is simple. If the soft market lasts for longer than most of us want and if that is the main reason for the share price weakness as I suspect it is then do shareholders feel comfortable holding Fairfax and waiting it out? Especially for those 65+, would it perhaps not be better to redeploy the capital elsewhere?

@bearprowler6, you bring up many important topics. Here are a couple of thoughts:

• High level: The P/C insurance cycle is very long (with each one often lasting decades?). The hard market part is usually a few short years of the total. Most of the time, P/C insurance is in some version of a soft market.
• Fairfax specific: In the last soft market Fairfax’s P/C insurance business performed pretty well. Performance was very strong at Odyssey. More importantly, the soft market gave Fairfax the opportunity to aggressively expand by acquisition - which they did from 2015 to 2017. The Allied World acquisition has been a home run. 
   
• Fairfax’s lost decade (2010 to 2020) was caused primarily by mis-steps with the investment management side of the business - not a soft P/C insurance market. The equity hedges/shorts were the big problem (causing an average loss of almost $600 million per year for 11 years straight). Too many poorly performing/very low quality equity holdings were a smaller (although important) issue. Importantly, both of these things were clear to shareholders at the time (there were not hypothetical problems - they were obvious). 
   

Fast forward to today. My assessment is Fairfax’s:

• P/C insurance business is the strongest it has ever been. 
• Its investment management business is the strongest it has ever been (the problems from 2010 to 2020 have largely been fixed). 
• Capital allocation has been best in class over the past 5 years. 

Bottom line, Fairfax looks exceptionally well positioned. They will do what they have always done - exploit market cycles (P/C insurance and/or financial markets) - and grow per share value for long term shareholders.

Edited 14 hours ago by Viking

[dealraker]

5 minutes ago, 73 Reds said:

Gives new meaning to "diversification".

OK Reds...here's the part that you will easily understand but may not have thought about.  She is by numbers of stocks "diversified" of course.

 

But as to value?   She's not much diversified at all.  That's because she has several stocks that have MASSIVE appreciation.  I could list a few, but you already basically know which ones they are.

[73 Reds]

Just now, dealraker said:

OK Reds...here's the part that you will easily understand but may not have thought about.  She is by numbers of stocks "diversified" of course.

 

But as to value?   She's not much diversified at all.  That's because she has several stocks that have MASSIVE appreciation.  I could list a few, but you already basically know which ones they are.

So the operative question is why keep the ones that have not performed, or IOW why do they even matter?  Was there a specific reason to buy each of the 150 stocks when they were all originally purchased?

[dealraker]

4 minutes ago, 73 Reds said:

So the operative question is why keep the ones that have not performed, or IOW why do they even matter?  Was there a specific reason to buy each of the 150 stocks when they were all originally purchased?

I am the culprit!  Yes there was a reason in my head for the purchases.  So basically I never invested with the goal of outperforming anyone or the market.  Throughout my life it has been "participate" in the market.

 

And there are a lot of things in her account, an account that's 40 years old, that did fabulous for years but have of course somewhat- but not entirely- stagnated in the last 10 maybe even more years.  The main thing is getting 11-12% Is likely in the top percentiles for any investor and we did it with her account with very little effort or administration time.

 

Angela had minimal expectations.  She has been literally flabbergasted at how much money the account has in it.   And that's the "don't you dare" from her as to this, it has worked so leave it alone.  She is a brilliant thinker - on the spectrum with all the traits that come with that - change is not wanted from her, she's never comfortable with changes.  I think you can grasp that!  

[Viking]

37 minutes ago, LC said:

@SafetyinNumbersI think your question is essentially, how does BV (ie earnings) not grow?

 

What would we see? An "imperfect storm" of: 

1) CRs approaching 100 depending on the extent of a softening market, i.e. if the global insurance market across lines softens holistically, plus if Fairfax gets hit with cats which they are not able to reprice. 

2) Equity investments: if we see the large investment gains retreat (eg losses at Eurobank, for instance) and/or write offs on some of their recent investments (sleep country)

3) Poorly times fixed income: essentially if Brian Bradstreet is shown to be human after all, i.e. locks in duration today and we see some spike in rates ; or if rates drop and the FI portfolio nor the equity portfolio respond as expected.

 

IMO these are the 3 big buckets of potential earnings - so in order to have lean years we would need to see weakness across all these. 

@LC, Fairfax’s best performing long-term investments are made during times of extreme volatility. My guess is that is going to continue in the future. Looking at ‘downside risk’ and Fairfax is much more nuanced than for traditional P/C insurance companies. For Fairfax what is perceived as risk is in reality opportunity. It is very counterintuitive. 

Edited 14 hours ago by Viking

[dealraker]

1 minute ago, dealraker said:

I am the culprit!  Yes there was a reason in my head for the purchases.  So basically I never invested with the goal of outperforming anyone or the market.  Throughout my life it has been "participate" in the market.

 

And there are a lot of things in her account, an account that's 40 years old, that did fabulous for years but have of course somewhat- but not entirely- stagnated in the last 10 maybe even more years.  The main thing is getting 11-12% Is likely in the top percentiles for any investor and we did it with her account with very little effort or administration time.

 

Angela had minimal expectations.  She has been literally flabbergasted at how much money the account has in it.   And that's the "don't you dare" from her as to this, it has worked so leave it alone.  She is a brilliant thinker - on the spectrum with all the traits that come with that - change is not wanted from her, she's never comfortable with changes.  I think you can grasp that!  

Bank of A reads 14.7% since 2011 when we moved it to them, that's not including contributions.  I really have no idea what returns we got prior to that.

[Buckeye]

24 minutes ago, bearprowler6 said:

I appreciate this question. I do believe that Fairfax is in a better position today than probably at any time in its history however more work needs to be done. The core team is aging and although a good bench has been developing behind them we do not know how they will perform when the core team is no longer there. I mentioned earlier that I believe the soft market is behind much of Fairfax's weak share price this year. This issue is largely out of their control. Yes they can position their book to not take on foolish risks in a soft pricing environment however that will not insulate the company entirely from market conditions. The TRS on their own shares is also troublesome. Many posters on here were pounding the table almost begging them to reduce this holding worried about exactly what has taken place. Its a self fulfilling accelerating downward spiral when the share price starts to drop. Many of their legacy  investments have been cleaned up but others are still on their books. I view Fairfax as having a weak sell discipline when it comes to cutting their losses. I hope that changes going forward. And Fairfax India.. its the airport... the rest is irrelevant and should be disposed of. This issue was discussed a few months back so no need to rehash here. Governance issues also persist with Prem's kids on the Board? Are  these the best available candidates? I would also like debt levels to come down. Hard to do in a soft market and with having to buy back the minority positions of several of their insurance holdings (e.g., Allied World). I could go on however this should give you a sense of my concerns. There is a reason the market is unwilling to reward Fairfax with  high price to book multiple and it has nothing to do with the market not knowing about the company or not understanding its business model. 

Are you just trolling here @bearprowler6?  You've asked for people's opinion on FFH, and after reading what seemed like many thoughtful responses, you responded with mostly scorn and lambaste.  You mention above many reasons why FFh may be temporarily underperforming the market, so the question to you is, how valid are your concerns?  If you determine them to be super valid, then it sounds like you should hold or sell.  If you think that these concerns aren't so valid, then you should hold or buy.   Just because FFH underperformed for 7 years does not make it a law of nature.  Just because it happened once doesn't mean it has to happen again.  As has been rightly pointed out, the conditions that led to the 7 years of underperformance have been rectified.  Certainly you can see that, correct?  And if you did decide to sell, what would you buy with your proceeds?  Maybe that would tell us more about your thinking.  

 

PS - If a 20% correction, in a stock that has gone up hugely over the last few years, is causing you this much inner conflict, perhaps your position size is too big? And with a name like Bearprowler, maybe you are more predisposed to always be looking for the downside?  Maybe you should just be in bonds...or in a company that owns lots of bonds...oh wait:)  If I were you, I would zoom out to the 5-10 year chart for FFH, and then spend the rest of the day outside:)

[thowed]

In haste, I think it's good to poke holes in Fairfax, as the bias here for a while has been to praise it (which I tlhink is justfied, but I still think you have to be humble and keep trying to kill your holdings).

 

To answer the original question, it sounds like maybe you should sell, as it doesn't sound like you have strong conviction in the stock, which is reasonable given your holding period and how you've seen both good times and lean.

 

Strong conviction is one of the most important things for holding a stock long-term, I feel, and if you don't have it, and you don't 'need' to sell, then maybe you can use the proceeds to go on a special holiday or something.

 

I think the majority here are bullish from a combination of our own research and the sharing here, particularly Viking's epic efforts.

 

We may all be wrong.  Or the market may just disagree with us for an unknown time.  If the latter, then conviction will be ever more important (for me, the buybacks help - if a company keeps going down without buybacks, there is more concern).

 

I don't know why FFH is down this year - it may be the soft market, I suspect it's also partly that a l lot of good stuff is being sold as people buy into the sexy new sectors like Memory and AI stocks, and of course the big 3 IPOs.

 

I hope this helps.

[73 Reds]

42 minutes ago, dealraker said:

I am the culprit!  Yes there was a reason in my head for the purchases.  So basically I never invested with the goal of outperforming anyone or the market.  Throughout my life it has been "participate" in the market.

 

And there are a lot of things in her account, an account that's 40 years old, that did fabulous for years but have of course somewhat- but not entirely- stagnated in the last 10 maybe even more years.  The main thing is getting 11-12% Is likely in the top percentiles for any investor and we did it with her account with very little effort or administration time.

 

Angela had minimal expectations.  She has been literally flabbergasted at how much money the account has in it.   And that's the "don't you dare" from her as to this, it has worked so leave it alone.  She is a brilliant thinker - on the spectrum with all the traits that come with that - change is not wanted from her, she's never comfortable with changes.  I think you can grasp that!  

Sounds like you married the right woman!  We have that in common.  Best "investment" I ever made.

Edited 14 hours ago by 73 Reds
missed line

[HoldForDearLife]

4 hours ago, longlake95 said:

Remember, we are here for a lumpy 15%+, not a smooth 12%. 

While this is true, I think it should be mentioned that a lumpy 15% can be a difficult hold, despite the more lucrative return potential. I can imagine that the current market conditions are exacerbating the challenges of holding their lumpy but high-MoS investments; I don't think any active investor can be fully immune to seeing their "correctly made" investments do nothing, when people are making boatloads of returns by being invested in one sector of the market, basically regardless of how "correct" their decision-making has been.

 

Now obviously, you cannot really be invested in these "lumpy 15%s" companies without the understanding that you're not going to move hand in hand with the general market, or else the periods of relative underperformance are going to be tough and likely lead to mistakes. But I'd say that generally speaking, a person allocating capital to the Fairfax-type companies of the market needs to have some system in place to protect themselves from when their portfolio isn't producing returns. This goes especially if they're running a concentrated portfolio, or have most of their portfolio invested in these types of firms.

 

I actually think that @bearprowler6 asks a valid question. It's one thing to estimate how likely a five-year 0% would be - you ideally answer that question before initiating a position - but if you think you're right about the lumpy 15% return over the long-term to the point where you invest in the company, you kind of have to consider what bearprowler said too. What part of your investment process keeps you invested, if the market disagrees with you for five years straight and your investment returns nothing? 

 

I guess there are multiple right answers to that question, but I do think that it can never be as simple as "my holding period is forever, I don't care" or something along those lines. At some point, everyone starts to wonder why they're not earning a return, and that's the point where the system gets tested. Fairfax has tested us relatively little for the last five years, but at some point, it likely will. 

 

Right now, it's easy for me to look at the 20% drawdown, see that the company is diversifying its earnings streams, buying back lots of stock, and being managed by a team that I trust, and deduce that I'm probably OK with my oversized position. Two more years of this? Might be a different answer then. We'll see.

 

 

Edited 13 hours ago by HoldForDearLife

[bearprowler6]

1 hour ago, 73 Reds said:

If that's the bear case, glad I own the stock.

Its a list of reasons why Fairfax as a stock never reaches the great heights you value guys think it should achieve. 

[LC]

44 minutes ago, Viking said:

@LC, Fairfax’s best performing long-term investments are made during times of extreme volatility. My guess is that is going to continue in the future. Looking at ‘downside risk’ and Fairfax is much more nuanced than for traditional P/C insurance companies. For Fairfax what is perceived as risk is in reality opportunity. It is very counterintuitive. 

 

I agree - I was just theorizing on an "imperfect storm" of what happens if we just consider the downside. In reality there is also opportunity created when markets sell off, which I would hope management would look to take advantage of. 

[bearprowler6]

1 hour ago, SafetyinNumbers said:

The only thing I agree with here is that the soft market is why the stock is down but that’s just reduced the multiple and has had no impact on BVPS growth or the change in fair value over market value for the holdings.

 

Everything else is fairly common hand waving nonsense that has nothing to do with intrinsic value. 

What you call "hand waving nonsense" is a list of reasons why Fairfax will not achieve the P/E or Price/Book multiples that other you and others on here think it should.  Tracking intrinsic value is key and Fairfax's IV has gone up nicely but the market will not reward it as you think it should because of all these issues. 

[thowed]

4 minutes ago, LC said:

opportunity created when markets sell off

 

Which, for example, it looks like CSU Universe have been taking advantage of.

[dealraker]

11 minutes ago, 73 Reds said:

Sounds like you married the right woman!  We have that in common.  Best "investment" I ever made.

I thoroughly enjoy inve sting discussions with you Reds.  You are (as usual ;-)) challenging...but in a good way.  The issue for me always is that I am not good at writing what I mean to deliver.  I'm terrible at it as a matter of fact, so it becomes too much work at times.  LOL.

[dealraker]

2 minutes ago, bearprowler6 said:

What you call "hand waving nonsense" is a list of reasons why Fairfax will not achieve the P/E or Price/Book multiples that other you and others on here think it should.  Tracking intrinsic value is key and Fairfax's IV has gone up nicely but the market will not reward it as you think it should because of all these issues. 

Decades ago when I was a Fairfax shareholder I thought that the stock would never get much above 1.5 times book value.  I was trained as an insurance and bank stock analyst and that training was substantial and included valuations of the past and expected future.  

 

Fairfax quickly went to 4 times book value.  Fact.

[LC]

8 minutes ago, thowed said:

 

Which, for example, it looks like CSU Universe have been taking advantage of.

 

Exactly - the same opportunity (and conflict) exists: CSU is down ~50% from its highs...should management prioritize share repurchases? M&A? A mix of both? Market declines present management with these opportunities. 

 

There are benefits to both approaches:

-buying out weak hands builds a more long term shareholder base

-expanding at low valuations benefits the whole shareholder base

Edited 13 hours ago by LC

[73 Reds]

12 minutes ago, bearprowler6 said:

Its a list of reasons why Fairfax as a stock never reaches the great heights you value guys think it should achieve. 

You may be overestimating expected heights.  In this case management has earned the right to take it at its word.  15% BV growth for the next several years is fine with me.  

Edited 13 hours ago by 73 Reds
spelling

[bearprowler6]

1 minute ago, dealraker said:

Decades ago when I was a Fairfax shareholder I thought that the stock would never get much above 1.5 times book value.  I was trained as an insurance and bank stock analyst and that training was substantial and included valuations of the past and expected future.  

 

Fairfax quickly went to 4 times book value.  Fact.

4 times BV was a different time for this company. Can it happen again? Sure! Will it happen  again? Highly unlikely! We should all be thankful if we get to 1.75 or 2 which as things are structured currently is not in the cards!