Fairfax 2026

[KFS]

On 6/14/2026 at 5:54 PM, SafetyinNumbers said:

They also used their more fairly valued stock to buy Allied World which reduced the impact of the hedging strategy by issuing equity and dramatically increased the float ahead of what they expected to be an increase in interest rates. That ultimately took a lot longer to happen. They were already in talks with AW in September of that year but they did bump in December to help get the AW BOD on board. Another example of how Fairfax often expresses the same bet in a multitude of ways.

 

 

Not to be nitpicky here but just to clarify, I'm not sure I would have called the stock fairly valued during this transaction.  Fairfax issued 5.1 million shares at a P/B of only 1.06 to acquire Allied World.  Of course it has worked out great over the years, but I don't remember it being an obviously good move at the time.  

 

From the 2017 annual report:

 

 

 

 

 

 

 

[Marco Van Basten]

6 hours ago, SafetyinNumbers said:

Probabilistic investing often looks like luck.

With all due respect, has the equity book outperformed the S&P over the last 15 years?  By the way, there have been plenty of incredible opportunities in both US and non-US.  Why buy Eurobank when you could have bought Aena, Halma, Diploma, Asml, Hermes, Sartorius Stadim Biotech, Safran?  Why buy Blackberry, et all when Alphabet, Microsoft, Meta, Nvidia, Micron, Moody's, S&P Global, Idexx, Heico, Transdigm, GE, RSG & WM, and the list goes on were available?  Why are we so proud of buying crappy businesses at 50 cents on the dollar when Nvidia was trading at 5 cents on the dollar 5 years ago?  

[Viking]

4 hours ago, Marco Van Basten said:

With all due respect, has the equity book outperformed the S&P over the last 15 years?  By the way, there have been plenty of incredible opportunities in both US and non-US.  Why buy Eurobank when you could have bought Aena, Halma, Diploma, Asml, Hermes, Sartorius Stadim Biotech, Safran?  Why buy Blackberry, et all when Alphabet, Microsoft, Meta, Nvidia, Micron, Moody's, S&P Global, Idexx, Heico, Transdigm, GE, RSG & WM, and the list goes on were available?  Why are we so proud of buying crappy businesses at 50 cents on the dollar when Nvidia was trading at 5 cents on the dollar 5 years ago?  

Is there a reason you use 15 years as the benchmark? Buffett has said that 5 years is a good timeframe to use to evaluate a management team. That is my preferred measure. 
 

Does year 6 to 10 performance matter? A little, but much less IMHO. 
What about year 11 to 15? Interesting… but too long ago to matter much IMHO. 

For instance… back in 2013, I did not use a 10 or 15 year timeframe to evaluate Fairfax’s management team at the time (their investment returns). That would have been pretty dumb, given the CDS and equity hedge positions (that worked fabulously well from 2007-2009) would have completely skewed results. The best way to evaluate Fairfax in 2013 was to look primarily at what they owned at the time, how the positions had performed recently (prior 5 years), and what their prospects were (next 5 years). (I did that and then sold all my shares in Fairfax.)

 

Imagine using a 15 year timeframe to evaluate management at BlackBerry back in 2013? It would have told an investor to back up the truck… Really?

 

One of the benefits of using 5 years is it makes calculating rate of return easier. Fairfax has a very concentrated portfolio:

• Eurobank
• FFH-TRS
• Poseidon
• Fairfax India - primarily BIAL
• Orla Mining

Do I care today that Eurobank was a terrible business in 2014? Nope. What I care deeply about is what kind of business Eurobank is today - and it is a very good business. Could that change? Of course… that is why I listen to every quarterly call). 

 

Holdings get much smaller after the big 5. But there are a bunch of stars in there as well. Fairfax’s hit rate the past 5 years is nuts. 

To this, add the returns on the holdings they sold in the last 5 years:

• Resolute Forest Products
• Stelco
• Sigma
• Orla (part)
• Poseidon (part)

All were massive home runs (5-year returns).

 

And then, of course, we should also add the gains on the insurance businesses they IPO’d/sold in the last 5 years… this needs to get counted somewhere…

• Digit
• Pet insurance
• Ambridge
• Euolife’s life insurance business

More massive gains…
 

After all, at the end of the day, we are trying to evaluate a management team on their capital allocation skills. It should be fair and balanced and look at all the important pieces.

 

How has Fairfax performed over the past 5 years?
 

They have smoked - absolute and relative to the S&P500. 
 

Especially if you use the correct cost basis:

• FFH-TRS cost basis is not the starting value of Fairfax’s share price. It is much less.

Interestingly, the last 5 years had two bear markets: 2022 and 2025 (I think just qualified). There was also a historic bear market in bonds. Yes, the starting point (Dec 31, 2020) was very favourable. But that is when you look at performance vs the S&P500. 
 

For the past 5 years, Fairfax’s capital allocation has been best-in-class and it is not close. The fact that people don’t get it is not surprising - this is Fairfax after all. 

Edited 14 hours ago by Viking

[Txvestor]

1 hour ago, Viking said:

Is there a reason you use 15 years as the benchmark? Buffett has said that 5 years is a good timeframe to use to evaluate a management team. That is my preferred measure. 
 

Does year 6 to 10 performance matter? A little, but much less IMHO. 
What about year 11 to 15? Interesting… but too long ago to matter much IMHO. 

For instance… back in 2013, I did not use a 10 or 15 year timeframe to evaluate Fairfax’s management team at the time (their investment returns). That would have been pretty dumb, given the CDS and equity hedge positions (that worked fabulously well from 2007-2009) would have completely skewed results. The best way to evaluate Fairfax in 2013 was to look primarily at what they owned at the time, how the positions had performed recently (prior 5 years), and what their prospects were (next 5 years). (I did that and then sold all my shares in Fairfax.)

 

Imagine using a 15 year timeframe to evaluate management at BlackBerry back in 2013? It would have told an investor to back up the truck… Really?

 

One of the benefits of using 5 years is it makes calculating rate of return easier. Fairfax has a very concentrated portfolio:

• Eurobank
• FFH-TRS
• Poseidon
• Fairfax India - primarily BIAL
• Orla Mining

Do I care today that Eurobank was a terrible business in 2014? Nope. What I care deeply about is what kind of business Eurobank is today - and it is a very good business. Could that change? Of course… that is why I listen to every quarterly call). 

 

Holdings get much smaller after the big 5. But there are a much of stars in there as well. Fairfax’s hit rate the past 5 years is nuts. 

To this, add the returns on the holdings they sold in the last 5 years:

• Resolute Forest Products
• Stelco
• Sigma
• Orla (part)
• Poseidon (part)

All were massive home runs (5-year returns).

 

And then, of course, we should also add the gains on the insurance businesses they IPO’d/sold in the last 5 years… this needs to get counted somewhere…

• Digit
• Pet insurance
• Ambridge
• Euolife’s life insurance business

More massive gains…
 

After all, at the end of the day, we are trying to evaluate a management team on their capital allocation skills. It should be fair and balanced and look at all the important pieces.

 

How has Fairfax performed over the past 5 years?
 

They have smoked - absolute and relative to the S&P500. 
 

Especially if you use the correct cost basis:

• FFH-TRS cost basis is not the starting value of Fairfax’s share price. It is much less.

Interestingly, the last 5 years had two bear markets: 2022 and 2025 (I think just qualified). There was also a historic bear market in bonds. Yes, the starting point (Dec 31, 2020) was very favourable. But that is when you look at performance vs the S&P500. 
 

For the past 5 years, Fairfax’s capital allocation has been best-in-class and it is not close. The fact that people don’t get it is not surprising - this is Fairfax after all. 

Well, it's also important to consider where they are currently allocating capital. 
-KW, is questionable for me based on said company's own shareholder returns last 5, 10 or 15yrs. But we will remain curious.
-UA a classic dumpster diving investment down 90% from its peak.

-Sleep county remains to be seen.
-Andrew Peller which also don't seem particularly cheap or particularly high moat businesses.

 

Whilst I acknowledge they have had a good 5yr run, that was after a long drought and it's by no means certain to me that they have had some sort of eureka moment and this will continue. For that reason, I'm generally a bigger fan of share repurchases than most of the above acquisitions. However only time will tell. 

Despite all that, I remain invested because of what I said previously, the better mouse trap that they have. And that helps enormously over the long term. 

I definitely do believe the insurance companies have turned a corner. They are much larger, more diversified across both lines of insurance, and geographically, and have better underwriting standards. Their float is now in excess of $40B and I think interest rates are going to be persistently higher for longer than people are currently expecting just as a function of global sovereign debt levels and inflation risks. Thats powerful with their total investment portfolio 3:1 leveraged. I do generally trust their prudent overall risk management as they have a lot of skin in the game. 

[Viking]

36 minutes ago, Txvestor said:

Well, it's also important to consider where they are currently allocating capital. 
-KW, is questionable for me based on said company's own shareholder returns last 5, 10 or 15yrs. But we will remain curious.
-UA a classic dumpster diving investment down 90% from its peak.

-Sleep county remains to be seen.
-Andrew Peller which also don't seem particularly cheap or particularly high moat businesses.

 

Whilst I acknowledge they have had a good 5yr run, that was after a long drought and it's by no means certain to me that they have had some sort of eureka moment and this will continue. For that reason, I'm generally a bigger fan of share repurchases than most of the above acquisitions. However only time will tell. 

Despite all that, I remain invested because of what I said previously, the better mouse trap that they have. And that helps enormously over the long term. 

I definitely do believe the insurance companies have turned a corner. They are much larger, more diversified across both lines of insurance, and geographically, and have better underwriting standards. Their float is now in excess of $40B and I think interest rates are going to be persistently higher for longer than people are currently expecting just as a function of global sovereign debt levels and inflation risks. Thats powerful with their total investment portfolio 3:1 leveraged. I do generally trust their prudent overall risk management as they have a lot of skin in the game. 

Can you explain to me what the financials look like for each investment? What was the money Fairfax put in? (That is not the reported deal price.) What is the (likely) return they are going to generate off it in the coming years? 
 

Bottom line, I am being open minded with their new purchases. One reason is I haven’t spent a lot of time trying to understand them. I will get around to it. Another reason is Fairfax has been hitting the ball out of the park - as a result, I am giving them the benefit of the doubt. 
 

i don’t expect them to be perfect. Some investments will look like clunkers. Lynch said if you are right 6 times out of 10 you will do well in this business. I am not worried when it comes to Fairfax’s equity portfolio these days.

Edited 14 hours ago by Viking

[Viking]

49 minutes ago, Txvestor said:

Well, it's also important to consider where they are currently allocating capital. 
-KW, is questionable for me based on said company's own shareholder returns last 5, 10 or 15yrs. But we will remain curious.
-UA a classic dumpster diving investment down 90% from its peak.

-Sleep county remains to be seen.
-Andrew Peller which also don't seem particularly cheap or particularly high moat businesses.

 

Whilst I acknowledge they have had a good 5yr run, that was after a long drought and it's by no means certain to me that they have had some sort of eureka moment and this will continue. For that reason, I'm generally a bigger fan of share repurchases than most of the above acquisitions. However only time will tell. 

Despite all that, I remain invested because of what I said previously, the better mouse trap that they have. And that helps enormously over the long term. 

I definitely do believe the insurance companies have turned a corner. They are much larger, more diversified across both lines of insurance, and geographically, and have better underwriting standards. Their float is now in excess of $40B and I think interest rates are going to be persistently higher for longer than people are currently expecting just as a function of global sovereign debt levels and inflation risks. Thats powerful with their total investment portfolio 3:1 leveraged. I do generally trust their prudent overall risk management as they have a lot of skin in the game. 

KW is an interesting company. I totally agree with you - retail shareholders in KW got taken out behind the woodshed owning the stock. But my read is Fairfax did ok. The stock they owned was table-stakes (as Jamie Dimon would say). It got Fairfax access to Kennedy Wilson’s deal flow. Real estate partnerships. Mortgage loans. ThePacWest deal was an absolute home run for Fairfax (still is). And in the end, it also allowed Fairfax to take KW out on the cheap (at least that is my initial uneducated read). Real estate is deeply out of favour - this is likely an ideal time to buy something like KW. 
 

Now having said all that… KW is a bit of a complex beast… so I could be completely off base in terms of how it works out for Fairfax. We will see.
 

It reminds me a little of when Fairfax took Recipe private when Covid was still a thing here in Canada - Fairfax got it cheap (in terms of buying when there was a lot of pessimism). 

Edited 14 hours ago by Viking

[SafetyinNumbers]

11 hours ago, KFS said:

 

 

Not to be nitpicky here but just to clarify, I'm not sure I would have called the stock fairly valued during this transaction.  Fairfax issued 5.1 million shares at a P/B of only 1.06 to acquire Allied World.  Of course it has worked out great over the years, but I don't remember it being an obviously good move at the time.  

 

From the 2017 annual report:

 

 

 

 

 

 

 

When they announced the deal in December 2016, the stock was trading closer to 1.3x BV. That’s when the Allied World BOD signed the definitive agreement. In March 2016, they also issued equity for closer to 1.4x BV. This was in a backdrop of low interest rates so ROE was structurally lower. 
 

 

[SafetyinNumbers]

9 hours ago, Marco Van Basten said:

With all due respect, has the equity book outperformed the S&P over the last 15 years?  By the way, there have been plenty of incredible opportunities in both US and non-US.  Why buy Eurobank when you could have bought Aena, Halma, Diploma, Asml, Hermes, Sartorius Stadim Biotech, Safran?  Why buy Blackberry, et all when Alphabet, Microsoft, Meta, Nvidia, Micron, Moody's, S&P Global, Idexx, Heico, Transdigm, GE, RSG & WM, and the list goes on were available?  Why are we so proud of buying crappy businesses at 50 cents on the dollar when Nvidia was trading at 5 cents on the dollar 5 years ago?  

The goal isn’t to outperform the S&P, it’s to generate absolute returns. Over time the process should outperform the S&P especially when the leverage is included. This most recent 15 year period the backdrop was particularly difficult for this investment style because of the change in market structure. Further, the decision by Fairfax to accumulate more significant influence and control positions ensures that the accounting returns lagged economic returns since 2012. While the lag continues, the gains are coming pretty regularly now as the strategy has matured. 

[Marco Van Basten]

9 hours ago, Viking said:

Is there a reason you use 15 years as the benchmark? Buffett has said that 5 years is a good timeframe to use to evaluate a management team. That is my preferred measure. 
 

Does year 6 to 10 performance matter? A little, but much less IMHO. 
What about year 11 to 15? Interesting… but too long ago to matter much IMHO. 

For instance… back in 2013, I did not use a 10 or 15 year timeframe to evaluate Fairfax’s management team at the time (their investment returns). That would have been pretty dumb, given the CDS and equity hedge positions (that worked fabulously well from 2007-2009) would have completely skewed results. The best way to evaluate Fairfax in 2013 was to look primarily at what they owned at the time, how the positions had performed recently (prior 5 years), and what their prospects were (next 5 years). (I did that and then sold all my shares in Fairfax.)

 

Imagine using a 15 year timeframe to evaluate management at BlackBerry back in 2013? It would have told an investor to back up the truck… Really?

 

One of the benefits of using 5 years is it makes calculating rate of return easier. Fairfax has a very concentrated portfolio:

• Eurobank
• FFH-TRS
• Poseidon
• Fairfax India - primarily BIAL
• Orla Mining

Do I care today that Eurobank was a terrible business in 2014? Nope. What I care deeply about is what kind of business Eurobank is today - and it is a very good business. Could that change? Of course… that is why I listen to every quarterly call). 

 

Holdings get much smaller after the big 5. But there are a bunch of stars in there as well. Fairfax’s hit rate the past 5 years is nuts. 

To this, add the returns on the holdings they sold in the last 5 years:

• Resolute Forest Products
• Stelco
• Sigma
• Orla (part)
• Poseidon (part)

All were massive home runs (5-year returns).

 

And then, of course, we should also add the gains on the insurance businesses they IPO’d/sold in the last 5 years… this needs to get counted somewhere…

• Digit
• Pet insurance
• Ambridge
• Euolife’s life insurance business

More massive gains…
 

After all, at the end of the day, we are trying to evaluate a management team on their capital allocation skills. It should be fair and balanced and look at all the important pieces.

 

How has Fairfax performed over the past 5 years?
 

They have smoked - absolute and relative to the S&P500. 
 

Especially if you use the correct cost basis:

• FFH-TRS cost basis is not the starting value of Fairfax’s share price. It is much less.

Interestingly, the last 5 years had two bear markets: 2022 and 2025 (I think just qualified). There was also a historic bear market in bonds. Yes, the starting point (Dec 31, 2020) was very favourable. But that is when you look at performance vs the S&P500. 
 

For the past 5 years, Fairfax’s capital allocation has been best-in-class and it is not close. The fact that people don’t get it is not surprising - this is Fairfax after all. 

I agree with you that 5 years is enough, but the longer the time period, the more accurate is the evaluation.  An organization that beats the S&P over five years but trails over 20 is not very good.  This is why I chose 15, you are free to choose 20 or 25.  

[SafetyinNumbers]

22 minutes ago, Marco Van Basten said:

I agree with you that 5 years is enough, but the longer the time period, the more accurate is the evaluation.  An organization that beats the S&P over five years but trails over 20 is not very good.  This is why I chose 15, you are free to choose 20 or 25.  

How about 40 years?

[Marco Van Basten]

7 minutes ago, SafetyinNumbers said:

How about 40 years?

Sure, that is even better.  What is the company's 40 year track record when it comes to its equity book?  

[Marco Van Basten]

2 hours ago, SafetyinNumbers said:

The goal isn’t to outperform the S&P, it’s to generate absolute returns. Over time the process should outperform the S&P especially when the leverage is included. This most recent 15 year period the backdrop was particularly difficult for this investment style because of the change in market structure. Further, the decision by Fairfax to accumulate more significant influence and control positions ensures that the accounting returns lagged economic returns since 2012. While the lag continues, the gains are coming pretty regularly now as the strategy has matured. 

Yes and  no.  Yes, you cannot eat relative returns, but if the S&P returns 15% per annum for 15 years while your equity portfolio returns 10% per year for 15 years, then clearly the people running the equity book are incompetent.   As markets change, your investment style has to change.  With all due respect, you could have bought plenty of incredible business at low multiple of earnings - ASR in 2004 is a good example (airport concessions in Mexico at 5x free cash flow.).  If you need leverage to make your equity portfolio match the S&P then why not just be long S&P and avoid the issues that come with leverage?

[SafetyinNumbers]

8 minutes ago, Marco Van Basten said:

Yes and  no.  Yes, you cannot eat relative returns, but if the S&P returns 15% per annum for 15 years while your equity portfolio returns 10% per year for 15 years, then clearly the people running the equity book are incompetent.   As markets change, your investment style has to change.  With all due respect, you could have bought plenty of incredible business at low multiple of earnings - ASR in 2004 is a good example (airport concessions in Mexico at 5x free cash flow.).  If you need leverage to make your equity portfolio match the S&P then why not just be long S&P and avoid the issues that come with leverage?

The market structure changed a lot during the period you are focused on. I think if you are uncomfortable with leverage you shouldn’t own Fairfax. I see the leverage as a feature not a bug. They did change their investment style by taking more control and significant influence positions (which hurts reported returns up front) but not their process of looking for margin of safety. Again beating the index is an outcome of the process not the goal. Most institutions since the GFC are focused on short term relative returns b/c they want to keep the AUM. Thankfully we don’t have to play that game.

[SafetyinNumbers]

21 minutes ago, Marco Van Basten said:

Sure, that is even better.  What is the company's 40 year track record when it comes to its equity book?  

I think it was 19% over 39 years but I can’t find the reference. Last three years have been good as we know but most of it hasn’t shown up in accounting returns yet. 
 

[Txvestor]

12 hours ago, Viking said:

Can you explain to me what the financials look like for each investment? What was the money Fairfax put in? (That is not the reported deal price.) What is the (likely) return they are going to generate off it in the coming years? 
 

Bottom line, I am being open minded with their new purchases. One reason is I haven’t spent a lot of time trying to understand them. I will get around to it. Another reason is Fairfax has been hitting the ball out of the park - as a result, I am giving them the benefit of the doubt. 
 

i don’t expect them to be perfect. Some investments will look like clunkers. Lynch said if you are right 6 times out of 10 you will do well in this business. I am not worried when it comes to Fairfax’s equity portfolio these days.

 

Not precisely, but anytime you are making an acquisition you can always trade expected returns for risk by adding more leverage.
It might not show up immediately, and in Fairfax's position you might even tell yourself, we can always bail out the subsidiary if needed, but ultimately it's risk. Of course if there is business stability for some period of time that risk dwindles and certainly that's a reasonable strategy given Fairfax's position. And yes they've employed that strategy in recent acquisitions.

Thats what Fairfax investors need to understand. Between the leverage at different layers in the corporate structure they are taking on risk and you are to some extent betting on the prudence of their risk management. 

[djokovic1]

4 hours ago, Marco Van Basten said:

Sure, that is even better.  What is the company's 40 year track record when it comes to its equity book?  

 

Average total return of their portfolio (FI and equities) over the last 40 years is 7.7%.

 

We don't have a direct number for the equity return but can approximate it.

 

Last 40 year average 5 year fixed income yield is 4.2%. Lets assume Fairfax earned that yield.

Split between fixed income and equity book has changed over time but I think 75% vs 25% is a good approximation for historical average.

So,

75% * Fixed income return + 25% * Equity return =  7.7%. Lets assume FI return = 4.2% so equity return over 40 years = 18.2%

Note that calculation is rough but S&P return over 40 years is 11.5% with dividends re-invested.

So unless you meaningfully disagree with my rough calculation, over 40 years Fairfax equity returns have trounced the S&P 500.

 

Edited 1 hour ago by djokovic1

[Maverick47]

15 minutes ago, djokovic1 said:

 

Average total return of their portfolio (FI and equities) over the last 40 years is 7.7%.

 

We don't have a direct number for the equity return but can approximate it.

 

Last 40 year average 5 year fixed income yield is 4.2%. Lets assume Fairfax earned that yield.

Split between fixed income and equity book has changed over time but I think 75% vs 25% is a good approximation for historical average.

So,

75% * Fixed income return + 25% * Equity return =  7.7%. Lets assume FI return = 4.2% so equity return over 40 years = 18.2%

Note that calculation is rough but S&P return over 40 years is 11.5% with dividends re-invested.

So unless you meaningfully disagree with my rough calculation, over 40 years Fairfax equity returns have trounced the S&P 500.

 

I think you’re directionally on the right track with trying to approximate the equity returns by backing them out of the total investment returns.  
 

One caution I would make is to be clear in differentiating between an arithmetic average return and a geometrically compounded return.  My guess is that the S&P 500 11.2% return is the CAGR over the period, meaning the geometric average.

 

Meanwhile, the 7.7% Fairfax investment return looks to me as if it might just be the simple arithmetic average of the individual years.  
 

The geometric average is what we’d want to have in order to compare with the equity index, but I don’t them we have that here.  
 

And generally speaking, when you take into account the possibility of negative return years, which have occurred four times in the Fairfax history, then the geometric return, which is what we want for comparison purposes to the index, is always going to be less than what appears to be an  arithmetic average return of 7.7%.

 

My guess is that Fairfax’s equity returns on a geometrically compounded basis probably have still exceeded those of the index over 40 years, but that they likely may not have not been quite as high as 18.2% annually.

 

[djokovic1]

Yes I agree @Maverick47 good point, I had thought about that and yes its only a rough approximation. 

For example, on the other hand, their fixed income return in the calculation is likely overstated as i) the realised fixed income yield would be less than the approximated 5 years Fixed income yield given short duration cash held will reduce the overall yield.  ii) There have been times when they have been significantly short duration relative to their liabilities (i.e assuming the 5 year yield is overstated for those periods). That would imply an equity return higher than I calculated above.

In aggregate, their equity returns may be somewhere 15-20% annually over 40 years but I am quite confident to say they have trounced the S&P500 over that period.

[Maverick47]

Just now, djokovic1 said:

In aggregate, their equity returns may be somewhere 15-20% annually over 40 years but I am quite confident to say they have trounced the S&P500 over that period.

Agreed.

[djokovic1]

Btw @Maverick47 I just had Claude estimate the Geometric return based on the AGM chart, and historical annual reports and given the low volatility in returns (due to high FI %), it calculated the Geometric return is 7.5%, not far off from the average.