What are the chances that FFH trades over US$750 some time in the next 5 years?

[petec]

Interested to know how people view this!

[Xerxes]

 

Needs to compound 14% per annum to get to that. At a minimum he needs to get there with all the tailwinds that we talked about, theoretically.

 

If he cannot go over 15% in the next few years to make up for the last few years, the long term growth rate will never average around 15%.

 

the first few years ought to be easy, given that he is starting off a low base.

[petec]

Sure but it trades at a discount to book today. So in very rough maths, and assuming BV is c.$500 today, they need to:

- earn a 10% ROE to get pre-dividend BV to $800

- pay $50 in dividends over 5 years.

- trade at 1x.

[Viking]

My vote was 50-75% (but closer to the 50% than 75%).

 

If Fairfax gets its investing mojo back i could see it trading at a 1.1 or 1.2 x BV multiple (so lets say 1.15).

 

For stock to trade at US $750 = $650 BV (1.15 multiple)

 

BV Sept 30, 2020 was US $442. If they hit on BB, Farmers Edge, AGT in 2021 then BV could easily be north of $500 by end of 2021.

 

Over next 5 years:

- Digit should drive $1 billion increase in BV all by itself (perhaps $400 million in Q1?). This is close to $40/share pre-tax.

- Atlas should drive $1 billion increase in BV.

- remaining equity holdings should drive + $1 billion increase in BV

- operating earnings (underwriting + interest and dividend income) at insurance units should drive BV growth each year of +$20/share

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The challenge with modelling Fairfax today is we are viewing it currently through the pandemic lense. So we are likely too pessimistic (too anchored on Fairfax’s most recent, depressed, 12 month results). What will its many businesses look like post pandemic? What will they earn? How much cash will get dividended up to Fairfax? How does the current hard market play out? Monetizations?

 

[Parsad]

Barring a market crash, it will trade over $750 before the end of 2022.  And I'm being conservative.  Cheers!

[petec]

Love it. Can I sell you my stock for $750 at the end of ‘22? ;)

[StubbleJumper]

Barring a market crash, it will trade over $750 before the end of 2022.  And I'm being conservative.  Cheers!

 

 

Sanj,

 

You did not place a currency indicator in front of the dollar sign.  FFH trading at CAD$750 is not so exciting because that is only US$600.  Book value for Q4 will be what, maybe US$460?  BV should be nicely over US$500 by Dec 2021, unless FFH's BB gains are as ephemeral as many of us fear.

 

If you did actually mean that it will trade at US$750 within the next 23 months, I would suggest that is perhaps a shade ambitious.  I'd love for that to happen, but...

 

 

SJ

[FairFacts]

Very high indeed, we’re starting at a low base BV of $442/sh at 9/30 coming out of the pandemic. Hard mkt for the insurance cos (tempered by low interest rates), too many possible home runs BB, ATCO, EuroBank, Digit, FDGE, India...

I agree mostly with Parsad on this one $750 within 24 months.....

[Parsad]

Barring a market crash, it will trade over $750 before the end of 2022.  And I'm being conservative.  Cheers!

 

 

Sanj,

 

You did not place a currency indicator in front of the dollar sign.  FFH trading at CAD$750 is not so exciting because that is only US$600.  Book value for Q4 will be what, maybe US$460?  BV should be nicely over US$500 by Dec 2021, unless FFH's BB gains are as ephemeral as many of us fear.

 

If you did actually mean that it will trade at US$750 within the next 23 months, I would suggest that is perhaps a shade ambitious.  I'd love for that to happen, but...

 

 

SJ

 

Sorry!  When I talk about FFH, I'm always talking in CDN dollars other than their financials...I'm still pissed over the NYSE listing!  :o

 

Yeah, for sure $750 CDN before 2022.  I think they've got a 60-70% chance of hitting $750 USD before the end of 2022.  Why?

 

Assume book value is at $500 USD now...in this market, 1.2 times book is already $600 USD or $750 CDN. 

 

I've been saying that insurance was heating up before Covid, and it took a stellar leap after Covid in terms of premium pricing.  They are going to write at 95% or better for the next 2 years.  Add a simple 4% return on the portfolio and increase in book value should be roughly $40-60 USD a year. 

 

That means book value would be closer to $600 USD near the end of 2022...1.2 times book would be $750 USD or around $930 CDN.  Mark my words!  Cheers!

[Xerxes]

Parsad

 

Interestingly, the cure to the valuation gap could be new listing in NYSE.

 

FFH is no longer the minnow that it was during the hedge fund bear raid, so it might very well benefit from it. Prem might not want to do it due to the history but once all is said and done with the asset monetization, and restructuring and buybacks ... if the discount doesnt narrow to zero considerably that could be the bitter pill to swallow that could fix the discount.

 

PS: we need to bring in the Americans to close the gap. Always can count on them with their animal spirits unleashed.

 

But before that, it needs to get ready. 

[no_free_lunch]

Very possible but oddly enough it may require high tech valuations to continue.  Digit, farmers edge, blackberry plus their other tech startups all have some real potential. If the hard market stays um hard, I could see a significant rerating. It's really out of our hands but I see a double as a distinct possibility and I could see it in 3 years even.  Maybe, maybe even within 2 years. I like that even if that doesn't pan out you are not paying up and downside seems reasonable.

 

My main focus with ffh is the very high, imo, chance of a 20%+ move over the next 6 months.

[petec]

I feel like I ought to run this poll again after the 4q numbers...

[Xerxes]

This is a great clip that was posted elsewhere. Just watched it now.

Somehow 6 months of discussion in this forum were condensed into 1 hour and delivered superbly.

 

I think it belongs here.

 

https://moiglobal.com/jeffrey-stacey-202101/

 

[FairFacts]

I’ll revise my earlier answer, the chances of a US $750 price within 5 years should be a forgone conclusion YES! it will.

A better question is what are the chances within 24 months.

 

1. Y/e reported book value was $477 per share.

2. Stated long-term objective is to achieve 15% BV growth.

3. BV of $477 compounded at 15% for two years gets to $630

4. Reversion to mean multiple on BV of 1.2 gets you to a share price of $756!

 

With all of the tailwinds discussed this should be a ‘mid-point’ estimate (the $750) it could easily by higher.

 

If not questions must be asked....I’m optimistic.....

 

Three IPO’s in the hopper already, bring it on.