No. of Recommendations: 4
This is the most detailed analysis of Fairfax Financial that I found available for free.
open.substack.com - Fairfax financial a generationalDespite a plethora of idiosyncratic opportunities, Fairfax Financial (FFH) stands out to BPC as a generational opportunity and thus represents ~49% of net assets (~24% at cost) based on our conviction that there is a high probability for ROE to exceed 15% (perhaps meaningfully) for the foreseeable future.
FFH is a complex company, and that’s one of the reasons it’s such a bargain, but we believe there are two key areas for variant perception. First, in underwriting, and second, in income from investments, including capital gains. If we are to distill our fundamental thesis in a run-on sentence, we believe FFH estimates are too low for underwriting and investment income, and that right-tail surprise could result in above-trend ROE for years to come. This is a good time to remind the reader that the recent trend ROE is mid-to-high teens ROE.
