Fairfax Financial: A Savvy Long-Term Bet on Canadian Insurance?

Yes, Fairfax (TSX:FFH) stock is expensive. However, it could be well worth the price if analysts are to be believed.

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Fairfax Financial Holdings (TSX:FFH) is one of those investments that investors really have to think hard about before buying. It comes down to the share price. Fairfax stock is one of the companies on the TSX today that continues to trade near the four-digit range. And that’s after coming down.

Shares of Fairfax stock are up 39% in the last year and 15% year to date. However, as mentioned, it trades near but not at the four-digit range, currently at $922 per share. Should investors buy now in hopes of a deal that leads to strong returns? Or is Fairfax stock too pricey to purchase?

Why Fairfax stock?

Fairfax stock provides insurance; it’s as simple as that. Yet getting into the details is where things get more complicated. Fairfax stock provides insurance around the world, with Asia, Canada, and the United States being its biggest markets. It provides insurance against everything from windstorms to terrorism and provides insurance to companies, individuals and workplace environments.

Fairfax stock has also expanded to investments as well, investing in restaurants, sporting goods, digital tools for agriculture, holiday resorts and more. That’s simply what you can expect from a company that’s been around since 1951.

Can this continue? That’s a lot of investment into areas of the market that can do quite poorly during economic downturns. What do analysts have to say about Fairfax stock?

Analysts weigh in

During its first-quarter earnings report, insurance providers received a thumbs up from analysts. Despite the difficult market conditions, Fairfax stock continues to have solid book value for shareholders. In fact, it currently has a consensus price target upside of 31% as of writing.

Growth has already come along as the company announced it would be acquiring a 46.32% interest in Gulf Insurance Group in Kuwait. The $860 million deal increased the current 43.69% stake to a full 90.01% in the company.

Analysts were on board with the move, as Gulf Insurance group continues to hold a diverse set of insurance groups in both the Middle East and North Africa regions. Analysts already thought the stock was attractive, and now it’s even more so.

A solid long-term choice

So, yes, Fairfax stock is expensive in terms of share price. But the company has proven to be well worth the investment over time. In the last decade, shares of Fairfax stock are up 120%. It offers a 1.49% dividend yield as well, while trading at just 15.57 times earnings.

As mentioned, Fairfax stock currently has a potential upside of 31%. So, if you were to purchase 30 shares of the stock today, here is what that could turn into, including dividends.

FFH: Now$92230$13.38$401.40Annually$27,660
FFH: Upside$1,20930$13.38$401.40Annually$36,270

So, while Fairfax stock may be expensive, it certainly has a lot of upside. Not only that, but there is a long history of growth for investors to consider. Growth that looks like it will continue far beyond this year’s economic downturn.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fairfax Financial. The Motley Fool has a disclosure policy.

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