It’s been a pretty uneven recovery for the broader stock markets this year, with technology leading and various commodity plays lagging. Indeed, the TSX Index is full of commodity and financial plays that have weighed down the Canadian index, causing it to trail the likes of the S&P 500 and the tech-heavy Nasdaq 100.
As we move into year’s end, I’d look for tech to cool and value to start shining once again. Indeed, growth-to-value rotations are never fun, but they are, at times, necessary for the sustainability of a market rally and a new bull market. Indeed, the broadening out of the market rally has been kind to a wide range of stocks, many of which lie outside of the technology sector.
Fairfax just broke another new high: More gains to come?
Fairfax Financial Holdings (TSX:FFH) stock is one of the Canadian names that many gave up on during the depths of the coronavirus crisis. Prem Watsa, the top boss behind Fairfax, is often referred to as the Canadian Warren Buffett. I believe the comparisons to Buffett are quite fitting, given the man’s ability to generate excess risk-adjusted returns over a lengthy period.
Undoubtedly, no investor can beat the stock market consistently year after year. There are slumps that are tough to avoid. And both Watsa and Buffett have had to endure their own “off” years that saw their firms underperform the market averages.
Whenever such slumps occur, many may be quick to conclude that the legendary investors have lost their way. Indeed, Buffett has faced criticism in the past, but he’s found a way to keep rewarding his long-term shareholders, many of whom dare not sell a single share.
Fairfax stock turned a corner in a massive way since bottoming out in 2020 at around $350 and change per share. Looking back, shares were an obvious bargain. However, at the time, macro headwinds seemed daunting, and FFH stock was feared to be just another value trap to be avoided at all costs.
After another remarkable day (shares up 4.3% last Friday), shares of Fairfax Financial Holdings are sitting at a fresh, new all-time high of over $1,100 per share. Indeed, I’ve described the insurance and holding company as a winner that will probably keep on winning. Even above $1,100, I continue to view FFH as a stock to hang onto on the way up.
The bottom line on FFH stock
Indeed, there’s a lot of momentum behind the stock. It’s up more than 220% in just over three years. Though any hot stock can be subject to a near-term pullback, I think the recent run in FFH stock is sustainable. Shares aren’t expensive quite yet at around 11 times trailing price to earnings.
Just how much runway Fairfax has from here remains the million-dollar question. Personally, I think FFH stock has its sights set on the $1,250 mark. Prem Watsa has knocked one out of the ballpark at a most uncertain time for the economy. Watsa’s the Canadian Buffett for a reason. He’s all about creating value for shareholders, with his long-term focus.
