The magnificent run continues for the great Prem Watsa’s empire. Shares of Fairfax Financial Holdings (TSX:FFH) have been surging in recent years thanks to better results and prior investments that are really starting to pay off. Indeed, better underwriting performance, better returns from fixed-income debt securities, and bold bets are just part of why the insurance and investment holding company is back on the high track.
With the stock now comfortably above $1,500 per share and quickly closing in on $1,600 per share, investors may be contemplating whether it’s still a good idea to get into it.
Indeed, the name may be more appealing to some momentum investors right here. However, I think there’s even more to love for value-conscious investors with a three- to five-year time horizon.
Prem Watsa: The man behind the curtain over at Fairfax
Indeed, Prem Watsa, the legendary manager at Fairfax, is called the Canadian Warren Buffett, and the reason should be more obvious after looking at the FFH stock chart.
In fact, one could argue that Mr. Watsa is a deeper value investor than the Oracle of Omaha himself!
Why? The late, great Charlie Munger, Warren Buffett’s right-hand man, encouraged Buffett to forgo the so-called “cigar butt” types of deep-value investments for higher-quality names at reasonable prices.
Indeed, the famous Buffett quote goes, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” This mantra has really helped take Buffett’s investment game to another level.
Though Buffett’s higher-quality approach may cause him to miss out on some pretty tempting cigar butts, I think that given how massive Berkshire Hathaway (NYSE:BRK.B) has become (can you believe it’s almost a firm with a nearly $1 trillion market cap?), such smaller-scale deep-value deals probably wouldn’t have been too much of a needle mover in the modern day anyway.
Fairfax stock: A Canadian Berkshire that could be a better bet for the long haul
As for Fairfax, though, it’s still a relative lightweight at the time of writing, even as the stock looks to keep on gaining for shareholders. Today, the stock boasts a mere $37.2 billion market cap.
By no means is it a small company, but compared to Berkshire, it’s a firm that can still move the needle markedly from even smaller-scale types of value investments. In many ways, Fairfax seems to be a Canadian Berkshire-esque play for younger generations of value investors.
Year to date, FFH stock has gained more than 31%. That kind of return puts the TSX Index to shame! Over the past two years, the stock is up a whopping 134.6%. Indeed, these kinds of returns are going to be hard to sustain in the next two years.
That said, at close to 7.5 times trailing price to earnings (no typo here; FFH is that cheap!), I’d argue that there’s still room to run and that investors may still be sleeping on shares of FFH amid their bullish comeback.
Bottom line on FFH stock
Moving ahead, Fairfax could continue to gain as the firm looks to deploy capital prudently. Indeed, the firm has a robust balance sheet and can take advantage of the deep-value deals that fall into Mr. Watsa’s strike zone. Indeed, Buffett fans have a lot to love about Fairfax right here. Even at more than $1,500 per share, FFH stock is a buy.
