With just a month and a half left in 2024, investors are sure to set their sights on 2025 and the slate of Canadian stocks that are capable of continuing to perform over the near- to medium-term. Indeed, past performance is never an indicator of what’s to come. That said, I do think that some of the top performers are still cheap enough to own, provided you’re planning on holding on for the next seven to eight years at least.
Undoubtedly, the TSX Index may have trailed the S&P 500 once again so far this year, but going into 2025, there’s a realistic possibility that the tides could turn. Of course, value stocks will need to hit back at the more popular growth stocks if the TSX Index is to have a shot at beating the S&P 500 or Nasdaq 100 in 2025.
In any case, there are intriguing individual value plays that could continue running hot into 2025 and beyond. And in this piece, we’ll cover one such name that stood out as a rather surprising market-beating play, one that I think has still gone under the radar of many long-term Canadian investors.
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A quiet market beater that’s still underrated!
Consider shares of Fairfax Financial Holdings (TSX:FFH), an insurance and investment holding firm that’s up a whopping 59% year to date. Indeed, that kind of incredible return has humbled the TSX Composite Index and the S&P 500, which returend 20% and 25.5% year to date, respectively.
Even the heated Nasdaq 100, which is up just north of 26%, couldn’t keep up with the well-run Canadian financial. And going into the new year, I do think shares of FFH could pull off another masterful performance. At writing, the stock is on the cusp of breaking out to yet another all-time high.
Undoubtedly, the latest Q3 number was definitely not incredible. In fact, I’d argue they were somewhat disappointing. However, there’s no ignoring the fact that underwriting was still a bright spot. And it’s this bright spot that’s a bigger deal for the long haul.
FFH stock could break $2,000 as underwriting and investments stand tall!
In numerous prior pieces, I urged investors to get behind Fairfax, not just because Prem Watsa is a wonderful value investor who can discover opportunities in corners of the Canadian market, but because the firm’s insurance underwriting was on the uptrend. Indeed, you need underwriting and investments to be firing on all cylinders if a stock like FFH is to rocket as quickly as it has.
Further, as rates fall off, I think Prem Watsa and company have a golden ticket to make more brilliant investments and takeovers as it has in recent years (think Sleep Country, the investment in Bauer, Recipe Unlimited, etc.). Indeed, the more deals that are landed, the more enthusiasm could build in the stock in the new year!
While the explosive rally may be viewed as concerning, I’d say that the rally is fully grounded in the fundamentals. In other words, Fairfax has what it takes to keep punching above its weight class!
Pending a downshift in underwriting performance, I see FFH having what it takes to extend its run, not just in 2025, but perhaps 2026. At writing, shares still look like a stupidly cheap value option at around 8.5 times trailing price-to-earnings (P/E). And with a 0.8 beta, which entails slightly less market risk, I’m inclined to view shares of Fairfax Financial as more of a “smart beta” play for investors seeking less choppiness and better results over time.
