I get it. That 3.5% might not seem like a lot. But for investors looking at FairFax Financial (TSX:FFH) that is just enough of a dip to jump in. The stock is down roughly 3.5% from its highs earlier this year, which might look like nothing on the surface. But dig deeper, and this looks like one of the most attractive long-term buys on the TSX today.
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First, why Fairfax?
Fairfax is a giant in the insurance and investment space, often compared to a Canadian version of Berkshire Hathaway. It’s led by Prem Watsa, who has built a reputation as a value-driven investor. The company owns insurance, reinsurance, and a massive portfolio of public and private investments. When markets are uncertain, this is exactly the kind of value stock you want to own.
In the first quarter of 2025, Fairfax reported net insurance revenue of US$6.2 billion, an increase from US$6.1 billion compared to the same period last year. Net earnings came in at US$945.5 million, or US$42.70 per diluted share. That’s up significantly from US$776.5 million last year, a solid number given the volatility across global markets. Most importantly, the company’s insurance businesses remain very profitable. Underwriting profit hit US$96.9 million, though down from US$373 million, and the consolidated combined ratio stood at a healthy 98.5%.
The real story, though, is in the investments. Fairfax’s interest and dividend income reached a whopping US$516.2 million in the quarter. That’s up from US$500.5 million from the year before, driven by higher yields on bonds and increased equity dividends. With interest rates expected to stay elevated, this trend should continue throughout 2025.
A prime time
So why is the stock down? Some of the decline can be chalked up to general profit-taking. After all, the stock soared nearly 60% in 2023, and is up an incredible 485% in the last five years! Investors likely locked in some gains. There’s also been some short-term noise around global insurance risk and market volatility. But the fundamentals haven’t changed. In fact, they’ve improved.
Right now, Fairfax trades at around 10 times earnings. For a value stock with a track record of growing book value, that’s compelling. It also pays a dividend currently yielding about 0.9%, which is modest but sustainable. The company has been buying back its own shares, which signals confidence from management and adds value for long-term holders.
The beauty of Fairfax is that it gives you exposure to many industries without you having to pick the winners. Through its insurance float and long-term investments, it owns pieces of banks, retailers, tech companies, and more. It’s like holding a diversified fund, but with the added benefit of insurance earnings and a deep value strategy.
Foolish takeaway
Of course, it’s not perfect. Insurance businesses can face unexpected catastrophe claims, and investment income can swing with market cycles. But Fairfax has shown it knows how to manage risk. Over the last decade, it has built a resilient balance sheet and expanded its footprint into India, Africa, and Latin America, markets with long-term growth potential.
For long-term investors, this pullback looks like a gift. You’re getting a top-tier company at a discounted price. And in a world where many stocks trade at stretched valuations, that’s not easy to find.
Fairfax isn’t flashy. But it’s the kind of stock you can tuck away for years and not worry about. It grows steadily, it pays you a dividend, and it’s managed by people with skin in the game. For those looking to buy and hold forever, this looks like one of the best deals on the TSX today.
