So much for that Santa Claus rally. The broad markets are entering what seems to be a bit of a Santa slump, with the S&P 500 and TSX Index both dragging their feet in the past week. Undoubtedly, there’s still time to make up for lost time as the new year hits, but, at this juncture, I wouldn’t look to chase any sort of rally, especially given the risk of correction as markets continue to take their time to digest the past year of gains.
At this juncture, I’m a huge fan of pursuing deeper value, and when it comes to outstanding value plays, I’d look to a name like Fairfax Financial Holdings (TSX:FFH), which may very well be one of the best insurance and investment holding companies under the incredible leadership of top boss Prem Watsa, a man who really does deserve the nickname of Canada’s Warren Buffett after an unforgettable 2025. With shares of FFH posting another 33% or so gain for the year, investors might be wondering if a big plunge is warranted, especially given the explosiveness of the rally in the past five years.
Fairfax stock looks like a steal as it breaks out
While there’s no doubting that the rally has slowed a bit and gotten just a bit choppier (shares corrected by over 12% just a few months ago, but have since recovered all of the ground en route to new highs), I do think that the year-end breakout is more than notable, especially as earnings momentum carries into the new year.
To put it simply, Fairfax is firing on all cylinders, and I think there’s still room to outpace the markets, especially if Prem Watsa makes new acquisitions for his firm in 2026. Undoubtedly, he’s a reliable value investor who has unlocked considerable deals via M&A. More importantly, with a mere $58.4 billion market cap, Fairfax can still feel the impact of the big acquisition, unlike some much larger conglomerates with market caps close to $1 trillion. Personally, I think partial public market stakes could be the key to unlocking next-level value from here.
The smart investments are adding up!
Recently, Fairfax increased its stake in Under Armour, one of the more intriguing deep-value plays out there. Whether such a deal turns into more of a needle-mover remains the big, unanswered question.
For now, it seems like the bet on the US$2.1 billion apparel retailer is more of a long-term play. Looking into the new year, there’s reason to believe the consumer environment could be a lot kinder to the fallen stars of apparel. And when it comes to dirt-cheap, it really doesn’t get cheaper than shares of this apparel company, especially at less than $5 per share.
Just because FFH stock is heating up again doesn’t necessarily mean things will end with a sharp implosion. There are still plenty of fundamental pillars of support that could keep the rally going strong for another year or more. At less than 10 times trailing price-to-earnings (P/E), I’d argue FFH stock remains a cheap momentum stock to stick with for the next three to five years.
