I get it. That 3.5% may not seem to be quite a bit. However for traders taking a look at FairFax Monetary (TSX:FFH) that’s simply sufficient of a dip to leap in. The inventory is down roughly 3.5% from its highs earlier this yr, which could appear like nothing on the floor. However dig deeper, and this appears to be like like one of the vital enticing long-term buys on the TSX at present.
First, why Fairfax?
Fairfax is a huge within the insurance coverage and funding house, typically in comparison with a Canadian model of Berkshire Hathaway. It’s led by Prem Watsa, who has constructed a repute as a value-driven investor. The corporate owns insurance coverage, reinsurance, and a large portfolio of private and non-private investments. When markets are unsure, that is precisely the type of worth inventory you wish to personal.
Within the first quarter of 2025, Fairfax reported web insurance coverage income of US$6.2 billion, a rise from US$6.1 billion in comparison with the identical interval final yr. Internet earnings got here in at US$945.5 million, or US$42.70 per diluted share. That’s up considerably from US$776.5 million final yr, a stable quantity given the volatility throughout world markets. Most significantly, the corporate’s insurance coverage companies stay very worthwhile. Underwriting revenue hit US$96.9 million, although down from US$373 million, and the consolidated mixed ratio stood at a wholesome 98.5%.
The actual story, although, is within the investments. Fairfax’s curiosity and dividend revenue reached a whopping US$516.2 million within the quarter. That’s up from US$500.5 million from the yr earlier than, pushed by increased yields on bonds and elevated fairness dividends. With rates of interest anticipated to remain elevated, this development ought to proceed all through 2025.
A first-rate time
So why is the inventory down? A few of the decline could be chalked as much as normal profit-taking. In any case, the inventory soared almost 60% in 2023, and is up an unbelievable 485% within the final 5 years! Traders possible locked in some beneficial properties. There’s additionally been some short-term noise round world insurance coverage threat and market volatility. However the fundamentals haven’t modified. In reality, they’ve improved.
Proper now, Fairfax trades at round 10 occasions earnings. For a price inventory with a monitor report of rising e book worth, that’s compelling. It additionally pays a dividend at the moment yielding about 0.9%, which is modest however sustainable. The corporate has been shopping for again its personal shares, which indicators confidence from administration and provides worth for long-term holders.
The fantastic thing about Fairfax is that it provides you publicity to many industries with out you having to select the winners. Via its insurance coverage float and long-term investments, it owns items of banks, retailers, tech firms, and extra. It’s like holding a diversified fund, however with the additional advantage of insurance coverage earnings and a deep worth technique.
Silly takeaway
In fact, it’s not excellent. Insurance coverage companies can face surprising disaster claims, and funding revenue can swing with market cycles. However Fairfax has proven it is aware of methods to handle threat. During the last decade, it has constructed a resilient stability sheet and expanded its footprint into India, Africa, and Latin America, markets with long-term development potential.
For long-term traders, this pullback appears to be like like a present. You’re getting a top-tier firm at a reduced worth. And in a world the place many shares commerce at stretched valuations, that’s not straightforward to search out.
Fairfax isn’t flashy. However it’s the type of inventory you’ll be able to tuck away for years and never fear about. It grows steadily, it pays you a dividend, and it’s managed by folks with pores and skin within the recreation. For these trying to purchase and maintain perpetually, this appears to be like like among the best offers on the TSX at present.