For those who’re on the lookout for a Canadian inventory that’s been quietly crushing the market, Fairfax Monetary (TSX:FFH) deserves your consideration. Over the previous yr, shares are up greater than 50%, massively outpacing the TSX and most insurers in North America. And now, after a monster second quarter, traders are questioning if this would possibly simply be the neatest funding on the TSX proper now.
Into earnings
Fairfax reported a whopping $1.44 billion in internet revenue within the second quarter alone. That’s a soar of over 57% from the identical quarter final yr, pushed by sturdy underwriting, booming funding returns, and constant premium progress. Earnings per diluted share got here in at $61.61, with e-book worth per share rising 10.8% yr up to now, even after accounting for its sizeable $15 dividend paid earlier this yr, which has since elevated. Fairfax’s skill to compound e-book worth over time is a giant a part of its long-term enchantment, and it’s clearly nonetheless working.
The engine behind these outcomes is the Canadian inventory’s core property and casualty insurance coverage enterprise. This section delivered a mixed ratio of 93.3% and an underwriting revenue of $426.9 million, up from final yr’s already strong displaying. Internet premiums written grew by almost 5%, displaying there’s nonetheless momentum within the enterprise regardless of trade headwinds. And with curiosity and dividend revenue rising to $579.7 million within the quarter, Fairfax additionally advantages from larger charges and good capital allocation.
Concerns
However what actually stood out within the second quarter was funding efficiency. Fairfax posted almost $1 billion in internet funding good points, most of it coming from fairness positions and strategic holdings like Eurobank and Poseidon. These are long-term bets which can be beginning to repay in a giant manner. Fairfax doesn’t commerce like a flashy progress inventory, however its outcomes this yr are something however boring.
Nonetheless, this isn’t a risk-free story. Fairfax is advanced, with publicity to world markets, reinsurance, and a few non-insurance companies. The Canadian inventory additionally depends closely on its funding efficiency, which may be unstable quarter to quarter. Which means one dangerous stretch within the markets might weigh closely on outcomes, particularly after such a powerful first half.
Wanting forward
But Fairfax has confirmed over a long time that it is aware of navigate via uncertainty. The Canadian inventory has $3 billion in holding firm money, greater than $10 billion in insurance coverage subsidiary money, and a well-diversified funding portfolio. Even with larger debt issuance this yr, its capital place stays sturdy, and administration continues to purchase again shares and make disciplined acquisitions.
There’s a cause why Prem Watsa, usually known as the Warren Buffett of Canada, has caught to this blueprint for therefore lengthy. It really works. And with the enterprise firing on all cylinders, funding good points accelerating, it’s exhausting to disregard Fairfax proper now.
Backside line
So, is that this the neatest funding you can also make right this moment? It simply may be. The combo of insurance coverage self-discipline, deep worth investing, and capital energy has made Fairfax one of the crucial spectacular and underrated success tales on the TSX. And after this type of quarter, with extra upside catalysts in play, there’s a powerful case that the very best might nonetheless be forward.
