Should You Remain Confident in Your Fairfax Financial Holdings (FRFHF) Shares?

·2 min read

Alphyn Capital Management, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio net return of 3.9% was recorded by the fund for the fourth quarter of 2021, and a 13.9% return for the past year, while its S&P 500 TR benchmark delivered a 28.7% return in 2021. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

Alphyn Capital Management, in its Q4 2021 investor letter, mentioned Fairfax Financial Holdings Limited (NYSE: FRFHF) and discussed its stance on the firm. Fairfax Financial Holdings Limited is a Toronto, Canada-based insurance company with a $12.5 billion market capitalization. FRFHF delivered a -4.24% return since the beginning of the year, while its 12-month returns are up by 27.54%. The stock closed at $471.26 per share on January 27, 2022.

Here is what Alphyn Capital Management has to say about Fairfax Financial Holdings Limited in its Q4 2021 investor letter:

"Fairfax, in contrast, is focused on what management view as a steep undervaluation of the company. Even though it gets little notice from the market, Fairfax’s growth formula is intact, with record earnings of almost $2.5 billion in the first nine months of 2021 and book value per share growing 20% in the third quarter. These results were driven in no small part by investment portfolio gains and a 25% growth in gross premiums written, which benefited from a continuing “hard market” in which premiums rates escalate and underwriting standards tighten.

In 2020 Prem Watsa personally bought $150m of stock, an impressive demonstration of his conviction in the company. Fairfax also bought back 1.4m shares or approximately 5% of shares outstanding. More recently, in Q4 2021, the company sold 10% of its insurance subsidiary, Odyssey Group (which accounts for only 20% of Fairfax’s total assets) for $900m and subsequently bought back 7.4% of parent Fairfax’s shares for $1bn. In my view, this is clever and value accretive capital allocation by a founder with a lot of skin in the game."

Pixabay/Public Domain

Our calculations show that Fairfax Financial Holdings Limited (NYSE: FRFHF) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. Fairfax Financial Holdings Limited (NYSE: FRFHF) delivered a 15.22% return in the past 3 months.

In April 2021, we also shared another hedge fund’s views on FRFHF in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.

Disclosure: None. This article is originally published at Insider Monkey.