July 27, 2023
Top 10 Stock Fairfax Strong Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: Fairfax – Top 10 Stock in Toronto Stock Exchange Index TSX Composite
Fairfax is listed as a top 10 stock on July 27, 2023 in the market index TSX Composite because of its high performance in at least one of the Obermatt investment strategies. As all consolidated Obermatt Ranks exhibit excellent performance, including positive market sentiment in the professional investor community, it is a solid stock investment where the risk of paying too much for the shares is limited. Based on the Obermatt 360° View of 100 (top 100% performer), Obermatt assesses an overall strong buy recommendation for Fairfax on July 27, 2023.
Snapshot: Obermatt Ranks
| Country | Canada |
| Industry | Property & Casualty Insurance |
| Index | TSX Composite |
| Size class | XX-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View Fairfax Strong Buy
| 360 METRICS | July 27, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 96 |
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| GROWTH | ||||||||
| GROWTH | 95 |
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| SAFETY | ||||||||
| SAFETY | 65 |
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| SENTIMENT | ||||||||
| SENTIMENT | 98 |
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| 360° VIEW | ||||||||
| 360° VIEW | 100 |
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ANALYSIS: With an Obermatt 360° View of 100 (better than 100% compared with alternatives) for 2022, overall professional sentiment and financial characteristics for the stock Fairfax are very positive. The 360° View is based on consolidating four consolidated indicators, with all four indicators above average for Fairfax. The consolidated Value Rank has an attractive rank of 96, which means that the share price of Fairfax is on the lower side compared with the typical size in indicators such as revenues, profits, and invested capital. This means the stock price is lower than for 96% of alternative stocks in the same industry. The consolidated Growth Rank has a good rank of 95, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. The company is also safely financed with a Safety rank of 65. Finally, professional market sentiment is above average compared with other stock investment alternatives with a Sentiment Rank of 98. ...read more
RECOMMENDATION: With a consolidated 360° View of 100, Fairfax is better positioned than 100% of all alternative stock investment opportunities based on the Obermatt Method. As all consolidated Obermatt Ranks exhibit excellent performance, such as good value (Value Rank of 96), above-average growth (Growth Rank of 95), safe financing practices (Safety Rank of 65), and a positive market sentiment in the professional investor community (Sentiment Rank of 98), it is a solid stock investment where the risk of paying too much for the shares is limited and disappointments are less likely to occur, unless information not publicly available. High-Value Ranks sometimes indicate that the company's future is challenging. If they are safely financed and have above average growth, and are still a good value, it may indicate that this will not continue. We recommend evaluating whether the future of Fairfax is as difficult as the stock’s low price, despite what good growth and safe financing practice suggest. Since the professional community is optimistic, you might have less to worry about, and the stock is just not sufficiently visible, which may indicate good timing right now. ...read more
Sentiment Strategy: Professional Market Sentiment for Fairfax very positive
ANALYSIS: With an Obermatt Sentiment Rank of 98 (better than 98% compared with alternatives) for 2022, overall professional sentiment and engagement for the stock Fairfax is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all four indicators above average for Fairfax. Analyst Opinions are at a rank of 93 (better than 93% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. Analyst Opinions Change is also positive with a rank of 69, which means that stock research experts are changing their opinions for the better and recommending investing in the company. They are getting more optimistic about stock investments in Fairfax. The Professional Investors rank is 80, which means that currently, professional investors hold more stock in this company than in 80% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 83 which means that the current professional news and professional social networks are on the positive side when discussing this company (more positive news than for 83% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 98 (more positive than 98% compared with investment alternatives), Fairfax has a reputation among professional investors that is significantly higher than that of its competitors. Since all market sentiment indicators are positive, the professional community highly recommends investment in the company. Does this mean Fairfax stocks are a safe investment? Far from it. Even professionals make mistakes. Especially in stock investing, there is a tendency to follow the leaders. Since trees don't grow to the heavens, such positive sentiment may also be interpreted as a danger sign. A lot of optimism can often be a sign of troubles to come, albeit unforeseen by most. ...read more
Value Strategy: Fairfax Stock Price Value at the top
ANALYSIS: With an Obermatt Value Rank of 96 (better than 96% compared with alternatives) for 2022, Fairfax shares are significantly less expensive than comparable stocks. The Value Rank is based on consolidating four value indicators, with three out of four indicators above average for Fairfax. Price-to-Sales (P/S) is 69, which means that the stock price compared with what market professionals expect for future sales is lower than for 69% of comparable companies, indicating a good value regarding Fairfax's revenue size. The same is valid for expected Price to Profits (or Price / Earnings, P/E), more favorable than for 100% of alternatives, and it's also true for the Price-to-Book Capital ratio (also referred to as market-to-book ratio) with a Price-to-Capital Rank of 86. But, compared with other companies in the same industry, dividend yields are expected to be lower than average; only 42% of all competitors have even lower dividend yields than Fairfax (a Dividend Yield Rank of 42). 58% alternative investments in the same business provide a higher dividend yield. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 96, is a buy recommendation based on Fairfax's stock price compared with the company's operational size and dividend yields. The below-average dividend yield may be a good sign, as it could mean the company has more attractive investment opportunities for the generated cash than to pay it out as dividends. A low dividend yield can also indicate a growth phase. ...read more
Growth Strategy: Fairfax Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 95 (better than 95% compared with alternatives) for 2022, Fairfax shows one of the highest growth dynamics in its industry. Investors also speak of high momentum. The Growth Rank is based on consolidating four value indicators, with all but one indicator above average for Fairfax. Profit Growth has a rank of 100 which means that currently professionals expect the company to grow its profits more than 100% of its competitors. The same is valid for capital growth and stock returns. Capital Growth has a rank of 95, and Stock Returns has a rank of 95 which means that the stock returns have recently been above 95% of alternative investments. Only revenue growth is low with a Sales Growth has a rank of 24 (76% of its competitors are better). ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 95, is a buy recommendation for growth and momentum investors. The many positive growth indicators indicate a positive growth momentum with only low revenue growth. That can also be attributed to divestments or the sale of unprofitable businesses. If that is the reason, overall growth is well on track to making this stock attractive for growth investors. ...read more
Safety Strategy: Fairfax Debt Financing Safety above-average
| SAFETY METRICS | July 27, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 53 |
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| REFINANCING | ||||||||
| REFINANCING | 66 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 28 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 65 |
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ANALYSIS: With an Obermatt Safety Rank of 65 (better than 65% compared with alternatives), the company Fairfax has financing practices on the safer side, which mean that their overall debt burden is lower than average. This doesn't mean that the business of Fairfax is safe, it only means that the company is on the safer side regarding possible bankruptcy, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators where two out of three are above average for Fairfax.Leverage is at 53, meaning the company has a below-average debt-to-equity ratio. It has less debt than 53% of its competitors.Refinancing is at a rank of 66, meaning that the portion of the debt that is about to be refinanced is below average. It has less debt in the refinancing stage than 66% of its competitors. Liquidity is at 28, meaning that the company generates less profit to service its debt than 72% of its competitors. This indicates that the company is on the riskier side regarding debt service. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 65 (better than 65% compared with alternatives), Fairfax has a financing structure that is safer than that of its competitors. Low leverage and low refinancing risk mean a safer financing situation. However, low liquidity means that current company cash flows are low in relation to the level of debt. This is a sign of caution in case it is expected for profits to remain low. ...read more
Combined financial peformance: Fairfax Top Financial Performance
| COMBINED PERFORMANCE | July 27, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 96 |
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| GROWTH | ||||||||
| GROWTH | 95 |
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| SAFETY | ||||||||
| SAFETY | 28 |
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| COMBINED | ||||||||
| COMBINED | 96 |
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ANALYSIS: With an Obermatt Combined Rank of 96 (better than 96% compared with investment alternatives), Fairfax (Property & Casualty Insurance, Canada) shares have much better financial characteristics than comparable stocks. Shares of Fairfax are a good value (attractively priced) with a consolidated Value Rank of 96 (better than 96% of alternatives), show above-average growth (Growth Rank of 95), and are safely financed (Safety Rank of 65), which means low debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 96, is a strong buy recommendation based on Fairfax's financial characteristics. As the company Fairfax's key financial metrics all exhibit excellent performance, such as good value (Obermatt Value Rank of 96), above-average growth (Obermatt Growth Rank of 95), and indicate that the company is safely financed (Obermatt Safety Rank of 65), it is a solid stock investment where the risk of paying too much for the share is limited, unless the company has a bleak future. Such good financial performance can indicate that the company's future might actually be challenging, as it may be difficult to maintain the good performance. If they are safely financed and have been growing above average, and are still a good value, it means that the market is keeping prices low, for a reason which may become clearer over time. We recommend evaluating the future of Fairfax. If you believe the company's future is market-typical or even better, this could be an argument for a share purchase. ...read more
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