October 17, 2024
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 October 17, 2024 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 October 17, 2024.
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 | October 17, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| VALUE | ||||||||
| VALUE | 71 |
|
||||||
| GROWTH | ||||||||
| GROWTH | 71 |
|
||||||
| SAFETY | ||||||||
| SAFETY | 65 |
|
||||||
| SENTIMENT | ||||||||
| SENTIMENT | 53 |
|
||||||
| 360° VIEW | ||||||||
| 360° VIEW | 100 |
|
||||||
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 71, 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 71% of alternative stocks in the same industry. The consolidated Growth Rank has a good rank of 71, 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 53. ...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 71), above-average growth (Growth Rank of 71), safe financing practices (Safety Rank of 65), and a positive market sentiment in the professional investor community (Sentiment Rank of 53), 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 positive
ANALYSIS: With an Obermatt Sentiment Rank of 53 (better than 53% compared with alternatives), overall professional sentiment and engagement for the stock Fairfax is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for Fairfax. Analyst Opinions are at a rank of 71 (better than 71% of alternative investments), which means that currently, stock research analysts tend to recommend a stock investment in the company. In addition, Analyst Opinions Change has a rank of 50, which means that currently, stock research experts are getting even more optimistic. Obermatt Market Pulse further supports this with a rank of 52, which means that the current professional news and professional social networks are generally positive when discussing this company (more positive news than for 52% of competitors). But there are few stock holdings by institutional investors. The Professional Investors rank is low at 25, which means that currently, professional investors hold less stock in this company than in 75% of alternative investment opportunities. Pros tend to invest in other companies. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 53 (more positive than 53% compared with investment alternatives), Fairfax has a reputation among professional investors that is above-average compared with that of its competitors. Not having too many professionals invested in Fairfax may be less of an issue, especially if the stock is from a smaller company where professionals typically invest less. It is natural for professional investors to focus on large and extra-large companies, as they provide more safety. Smaller companies attract fewer professionals in the shareholder community. Overall, the signals from the professionals are still quite favorable for investments in Fairfax. ...read more
Value Strategy: Fairfax Stock Price Value better than average
ANALYSIS: With an Obermatt Value Rank of 71 (better than 71% compared with alternatives), Fairfax shares are more attractively priced than the majority of comparable stocks. The Value Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Fairfax. Price-to-Profit (also referred to as price-earnings, P/E) is 95 which means that the stock price compared with what market professionals expect for future profits is lower than for 95% of comparable companies, indicating a good value concerning Fairfax's profit levels. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with a Price-to-Book Rank of 78, which means that the stock price is lower as regards to invested capital than for 78% of comparable investments. On the other hand, Price-to-Sales is less favorable than for 57% of alternatives (only 43% of peers have an even less favorable ratio). The same is valid for dividend yield, which is lower than for 65% of comparable companies, making the stock more expensive compared with the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 71, is a buy recommendation based on Fairfax's stock price compared with the company's operational size and dividend yields. This is a puzzling picture, because it means that profits are high while dividends are low. Since the stock price is low compared with invested capital but high concerning expected revenues, the company has more invested capital than peers for generating the same amount of revenue. Since profits are higher, it could be a "cash cow" situation (using the classic Boston Consulting Group or BCG matrix naming convention) where the company is on a downward trend, still living from the profits of past products. As the company pays low dividends, it may harbor the opinion that a turnaround is possible, and it rather invests the cash than distribute it to shareholders through dividends, thus sealing the company's fate early. Any investment optimism should only be a buy trigger once thorough research is completed. ...read more
Growth Strategy: Fairfax Growth Momentum good
ANALYSIS: With an Obermatt Growth Rank of 71 (better than 71% compared with alternatives), Fairfax shows an above-average growth dynamic in its industry. Investors also speak of positive momentum. The Growth Rank is based on consolidating four value indicators, with all but one indicator above average for Fairfax. Sales Growth has a rank of 72 which means that currently, professionals expect the company to grow more than 72% of its competitors. Capital Growth is also above 1% of competitors with a rank of 83, and Stock Returns with the rank of 83 is also an outperformance. Only Profit Growth is low with a rank of 1 which means that currently, professionals expect the company to grow its profits less than 99% of its competitors. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 71, is a buy recommendation for growth and momentum investors. All three operating growth indicators, namely revenue, profit, and capital growth, are showing improvements. This is a good indication of a company with a positive future. That might, at the same time, be the simple reason why profit growth is low. A growing company needs money and thus can't yet show high profit growth. Look out for signs in corporate communication about extra growth efforts costing time and money. If that is the case, Fairfax is a good growth stock. ...read more
Safety Strategy: Fairfax Debt Financing Safety above-average
| SAFETY METRICS | October 17, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| LEVERAGE | ||||||||
| LEVERAGE | 48 |
|
||||||
| REFINANCING | ||||||||
| REFINANCING | 66 |
|
||||||
| LIQUIDITY | ||||||||
| LIQUIDITY | 43 |
|
||||||
| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 65 |
|
||||||
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, with just one indicator above average for Fairfax and the other two below average. Refinancing is at 66, meaning the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 66% of its competitors. But Leverage is high with a rank of 48, meaning the company has an above-average debt-to-equity ratio. It has more debt than 52% of its competitors. Liquidity is also on the riskier side with a rank of 43, meaning the company generates less profit to service its debt than 57% of its competitors. ...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. A good Refinancing Rank means that the problems of the company may not be around the corner. But high Leverage is only good if things go well, and low Liquidity is a signal for caution. The financing signals for Fairfax are on the riskier side, requiring the company's future to be on the safer side. Investors may want to look at Growth and Sentiment ranks before making an investment decision. ...read more
Combined financial peformance: Fairfax Top Financial Performance
| COMBINED PERFORMANCE | October 17, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| VALUE | ||||||||
| VALUE | 71 |
|
||||||
| GROWTH | ||||||||
| GROWTH | 71 |
|
||||||
| SAFETY | ||||||||
| SAFETY | 43 |
|
||||||
| COMBINED | ||||||||
| COMBINED | 96 |
|
||||||
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 71 (better than 71% of alternatives), show above-average growth (Growth Rank of 71), 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 71), above-average growth (Obermatt Growth Rank of 71), 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
Obermatt Portfolio Performance
We’re so convinced about our research, that we buy our stock tips.
See the performance of the Obermatt portfolio.