Book valueThanks for the posts. Got me going back to Fairfax Financials shareholder letters to look at book value versus share prices. Watsa lays it all out for you to see. Interesting that essentially the long term share price mirrors book value although year to year the two can diverge quite a bit. So Fairfax India will likely do the same.
Also interesting to note that Fairfax financial trades at 1.35 Price to book currently, but the 10 year average is 1.16X. However over the past 10 years the growth in book value per share has been 8% for Fairfax Financial. The forward growth potential is much lower largely due to the law of large numbers, and the margins of the insurance industry in which it primarily invests.
The growth in book value per share for Fairfax India may well be double this level, by Watsa's proclamations and the calculations earlier by Skyline.
If you have double the growth, one would assume that the P/B therefore would be higher, as investors are obviously willing to pay a higher valuation for double the growth.
I would think therefore that a 1.16X P/B would be conservative for this vehicle. Watsa has indicated that a 2.0 P/B would be excessive. Therefore I think I will peg my expectations at a 1.5X Price to Book over the long term as a reasonable estimate when I run my numbers.
That brings me to a fair value today of 1.5 X $14 = $21 presently.
Any financial people out there with comments or corrections? Thanks in advance.