RE:RE:Bulls and BearsWell, there is really very little chance of a double from here next year unfortunately. Fairfax India is valued by the market as a conglomerate, which means it is valued based off of book. Fairfax Financial is also. And by 'the market' I mean the valuation attributed by institutional buyers, which hold for 75% of Fairfax India's shares currently, including mutual fund holdings. Retail investors basically have little effect on the share price on a company that is held 75% by institutions.
This is why Prem and his team always quote BV in their shareholder and annual letters. Forget EPS - if the company were to break up and sell the assets, it is book value one would receive when the assets were sold. On a P/E basis, Fairfax India and Fairfax Financial will always be cheap - this is just the reality of conglomerates.
So the fundamental question is, what will BV grow by over the long term? Well, Prem has indicated that he does not invest in any company in India unless he feels his analysis indicates at least 20% annual BV growth. Fees taken by Fairfax would be about 5% of this. So 15%, minimum.
The other question is what multiple of BV will the shares trade at in the future? There is generally a fairly tight range of P/BV values afforded to conglomerates - let's say 0.8X on the low end to 1.5X on the high end. If a company can grow BV at 20% annually, they would deserve a valuation towards the higher end of the range.
i am looking at 20% growth in BV between now and one year from now, pegging BV at around $16.20 at this time next year. Put today's 1.1X BV valuation on that and you get a share price of $17.80 at this time next year.
But as for $30, well, that is probably not very realistic.