After repeatedly telling investors that the shares of Fairfax Financial Holdings Ltd.
Mr. Watsa, a seasoned investor and billionaire, has more than doubled his holding of Fairfax subordinate voting shares by acquiring 482,600 shares in a series of purchases since last Wednesday. He now owns approximately 3 percent of the company’s subordinate voting shares and continues to control Fairfax through his ownership of multiple voting shares.
The 69-year-old CEOs join a long list of Canadian executives who increased stakes in their own companies after the market fell in March due to the economic impact of the global pandemic.
“At our annual meeting and in our call for the release of first quarter results, I said our stocks were ridiculously cheap,” Watsa said in a press release Monday. I have never seen Fairfax stocks sell at a greater discount to their intrinsic value than they have recently.
“I have now backed up my strong words by purchasing almost US $ 150 million of Fairfax shares on the market over the past few days because I believe it will be a great long term investment,” Mr. Watsa said. .
Insider trading records show Mr Watsa last made a major purchase of Fairfax shares in 2003, when the company’s stock price fell during a campaign by sellers discovered. Mr. Watsa earns US $ 600,000 per year as CEO of Fairfax – a salary that has remained the same for decades – and does not receive any stock-based compensation from the company. Other business leaders have share-linked compensation.
Fairfax’s share price fell sharply in March, along with that of nearly all publicly traded companies, and has since become out of balance, in a widespread rally in the equity market. So far this year, the Fairfax share price has fallen 30.9%.
Mr Watsa has stepped up his efforts at a time when analysts agree that Fairfax shares are trading at a significant discount to their book value – which is unusual for the company – due to investor concerns about the capacity. insurer to match historic levels of profitability during the global pandemic. For example, analysts at RBC Dominion Securities Inc. said in a report Friday that the book value per share of Fairfax is currently US $ 422, while the stock closed on the New York Stock Exchange on Monday at 308.20. US $.
“Our thesis is that Fairfax’s long-term track record of double-digit book value growth will continue and that the current valuation provides an attractive risk-return entry point for those who wish to support the track record of The company’s long-term investment, ”RBC Dominion Securities Mark Dwelle said in the report. “Fairfax has a strong cash position and broad access to capital, which gives it the flexibility to be opportunistic and patient.”
Fairfax is one of the largest commercial and property and casualty insurers in the world, and recorded a loss of US $ 1.26 billion in the first quarter of 2020 as the market decline forced the company to write down the value of its investments.
At the time, Mr. Watsa said: “Despite this unprecedented period of turmoil, our insurance companies continued to show strong underwriting performance in the first quarter. In 2019, Fairfax made an annual profit of US $ 2 billion and its book value per share was US $ 486 million at the end of the year.
North American stock markets hit record highs in February, and in the first two months of this year, corporate insiders were selling far more shares of their own companies than they were buying. In Canada, the executives of the companies in the S & P / TSX 60 index were selling 20 shares for every share bought. After the market closed in March, buying and selling were balanced.
At the end of March, Scotia Capital analysts looked at insider buying and selling at 200 companies in the S & P / TSX Composite Index and said “that after a prolonged buying strike, insiders began to nibble on their own stocks ”. Scotia research shows that the increase in insider buying matches the cyclical lows of the benchmark stock index.
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