Toronto's Fairfax Financial Has Buffett-esque Feel

By Will Ashworth

Prem Watsa is the CEO and founder of Fairfax Financial Holdings (FFH), a Toronto-based holding company he started in 1985.

It is very similar to Berkshire Hathaway (BRK.B) in that it generates significant revenue from insurance-related businesses. As a result, Watsa has been called the “Canadian” Warren Buffett. 

Watsa started investing in 1974 when he was hired as a research analyst at Confederation Life, a prominent insurance company. Watson had come to Canada from India to get his MBA at the University of Western Ontario Business School.

His mentor at Confederation Life was John Watson, who taught Watsa about value investing and the strategies of Benjamin Graham, Warren Buffett’s mentor. 

Watsa was hooked. 

After nine years, he and several partners formed Hamblin Watsa Investment Counsel. Two years later, Watsa took control of a small insurance company owned by Markel Group (MKL) with CAD$10 million (all figures are U.S. dollars unless noted) in annual premiums. 

Watsa renamed it Fairfax Financial Holdings. The rest is history. 

Fairfax stock gained 64% in 2024. An investment in 1985 in Fairfax, if held today, would be worth 600x more. In fact, over the past five years, FFH stock generated a 390% return, more than double the 179% return for Warren Buffett.

There’s no question Prem Watsa is an excellent investor, but is Fairfax Financial Canadian enough to make the Buy Canadian Index?    

Let’s find out.

Fairfax Went Public on TSX

The company went public on the TSX in 1985, selling shares at CAD$3.25. In 1986, it raised CAD$20 million from investors at CAD$10 a share. It now trades over CAD$2,000. 

In addition to Fairfax subordinate voting shares, the holding company took Fairfax India Holdings (FIH) public in 2015, selling 76.9 million subordinate voting shares in the newly-formed business, while Fairfax got 30 million multiple voting shares, enabling Fairfax to control Fairfax India. 

10 points - A stock is listed only on a Canadian stock exchange.

6 points - A stock is dual-listed on a Canadian and foreign exchange. 

3 points - A stock is only listed on a stock exchange outside Canada.

Fairfax’s only listing is on the TSX. On this criterion, it gets 10 points. 

Fairfax Revenues 

As I mentioned in the intro, Fairfax generates a significant portion of its annual revenues (79%) from the insurance business. 

In 2024, its insurance revenue was $31.06 billion, 15.3% higher than in 2023. If you exclude reinsurance, its net insurance revenue was $24.87 billion, 13.3% higher than a year earlier. Its non-insurance operations, which include retail businesses such as Sleep Country Canada, Golf Town, and Sporting Life Group, had $6.68 billion in revenue in the past year.

Of the $24.87 billion in insurance revenue, just 10.5% was in Canada, with a majority (57.5%) in the U.S. and the remaining 32% in other parts of the world. 

Of the $6.68 billion in non-insurance revenue, $1.77 billion was from retail and hospitality, and that’s close to or 100% Canadian revenue. Approximately $1.2 billion was revenue from Fairfax India and Thomas Cook India. That’s 100% non-Canadian. Of the remaining $3.64 billion, only its Grivalia Hospitality revenue would be non-Canadian, so I’d say $3.28 billion is also Canadian.

Based on this estimate, $7.66 billion (24%) of $31.55 billion in total revenue was Canadian in 2024.  

10 points - A stock generates 75% of its revenue in Canada. 

6 points - A stock generates 50.1% to 74.9% of its revenue in Canada.

3 points - A stock generates 50.0% or less of its revenue in Canada. 

Fairfax gets 3 points. 

Fairfax’s Canadian Ownership 

S&P Global Market Intelligence says Prem Watsa is the company’s largest shareholder, with 9.6% of the outstanding stock. 

However, he can control the business through Sixty Two Investment Company, his personal holding company, which owns all the multiple voting shares. Each multiple-voting share comes with 50 votes. As a result, Watsa controls 43.3% of Fairfax’s total voting power.

By the type of investor, retail investors account for 59.62% of its stock, institutions another 29.58%, and insiders the remainder. 

Assuming that a significant percentage of the retail investors are Canadian and a decent amount of the institutional investors are, it’s safe to say Canadians hold over 75% of votes, with Watsa ruling the roost. 

10 points - Canadian investors hold 75% of its shares or more.  

6 points - Canadian investors hold 50.1% to 74.9% of its shares.

3 points - Canadian investors hold 50.0% or less of its shares.

Fairfax gets 10 points. 

How Many of Fairfax’s Employees Are Located in Canada?

As of Dec. 31, 2024, according to S&P Global Market Intelligence, Fairfax had 50 employees in its head office, with 57,000 full-time employees employed by its insurance and non-insurance subsidiaries. 

Based on the revenue split between Canada, the U.S., and elsewhere, Fairfax has approximately 13,730 Canadian-based employees [50 + 57,000 * 24% revenue], or 24% based in Canada. 

That doesn’t include all the part-time employees in its retail and hospitality businesses. Let’s say that bumps the total number of employees up to 75,000 and the Canadian total to 27,230 [13,730 + (75,000 - 57,000) *75%], or 36%.   

10 points - 75% of its employees are based in Canada. 

6 points - 50.1% to 74.9% of its employees are based in Canada. 

3 points - Less than 50.0% of its employees are based in Canada. 

On this criterion, unfortunately, Fairfax only gets 3 points. 

 Does Fairfax Qualify for the Buy Canadian Index? 

With 26 points, despite an excellent performance, it doesn’t qualify for the Buy Canadian Index.

Disclaimer: The author did not hold a position in any of the securities mentioned above. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. Always conduct your own research or consult with a licensed financial professional before making any investment decisions. Past performance is not indicative of future results.

Will Ashworth is currently ranked 481 out of 30,991 financial bloggers analyzed by TipRanks, with a 11.8% return on his buy and sell ratings. He is one of the founding contributors to this newsletter.

Will has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.