Author Topic: Fairfax Valuation  (Read 604 times)

jfan

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Fairfax Valuation
« on: April 16, 2019, 07:11:12 PM »
Hey everyone,

Fairfax is a pretty complex beast to value with all its moving parts but thought I would give it an amateurish attempt.

Just wondering if all you nice people on this board won't be opposed to provide me with some criticism and feedback to my simple dcf model.

Thanks for your time.

Jerome


Spekulatius

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Re: Fairfax Valuation
« Reply #1 on: April 17, 2019, 05:36:25 AM »
Hey everyone,

Fairfax is a pretty complex beast to value with all its moving parts but thought I would give it an amateurish attempt.

Just wondering if all you nice people on this board won't be opposed to provide me with some criticism and feedback to my simple dcf model.

Thanks for your time.

Jerome

It seems that you tax investment earnings twice - one time by putting a tax on investment earnings (1/3) and the second time, but assuming a company tax rate of 27%.
To be a realist, one has to believe in miracles.

jfan

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Re: Fairfax Valuation
« Reply #2 on: April 17, 2019, 06:18:25 AM »
The 2/3 discount on the investment income was just a margin of safety that was imposed in order to be conservative. I recognize that it will be quite difficult to forecast their future investment returns as it will be dependent on the skill of the team, market sentiment changes to revalue their stock picks, the weighted average interest rate changes, global macroeconomic Dynamics, ever changing capital shifts in their portfolio, etc. I just reasoned that given the uncertainty and the complexity of all the variables, trying to predict a precise estimate would be fool's game and that the central tendency would be the most least error prone value.