Fairfax Financial Holdings (TSX:FFH) has long been regarded as a cornerstone investment for those seeking stability, growth, and proven leadership in an unpredictable market. Founded and led by the legendary Prem Watsa, often dubbed the "Canadian Warren Buffett," Fairfax's reputation as a value investor's dream has been built on decades of savvy decision-making.

Under Watsa's leadership, the company has consistently employed a value-based approach to investing. This discipline has enabled Fairfax to weather economic storms while capitalizing on undervalued opportunities. Fairfax stock's ability to adapt to evolving markets while staying true to its core principles has made it a stronghold for patient, long-term investors.

Diversification leads to reliable returns

One of the key reasons Fairfax stock has been such a reliable investment is its diverse portfolio. It spans property and casualty insurance, reinsurance, and a wide range of global investments. The company's insurance businesses generate steady cash flow through underwriting profits, which then fund its investment strategy.

Fairfax is also exceptional in its underwriting discipline, consistently achieving combined ratios below 100%. In the third quarter of 2024, Fairfax reported a combined ratio of 93.9%, further underlining its operational efficiency. For Q3 2024, Fairfax stock reported net gains on investments totalling over $1.3 billion, driven by solid returns in both bonds and equity markets. Despite broader market volatility, Fairfax's investments generated significant returns.

These were complemented by strong premium growth in its insurance businesses. Gross premiums written rose by 13.9% year-over-year, driven in part by Fairfax stock's strategic acquisitions such as its recent purchase of Gulf Insurance. These acquisitions have expanded Fairfax's global footprint and premium base, positioning the company for future growth in emerging markets.

Shares rising more and more

What also sets Fairfax stock apart is its commitment to increasing shareholder value. The company has a strong track record of growing book value per share, a key metric that long-term investors watch closely. As of the third quarter of 2024, Fairfax's book value per share stood at $1,033.18, an 11.7% increase year-to-date.

This consistent growth reflects Fairfax stock's disciplined capital allocation and ability to generate returns across market cycles. Plus, the company's willingness to reward shareholders directly through dividends reinforces its appeal. In January 2024, Fairfax stock announced a significant 50% increase in its annual dividend, raising it to $15 per share – a testament to its commitment to delivering tangible value to shareholders.

More to come

Fairfax stock's strong balance sheet further cements its reputation as a reliable long-term investment. As of the most recent quarter, the company reported $8.7 billion in cash, ensuring ample liquidity to weather any short-term challenges or seize investment opportunities as they arise. Its debt-to-equity ratio of 37.2% remains well within a manageable range, reflecting the company's prudent approach to leveraging its capital. Coupled with steady cash flows from its insurance operations and growing investment income, Fairfax stock's financial health is robust and well-positioned for sustainable growth.

The future outlook for Fairfax stock is equally compelling. The company's insurance operations continue to grow, benefiting from more disciplined insurance markets and an expanding premium base. Recent acquisitions, such as Gulf Insurance, have significantly increased Fairfax's market share in regions poised for economic growth.

On the investment side, Fairfax remains well-diversified across equities, fixed income, and alternative investments. This should allow it to capitalize on opportunities regardless of broader market conditions. Analysts have projected steady revenue growth for Fairfax over the coming years, with forecasts indicating a 3.2% annual increase. While short-term earnings may fluctuate due to investment gains or losses, Fairfax stock's long-term strategy remains firmly intact, driven by its focus on value creation and disciplined capital management.

Bottom line

Ultimately, Fairfax Financial Holdings offers a rare combination of stability, growth, and value creation that is difficult to find elsewhere. Whether it's the proven investment strategy, its impressive financial performance, or the visionary leadership of Prem Watsa, Fairfax stock provides all the hallmarks of a must-buy stock for long-term investors. For those willing to be patient, Fairfax represents not just a stock, but a legacy investment that continues to reward those who believe in its story.