Pieter Slegers — Buying more of this stock (Compounding Quality)

One-line take: this is the 1 September "Fairfax up" decision being carried out. It is the same order as the 16 August purchase: 30 shares at a CAD 2,300 limit, which doubles the position from ~2.7% to ~5.3%. The August issue had no valuation at all. This one supplies a number: an 18.6%/yr expected return from the house Earnings Growth Model, the highest in the portfolio, against a 13.9% average. But a footnote on the sheet says that figure is built on revenue growth, not EPS ("For Fairfax Revenue was used": 26,825 → 43,708, 17.67%/yr plus a 0.9% dividend). For an insurer, revenue is premiums plus investment income, not per-share earnings power, so the headline number is softer than the others in the column. The case has three legs. The insurance book has gone "From Good to Great". The company is a cannibal, buying back 2.4% of its shares in June 2026 alone (21.7m shares at Dec '25 → 21.4m LTM; −25% since 2017). And it offers India: 5.7% of the investment portfolio, 42.9% of Fairfax India, plus fees earned on it. Before any of that, the post makes a rare concession: "The current results are below our expectations. Quality has had a rough time recently". It answers with a conviction argument ("You can borrow someone's stock idea, but you can never borrow their conviction") and a portfolio FCF yield of ~5.9%, the highest on its 2015-2026 chart. The add is also the first fresh money since the September policy reset, and it goes to the book's second-smallest position. Zoetis (~1.8%) stays smaller still, although the 1 September letter called it one of the cheapest holdings.

1. Stocks & names mentioned

Fairfax is the only argued view and the only transaction. The other nineteen holdings appear only on two images, the expected-return sheet and the current-weights chart. They are listed as held, no new view: Neutral here means "no stance in this issue", not a downgrade. The standing ratings are on the 17 September Buy-Hold-Sell List. The six US compounders ranked above Fairfax since 1985, Berkshire, Fairfax India and the Bangalore airport are context only. Weights are read by eye off the bar chart (±0.1pp). Research legend: QT Qualtrim · SA Seeking Alpha · STK Stock Analysis. Written post with no timestamps: the At link opens the article.

Ticker	Name	Research	View	What he said	At
FFH.TO	Fairfax Financial Holdings	QT · SA · STK · FA	Positive	Bought more: 30 shares at a CAD 2,300 limit, weight ~2.7% → ~5.3%. "Today it's time to buy more of a stock we already own… I definitely believe Fairfax deserves a higher weight." The pitch: it "wants to double every 5 years" (Fairfax's own target is 15% book value per share, 18.7% achieved since inception), it is "led by one of the best capital allocators in the world", and "management thinks the company is too cheap". Its 19.5%/yr since 1985 is 7th of ~6,000 US-listed companies (Berkshire is 49th). The three reasons: the insurer has gone "From Good to Great"; it is a cannibal, buying back 2.4% of shares in June 2026; and India, at 5.7% of the portfolio, 42.9% of Fairfax India, with fees on top. Expected return 18.6%/yr, the book's highest, but computed on revenue growth (26,825 → 43,708) rather than EPS.	read ↗
BN	Brookfield Corporation	QT · SA · STK · FA	Neutral	Referenced only — held, no new view. The largest weight on the chart (~8.45%), up from its 1 September upweight. On the expected-return sheet: EPS 2.6 → 3.95 (15.0%/yr) + 0.8% yield = 15.8%/yr.	read ↗
MEDP	Medpace Holdings	QT · SA · STK · FA	Neutral	Referenced only — held, no new view. Weight ~8.3% (2nd). Sheet: EPS 15.28 → 20.81, 10.84%/yr expected, no dividend.	read ↗
EVO.ST	Evolution AB	QT · SA · STK	Neutral	Referenced only — held, no new view. Weight ~7.95% (3rd). Sheet: EPS 5.24 → 6.71, 8.59%/yr expected and no dividend, the second-lowest in the book, although it is the third-largest position.	read ↗
AMP	Ameriprise Financial	QT · SA · STK · FA	Neutral	Referenced only — held, no new view. Weight ~6.1%. Sheet: EPS 39.29 → 55.39 + 1.2% yield = 13.33%/yr.	read ↗
V	Visa	QT · SA · STK · FA	Neutral	Referenced only — held, no new view. Weight ~6.05%. Sheet: EPS 11.47 → 16.85 + 0.7% yield = 14.38%/yr.	read ↗
KPG.AX	Kelly Partners Group Holdings	STK	Neutral	Referenced only — held, no new view. Weight ~5.95%. Sheet: NPATA 9 → 20, 30.50%/yr, the book's highest expected return by a wide margin, and 122% total growth in three years. That input is an outlier, and the sheet does not discuss it.	read ↗
TOI.V	Topicus.com	QT · SA · STK	Neutral	Referenced only — held, no new view. Weight ~5.95%. Sheet: EPS 3.43 → 5.49, 17.00%/yr.	read ↗
CSU.TO	Constellation Software	QT · SA · STK · FA	Neutral	Referenced only — held, no new view. Weight ~5.9%. Sheet: EPS 79.8 → 121.37 (15.0%/yr) + 0.2% = 15.20%/yr.	read ↗
KNSL	Kinsale Capital Group	QT · SA · STK · FA	Neutral	Referenced only — held, no new view. Weight ~5.8%. Sheet: EPS 19.51 → 28 + 0.2% = 13.00%/yr.	read ↗
GAW.L	Games Workshop	QT · SA · STK	Neutral	Referenced only — held, no new view. Weight ~5.5% (10th). Sheet: EPS 594.9 → 666.93 + 2.8% = 6.68%/yr, the lowest expected return in the book. It is still sized larger than eight other holdings, including the Fairfax add before it settles.	read ↗
LVMUY	LVMH (ADR)	QT · SA	Neutral	Referenced only — held, no new view. Weight ~4.65%. Sheet: EPS 21.85 → 27.67 + 2.9% = 11.09%/yr.	read ↗
BRO	Brown & Brown	QT · SA · STK · FA	Neutral	Referenced only — held, no new view. Weight ~4.3%. Sheet: EPS 4.26 → 5.23 + 0.96% = 8.04%/yr.	read ↗
DNP.WA	Dino Polska	SA · STK	Neutral	Referenced only — held, no new view. Weight ~3.8%. Sheet: EPS 1.59 → 2.31, 13.26%/yr. It is still in the book despite the 1 September developed-countries-only rule.	read ↗
IPAR	Inter Parfums	QT · SA · STK · FA	Neutral	Referenced only — held, no new view. Weight ~3.7%. Sheet: EPS 5.24 → 6.49 + 2.6% = 9.99%/yr.	read ↗
HGT.L	HgCapital Trust	STK	Neutral	Referenced only — held, no new view. Weight ~3.6%. Sheet: EPS 0.28 → 0.39 + 1.3% = 13.30%/yr.	read ↗
III.L	3i Group plc	QT · SA · STK	Neutral	Referenced only — held, no new view. Weight ~3.4%. Sheet: EPS 1.63 → 2.48 (15.0%/yr) + 3.1% = 18.10%/yr, second only to Fairfax among the non-KPG names.	read ↗
KKR	KKR & Co.	QT · SA · STK · FA	Neutral	Referenced only — held, no new view. Weight ~3.0%. Sheet: EPS 6.11 → 9.29 (15.0%/yr) + 0.8% = 15.80%/yr.	read ↗
SPGI	S&P Global	QT · SA · STK · FA	Neutral	Referenced only — held, no new view. Weight ~2.85%. It was named alongside Fairfax for an increase on 1 September, but it is still the third-smallest position and is not added to here. Sheet: EPS 17.83 → 23.03 + 0.9% = 9.80%/yr.	read ↗
ZTS	Zoetis	QT · SA · STK · FA	Neutral	Referenced only — held, no new view. The smallest weight (~1.8%). Sheet: EPS 6.41 → 7.91 + 2.7% = 9.96%/yr.	read ↗
FIH-U.TO	Fairfax India Holdings ($FIH.U)	QT · SA · STK · FA	Neutral	Cited as evidence, not a stance — the India leg of the Fairfax case. "They own 42.9% of the publicly traded Fairfax India… Their biggest stake is the Bangalore Airport. Fairfax also receives management and performance fees from Fairfax India." This is the same fee-collector logic as the 27 August study: own the parent that collects the fees rather than the vehicle that pays them.	read ↗
private	Bangalore International Airport Limited (BIAL)	—	Neutral	Referenced only — "Their biggest stake is the Bangalore Airport" (held via Fairfax India). No figures given.	read ↗
BRK.B	Berkshire Hathaway	QT · SA · STK · FA	Neutral	Used as the comparison rather than a pick — "You can see Fairfax Financial as a mini Berkshire," and on the 1985-onward return ranking "Berkshire stands at place 49".	read ↗
AAPL	Apple	QT · SA · STK · FA	Neutral	Passing mention — #1 on the Fairfax slide of top-1% US compounders since 1985, at 22.7%/yr. No view.	read ↗
HD	Home Depot	QT · SA · STK · FA	Neutral	Passing mention — #2 on the same slide, at 21.3%/yr. No view.	read ↗
AMAT	Applied Materials	QT · SA · STK · FA	Neutral	Passing mention — #3 on the same slide, at 21.2%/yr. No view.	read ↗
AMGN	Amgen	QT · SA · STK · FA	Neutral	Passing mention — #4 on the same slide, at 20.4%/yr. No view.	read ↗
DHR	Danaher Corporation	QT · SA · STK · FA	Neutral	Passing mention — #5 on the same slide, at 20.1%/yr. No view.	read ↗
UNH	UnitedHealth Group	QT · SA · STK · FA	Neutral	Passing mention — #6 on the same slide, at 19.7%/yr, the last name above Fairfax. No view.	read ↗

Four things the issue does not say about its own numbers. (1) Fairfax's 18.6% is not like-for-like. Every other row is EPS growth plus dividend yield, but Fairfax's is revenue growth plus yield. For an insurer, revenue swings with premium volume and investment gains, and a revenue path from 26,825 to 43,708 in three years (+63%) is a much bigger claim than the 15% book-value target the post quotes. (2) The expected return has fallen, and the post does not say so. The 1 September letter modelled 17.1% for the book; this sheet shows 13.9%. The two may be different models (owner's-earnings growth plus yield versus a three-year EPS path), but the change is not addressed. (3) Sizing does not follow the sheet. The three largest-but-lowest-returning names (EVO 8.6%, MEDP 10.8%, and GAW at 6.7% in 10th place) keep their size, and only Fairfax is added. (4) A small inconsistency: this issue says the Watsa letters run to 671 pages, while the 8 September issue said 772.

2. Talking points

Performance: "below our expectations"

"The current results are below our expectations. Quality has had a rough time recently. Every active strategy will out- and underperform the market from time to time."
The defence is conviction: "You can borrow someone's stock idea, but you can never borrow their conviction… If you blindly follow someone else's stock tip but you're not convinced in the stock idea yourself, you'll never be able to stay the course."
"While I'm not happy with the recent result of the Portfolio, I am sticking the course." No return figure is printed. The last disclosed one was a 1.3% three-year CAGR against 20.1% for the index (1 Sep).

The book's expected return: 13.9%

A 20-row Earnings Growth Model sheet: EPS 2025 → EPS 2028, plus dividend yield. "The average company in Our Portfolio is expected to grow by 13.9% per year."
Range: KPG 30.5% (NPATA 9 → 20), then FFH 18.6%, III 18.1%, TOI 17.0%, BN/KKR 15.8%, CSU 15.2%, V 14.4%. The bottom is GAW 6.7%, then BRO 8.0%, EVO 8.6%, SPGI 9.8%, ZTS 10.0%, IPAR 10.0%.
Four rows share an identical 52.09% three-year growth (15.0%/yr): CSU, BN, III and KKR. That points to a plug value rather than four separate forecasts.

Valuation: FCF yield at a decade high

The portfolio's FCF yield by year: ~4.2% (2015), a low of ~3.3% (2021), ~4.7% (2024), ~5.6% (2025), and ~5.9% "right now", the highest on the chart.
"As long as our companies keep generating more and more value for us, I am less concerned about what the stock market is doing in the meantime." Readers are pointed to Jochen's report "What if you fired Warren Buffett in 1999".

The pick, teased

"This company: wants to double every 5 years; is led by one of the best capital allocators in the world; management thinks the company is too cheap." It is also "one of the best performing stocks in the US since 1985".
A redacted slide of top-1% US compounders since 1985: Apple 22.7, Home Depot 21.3, Applied Materials 21.2, Amgen 20.4, Danaher 20.1, UnitedHealth 19.7, then #7 at 19.5, revealed as Fairfax.

How Fairfax makes money

"Fairfax makes money by selling insurance and reinsurance policies… It then invests the money it holds before paying claims (the 'float') to earn additional returns. You can see Fairfax Financial as a mini Berkshire."
"Fair & Friendly acquisitions": reasonable prices, good faith, no hostile takeovers.
Its own AGM slide: disciplined underwriting + value investing; a 15% long-term BVPS CAGR target, 18.7% achieved since inception. The flywheel graphic: ~$75bn portfolio (~$55bn fixed income, ~$20bn equities); last year $2.2bn interest and dividends plus $3.1bn net gains.

Why add, and why now

"Currently, Fairfax has a low weight in Our Portfolio… I definitely believe Fairfax deserves a higher weight." On the weights chart it is 19th of 20 at ~2.7%, above only Zoetis (~1.8%).
The homework: "The Fairfax Way", then every Prem Watsa letter since 1985 ("671 pages"). The Peter Lynch test: explain it to a 13-year-old in two minutes.
The record: 19.5%/yr since 1985, so "$1,000 invested… would be worth well over $1.2 million today". Of ~6,000 companies only 6 did better, and Berkshire is 49th. "The best years might still be ahead."

Three reasons

Insurance quality: "Fairfax has transformed from a mediocre insurer to a quality business… From Good to Great." No combined ratio or other metric is given.
Cannibal: "In June 2026, he bought back 2.4% (!) of Total Shares Outstanding in a single month." Share count 28.6m (Dec '17) → 21.4m (LTM), −24.96%, a 3.4%/yr CAGR.
India: 5.7% of the investment portfolio; 42.9% of Fairfax India, whose biggest stake is Bangalore Airport; and management and performance fees on top.

What to expect

"Fairfax itself expects to double its intrinsic value every 5 years. If this would be true, you'd achieve a yearly return of 15% per year." The buybacks show management thinks the shares are cheap, "as a result, you could expect an even higher return".
"In our Earnings Growth Model, the expected return for Fairfax now equals 18.6% per year." The sheet's footnote says revenue was used for Fairfax.

The transaction

"We are buying Q 30 at a limit price of 2.300 CAD. As a result, the weight of Fairfax in Our Portfolio will approximately increase from 2.7% to 5.3%."
This is identical to the 16 August opening order (30 shares, CAD 2,300 limit, ~$50,000), so the position doubles in five weeks. It is the one concrete step taken on the 1 September "BN, SPGI and FFH up" plan. SPGI (~2.85%) is not touched.

3. In plain English

FFH.TO — Fairfax Financial Holdings Positive

Fairfax is a Canadian insurance group run by its founder, Prem Watsa. It collects premiums from customers and pays claims later. In the meantime it invests that pile of money (the "float") in bonds and shares. Done well, that gives two sources of profit, underwriting and investing, which is why Slegers calls it "a mini Berkshire".

Compounding Quality first bought a small stake in August and is now buying the same amount again, doubling the position from under 3% of the portfolio to just over 5%. He gives three reasons. The insurance side has become a genuinely good business. The company keeps buying back its own shares while they are cheap, 2.4% of all shares in June alone, so each remaining share owns more of the company. And it holds a large stake in Fairfax India, which owns Bangalore's airport, and collects fees for managing it.

His model says Fairfax could return about 18.6% a year, more than anything else he owns. One caution: for Fairfax the model uses growth in revenue rather than earnings per share, unlike every other holding on the sheet. Fairfax's own long-term target is more modest, growing book value per share by 15% a year, which it has beaten since 1985 (18.7%).

Summary derived from the archived Compounding Quality post (text and transcribed tables in transcript.txt) for personal study. Not investment advice. © Compounding Quality / Pieter Slegers for source material.