This one came through as a bit of a challenge for the Thinkolator, but I think we’ve got a solid answer for you…
This tempting note yesterday from Motley Fool Stock Advisor Canada majordomo Iain Butler is what drove a bunch of questions our way:
“… sometimes there’s a stock I keep coming back to… a stock that looks poised for off-the-charts growth… is unbelievably cheap… has first-class management… or sometimes, all of the above. That’s exactly the sort of stock that we just sent out a ’10-Bagger’ buy alert on this morning!”
“10-bagger” is just a popular term for an investment that goes up by 10X… I guess it’s got roots in baseball, and it is certainly widely used by the Motley Fool and others these days, but the term was popularized by Peter Lynch in his One Up on Wall Street about 30 years ago. (That book has aged a bit, I don’t think it’s been updated since 2000 or so, but it’s still a great intro to the world of stock market investing.)
And who doesn’t want to get 10X returns, right? So what’s this new alert from the Canadian Foolies all about?
Here’s a little more of a taste of the ad, this is about all we get by way of clues…
“… you should know that this investing strategy directly relates to a little-known Canadian stock that one billionaire insider says is “ridiculously cheap” right now.
“In fact, he’s so convinced that he just picked up an additional $149 MILLION worth of stock for his personal portfolio!
“Now, it’s one thing to make a bold statement… it’s another thing entirely to put your money where your mouth is…
“And this is just one more reason why we’re pounding our fists on the table that this under-the-radar TSX stock is a screaming BUY today!”
That “investing strategy” they talk about is “buying founder-led companies,” which Tom Gardner over at the Fool has certainly talked up as an important factor in his investing decisions (and it’s the core strategy of one of his “upsell” newsletters, the Ownership Portfolio)… here’s how they put it in the ad:
“… while our AVERAGE recommendation in Stock Advisor Canada is beating the market by nearly 3x… it’s our founder-led stocks picks that are leading the pack with more than 10x returns….
“Investing in founder-led companies has been more lucrative than any other investment strategy we have EVER recommended in The Motley Fool’s history.”
And that’s about all we get in the way of clues… so what’s the story?
Well, I can’t say that I’m quite 100% sure of the Thinkolator’s response to this one, but I did pull her out of the garage and give her a nice rubdown before pulling the starter cord, and our answer did come out pretty quick… so I’ll say I’m 99% sure that Butler is teasing… Fairfax Financial (FFH.TO, FRFHF).
Sound familiar? Yes, the stock has been teased many times, and I’ve written about it quite a bit over the past decade as I’ve been in and out of the stock personally, so it’s not new to longtime Gumshoe readers. But it’s been a while, so let’s dig in a bit.
What’s the story? Fairfax Financial has often been talked up as the “Berkshire Hathaway of Canada”, and founder and CEO Prem Watsa as the “Buffett of the North” — though that bloom has come off the rose a bit in the past few years as Fairfax has seen faltering investment performance and some folks, like me, have lost a bit of confidence in Watsa.
The company is a conglomerate of wholly and partially owned insurance companies, loosely controlled by the Fairfax HQ, and the investment of those insurance portfolios and of any extra cash spun out of those businesses is handled by CEO Prem Watsa, following a value investing strategy that he believes emulates Warren Buffett. Watsa essentially built the company on top of a distressed Canadian trucking insurance specialist firm called Markel Financial that he and his partners bought control of in the mid 1980s, and, yes he is t