The performance of Fairfax’s insurance business has slowly but steadily improved in recent years. And Fairfax tends not to go all out when times are good, because bad times can always be around the corner. He knows the business cycle booms and busts. Fairfax’s managers are all about unlocking returns relative to risks. With a recession on the horizon, I think the odds are good that Fairfax will be able to outperform. Prem Watsa ploughed through the Great Financial Crisis with impressive gains. And I think that those who are patient enough with the man will get results over time. The investment business has had mixed results in recent years. Fairfax Financial Holdingsįairfax Financial Holdings ( TSX:FFH) is headed by legendary value investor Prem Watsa. Without further ado, let’s get into the names that I think are backed by cash flows and predictable earnings growth trajectories - something that many burst bubbles lacked in the plunge of 2022. That’s how trouble can happen and how bubbles begin. When other investors lose sight of a stock’s valuation, they get euphoric and more willing to pay a higher price. That’s why it’s so important to be mindful of the price being paid. And when they cool down, many investors late to the party can take a big hit on the jaw. Remember, hot momentum stocks don’t stay hot forever. As long as there are real fundamentals backing up a firm, rather than just excitement and enthusiasm from other investors around you, investors need not fear momentum as long as their expectations are in check. Many new investors may be shying away from momentum plays after the horrific tech wreck of 2022. In this piece, we’ll look at two TSX stocks that have momentum at their back alongside a valuation that’s still compelling. ![]() That said, I think valuation should play a bigger role in moves made by a truly long-term investor. Of course, it’s always more comforting for a value investor to wait for a pullback. Undoubtedly, momentum isn’t a bad thing in itself, as long as the investor puts in the homework and ensures they’re not running the risk of overpaying. Momentum investing can be dangerous, especially for a beginner who neglects value. Written by Joey Frenette at The Motley Fool Canada
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