Hi. This is Matt Brundage at Bridgehouse. I recently had an opportunity to speak with Sionna's founder and Co CIO, Kim Shannon, about Fairfax Financial. A name that Kim and Sionna consider to be attractive today. It's also holding in all three of our Sionna mutual fund offerings. Here are Kim's thoughts on Fairfax. The stock pick that I thought I'd lead off with is a stock that's already had a nice move. And then it's that we still think is gonna have another good move.
So proof that it's already happening and proof that more to come. And that would be FairFax for It's, property and casualty insurer. It's a global reinsurer. It's run by prem Watts, noted value manager. Although he's certainly expanded his horizon beyond investing. And, there's three major advantages that Fairfax benefiting from right now. One is that, they're getting really good underwriting gains because they now finally have what's called a hard market where, it was a
tough market in the PNC reinsurance world. So a lot of players exited various components of the market with a lot of global warming. There's been a lot of environmental challenges. It's been expensive. Some people have decided exit the business. And so now everyone who's left doing the business is able to charge a more normal level so they can all get a reasonable level of profitability. So they call that a hard market. So the basic core insurance is strong and profitable overall.
But, most another tellingly element, is the other two, which is the opportunity for capital gains in their investment portfolio. And the first leg of it is the, the fixed income component they took the view when rates were very, very low. A big part of the investment portfolio at insurance companies tends to be bonds. They decided bonds were not cost effective, and they held a lot of cash which meant they got less and less return in a in a deflationary environment.
They they ate that up, knowing that the change was coming. And when it did come, They were patient, they waited before they reinvested a lot of that money out of cash into longer paper and are now collecting higher returns and you're seeing that coming through on the portfolio. They're getting really good returns on their fixed income portfolio now. And as well, they also have equity portfolio, both private equity and public equity. They've been selling some of their private equity portfolio
significant gains. And obviously with their value style, they're benefiting in their public equities. From value doing well around the world. So those are all adding to the returns. The stock was very cheap coming into this period. It was quite washed out. But even today, it's still only trading at a seven PE multiple trailing and not much different if you look at it forward. Prices sales ratio is very reasonable. Priced a book is sitting right around book. So we think there's a good
solid opportunity over the next year or two. We we think this hard market is going to be sustained for a couple of years potentially. We certainly believe, as you heard earlier, the value approach is likely to work, and that rates might continue to rise in their conservative approach to the bond portfolio, all of that together with strong management and and prim themselves an excellent investor in the market. It's a big part of insurance reserves.
And that this this entity will continue to benefit.