Fairfax Financial Holdings Ltd Subordinate Voting Shares (OTCMKTS:FRFHF) and Arch Capital Group (NASDAQ:ACGL) are both large-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their risk, dividends, earnings, profitability, valuation, analyst recommendations and institutional ownership.

Profitability

This table compares Fairfax Financial Holdings Ltd Subordinate Voting Shares and Arch Capital Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Fairfax Financial Holdings Ltd Subordinate Voting Shares 4.53% 4.58% 1.12%
Arch Capital Group 20.48% 10.58% 3.17%

Institutional & Insider Ownership

0.9% of Fairfax Financial Holdings Ltd Subordinate Voting Shares shares are owned by institutional investors. Comparatively, 79.9% of Arch Capital Group shares are owned by institutional investors. 5.2% of Arch Capital Group shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

Fairfax Financial Holdings Ltd Subordinate Voting Shares pays an annual dividend of $10.00 per share and has a dividend yield of 2.3%. Arch Capital Group does not pay a dividend.

Valuation and Earnings

This table compares Fairfax Financial Holdings Ltd Subordinate Voting Shares and Arch Capital Group’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Fairfax Financial Holdings Ltd Subordinate Voting Shares $17.76 billion 0.68 $376.00 million N/A N/A
Arch Capital Group $5.45 billion 2.89 $757.97 million $2.20 17.69

Arch Capital Group has lower revenue, but higher earnings than Fairfax Financial Holdings Ltd Subordinate Voting Shares.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Fairfax Financial Holdings Ltd Subordinate Voting Shares and Arch Capital Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fairfax Financial Holdings Ltd Subordinate Voting Shares 0 0 1 0 3.00
Arch Capital Group 0 4 3 0 2.43

Arch Capital Group has a consensus price target of $38.23, suggesting a potential downside of 1.76%. Given Arch Capital Group’s higher probable upside, analysts plainly believe Arch Capital Group is more favorable than Fairfax Financial Holdings Ltd Subordinate Voting Shares.

Volatility and Risk

Fairfax Financial Holdings Ltd Subordinate Voting Shares has a beta of 0.55, suggesting that its stock price is 45% less volatile than the S&P 500. Comparatively, Arch Capital Group has a beta of 0.65, suggesting that its stock price is 35% less volatile than the S&P 500.

Summary

Arch Capital Group beats Fairfax Financial Holdings Ltd Subordinate Voting Shares on 11 of the 14 factors compared between the two stocks.

Fairfax Financial Holdings Ltd Subordinate Voting Shares Company Profile

Fairfax Financial Holdings Limited, through its subsidiaries, provides property and casualty insurance and reinsurance, and investment management services in the United States, Canada, Asia, and internationally. The company also underwrites specialty insurance and reinsurance; develops, produces, markets, and distributes television programs; and franchises, owns, and operates dining restaurants and holiday resorts. In addition, it is involved in the provision of pet medical insurance and database services; retail of tableware and gifts, and home improvement goods, as well as sporting goods and sports apparel comprising golf equipment, consumables, and athletic apparel and accessories; investment of real estate; and provision of integrated travel and travel-related financial services. The company was formerly known as Markel Financial Holdings Limited and changed its name to Fairfax Financial Holdings Limited in 1987. Fairfax Financial Holdings Limited was founded in 1951 and is headquartered in Toronto, Canada.

Arch Capital Group Company Profile

Arch Capital Group Ltd., together with its subsidiaries, provides property, casualty, and mortgage insurance and reinsurance products worldwide. The company's Insurance segment offers primary and excess casualty coverages; loss sensitive primary casualty insurance programs; collateral protection, debt cancellation, and service contract reimbursement products; directors' and officers' liability, errors and omissions liability, employment practices and fiduciary liability, crime, professional indemnity, and other financial related coverages; medical professional and general liability insurance coverages; and workers' compensation and umbrella liability, as well as commercial automobile and inland marine products. It also provides property, energy, marine, and aviation insurance; travel insurance; accident, disability, and medical plan insurance coverages; captive insurance programs; employers' liability insurance coverages; and contract and commercial surety coverages. This segment markets its products through a group of licensed independent retail and wholesale brokers. Its Reinsurance segment provides reinsurance for third party liability and workers' compensation exposures; marine and aviation reinsurance; surety, accident and health, workers' compensation catastrophe, agriculture, trade credit, and political risk products; reinsurance protection for catastrophic losses and commercial property risks; life reinsurance; casualty clash; and risk management solutions. This segment markets its reinsurance products through brokers, and directly to ceding companies. The company's Mortgage segment offers private mortgage insurance covering one-to-four family residential mortgages; mortgage insurance to cover previously originated residential loans; quota share reinsurance; and risk-sharing products. This segment sells its products through direct basis and through brokers to mortgage originators. The company was founded in 1995 and is based in Pembroke, Bermuda.

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