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Little Morningstar Note On Fairfax


Parsad
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I believe it is $320 per share but I don't think they understand the company.  They also don't understand the media firms or the silver royalty firms the value.  The former they assume terminal revenue declines (thus get no value) and the later they discount at the risk-free rate so they overvalue it.

 

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  • 3 weeks later...

I believe it is $320 per share but I don't think they understand the company.  They also don't understand the media firms or the silver royalty firms the value.  The former they assume terminal revenue declines (thus get no value) and the later they discount at the risk-free rate so they overvalue it.

 

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Its funny, because I found out about FFH through morningstar in 2004.  Justin Fuller and Patrick Dorsey were huge bulls. They I believe a $390 fair value estimate for the company in 2004!  I forget exactly though, but I have this link that says $344.  http://quicktake.morningstar.com/stocknet/san.aspx?id=116986 .  I think it started at $390 then they lowered it.  Though Justin missed the mark in overvaluing it, he understood the company much better than any of the schmucks they've assigned to it lately, and understood the value comes from the investments.  Traditional insurer analysts assume that companies will not be able to generate sustained alpha and focus on underwriting profitability predominately, which is why the analysts lately have been undervaluing it.

 

My opinion on M* in general is that when they went public the quality of their research plummeted; they stretched their team too thin and hired very junior analysts to reduce costs.  However, there was a noticeable decline in quality as well.  I stopped renewing my subscription in summer 2007.  From what I understand, they've done very poor throughout the recession.  As typical of Morningstar, they severely overvalued certain stocks (such as homebuilders and banks) and were too late to adjust downward.

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