Analyzing Brett Horn

[glider3834]

51 minutes ago, Hoodlum said:

That is not a good look.  I have a hard time understanding how that could have been a typo. 

it could be coding error 

[Jaygo]

3 minutes ago, glider3834 said:

it could be coding error 

This seems nefarious and it is definitely strange. Is someone at Morningstar on the take?

[Hoodlum]

15 minutes ago, glider3834 said:

it could be coding error 

It would need to be a selective coding error, as the below section from the press release did not have the word “never” removed. 
 

Quote

We have always been focused on building for the long term and have never given any quarterly guidance.

 

Edited February 14, 2024 by Hoodlum

[SafetyinNumbers]

Just now, Hoodlum said:

It would need to be a selective coding error, as the below section from the press release did not have the word “never” removed. 
 

 

someone on Twitter pointed out that Morningstar system probably wasn’t able to read underlined words. I guess it’s rare to see them in press releases.

[Parsad]

11 minutes ago, Jaygo said:

This seems nefarious and it is definitely strange. Is someone at Morningstar on the take?

 

No one ever thought Morgan Keegan was involved in anything until it was proven they were and John Gwynn was fired.  We still don't know how John Gwynn died.  Cheers!

 

https://www.wsj.com/articles/SB122110590390722731

[TwoCitiesCapital]

50 minutes ago, Santayana said:

Wow, it really would be something if the report was on the behalf of Brett Horn.   Claim Fairfax book is 20% overstated, hope for a drawdown of at least that much, and then Brett can point to his price target and say "See, I knew it was overvalued".

 

Jokes on us. Brett Horn hired MW just to have a second voice agree with him

[glider3834]

Here is a press release for Watsco  on morningstar site & the underlined words are also missing as well - so it looks like this is a system wide issue

 

https://www.morningstar.com/news/globe-newswire/9036198/watsco-reports-strong-2023-performance-gaining-share-in-a-soft-market-boosts-annual-dividend-10-to-1080-per-share

 

 

from watsco site https://www.globenewswire.com/en/news-release/2024/02/13/2828098/0/en/Watsco-Reports-Strong-2023-Performance-Gaining-Share-in-a-Soft-Market-Boosts-Annual-Dividend-10-to-10-80-Per-Share.html

[SafetyinNumbers]

9 minutes ago, glider3834 said:

Here is a press release for Watsco  on morningstar site & the underlined words are also missing as well - so it looks like this is a system wide issue

 

https://www.morningstar.com/news/globe-newswire/9036198/watsco-reports-strong-2023-performance-gaining-share-in-a-soft-market-boosts-annual-dividend-10-to-1080-per-share

 

 

from watsco site https://www.globenewswire.com/en/news-release/2024/02/13/2828098/0/en/Watsco-Reports-Strong-2023-Performance-Gaining-Share-in-a-Soft-Market-Boosts-Annual-Dividend-10-to-10-80-Per-Share.html

The most likely explanation is correct. Just more incompetence at Morningstar. 

[Hektor]

1 hour ago, SafetyinNumbers said:

I agree. I sent an email to the company. Hopefully, they follow up.

 

1 hour ago, glider3834 said:

I just sent an email to morningstar as well

Look at all the alligators in FFH’s moat 

 

With shareholders like these, FFH need not be concerned about shorts, I guess.

[dartmonkey]

15 hours ago, glider3834 said:

Here is a press release for Watsco  on morningstar site & the underlined words are also missing as well - so it looks like this is a system wide issue

Wow, great pick-up! With hindsight, we should have noticed that the two missing words were the two words that were underlined. 

 

 

 

[Luke]

HAHA! Love his description of the company as "the no moat company". A disgrace to watsa and Co.

[Luke]

38 minutes ago, Haryana said:

 

Certainly, it sounds ridiculous.

 

However, that is part of their categorization. They categorize all companies in either of

1. Wide Moat

2. Narrow Moat

3. No Moat

 

What looks unbelievably ridiculous is that their newswires are still up there without the underlined texts.

I wonder when this bug got started in their system or for how long this issue has been out there.

 

I find "no moat" also quite undifferentiated. Yes, opening a burger restaurant next door is a very small to no moat. But a globally scaled insurance company does have a moat, they have trust of consumers, they spend significant amounts on advertising to preserve the trust, with scale one can compete on the price front too. Its not a wide moat but its also not NO moat...

 

 

[Tommm50]

To me "no moat" basically means nothing special, it can be easily replicated. How would Brett suppose to replicate the global reach, the market position in emerging economies, the diversity of industries, the expertise in bond investing, and longevity and loyalty of staff enjoyed by Fairfax?

[SafetyinNumbers]

1 hour ago, Tommm50 said:

To me "no moat" basically means nothing special, it can be easily replicated. How would Brett suppose to replicate the global reach, the market position in emerging economies, the diversity of industries, the expertise in bond investing, and longevity and loyalty of staff enjoyed by Fairfax?

The no moat stuff is nonsense but it’s the improbable earnings estimates that I really have trouble reconciling. 

[Mystery Guest]

1 minute ago, Mystery Guest said:

The Moat is Hamblin Watsa. 

 

 

 

Long time Lurker 

[steph]

     The longer it lasts the more ridiculous he becomes. 

[SafetyinNumbers]

On 5/4/2024 at 4:30 AM, steph said:

     The longer it lasts the more ridiculous he becomes. 

Quants gonna quant 

[TwoCitiesCapital]

On 5/3/2024 at 8:23 PM, Haryana said:

Brett Horn blares again

https://www.morningstar.com/company-reports/1221484-fairfax-earnings-tailwinds-remain-in-place

"

We think Fairfax’s first-quarter results were solid. Underwriting margins held at an attractive level, and tailwinds continue on the investing side. Book value per share, adjusted for dividends, increased 2% from year-end. We will maintain our CAD 1,180 fair value estimate and no-moat rating. We continue to see shares as overvalued. While Fairfax is performing well right now, its historical record is mixed, and we think the market is overly focused on the favorable near-term outlook.

"

 

 

I think he's paying too much attention to the no-moat piece and maybe that's what is holding him back? 

 

Let's ignore the moat. Let's assume insurance, and every insurance company out there, is offering a commodity product. Fairfax is still exceptionally well positioned with low duration, little-to-no capital impact from rising rates, and investments/associates that are banging on all cylinders. The earnings power is almost as perfectly predictable as you could hope barring a catastrophe and it's extraordinarily high for the next 2-3 years.

 

Even if we assume no differentiation or skill of management, we know Fairfax will earn ~600 CAD/share over the next 3-4 years. Assuming no reinvestment and just adding to BV as retained earnings, you'd expect the stock price to go up $ for $ and that alone represents an 11-15% annualized return over the next 3-4 years without assuming compound returns OR a rerating of the stock.

 

So why does he assume an equity risk premium of 6-10% for Fairfax with such visibility into its earnings? 

 

[Crip1]

Guessing it's a combination of Inconsistency-Avoidance Tendency (#5 of Charlie Munger's Psychology of Human Misjudgment) and the fact that any indication akin to "I was wrong", no matter how refreshing it is in real life, is a resume-killer in the profession of Equity Analysis.

 

-Crip

[Parsad]

24 minutes ago, Crip1 said:

Guessing it's a combination of Inconsistency-Avoidance Tendency (#5 of Charlie Munger's Psychology of Human Misjudgment) and the fact that any indication akin to "I was wrong", no matter how refreshing it is in real life, is a resume-killer in the profession of Equity Analysis.

 

-Crip

 

+1!  Cheers!

[Viking]

On 4/12/2024 at 6:36 PM, Mystery Guest said:

The moat is Hamblin Watsa. 

@Mystery Guest , I think you might be on to something. Fairfax compounded book value at 18.4% for 38 straight years. That is a phenomenal track record. To call the company ‘no-moat’ is, of course, idiotic. Obviously, there is a moat hiding in there somewhere. 

 

[Gamma78]

By his logic all insurance companies are no-moat. 

Yet the sector has not done badly long term. And some standouts (Chubb, Fairfax, Berkshire, Markel) have done spectacularly well. The lack of curiosity as to understand why that is is the marker that defines his lack of intellect. 

[SafetyinNumbers]

6 hours ago, Gamma78 said:

By his logic all insurance companies are no-moat. 

Yet the sector has not done badly long term. And some standouts (Chubb, Fairfax, Berkshire, Markel) have done spectacularly well. The lack of curiosity as to understand why that is is the marker that defines his lack of intellect. 

Quants don’t analyze these types of companies well because of the volatility in the earnings streams and because float looks like debt. He’s got to find a narrative to explain the valuation the computer spits out. Why he keeps his estimates so low is the real head scratcher. It’s probably a 10 year average or something like that.

[UK]

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Edited October 6, 2024 by UK

[SafetyinNumbers]

Looks like Morningstar published again on Oct 10 and upped its estimates considerably boosting adjusted EPS estimates (which quants care about) and potentially the stock.