Analyzing Brett Horn

[Hoodlum]

3 hours ago, gfp said:

 

Can you copy and paste the text here please?  I can only read the first paragraph

 

I could look at it earlier, but now I cannot see the whole report.

[Maverick47]

54 minutes ago, Haryana said:

Did he raise the official Fair Value Estimate while spewing all the negatives along with some positive?

Yes, this latest version raised the FVE to $1540 CAD from the prior $1290.

 

Reason given mentioned time value of money and recent results. Seems to me as if he forgot to include the earnings in his memo from a few weeks back when he left the target unchanged.  

 

 

[nwoodman]

You guys have a slightly unhealthy obsession with this analyst.  Vacuous analysis attached 

Morningstar FRFHF Investment Report.pdf Fairfax Is Enjoying a Favorable Moment Morningstar.pdf

Edited March 15, 2025 by nwoodman

[cwericb]

11 hours ago, nwoodman said:

You guys have a slightly unhealthy obsession with this analyst.  Vacuous analysis attached 

Morningstar FRFHF Investment Report.pdf 32.11 kB · 14 downloads Fairfax Is Enjoying a Favorable Moment Morningstar.pdf 63 kB · 20 downloads

 

"5-Mar-2025
Fairfax provides reinsurance and property and casualty
insurance in Canada, the United States, and other
international markets. The company also has some
noninsurance operations such as restaurants. Fairfax has
been led by Prem Watsa, its chairman and CEO, since its
formation in 1985."

 

Really?? Are you kidding me? Fairfax has a restaurant sideline. Jeez, if that is Morningstar's concept of Fairfax then it is not much wonder Mr. Horne is so out of touch.

 

Mr. Horne's vision of Fairfax probably includes envisioning Prem out flipping burgers in a Harvey's parking lot on weekends.

Edited March 15, 2025 by cwericb

[Parsad]

9 hours ago, cwericb said:

 

"5-Mar-2025
Fairfax provides reinsurance and property and casualty
insurance in Canada, the United States, and other
international markets. The company also has some
noninsurance operations such as restaurants. Fairfax has
been led by Prem Watsa, its chairman and CEO, since its
formation in 1985."

 

Really?? Are you kidding me? Fairfax has a restaurant sideline. Jeez, if that is Morningstar's concept of Fairfax then it is not much wonder Mr. Horne is so out of touch.

 

Mr. Horne's vision of Fairfax probably includes envisioning Prem out flipping burgers in a Harvey's parking lot on weekends.

 

Stop wasting any energy you guys have on this guy.  Who gives two shits what he thinks?  I never listened to any analyst when Fairfax was dirt cheap, and I don't need to listen to any analyst now.  The only analysis that matters is your own.  

 

Does anyone remember John Gwynn's name today?  Not really other than a handful of Fairfax shareholders.  Does anyone care about Herb Greenberg?  Who!  Does anyone care about John Hempton?  Some do, but they just don't know any better!  

 

All of these guys are has-beens, also-rans, failures who are completely irrelevant today.  While Fairfax goes on and on like Berkshire and Prem's reputation has never been higher.

 

Brett Horne can suck it, just like the rest!  Cheers!

[Alekbaylee]

2 minutes ago, Parsad said:

 

Stop wasting any energy you guys have on this guy.  Who gives two shits what he thinks?  I never listened to any analyst when Fairfax was dirt cheap, and I don't need to listen to any analyst now.  The only analysis that matters is your own.  

 

Does anyone remember John Gwynn's name today?  Not really other than a handful of Fairfax shareholders.  Does anyone care about Herb Greenberg?  Who!  Does anyone care about John Hempton?  Some do, but they just don't know any better!  

 

All of these guys are has-beens, also-rans, failures who are completely irrelevant today.  While Fairfax goes on and on like Berkshire and Prem's reputation has never been higher.

 

Brett Horne can suck it, just like the rest!  Cheers!

[gfp]

Not me - I want to read every page of Brett Horn and Muddy Waters on Fairfax when it goes against my position.  If they've got nothing, great.  But I want to read it.

[Parsad]

13 minutes ago, gfp said:

Not me - I want to read every page of Brett Horn and Muddy Waters on Fairfax when it goes against my position.  If they've got nothing, great.  But I want to read it.

 

Knock yourself out!  Cheers!

[villainx]

3 hours ago, Parsad said:

Knock yourself out!  Cheers!

 

Open brokerage account for kids, they are still accumulating!

 

=P

 

[Michael Campbell]

Fairfax M* 8.1.25.pdf

 

 

[Parsad]

28 minutes ago, Haryana said:

A little meaningful line for a change -

"Net written premiums were up 5% year over year. Growth was heavily weighted toward international operations, with North American premiums up only 1%."

 

However, the same result as usual - 

"We will maintain our CAD 1,540 fair value estimate for the no-moat company and see shares as materially overvalued."

 

Haha! 

 

At $1,540 CDN Fairfax would be trading at about 6 times earnings based on Viking's estimates for the next year.  It would be around 0.85 2025 year-end book value. 

 

I would be loading up the truck again like I did in 2020!  Cheers!

[Crip1]

17 hours ago, Michael Campbell said:

Fairfax M* 8.1.25.pdf 1.44 MB · 36 downloads

 

 

After taking the time to read through this, it’s really easy to see his consistency bias. For those unfamiliar with this bias, Charlie Munger covered this in interviews over the years and in Poor Charlie’s Almanac. A few examples:

 

“We think Fairfax's performance will continue to hinge on whether Watsa's investment theses play out, but results on this front have become increasingly hit and miss over the years.” - An unbiased review of this would state that results have been increasingly hit and hit over the years…things were a ton more hit and miss in the 2005-2015 timeframe compared to 2015-2025.

 

“Fairfax has seen a lot of ups and downs, but its performance over time has been trending toward mediocrity”. Toward? When a company puts out multiple years of the best financial performance in its history, how can one state that it’s trending toward mediocrity?

 

“Our Capital Allocation Rating for Fairfax is Standard. In our opinion, the company’s balance sheet is sound, its capital investment decisions are fair, and its capital return record is mixed.” – In retrospect, what does Brett think Fairfax SHOULD have done from a capital investment perspective in the past 10 years that they didn’t?

 

14 Mar 2025 - We are increasing our fair value estimate to CAD 1,540 per share from CAD 1,290 due to time value and a change in the exchange rate since our last update, as well as some adjustments to our assumptions given the company's recent performance. Brett has raised the fair value of Fairfax from C$600 to C$1,290 in 4 years (a CAGR of over 26%), yet the market values the company at close to 60% more than his fair value estimate. Minimal credibility.

 

It’s interesting to contemplate what his higher-ups think about this. He took a position years ago that Fairfax was mediocre, and simply cannot escape that paradigm.

 

-Crip

[Hoodlum]

3 minutes ago, Crip1 said:

After taking the time to read through this, it’s really easy to see his consistency bias. For those unfamiliar with this bias, Charlie Munger covered this in interviews over the years and in Poor Charlie’s Almanac. A few examples:

 

“We think Fairfax's performance will continue to hinge on whether Watsa's investment theses play out, but results on this front have become increasingly hit and miss over the years.” - An unbiased review of this would state that results have been increasingly hit and hit over the years…things were a ton more hit and miss in the 2005-2015 timeframe compared to 2015-2025.

 

“Fairfax has seen a lot of ups and downs, but its performance over time has been trending toward mediocrity”. Toward? When a company puts out multiple years of the best financial performance in its history, how can one state that it’s trending toward mediocrity?

 

“Our Capital Allocation Rating for Fairfax is Standard. In our opinion, the company’s balance sheet is sound, its capital investment decisions are fair, and its capital return record is mixed.” – In retrospect, what does Brett think Fairfax SHOULD have done from a capital investment perspective in the past 10 years that they didn’t?

 

14 Mar 2025 - We are increasing our fair value estimate to CAD 1,540 per share from CAD 1,290 due to time value and a change in the exchange rate since our last update, as well as some adjustments to our assumptions given the company's recent performance. Brett has raised the fair value of Fairfax from C$600 to C$1,290 in 4 years (a CAGR of over 26%), yet the market values the company at close to 60% more than his fair value estimate. Minimal credibility.

 

It’s interesting to contemplate what his higher-ups think about this. He took a position years ago that Fairfax was mediocre, and simply cannot escape that paradigm.

 

-Crip

 

It looks like he is in a time warp from 10 years ago and is unable to escape from it.   At some point he will need to change his position and it will be interesting to see how that occurs.  I suspect there will be no reflection on prior analysis when that does occur.

[Parsad]

12 hours ago, Crip1 said:

 

 

“Our Capital Allocation Rating for Fairfax is Standard. In our opinion, the company’s balance sheet is sound, its capital investment decisions are fair, and its capital return record is mixed.” – In retrospect, what does Brett think Fairfax SHOULD have done from a capital investment perspective in the past 10 years that they didn’t?

 

14 Mar 2025 - We are increasing our fair value estimate to CAD 1,540 per share from CAD 1,290 due to time value and a change in the exchange rate since our last update, as well as some adjustments to our assumptions given the company's recent performance. Brett has raised the fair value of Fairfax from C$600 to C$1,290 in 4 years (a CAGR of over 26%), yet the market values the company at close to 60% more than his fair value estimate. Minimal credibility.

 

 

He actually had his target price at $1,180 CDN in August 2024.  So even going by today's much lower number than the 2025 high, that is a 100% return!  This guy is a fucking idiot!  I'm not sure we've seen a better example of cognitive bias than this in the last few years.  Cheers!

[nwoodman]

Bless his cotton socks, Brett does long term shareholders an immense service

[SafetyinNumbers]

On 8/9/2025 at 3:02 AM, Parsad said:

 

He actually had his target price at $1,180 CDN in August 2024.  So even going by today's much lower number than the 2025 high, that is a 100% return!  This guy is a fucking idiot!  I'm not sure we've seen a better example of cognitive bias than this in the last few years.  Cheers!

A Morningstar computer sets the target. He sets the moat rating and the financial estimates. It’s not surprising the algorithm doesn’t like the no moat rated stock where earnings are ultimately collapsing.

 

[Parsad]

4 hours ago, SafetyinNumbers said:

A Morningstar computer sets the target. He sets the moat rating and the financial estimates. It’s not surprising the algorithm doesn’t like the no moat rated stock where earnings are ultimately collapsing.

 

 

What would be great to see is his estimates of earnings relative to the "beat" that Fairfax handed him each quarter and year.  His assumption is that in 2027 and later, Fairfax's "guaranteed" income will drop.  I'd like to see how he predicted the earnings in past years, which Prem, Brian and the team weren't supposed to achieve and then how much they beat him by.  Horn's erroneous assumption is that Hamblin-Watsa isn't creative enough to continue growing investment income.  Cheers!

[SafetyinNumbers]

1 hour ago, Parsad said:

 

What would be great to see is his estimates of earnings relative to the "beat" that Fairfax handed him each quarter and year.  His assumption is that in 2027 and later, Fairfax's "guaranteed" income will drop.  I'd like to see how he predicted the earnings in past years, which Prem, Brian and the team weren't supposed to achieve and then how much they beat him by.  Horn's erroneous assumption is that Hamblin-Watsa isn't creative enough to continue growing investment income.  Cheers!

Actually he’s got pretty healthy growth in investment income.From my quick review, he doesn’t have anything for gains and expects underwriting to get much worse. 

[Parsad]

3 minutes ago, SafetyinNumbers said:

Actually he’s got pretty healthy growth in investment income.From my quick review, he doesn’t have anything for gains and expects underwriting to get much worse. 

 

But that's his exact problem with his estimates.  

 

If there is a significant catastrophe event, historically, Fairfax's underwriting has been conservative and they tend to benefit from higher premium pricing compared to most of their peers.

 

We've also seen that Fairfax's gains don't come in steady measures like say Markel, but in huge bursts as their investments pan out over time.  They invest in much more distressed assets than many insurers, so the turnaround and eventual capital gains come over longer periods.  And because they are such distressed assets, the gains tend to be multiples of capital invested, rather than a 20-100% return over a shorter period of time.  Although, with the slow passing of the torch to Wade and Lawrence, I imagine future gains will be a little more consistent.  

 

Cheers!

[SafetyinNumbers]

8 hours ago, Parsad said:

 

But that's his exact problem with his estimates.  

 

If there is a significant catastrophe event, historically, Fairfax's underwriting has been conservative and they tend to benefit from higher premium pricing compared to most of their peers.

 

We've also seen that Fairfax's gains don't come in steady measures like say Markel, but in huge bursts as their investments pan out over time.  They invest in much more distressed assets than many insurers, so the turnaround and eventual capital gains come over longer periods.  And because they are such distressed assets, the gains tend to be multiples of capital invested, rather than a 20-100% return over a shorter period of time.  Although, with the slow passing of the torch to Wade and Lawrence, I imagine future gains will be a little more consistent.  

 

Cheers!

I don’t think they have a lot of distressed assets left. It’s just how accounting works that delays the recognition in the accounting statements for the increase in the multiple which comes when they liquidate the position. I’m not sure why that changes under Wade and Lawrence.

[73 Reds]

10 hours ago, Parsad said:

 

But that's his exact problem with his estimates.  

 

If there is a significant catastrophe event, historically, Fairfax's underwriting has been conservative and they tend to benefit from higher premium pricing compared to most of their peers.

 

We've also seen that Fairfax's gains don't come in steady measures like say Markel, but in huge bursts as their investments pan out over time.  They invest in much more distressed assets than many insurers, so the turnaround and eventual capital gains come over longer periods.  And because they are such distressed assets, the gains tend to be multiples of capital invested, rather than a 20-100% return over a shorter period of time.  Although, with the slow passing of the torch to Wade and Lawrence, I imagine future gains will be a little more consistent.  

 

Cheers!

You're overthinking this.  He's been very wrong for very long.  No need to try and rationalize it.  At some point in the future underwriting may not be as strong or the stock could have a downdraft and he'll claim victory even though a broken clock is also right twice a day.

[Crip1]

3 hours ago, 73 Reds said:

You're overthinking this.  He's been very wrong for very long.  No need to try and rationalize it.  At some point in the future underwriting may not be as strong or the stock could have a downdraft and he'll claim victory even though a broken clock is also right twice a day.

Well said.

[Parsad]

13 hours ago, SafetyinNumbers said:

I don’t think they have a lot of distressed assets left. It’s just how accounting works that delays the recognition in the accounting statements for the increase in the multiple which comes when they liquidate the position. I’m not sure why that changes under Wade and Lawrence.

 

Their biggest position was a distressed asset...Eurobank.  Same with Seaspan which eventually became Poseidon.  Blackberry when they bought it.  Level 3 when they bought the convertible bonds.  ToysRUs when they bought it.  

 

The fact that many of them turned around over time and are no longer distressed, doesn't mean that they won't invest in more businesses like that...they've historically done very well on those bets.  But Wade and Lawrence tend to look for more quality businesses that are mispriced.  Cheers!

[Parsad]

11 hours ago, 73 Reds said:

You're overthinking this.  He's been very wrong for very long.  No need to try and rationalize it.  At some point in the future underwriting may not be as strong or the stock could have a downdraft and he'll claim victory even though a broken clock is also right twice a day.

 

I'm not rationalizing it...I'm saying why he's wrong and his estimates continue to give him the wrong answer.  Cheers!

[villainx]

12 hours ago, 73 Reds said:

You're overthinking this.

 

Hahaha, this thread is Analyzing Brett Horn.