Analyzing Brett Horn

[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. 

[Haryana]

On 1/24/2024 at 9:04 PM, Haryana said:

The way the estimate value numbers have changed over last year seem like being done manually.

 

As if someone is making the numbers up strategically from their La-Z-Boy recliner to camouflage.

 

First, the number changed from 730 to 790, that is the maximum to go in 700s with just one digit.

 

Then, the number changed from 790 to 970, that is the maximum below 1000 exchanging a digit.

 

 

Now the number has changed from 970 to 1180 which again make it look like something around a 1000.

 

For this purpose, he had to make sure that the new number is under 1200 even if the math is senseless.

 

So he has moved the fair value from 730 to 1180 in steps where each step made to look like nothing big.

 

Because all the while he analyzed that the company was overvalued and management value destructive.

 

[Mystery Guest]

1 minute ago, Mystery Guest said:

The Moat is Hamblin Watsa. 

 

 

 

Long time Lurker 

[Haryana]

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.

"

 

[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.