No. of Recommendations: 2
He has been very pessimistic on Fairfax which he has rated as overvalued since 2021. His current fair value is CAD 1290 and current share price is CAD 1990 , or 54% overvalued.
...
"We think investors attracted to the stock due to a belief in Watsa’s ability to produce alpha should consider his record over the past decade, which includes some big wins but also substantial losses and missed opportunities. Fairfax has seen a lot of ups and downs, but its performance over time has been trending toward mediocrity.
In the near term, however, strong industry pricing and higher interest rates should be a material tailwind for Fairfax and its peers and lead to unusually strong profitability."
This is quite consistent with what Brett Horn has been saying for several years, every year boosting his target price so that it remains at something like 2/3 the market price.
Many of his points are legitimate - it is quite true that Watsa had a really bad decade as some of his investments (Blackberry being the obvious example) went sour and his market shorts hurt the overall returns badly.
However, while he says he likes insurance companies that have disciplined underwriting (rather than relying on less predictable investment gains), it is odd that he doesn't acknowledge how good Fairfax's underwriting has been in the last few years (98%, 92%, 95%, 95%, and 93% in the last 5 years, for instance.) And to say that the performace is 'trending to mediocrity, despite the good underwriting and really positive investment results in recent years, just seems dishonest.
But I guess after being so negative at share prices a quarter of today's it will be psychologically hard for him to reverse course and acknowledge that things are really looking pretty good for the company!
dtb
