RE:CIBCThis time they got it right. GLTA
With long bond yields advancing higher and equity markets repricing lower, enthusiasm has waned for a number of our market-sensitive names and we are revising price targets lower for a variety of companies under coverage,” he said. “In the current environment, however, we feel our Outperformer rating on Fairfax has only strengthened.”
Mr. Priebe’s target for Fairfax Financial Holdings Ltd. (“outperformer”) rose to $1,500 from $1,400. The average is currently $1,485.09.
“Since mid-May, long bond yields have been advancing rapidly as a ‘higher-for-longer’ narrative creeps into the discourse around the future trajectory of policy rates,” he said. “We believe that Fairfax is positioned to benefit disproportionately versus other financials and P&C insurers. Even in the context of a strong run-up in the shares, we believe that the magnitude of the yield enhancement opportunity might be underappreciated by the market. In this note we also highlight how management’s “soft guidance” on run-rate earnings is probably understated and could be revised upward at year-end. The company is well positioned to participate in hard markets for property-CAT risks, and should be putting better quality business on its books in the current environment. Thematically, the company is well positioned for a risk-off environment, and we see little incentive for profit-taking on the basis of relative value. Overall, we believe that momentum is clearly on the side of Fairfax and the stock has become increasingly difficult to ignore.”