Shares of Fairfax Financial Holdings (FFH.TO) fell as much as 9.5 per cent on Thursday, following a downgrade from BMO Capital Markets.
Toronto-based Fairfax is led by Canadian billionaire businessman Prem Watsa, who is often called Canada’s Warren Buffett, in part for his focus on the insurance industry. Fairfax has invested in a wide array of Canadian companies, including BlackBerry and Recipe Unlimited, owners of Swiss Chalet, Harvey’s, and The Keg.
In a note to clients on Thursday, BMO’s Tom Mackinnon warned the company’s investments in the insurance industry face a challenging environment.
“With softening global insurance/reinsurance markets, declining underwriting income, moderating investment income growth/muted investment gains outlook, we see limited growth/multiple expansion,” Mackinnon wrote.
BMO cut its price target on Fairfax’s Toronto-listed stock to $2,500 per share from $2,600, while moving its rating to “market perform” from “outperform.”
The stock closed 4.7 per cent lower on Thursday at $2,308.41 per share, after a steeper decline at the start of the session.
Toronto – Delayed Quote • USD
2,308.41 -113.94 (-4.70%)
At close: January 22 at 4:00:00 p.m. EST
The company’s stock has gained about 14 per cent over the past 12 months, besting shares of Buffett’s Berkshire Hathaway (BRK-B), which have risen about 4.7 per cent during that time.
Fairfax joined the S&P/TSX 60 Index (TX60.TS) on Dec. 22, marking the company as one of Canada’s largest, while raising exposure to investors and exchange-traded funds (ETFs) that track the index.
In November, Fairfax said its net insurance revenue for the third quarter increased nearly five per cent year-over-year. The company reported overall net earnings for the three months ended Sept. 30 rose almost 12 per cent on an annualized basis to US$1.03 billion.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on X @jefflagerquist.