Fairfax Financial led by Prem Watsa Indian-Canadian investment guru is a sizable entity. Its value goes beyond its current $1.42 billion stock portfolio. When we sum up all the company’s assets it goes to a whopping figure of $84 billion. Just in bonds, they own assets valued at $34 billion. But, today we will focus on Prem Watsa’s portfolio holdings from his latest 13F filing.
His $1.42 billion portfolio is divided between 57 holdings. But, Occidental Petroleum Corp and Micron Technology Inc take more than half of the entire value of the portfolio. Other major holdings in his portfolio are Blackberry Ltd, Orla Mining Ltd, and Kennedy-Wilson Holdings Inc.
Prem Watsa is currently facing accusations of cooking books intending to create an $889.9 million profit in 2018. Also, recent performances have been mixed. In 2023 the fund generated -2.59% returns. Other recent underperforming results manifested in 2020, 2018, and 2016.
But, Watsa’s financial empire has a global reach and wide asset distribution, making it a financial sector giant. Stay with us while we dive into his current portfolio holdings and strategies.
Fairfax Financial
Fairfax Financial is a holding company based in Toronto. They offer a wide array of services including property investment, insurance and reinsurance, investment management, and insurance claims management.
They operate through several subsidiaries. Allied World, Northbridge Financials, Verassure Insurance, and Crum & Forster are among the most important ones. Their total assets are estimated at $84 billion.
Key Holdings
- Occidental Petroleum Corp (NYSE:OXY) with 25.8% of the portfolio
OXY is a relatively new holding in Watsa’s portfolio going back to Q2 2022. Since then he has been increasing this position reaching current 6 million shares. He is after Warren Buffett the second largest stakeowner in the company while his stake is valued at $365 million. In these two years, he invested a total of $367 million resulting in minimal losses. But, he is looking at the long-term picture, and he is still expecting the best to come out of this holding.
- Micron Technology Inc (NASDAQ:MU) with 24.77% of the portfolio
Watsa is constantly increasing his stake in Micron. He started with modest buys in 2018 and 2019, but over time he increased his stake to 3.91 million shares. This holding value is at a reported $351 million. He invested a total of $219 million netting a 60% gain. Their share price has been steadily rising since the beginning of 2023 jumping from $50 to the current $90.
- BlackBerry Ltd (NYSE:BB) with 8.96% of the portfolio
Watsa wanted to acquire BlackBarry in 2013 when they were in a dire position. Their value significantly dropped but, he believed that he could pull once a giant of the gutter. The deal was at first made, but it was later scrapped. It was replaced by a $1 billion financial injection. In the short term, it did help the company to get back on its feet. But its value is constantly dropping while its stock is currently valued at $2.7.
- Orla Mining Ltd (TSE:OLA) with 8.68% of the portfolio
The Canadian mining giant has been a part of Watsa’s portfolio since Q3 2022 and for now, it hasn’t delivered the returns that were expected. Watsa has been constantly increasing his position and he now owns 37.7 million shares in the company. He invested $144 million, while his stake is now at $122 million resulting in a loss of 15%.
- Kennedy-Wilson Holdings Inc (NYSE:KW) with 8.02% of the portfolio
Another long-term investment that still has to generate results. Kennedy-Wilson holdings have been a part of Watsa’s portfolio for 13 years, and he increased his stake to 13.3 million shares. He has been quiet since 2018. The firm’s stock price has been going down for some time now, intensifying in 2024. Its peak was $25 in Q1 2022 and since then it has gone downhill to its current $8.4. Watsa invested $313 million over the years, while the stake is now valued at $112 million with a loss of 64%.
Geographic Exposure
Prem Watsa’s operations are diversified all over the world. He has insurance and fund offices from Canada and the United States, to Asia, specifically India, and Europe.
If we are looking precisely into the geographic exposure of his investments, they are also diversified. Most of the investments are based in the United States, but Watsa is also heavily involved with markets in Canada, Taiwan, and China. The best examples are his investments in the Bank of Nova Scotia (TSE:BNS), Orla Mining from Canada, Alibaba Group Holding Ltd (HKG:9988) from China, and Taiwan Semiconductor Manufacturing International Ord Shs (HKG:0981).
Sector Allocation
Prem Watsa’s portfolio is heavily entrenched in the technology and energy sectors, with minor stakes in several other industry sectors. The current portfolio sector allocation is listed below:
- Technology with 40.8% of the portfolio valued at $572 million
- Energy with 27.5% of the portfolio valued at $386 million
- Materials with 9.1% of the portfolio valued at $128 million
- Real Estate with 8.2% of the portfolio valued at $115 million
- Finance with 5.9% of the portfolio valued at $83 million
- Healthcare with 3.4% of the portfolio valued at $48.1 million
- Consumer Discretionary with 1.7% of the portfolio valued at $24.4 million
- Industrials with 0.9% of the portfolio valued at $13.1 million.
Prem Watsa Portfolio Investment Philosophy & Strategy
Risk Management Strategies
Although he is looking at undervalued companies he rarely takes excessive risks and puts a priority on preserving the capital. He aims to spread the risk by diversification of investing. He invests in different industry sectors, in different markets. That way he is lowering the risk of overexposure from specific problems.
Since he also has insurance companies under his helm, Watsa also uses insurance floats as access to additional capital. But, like the rest of his strategies, he uses these opportunities carefully, on investments with low risks.
What has been Watsa’s approach almost from the beginning is carefully thinking through every investment and maintaining a strong financial position in every holding. He ensures that every position has a guaranteed healthy liquidity ratio and capital adequacy.
Long Term Value Investing
Prem Watsa is often referred to as the Warren Buffett of Canada due to his value investing approach. His core principles are focused on finding undervalued companies and investing in them with the goal of long-term gains. He looks at the intrinsic value below the perceived worth of the company.
To find the best-suited companies he conducts disciplined analysis. He focuses on a wider picture, looking at the company from the perspective of the entire industry sector. Like Warren Buffet, he notes any competitive advantages the company has, as it can bolster its position later on.
Prem Watsa Portfolio Performance Analysis
Fairfax Financial’s performance has been mixed. In the beginning, during the late 80s and ’90s, the fund regularly outperformed the S&P 500. But, if we take a look at the last 10 years we can see irregular results.
The fund delivered lower returns than the index in 2013 (-7.8% to 29.62%), 2016 (-6.4% to 9.53%), 2019 (14.8% to 28.87%) and 2020 (0.6% to 16.25%).
But, in the same period, Fairfax had several very good years when it performed much better than the index. The best examples are 2014 (19.5% to 11.41), 2015 (4.5% to -0.73%), and 2017 (24.7% to 19.41%). In 2023 the fund underperformed returning a -2.59%.
Take A Look At Why is ‘Canadian Warren Buffett’ Prem Watsa, so bullish on India?:
Future Outlook
Latest developments are putting Prem Watsa in a bad position with accusations from Muffy Waters regarding alleged accounting abuse. This puts Watsa’s Indian investments valued at $7 billion under a lot of scrutiny. This also impacted his reputation and the standing of other subsidiaries. These allegations still need to play out, with Watsa downplaying these accusations.
Regarding his investment activities, they are going through a bad patch when we look at the last year. But, in the long term that doesn’t need to have a significant impact on his performance. In the last 5 years, his fund outperformed when compared to the S&P 500 (10.10% to 7.5%).
He did exit from several smaller holdings in 2023 (Activision Blizzard, Telesat Corp, Liberty Trip Advisor) with mixed results. It looks like Watsa shifted his focus on the energy sector with new holdings in Franco-Nevada Corporation (TSE:FNV), United States Still, and ATS Corp (TSE:ATS). Watsa also increased his positions in several existing energy-based holdings like Orla Mining, and Occidental Petroleum.
FAQ
Who Owns Fairfax Financial Holdings Limited?
Prem Watsa holds the controlling stake in the company but the exact percentage of it is not publicly available.
Final Thoughts
When you hear a story about a man who moved from India with $8 in his pocket while selling furnaces and air conditioners to support his education, you cannot feel anything but admiration.
Right after graduation, he joined a local insurance company and it took him only a year to find an opportunity to start his business. He did just that in 1985 and the rest is history. He bought a small, failing insurance company and made it into a financial giant. Fairfax Financials is now active in several financial sectors, from insurance to investment, and is a player on the global scale.
Their value investing approach in the Warren Buffet mold has drawn the attention of both institutional and individual investors. In recent years they did have mixed results, but overall have good performance.
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