Prem Watsa
Adds to Research-in-Motion, AbitibiBowater, Reduces Wells Fargo
Prem Watsa
is known for running the extremely successful insurance company
Fairfax, increasing its book value by 25% for 25 years. Besides
running successful business, he is also a great investor. He has
made sizable gains by investing in common stocks, too.
Prem Watsa
's investment idol is Ben Graham, and he spent a great deal of
time studying Ben Graham. During our interview with him, he
repeatedly mentioned Ben Graham. Running an insurance company, he
is extremely cautious with risks.
He said several times
that Ben Graham wrote "If you were not bearish, if you're not
concerned about the economy in 1925, not in 1927, 28, 29, but in
1925, there was only a 1/100 chance that you survived the
depression, because what'd you have looked at was if you were not
bearish in 1925, you'd have seen the crash in 1929, drop 50%, and
you'd have come right in and thought of it as an opportunity,
because the Dow Jones dropped from 400 to 200, went back up to
300, and the second leg after that was a killer, dropping about
90%!!"
Prem Watsa is certainly a Ben Graham type of investor. He looks
to buy stocks that are cheap to their book values, and holds them
for long term. This can be clearly seen from his investment
portfolio. He bought Bank of Ireland (
IRE
) with the thought that the book value is about 0.3 Euro per
ordinary shares. He will usually average down, i.e. buy more if
the stock prices go down. This is one of secrets to the success.
This is exactly what he is doing with Research-in-Motion (
RIMM
) and AbitibiBowater (
ABH
). In the quarter ended on March 31, 2012, he added to his
positions in both of them, as the stock prices decline.
Prem Watsa started to buy Research-In-Motion in the third quarter
of 2010. He bought about 2 million shares when the stock was
trading in the $50s. He then added to his position as the stock
price collapsed to the $40s then $30s and $20s in 2011. The last
time he bought was January of 2012. He doubled down on his
position and bought another 14 million shares. We estimate that
his cost per share is around $30. He owns 26.8 million shares as
of January 2012, which is about 5% of the shares outstanding. At
the current price of around $12 a share, Prem Watsa has had more
than $400 million of paper loss with his position in
Research-In-Motion.
His position with AbitibiBowater was received from debt
conversion. He bought the debt of the company at good prices. The
debt was converted to shares as the company emerges from
bankruptcy.
It is interesting to see Prem Watsa keep seeking Well Fargo (
WFC
), the bank that Warren Buffett loves and has in his personal
portfolio. This is the holding history of Prem Watsa with Wells
Fargo
Here is the complete portfolio of Prem Watsa. Also check out the
Undervalued Stocks, Top Growth Companies, and High Yield stocks
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