Fairfax Financial CEO
Prem Watsa
doubled down his bet on Research-In-Motion (
RIMM
). He bought another 25 million shares of RIMM in the last month.
As of July 4, he owns 51.8 million shares of RIMM, which is about
9.9% of the company. He owned 26.8 million as of March 31, 2012,
which was more than doubled from his holdings at the end of 2011.
Prem Watsa
started buying RIMM in the third quarter of 2010, when the stock
was traded at $50s and has declined 60% from its peak in 2008.
The stock has since lost another 90% while
Prem Watsa
kept buying. His average cost was about $26 a share before the
latest purchase. The latest purchase in June brings his cost per
share to high teens, which is still significantly higher than its
current price of just below $7 a share.
Prem Watsa
is apparently full of confidence with RIMM. At Fairfax Financial
Dinner in May, he noted that RIMM remains #1 in many markets. It
has $2.1 billion in cash and no debt. Prem is bullish on BB10,
the firm has terrific technology, and he notes that Mike
Lazaridis is a genius. He also likes Thorsten Heins and remains
happy to hold RIM's shares.
Averaging down is one of the secrets in Mr. Watsa's 35 years of
investing. In his last shareholder letter, he wrote: "average
down when buying and average up when selling! Illustrated with
the case of International Coal, we averaged down from our initial
cost of $4.58 per share to an average cost of $3.37 per share. We
sold half our position at $7.26 per share (a 115% gain) and only
five months later, there was a takeover offer for the whole
company at double that price. In spite of not buying only at the
low and not selling only at the high, we earned $341.2 million by
selling at over three times our cost."
We have had a lot of discussions of value traps lately. RIMM is
considered a value trap as the company continues to lose market
share and delay the release of its new products. But Prem Watsa
is not an average investor. He is doubling down again.
The question is, will you follow Prem Watsa into RIMM?
Related:
GuruFocus Interview with Fairfax CEO Prem Watsa
What You Want to Know from the Shareholder Letter of
Fairfax CEO Prem Watsa
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