Prem Watsa

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‘Smart Money’ Stocks: Prem Watsa (Fairfax Financial Holdings)

Up next is Prem Watsa, a Canadian value investor with a fantastic long-term record that has hit something of a rough patch of late.

Called the “Warren Buffett of Canada” both for his value style and his use of an insurance company as his investment vehicle, Watsa has beaten the pants off the S&P 500 over his career. He’s boosted the book value of his company, Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF), at a 16.9% annual clip over the past 25 years.

By comparison, the S&P 500 returned 9.6% annually.

Unfortunately, Watsa bet big on BlackBerry Ltd (NASDAQ:BBRY), and it has been an unmitigated disaster for him. BlackBerry now makes up 29.3% of Watsa’s stock portfolio.

Perhaps falling victim to the home-market bias, Watsa has been a consistent buyer of the battered Canadian communications company and erstwhile smartphone leader. Watsa started buying the stock in the $50s and been averaging down ever since. As of this writing, BlackBerry traded for $10.13 per share.

I’m not going to recommend we follow Watsa into BlackBerry. From what I can see, Watsa has lost all objectivity when it comes to this stock. Either that, or he has reasons for buying it that we cannot understand or that do not apply to us, such as keeping a Canadian icon under Canadian control.

Instead, I want to highlight Watsa’s largest current holding, Resolute Forest Products Inc (NYSE:RFP), which makes up 35% of his stock portfolio. Resolute makes paper products and lumber, and business has not been particularly good. The stock trades at less than half its early 2011 high and is down by 36% from its recent highs set earlier this year.

Still, RFP trades for just 0.6 times book value and 0.29 times sales. The stock is anything if not cheap at these prices.

Source: Investor Place