Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

BlackBerry Ltd (BBRY), International Business Machines Corp. (IBM): Prem Watsa Still Bullish on Struggling Value Investments

Page 1 of 2

Prem Watsa‘s Fairfax Financial Holdings recently filed its 13F form with the SEC for the reporting period of March 31. Despite weak performances from International Business Machines Corp. (NYSE:IBM) and BlackBerry Ltd (NASDAQ:BBRY), the holding company continues to, well, ‘hold’ them among its top three picks, which represented nearly 76% of its exposure to US-traded equities. The investor’s third holding, which we’ll also discuss in this article, is Resolute Forest Products Inc (NYSE:RFP).

Prem Watsa

The Toronto, Canada-based holding company Fairfax was founded in 1985 by Prem Watsa, a Canadian of Indian descent, who’s achieved the nickname “Canada’s Warren Buffett“. He has often been compared to the legendary investor owing to the value-oriented investment strategies that he ascribes to. Apart from the above likeness with Buffett, he is also known within investment circles for his performance between 2008 and 2009. His holding company didn’t just sail through the financial crises, it made a ton of money during that time owing to its fat book of credit default swaps (CDS) on 25 to 30 companies, who were mostly mortgage lenders and bond insurers. Excluding dividends, Fairfax’s book value per share increased by 60% during the time when huge chunks of equity were being wiped out from Wall Street. The market value of Fairfax’s equity portfolio stood at $1.42 billion at the end of the first quarter, with the technology sector contributing 45%. The holding company had a turnover ratio of 18.6% for the quarter, signaling relatively little changes in its holdings during the period.

Most investors don’t have enough time to do in-depth analysis on each stock that they want to include in their portfolios. Professional investors like Prem Watsa on the other hand spend weeks conducting due diligence on each company and spend millions obtaining information and paying the salaries of Ivy League-educated analysts. That’s why we have always believed that imitating the stock picks of hedge funds and billionaires is an excellent short cut we can take. It doesn’t cost an arm and a leg either. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of hedge funds performed better than the market and their large-cap picks. A portfolio of the 15 most popular small-caps among several hedge funds outperformed the S&P 500 Total Return Index by 95 basis points per month between 1999 and 2012. The exceptional results of this strategy got even better in the forward tests we have been conducting since the end of August 2012. The most popular small-cap stocks among hedge funds beat the market by more than 80 percentage points since then, returning over 139% (see the details here).

Coming back to Fairfax’s portfolio, Resolute Forest Products Inc (NYSE:RFP) climbed to the top spot from the second position it held during the previous reporting period, despite the fact that no additional purchases were made. The $1.18 billion representative of the basic materials sector has depreciated by 28.56% so far this year, however most of this slide occurred has occurred during the second quarter, after Resolute Forest Products Inc (NYSE:RFP) dropped a bombshell on its investors in the form of its financial results for the first quarter. The company’s net loss per share of $0.32 was substantially unfavorable compared to the estimates of $0.09 in earning per share, while revenues of $920 million were $140 million short of expectations. Headwinds faced by Resolute Forest Products Inc (NYSE:RFP) included the low prices prevalent in the market of pulp and wood products driven by the shrinking global newsprint market. On top of that, the company registered an increase of $15 million in its pension and OPEB expenses relating to the amortization of its 2014 increase in pension liabilities. Faifax held some 29.04 million shares of Resolute Forest Products Inc (NYSE:RFP) valued at $500.72 million. Two other prominent stockholders of the company are Michael Johnston’s Steelhead Partners and Francis Chou‘s Chou Associates Management.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!