Fairfax Financial is a holding company founded by Prem Watsa, often called the Warren Buffett of Canada. At the end of June, Fairfax Financial’s public equity portfolio was worth $1.53 billion, which fell to $1.11 billion as of the end of September. The decline doesn’t appear to be due to performance however, at least not on the long side of the firm’s portfolio. Fairfax’s 21 long positions in stocks that were valued at $1 billion or more on June 30 had weighted average returns of 13.87% in the third quarter.
Keep in mind though, that our calculations of the fund’s returns can be different from its actual returns, because we don’t include positions in micro-cap stocks, short positions, or some other instruments. Nonetheless, our measurement can still be used for assessing the fund’s investment expertise when it comes to bullish bets on larger companies. With that said, in this article we’ll take a closer look at four of Fairfax Financial’s holdings on June 30, which include BlackBerry Ltd (NASDAQ:BBRY), International Business Machines Corp. (NYSE:IBM), Kennedy-Wilson Holdings Inc (NYSE:KW), and Resolute Forest Products Inc (NYSE:RFP).
For starters, we have BlackBerry Ltd (NASDAQ:BBRY), a company mostly known for its famous BlackBerry brand of smartphones. The firm made no change to its position in the company during the second quarter, continuing to hold 46.72 million shares of the stock, which were valued at $313.15 million at the end of June. This position comprised 20.50% of its equity portfolio’s value, and the stock delivered a return of 18.9% during the third quarter, though it remains down by over 23% this year. BlackBerry recently got in a dust-up with Apple after a Bloomberg article claimed that the latter was pilfering key employees from the former. BlackBerry disputed the article in a blog post, pointing out numerous factual errors, including the positions of some of the employees who left for Apple.
At Q2’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in BlackBerry, a 17% dip from the first quarter of 2016. One of the largest shareholders of BlackBerry Ltd (NASDAQ:BBRY) was Renaissance Technologies, which amassed a stake valued at $107.1 million. Kahn Brothers, D E Shaw, and Wynnefield Capital also held valuable positions in the company.
The second stock we are going to analyze is one of the world’s most famous tech companies, International Business Machines Corp. (NYSE:IBM). Fairfax Financial Holding also kept its position in this company unchanged from the previous quarter, holding 1.36 million shares of it which were valued at $206.80 million on June 30. IBM’s stock returned 5.6% during the third quarter, and over the past 12 months has gained 17.24%.
Heading into the third quarter of 2016, a total of 53 of the hedge funds tracked by Insider Monkey held long positions in IBM, unchanged quarter-over-quarter. Warren Buffett’s Berkshire Hathaway held the largest position in International Business Machines Corp. (NYSE:IBM), worth close to $12.33 billion, accounting for 9.5% of its total 13F portfolio. Coming in second was Masters Capital Management, led by Mike Masters, which held a $354.5 million position of call options underlying IBM shares. Remaining hedge funds and institutional investors with similar optimism contained Ric Dillon’s Diamond Hill Capital and Phill Gross and Robert Atchinson’s Adage Capital Management.
We’ll check out two more of Fairfax’s stock picks on the next page.
Yet another stock in which Fairfax Financial Holdings kept its position from a quarter earlier was in Kennedy-Wilson Holdings Inc (NYSE:KW), a real estate investment company, which returned 19.7% during the third quarter. The fund held 8.95 million shares which were worth $169.79 million at the end of June. The stake comprised 11.12% of its equity portfolio. Since the beginning of the year, the company’s shares have lost 6.56%. The Brexit decision is still being felt by the company, as about 21% of its investments are in the U.K.
At Q2’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in Kennedy-Wilson, a dip of 11% from the end of the first quarter. When looking at the institutional investors followed by Insider Monkey, one of the most bullish fund managers on Kennedy-Wilson Holdings Inc (NYSE:KW) was Alan S. Parsow of Elkhorn Partners, with a $76.8 million position; 50.1% of its 13F portfolio was allocated to the stock. Some other peers that were bullish consisted of Chuck Royce’s Royce & Associates, Martin Whitman’s Third Avenue Management, and Charles Paquelet’s Skylands Capital.
Lastly, Fairfax Financial boosted its position in Resolute Forest Products Inc (NYSE:RFP), which is a company that produces a variety of wood-related products, such as tissues and pulp, by 5% during the second quarter. The firm held 30.55 million shares of the company valued at $161.6 million on June 30, which amassed 10.58% of its equity portfolio’s value. During the third quarter, the stock lost 10.6% and has lost 45.18% on a year-to-date basis.
Is Resolute Forest Products Inc (NYSE:RFP) a buy, sell, or hold? Prominent investors in our system are turning more bullish. The number of long hedge fund bets inched up by two in the second quarter, to 16. One of the largest stakes in Resolute Forest Products Inc (NYSE:RFP) was held by Chou Associates Management with a $25.9 million position. Other investors bullish on the company included Steelhead Partners, Renaissance Technologies, and Wallace Capital Management.
It should be noted that Fairfax Financial recently issued its 13F for the September 30 reporting period, in which no changes were made to any of its positions mentioned in this article. Because of the strong performance of BlackBerry during the third quarter, Fairfax’s position in the stock surged to account for 33.58% of the value of its U.S equity portfolio.