Canadian Billionaire Prem Watsa Still Likes Blackberry, IBM

Prem Watsa, popularly known as the Warren Buffett of Canada, is the founder of Fairfax Financial Holdings. Born in India, Watsa graduated with a degree in chemical engineering from the prestigious Indian Institute of Technology. He later completed an MBA at the Richard Ivey School of Business at the University of Western Ontario. Watsa began his career at Confederation Life and, in 1984, Watsa and his former boss began an investment firm called Hamblin Watsa Investment Counsel. By 1985, Watsa took full charge of the company and renamed it Fairfax Financial Holdings.

Based out of Toronto, Fairfax Financial’s equity portfolio is valued at around $1.53 billion as of the end of June. The portfolio is heavily invested in the Technology sector, which represents 67% of the total portfolio value at the end of the second quarter. Fairfax had another 14% invested in the Financial sector and 11% of the portfolio was represented by Materials stocks. In this article, we will focus on some of Fairfax Financial’s major holdings, including BlackBerry Ltd (NASDAQ:BBRY), International Business Machines Corp. (NYSE:IBM), Kennedy-Wilson Holdings Inc (NYSE:KW), Resolute Forest Products Inc (NYSE:RFP), and Overstock.com Inc (NASDAQ:OSTK). In addition, we are going to take a look at what is the general hedge fund sentiment towards these stocks.

At Insider Monkey, we track around 740 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

BlackBerry Ltd (NASDAQ:BBRY) remained Fairfax Financial’s largest holding at the end of the second quarter. Fairfax held around 46.72 million shares of BlackBerry at the end of the quarter, unchanged from the previous one, while the value of the holding amounted to $313.14 million, accounting for 20.50% of the equity portfolio. In addition, Fairfax Financial also held 500,000,000 shares of BlackBerry through a Promissory Note valued at $495.7 million at the end of June. Fairfax Financial first initiated a position in the smartphone maker in the third quarter of 2010. Although Fairfax Financial is extremely bullish on BlackBerry, the stock has fallen by nearly 22% so far this year. Last month, Raymond James released a bullish note on BlackBerry, highlighting the launch of the company’s second Android-powered smartphone, the DTEK50. Raymond James analyst Steven Li described the launch as a positive as there is minimum risk for the company since it is not designing nor making the phone itself. However, Li noted that there is an upside to the launch since it could create a new market for secured Android, something BlackBerry can license to other makers. Raymond James also raised its rating on the stock to ‘Outperform’ from ‘Market Perform’ and boosted the price target to $10.50 from $8. At the end of the second quarter, 20 funds we track held $529.87 million worth of BlackBerry shares, down from  24 funds holding $673.72 million worth of stock a quarter earlier.

International Business Machines Corp. (NYSE:IBM) is another stock that Fairfax Financial has a large position in. According to the fund’s 13F filing, it held 1.36 million shares of International Business Machines (unchanged over the quarter) worth $206.80 million at the end of June. International Business Machines accounted for 13.54% of the 13F portfolio value. International Business Machines is seen as a value stock, offering a dividend yield of 3.63%. International Business Machines is scheduled to release its third-quarter results on October 17 and the consensus forecast for earnings is at $3.23 per share, while revenue is estimated at $19 billion. A total of 53 of the funds in our database were long International Business Machines at the end of the second quarter, holding $14 billion in stock in aggregate of or 9.60% of the total outstanding shares, compared to 53 funds holding $14.16 billion worth of shares at the end of the previous quarter.

Kennedy-Wilson Holdings Inc (NYSE:KW) was Fairfax Financial’s fourth-largest position at the end of the second quarter. The fund held 8.95 million shares of Kennedy-Wilson Holdings shares at the end of the quarter, the market value of which stood at $169.78 million. The stake amassed 11.12% of Fairfax’s equity portfolio. The fund first initiated a position in the company in the second quarter of 2011. Kennedy-Wilson’s shares are down by more than 9% so far this year, but over the last five years, the stock has returned more than 90%. Earlier this week, Kennedy-Wilson announced that its Kennedy Wilson Real Estate Fund V has acquired a 100% stake in LIV Bel-Red, a 451-unit multifamily community in Bellevue, Washington. The transaction is valued at $172 million. The number of funds from our database long Kennedy-Wilson at the end of the June quarter stood at 16 and the aggregate value of their positions amounted to $350.26 million, which translated into 16.20% of the outstanding stock.

Resolute Forest Products Inc (NYSE:RFP) was Fairfax Financial’s largest position in the Materials sector and the fifth-largest in its equity portfolio. At the end of the June quarter, the fund held approximately 30.55 million shares of Resolute Forest Products, up by 1.50 million over the quarter. The value of the stake amounted to $161.60 million and amassed slightly over 10% of the fund’s equity portfolio. Despite the fund’s bullish stance, Resolute Forest’s stock has fallen by more than 36% so far this year. Earlier this month, Resolute Forest Products announced that it has signed a new senior secured credit agreement with an aggregate lender commitment of up to $185 million. The agreement includes a $46.25 million nine-year term loan and a $138.75 million six-year revolving credit facility. Among the funds we track, 16 held $227.64 million worth of Resolute Forest Products shares at the end of the second quarter, compared to 14 funds holding $238.57 million worth of shares a quarter earlier.

In Overstock.com Inc (NASDAQ:OSTK), Fairfax reported ownership of some 3.18 million shares worth $51.24 million at the end of the quarter. Overstock.com recently has announced that Keystone Capital Corporation selected its financial technology subsidiary t0’s blockchain-based trading technology to support a blockchain preferred share offering from Overstock.com. The number of investors from our database holding a long position in Overstock stood at 12 at the end of June, unchanged over the quarter, while the total value of their holdings went up to $86.44 million from $75.48 million and represented 21.20% of the float at the end of the second quarter.

Disclosure: none