Fairfax Financial Holdings‘ recently published its 2018 Annual Letter, in which its founder and CEO, Prem Watsa, discussed his latest thought on several companies from its 13F portfolio. You can download a copy of the letter – here. Among those stocks was Resolute Forest Products Inc. (NYSE:RFP), for which Prem Watsa said that it has been a lousy investment for a while.
We have invested $791 million in Resolute and received a special dividend of $46 million, for a net investment cost of $745 million. Our initial investment was a convertible bond purchased in 2008 for $347 million.We invested an additional $131 million prior to Resolute entering into creditor protection and most of the remainder during the period from December 2010 to 2013. Subsequent to write-downs and our share of profits and losses overtime, at December 31, 2018 we held our 30.4 million Resolute shares in our books at $300 million ($9.87 per share). The current fair market value of these shares is $244 million ($8.03 per share). You can see that Resolute has been a very poor investment to date!
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Resolute Forest Products is a pulp and paper manufacturer formed as a result of a merger between Abitibi-Consolidated and Bowater Inc. back in 2007. It has a market cap of $741.53 million, while trading at a price-to-earnings ratio of 3.21. Over the last 12 months, its shares lost almost 16%, having a closing price on March 29th of $7.90.
Heading into the first quarter of 2019, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards RFP over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Resolute Forest Products Inc (NYSE:RFP) was actually held by Fairfax Financial Holdings, which reported holding $242.2 million worth of stock at the end of September. It was followed by Chou Associates Management with a $36.3 million position. Other investors bullish on the company included Renaissance Technologies, Arrowstreet Capital, and Prescott Group Capital Management.
In its last financial report for the fourth quarter of 2018, Resolute Forest Products disclosed net income of $36 million or $0.38 per diluted share, versus $13 million, or $0.14 per diluted share in the corresponding quarter of 2017.
Disclosure: None.
This article was originally published at Insider Monkey.
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For example S&P 500 Index returned 43.4% in 1958. If Warren Buffett’s hedge fund didn’t generate any outperformance (i.e. secretly invested like a closet index fund), Warren Buffett would have pocketed a quarter of the 37.4% excess return. That would have been 9.35% in hedge fund “fees”.
Actually Warren Buffett failed to beat the S&P 500 Index in 1958, returned only 40.9% and pocketed 8.7 percentage of it as “fees”. His investors didn’t mind that he underperformed the market in 1958 because he beat the market by a large margin in 1957. That year Buffett’s hedge fund returned 10.4% and Buffett took only 1.1 percentage points of that as “fees”. S&P 500 Index lost 10.8% in 1957, so Buffett’s investors actually thrilled to beat the market by 20.1 percentage points in 1957.
Between 1957 and 1966 Warren Buffett’s hedge fund returned 23.5% annually after deducting Warren Buffett’s 5.5 percentage point annual fees. S&P 500 Index generated an average annual compounded return of only 9.2% during the same 10-year period. An investor who invested $10,000 in Warren Buffett’s hedge fund at the beginning of 1957 saw his capital turn into $103,000 before fees and $64,100 after fees (this means Warren Buffett made more than $36,000 in fees from this investor).
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