Prem Watsa is known for running the extremely successful insurance company Fairfax, increasing its book value by 25% for 25 years. Besides running successful business, he is also a great investor. He has made sizable gains by investing in common stocks, too.
Prem Watsa’s investment idol is Ben Graham, and he spent a great deal of time studying Ben Graham. During our interview with him, he repeatedly mentioned Ben Graham. Running an insurance company, he is extremely cautious with risks. He said several times that Ben Graham wrote “If you were not bearish, if you're not concerned about the economy in 1925, not in 1927, 28, 29, but in 1925, there was only a 1/100 chance that you survived the depression, because what'd you have looked at was if you were not bearish in 1925, you'd have seen the crash in 1929, drop 50%, and you'd have come right in and thought of it as an opportunity, because the Dow Jones dropped from 400 to 200, went back up to 300, and the second leg after that was a killer, dropping about 90%!!”
Prem Watsa is certainly a Ben Graham type of investor. He looks to buy stocks that are cheap to their book values, and holds them for long term. This can be clearly seen from his investment portfolio. He bought Bank of Ireland (IRE) with the thought that the book value is about 0.3 Euro per ordinary shares. He will usually average down, i.e. buy more if the stock prices go down. This is one of secrets to the success.
This is exactly what he is doing with Research-in-Motion (RIMM) and AbitibiBowater (ABH). In the quarter ended on March 31, 2012, he added to his positions in both of them, as the stock prices decline.
Prem Watsa started to buy Research-In-Motion in the third quarter of 2010. He bought about 2 million shares when the stock was trading in the $50s. He then added to his position as the stock price collapsed to the $40s then $30s and $20s in 2011. The last time he bought was January of 2012. He doubled down on his position and bought another 14 million shares. We estimate that his cost per share is around $30. He owns 26.8 million shares as of January 2012, which is about 5% of the shares outstanding. At the current price of around $12 a share, Prem Watsa has had more than $400 million of paper loss with his position in Research-In-Motion.
His position with AbitibiBowater was received from debt conversion. He bought the debt of the company at good prices. The debt was converted to shares as the company emerges from bankruptcy.
It is interesting to see Prem Watsa keep seeking Well Fargo (WFC), the bank that Warren Buffett loves and has in his personal portfolio. This is the holding history of Prem Watsa with Wells Fargo
Here is the complete portfolio of Prem Watsa. Also check out the Undervalued Stocks, Top Growth Companies, and High Yield stocks of Prem Watsa.