A generally cautious investor, Watsa noted in his fourth quarter 2012 letter that he continues to be fully hedge in his common stock portfolio due to issues with the economy, unemployment, record-high stock market, money printing and Europe.
“In spite of QE1, QE2 and recently QE3, the economic fundamentals remain weak while stock markets and bond markets are back to near record levels, leading Gary Shilling, one of the best economists we know, to call this ‘the grand disconnect,’” he said in his letter. “This ‘disconnect’ or gap will be closed by either eco- nomic fundamentals rising to meet the financial markets or the markets coming down to meet the fundamentals. We think that the latter is likely and that the Fed has simply postponed the inevitable by its QE1, QE2 and QE3 actions.”
New Buy Details
Watsa bought 37,500 shares of Zhongpin Inc. for $13 per share on average in the first quarter. The holding has a 0.018% portfolio weighting.
Zhongpin is a U.S.-traded met and food processing company located in the Peoples Republic of China, focusing on developing a high-quality brand. On Nov. 26, Zhongpin announced it planned a merger with Golden Bridge Holdings Limited, Golden Bridge Merger Sub Limited and the company’s chairman, Xianfu Zhu. Shareholders will receive the right to $13.50 in cash for each of their shares. The merger will take the company private.
Zhongpin Inc. has a market cap of $481.6 million; its shares were traded at around $12.91 with a P/E ratio of 11.00 and P/S ratio of 0.30. Zhongpin Inc. had an annual average earnings growth of 16.9% over the past five years.
See Prem Watsa’s portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Prem Watsa.