Prem Watsa (Trades, Portfolio) has hedged his portfolio for several years, which has muted his returns but protected his investors from the possibility of a once-in-a-century economic disaster.
From 2011 to 2015, Watsa’s Fairfax Financial Holdings (TSX:FFH, Financial), an insurance conglomerate and investment vehicle styled like Buffett’s Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial), had an average total return on investments of 3%, its lowest period to date because of hedges. Since its founding, Fairfax’s book value increased at a compounded rate of 20.4% and its stock at 19.4% per year.
“We expect to make up (in a hurry!) for the low average total return on our investment portfolio over the past five years and, combined with disciplined underwriting results, return to average annual growth in book value per share of 15%,” Watsa said in this year’s letter.
His largest new first-quarter buys of seven were: ICICI Bank Ltd. (IBN, Financial), Leucadia National (Trades, Portfolio) Corp. (LUK, Financial), Starwood Hotels & Resorts Worldwide Inc. (HOT, Financial), The ADT Corp. (ADT, Financial) and Cleco Corp. (CNL, Financial).
ICICI Bank Ltd. (IBN, Financial)
Watsa purchased 1.5 million shares, representing 0.95% of the portfolio. The stock’s quarterly share price averaged $6.
ICICI Bank Ltd. has a market cap of $19.6 billion; its shares were traded around $6.75 with a P/E ratio of 12.65. The trailing 12-month dividend yield of ICICI Bank Ltd. stocks is 2.34%. The forward dividend yield of ICICI Bank Ltd. stocks is 2.24%. ICICI Bank Ltd. had an annual average earnings growth of 16.7% over the past 10 years. GuruFocus rated ICICI Bank Ltd. the business predictability rank of 2.5-star.
Leucadia National (Trades, Portfolio) Corp. (LUK, Financial)
Watsa purchased 300,000 shares of Leucadia National (Trades, Portfolio) Corp., worth 0.4% of the portfolio. The stock’s first-quarter share price averaged $16.
Leucadia National (Trades, Portfolio) Corp. has a market cap of $6.33 billion; its shares were traded around $17.48 with and P/S ratio of 0.63. The trailing 12-month dividend yield of Leucadia National (Trades, Portfolio) Corp. stocks is 1.41%. The forward dividend yield of Leucadia National (Trades, Portfolio) Corp. stocks is 1.42%. Leucadia National (Trades, Portfolio) Corp. had an annual average earnings growth of 0.6% over the past five years.
Starwood Hotels & Resorts Worldwide Inc. (HOT, Financial)
Watsa purchased 6,700 shares of Leucadia National (Trades, Portfolio) Corp., worth 0.05% of the portfolio. The stock’s first-quarter share price averaged $68.
Starwood Hotels & Resorts Worldwide Inc. has a market cap of $12.54 billion; its shares were traded around $73.96 with a P/E ratio of 26.13 and P/S ratio of 2.17. The trailing 12-month dividend yield of Starwood Hotels & Resorts Worldwide Inc. stocks is 2.02%. The forward dividend yield of Starwood Hotels & Resorts Worldwide Inc. stocks is 1.85%. Starwood Hotels & Resorts Worldwide Inc. had an annual average earnings growth of 2.6% over the past 10 years.
The ADT Corp. (ADT, Financial)
Watsa purchased 12,500 shares of ADT Corp., worth 0.05% of the portfolio. The stock’s first quarter share price was $35.
The ADT Corp. has a market cap of $6.94 billion; its shares were traded around $41.98 with a P/E ratio of 24.55 and P/S ratio of 1.99. The trailing 12-month dividend yield of The ADT Corp. stocks is 2.02%. The forward dividend yield of the ADT Corp. stocks is 2.1%.
Watsa purchased 9,200 shares, worth 0.05% of the portfolio. The stock’s first quarter share price was $51.
Cleco Corp. has a market cap of $3.35 billion; its shares were traded around $55.36 with a P/E ratio of 25.16 and P/S ratio of 2.78. The trailing 12-month dividend yield of Cleco Corp. stocks is 2.89%. The forward dividend yield of Cleco Corp. stocks is 2.89%. Cleco Corp. had an annual average earnings growth of 3.9% over the past 10 years.
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