Investment Guru of the Year 2008: Prem Watsa of Fairfax Financial Holdings

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Dec 29, 2008
We are very glad to announce that Prem Watsa has been nominated as Investment Guru of the Year for 2008 by our readers.


Prem Watsa was born in 1950 in Hyderabad, India and is the founder, chairman, and chief executive of Fairfax Financial Holdings, based in Toronto, Ontario. He has been called the "Canadian Warren Buffett" by some during successful periods of investing in the past. He is a Chartered Financial Analyst, a graduate of the Indian Institute of Technology with a degree in Chemical Engineering and a holder of an MBA from the Richard Ivey School of Business of the University of Western Ontario.


In 1985 Mr. Watsa started his insurance company Fairfax Holdings by buying Markel Financial Holdings, a Canadian-based specialist in trucking insurance from the Virginia-based Markel family. Fairfax then bought up beat-up P&Cs on the cheap, and turned them around by improving their core operations and by generating more profits from their investment portfolio. Since 1985 Fairfax has grown its book value per share 26% a year over the past 22 years and its stock price has gained 23% per year. This kind of numbers can only be seen from companies like Berkshire Hathaway (BRK-A) and Leucadia National (LUK). Over the same period, Fairfax’s investment portfolio gained 9.5% a year.


In 2007, Mr. Watsa saw the storms coming, and hedged his portfolio for a 1 in 50 or 1 in 100 crisis. His portfolio greatly benefited from what happened afterwards. As the market was cut almost in half from its peak, Mr. Watsa went on removing the hedge in his equity portfolio and buying, as reported by Fairfax.


His current best investment idea: Johnson & Johnson (JNJ, Financial). He wrote in the shareholder letter: “I am pleased to say we have identified one position that we feel very comfortable holding for a very long time because of its excellent track record, wonderful culture and decentralized structure of operations. Johnson & Johnson has perhaps the best long term track record we have come across. They have compounded sales and earnings for the last 100 years in excess of 10% per year. The growth prospects for their products on a worldwide basis are unlimited. We own 5.9million shares at a cost of $62.29 per share with a market value of $370 million. We think in the next few years, Mr. Market may give us many more opportunities like Johnson & Johnson that we can purchase at attractive prices for the long term. If we choose properly, you may be pleased with our rate of compounding of book value in the future.”


A GuruFocus reader, Augustabound, said: “I'm with Prem Watsa. He made millions for his company by calling the recent problems in the market.” This was seconded by Kfh227. Prem Watsa, along with a few others such as Robert Rodriguez, all predicted the crisis. Ustaad, a GuruFocus reader, said “ Prem Watsa. He along with Bill Ackman and Bob Rodeiquez were my three choices. All 3 predicted (to different extents), the crisis but Watsa had the boldest moves (to invest a ton of money on CDS while FFH was raising equity).”


Congratulations, Mr. Watsa!!