Prem Watsa Significantly Increases US Bancorp, Buys 4 Stocks

Watsa went big on the bank and added for smaller positions in Q4

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Feb 15, 2017
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Prem Watsa (Trades, Portfolio) devoted most of his fourth-quarter portfolio activity to building onto holdings he already owned, starting only four small new stock positions, the Fairfax Financial CEO reported Monday.

Watsa’s meager stock buying seemed to be at odds with the upbeat outlook for the economy under a Donald Trump presidency he gave in December. Policies that reduce taxes, bureaucracy and regulation while boosting infrastructure spending would spur significant growth, Watsa, said.

But Watsa has been spending big on acquisitions. He paid $4.9 billion in the quarter on his largest acquisition ever, of Allied World Assurance Co., citing confidence in a pro-business president. On Jan. 13 he increased his ownership in Fairfax India and on Feb. 8 announced an all-cash offer for Tower, a holding company for Tower Insurance .

Only a month and a half into his presidency and beset with difficulties, Trump also has yet to implement many of economy-stimulating changes Watsa is looking to for growth, though the market continues its post-election rally.

Prior to the election, Watsa had primarily sat on the sidelines for years, hedging his portfolio for safety at the cost of some returns in the bull market. His Canadian insurance conglomerate Fairfax Financial (TSX:FFH, Financial) has grown at a compound rate of 20.4% since inception, compared to 19.2% for Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway (BRK.A)(BRK.B), which operates similarly.

Like many prominent investors, Watsa boosted his exposure to financials, increasing his US Bancorp (USB, Financial) position by 1,659%. He purchased 384,800 shares, increasing his total holding to 408,000 shares and giving it a portfolio weight of 1.79%. The stock traded around $48 per share for the quarter. The position represented his biggest portfolio increase.

New stocks

Monsanto Co. (MON, Financial)

Watsa bought 6,200 shares of Monsanto, which traded for an average price around $103 in the quarter. The stock represents 0.06% of his portfolio.

Monsanto has a market cap of $47.85 billion; its shares were traded around $109.11 with a P/E ratio of 29.49 and P/S ratio of 3.47. The trailing 12-month dividend yield of Monsanto stocks is 1.99%. The forward dividend yield of Monsanto stocks is 2.01%. Monsanto had an annual average earnings growth of 9.40% over the past 10 years. GuruFocus rated Monsanto the business predictability rank of 3.5-star.

The Valspar Corp. (VAL, Financial)

Watsa bought 6,200 shares of Valspar, giving it a 0.06% portfolio weight. The stock traded for around $103 per share in the quarter.

The Valspar has a market cap of $8.8 billion; its shares were traded around $110.79 with a P/E ratio of 25.44 and P/S ratio of 2.13. The trailing 12-month dividend yield of The Valspar stocks is 1.23%. The forward dividend yield of The Valspar stocks is 1.34%. The Valspar had an annual average earnings growth of 10.30% over the past 10 years.

Destination Maternity Corp. (DEST, Financial)

Watsa bought 70,000 shares of Destination Maternity, which traded for around $7 a share in the quarter. The stock has a 0.03% portfolio weight.

Destination Maternity has a market cap of $74.400 million; its shares were traded around $5.31 with and P/S ratio of 0.16. The trailing 12-month dividend yield of Destination Maternity stocks is 3.77%.

Team Health Holdings Inc. (TMH, Financial)

Watsa bought 6,000 shares of Team Health Holdings, which traded around $41 in the quarter. The stock traded around $41 per share in the quarter.

Team Health Holdings has a market cap of $3.24 billion; its shares were traded around $43.50 with a P/E ratio of 167.31 and P/S ratio of 0.74. Team Health Holdings had an annual average earnings growth of 24.50% over the past five years.

See Prem Watsa (Trades, Portfolio)’s portfolio here.