(GuruFocus, September 25, 2009) In investing, size matters. Young Warren Buffett invests differently from the same Buffett today. Prem Watsa, the boss of Fairfax Financial Holdings or otherwise known as the “Warren Buffett from the North” , seems to have more flexibility and ingenuity in the past couple of years than Warren Buffett. During the housing/financial and credit crisis in the past couple of years, Prema Watsa made one billion dollars by shorting CDS that are tied to residential mortgages. And Buffett stayed long on everything. He doesn’t approve people playing with financial derivatives, yet he sold put options on stock index that will expire in distant future, which essentially is still a long strategy.
Of course, Buffett makes good money on the long side as well. His investment into GE and Goldman Sachs at the late stage of the crisis is paying off handsomely.
It is just the expectation for Guys like Buffett are so high that he should be able to make money both ways.
The difference? Watsa manages a balance sheet of a couple of billions of dollars and Buffett manages a couple of hundred billions. It is much more easies for the former to get in and out of market, either long or short.
And Watsa can have both ways. Having had made his billion dollars, he took away the hedges on the equity late last year and start to buy into stocks he thinks he can hold forever. Watsa is going long again.
But as we discovered, he started from the list of stocks that Buffett owns and bought his stakes in many of them. These are the stock ideas he shares with Buffett, a total 12 of them:
And he is really doing well with his portfolio:
Don’t be fooled by the sharp run up lately of the portfolio, much of that is due to price change in Odyssey Re Holding (ORH). Watsa owns 72.5% in the company and he is buying the rest shares at about 30% premium. Read the company press release for details. Prem issued $1 billion worth of Fairfax stocks to pay for the acquisition. How do you make it? Do you think he consider FFH over valued or ORH undervalued (at $65), or both?
Get back to the ideas that he shares with Buffett, here are the brief review of the first six companies:
Wells Fargo & Company (WFC)
Wells Fargo & Company is a diversified financial services company providing banking insurance investments mortgage and consumer finance services through stores its Internet site and other distribution channels across North America as well as internationally. (Company Press Release) Wells Fargo & Company has a market cap of $132.91 billion; its shares were traded at around $28.45 with a P/E ratio of 32 and P/S ratio of 2.5. The dividend yield of Wells Fargo & Company stocks is 0.7%. Wells Fargo & Company had an annual average earning growth of 10.8% over the past 10 years. GuruFocus rated Wells Fargo & Company the business predictability rank of 4-star.
Buffett owns 302,609,212 shares as of 06/30/2009 and Watsa owns 20,028,700 shares.
Burlington North/Santa Fe (BNI)
Burlington North/Santa Fe through its subsidiary The Burlington Northern and Santa Fe Railway Company operates one of the largest railroad networks in North America. This vast network covers the western two-thirds of the United States stretching from major Pacific Northwest and Southern California ports to the Midwest Southeast and Southwest and from the Gulf of Mexico to Canada. Burlington Northern Santa Fe Corp. has a market cap of $27.88 billion; its shares were traded at around $81.98 with a P/E ratio of 14.3 and P/S ratio of 1.6. The dividend yield of Burlington Northern Santa Fe Corp. stocks is 1.9%. Burlington Northern Santa Fe Corp. had an annual average earning growth of 8.1% over the past 10 years. GuruFocus rated Burlington Northern Santa Fe Corp. the business predictability rank of 2.5-star.
Buffett owns 76,777,029 shares as of 06/30/2009 and Watsa owns 2,088,000 shares
Johnson & Johnson (JNJ)
Johnson & Johnson is engaged in the manufacture and sale of a broad range of products in the health care field in many countries of the world. The company's worldwide business is divided into three segments: Consumer; Pharmaceutical; and Professional. Johnson & Johnson has a market cap of $167.33 billion; its shares were traded at around $60.72 with a P/E ratio of 13.4 and P/S ratio of 2.6. The dividend yield of Johnson & Johnson stocks is 3.2%. Johnson & Johnson had an annual average earning growth of 12.5% over the past 10 years. GuruFocus rated Johnson & Johnson the business predictability rank of 4.5-star.
Buffett owns 36,914,633 shares as of 06/30/2009 and Watsa owns 6,884,300 shares .
Kraft Foods Inc. (KFT)
Kraft Foods Inc. is the largest branded food and beverage company headquartered in the U.S. and the second largest in the world. They have a superior brand portfolio created and supported through dynamic product innovation worldclass marketing experienced management global scale and strategic acquisitions. Consumers of all ages around the world enjoy their brands across the entire spectrum of food and beverage occasions: breakfast lunch dinner and snacks. Brands include Kraft Nabisco Oscar Mayer Post Maxwell House Philadelphia and Jacobs. Kraft Foods Inc. has a market cap of $38.91 billion; its shares were traded at around $26.38 with a P/E ratio of 14.1 and P/S ratio of 0.9. The dividend yield of Kraft Foods Inc. stocks is 4.3%.
Buffett owns 138,272,500 shares as of 06/30/2009 and Watsa owns 9,949,871 shares.
U.S. Bancorp (USB)
U.S. Bancorp is a financial services holding company. They operate full-service branch offices and ATMs and provides a comprehensive line of banking brokerage insurance investment mortgage trust and payment services products to consumers businesses and institutions. U.S. Bancorp is the parent company of Firstar Bank and U.S. Bank. U.s. Bancorp has a market cap of $41.87 billion; its shares were traded at around $21.9 with a P/E ratio of 26.4 and P/S ratio of 2.2. The dividend yield of U.s. Bancorp stocks is 0.9%. U.s. Bancorp had an annual average earning growth of 13.4% over the past 10 years. GuruFocus rated U.s. Bancorp the business predictability rank of 3.5-star.
Buffett owns 69,039,426 shares as of 06/30/2009 and Watsa owns 15,870,900 shares.
Wesco Financial Corp. (WSC)
Wesco Financial Corp. is engaged in three principal businesses through wholly owned subsidiaries: the insurance business through Wesco-Financial Insurance Company and The Kansas Bankers Surety Company; and the steel service center business through Precision Steel Warehouse Inc. and the furniture rental center through CORT Business Services Corporation. Wesco Financial Corp has a market cap of $2.25 billion; its shares were traded at around $316.33 with a P/E ratio of 33.1 and P/S ratio of 2.8. The dividend yield of Wesco Financial Corp stocks is 0.5%. Wesco Financial Corp had an annual average earning growth of 2.8% over the past 10 years.
Buffett owns 5,703,087 shares as of 06/30/2009, Watsa owns 1,100 shares. Watsa owns some shares so he can go to Charlie Munger’s annual shareholder conference? Watsa also owns 120 shares of Berkshire Hathaway Class B and he goes to Berkshire’s annual meetings.
Great minds think alike. Watsa share 12 ideas with Buffett and he bought Berkshire stocks. So it is not just you and I have the tendency of piggy-backing Buffett.
For the remainder of the 12, visit Aggregated Guru Portfolio feature of GuruFocus.
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