According to the Aggregated Portfolio, a GuruFocus Premium feature, three stocks Prem Watsa (Trades, Portfolio) and Francis Chou (Trades, Portfolio) both agree on as of third quarter-end are Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial), Resolute Forest Products Inc. (RFP, Financial) and BlackBerry Ltd. (BB, Financial).
Background
Watsa studied at the Indian Institute of Technology and later pursued an MBA at the Ivey Business School at the University of West Ontario. In 1985, Watsa met Chou, who casually asked how Buffett “made his money.” Chou pointed out to Watsa something the future Fairfax Financial Holdings Ltd. (TSX:FFH, Financial) CEO did not realize: Buffett made money through insurance float. Watsa purchased Markel Financial for $5 million and in 1986 renamed it Fairfax Financial, meaning “fair, friendly acquisitions.”
On the other hand, Chou started as a telephone repairman, yet still managed to acquire books from legendary value investor Benjamin Graham. In 1981, he started an investment club with six of his fellow telephone repairmen and turned it into Chou Associates Fund in 1986.
Berkshire Hathaway
As of Sept. 30, Watsa and Chou have a combined weight of 28.85% in Berkshire’s Class A stock, with shares averaging $309,558 during the quarter. Despite this, Watsa’s conglomerate owns just one share while Chou’s fund owns 150 shares. Additionally, Buffett’s conglomerate is Chou’s top holding according to the Top-10 Holdings views, a Premium feature of GuruFocus.
Buffett and co-manager Charlie Munger (Trades, Portfolio) seek long-term capital appreciation through a four-criterion investment approach, selecting stocks with predictable revenue and earnings, strong economic moat, no debt while growing its business and trading at attractive valuations based on the price-earnings-to-growth ratio.
Watsa mentioned in his 2018 shareholder letter that Fairfax seeks to achieve a 7% return on its investment portfolio through equity investments using a value-oriented approach. Likewise, Chou seeks bargain investments in companies with strong balance sheets, cash flows, profitability and industry position.
Resolute Forest Products
Watsa and Chou have a combined weighting of 21.85% in Resolute Forest Products as of quarter-end. The Fairfax leader owns 30,548,190 shares, giving the stake 8.61% equity portfolio weight, while Chou owns 4,571,960 shares, giving the position 13.24% equity portfolio weight.
The Montreal, Quebec-based company produces forest products like market pulp, tissue, wood, newsprint and specialty papers. GuruFocus ranks the company’s financial strength 5 out of 10: Although Resolute’s debt ratios outperform over 64% of global competitors, it has a weak Altman Z-score of 0.89 and a cash-to-debt ratio that underperforms 62.54% of global forest product producers.
BlackBerry
Watsa and Chou have a combined weighting of 16.40% in BlackBerry as of quarter-end. Watsa’s 46,724,700 shares represent 14.69% of the equity portfolio, while Chou’s 529,040 shares represent just 1.71% of the equity portfolio.
The Waterloo, Ontario-based company designs and markets wireless handsets and software. GuruFocus ranks BlackBerry’s financial strength 5 out of 10: Although the company’s equity-to-asset ratio outperforms 64.03% of global competitors, its cash-to-debt ratio and debt-to-equity ratio underperform over 59% of global infrastructure companies.
Disclosure: No positions.
Read more here:
- Michael Burry’s Top 5 Holdings
- Top 4 Holdings of Howard Marks’ Oaktree
- Wasatch International Growth’s Top 5 Buys of the 3rd Quarter
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