Prem Watsa (Trades, Portfolio), the founder of Fairfax Financial Holdings Ltd. (TSX:FFH, Financial), disclosed this week that his company’s top five new buys during the first quarter were in Crescent Capital BDC Inc. (CCAP, Financial), Franklin Resources Inc. (BEN, Financial), Alphabet Inc. (GOOGL, Financial)(GOOG, Financial), Chevron Corp. (CVX, Financial) and Booking Holdings Inc. (BKNG, Financial).
Watsa earned an MBA at the University of Western Ontario’s Ivey School of Business. In 1985, he met Francis Chou (Trades, Portfolio), who told Watsa that Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio) made money by using insurance float.
The Fairfax chairman said in his 2019 annual letter that the company's book value per share increased over 14% for the year ending December 2019. Additionally, the investment portfolio achieved approximately an 8% return since inception. As of March 2020, Watsa’s $1.44 billion equity portfolio contains 57 stocks, of which 19 represent new holdings. The top three sectors in terms of weight are financial services, technology and real estate, representing 57.86%, 16.87% and 12.44% of the equity portfolio.
Crescent Capital
Fairfax purchased 3,796,246 shares of Crescent Capital, giving the stake a 2.54% weight in the equity portfolio. Shares averaged $13.88 during the first quarter.
The Los Angeles-based business development company seeks to achieve its investment objectives by investing in secured debt, unsecured debt and equity securities of private U.S. middle-market companies. According to GuruFocus, the company’s equity-to-asset ratio of 0.55 and debt-to-equity ratio of 0.79 are underperforming over 63% of global asset management competitors.
Michael Price (Trades, Portfolio) also has a holding in Crescent Capital.
Franklin Resources
Fairfax purchased 1 million shares of Franklin Resources, giving the position 1.16% weight in the equity portfolio. Shares averaged $23.06 during the first quarter.
The San Mateo, California-based company provides investment services for individual and institutional investors under brands like Franklin Templeton, Fiduciary and Darby. GuruFocus ranks Franklin Resources’ financial strength 8 out of 10 on the back of strong interest coverage of over 60 and a solid Altman Z-score of 3.51.
Gurus with large holdings in Franklin Resources include David Abrams (Trades, Portfolio)’ Abrams Capital Management and the T Rowe Price Equity Income Fund (Trades, Portfolio).
Alphabet
Fairfax purchased 13,731 Class A shares of Alphabet, giving the position 1.10% weight in the equity portfolio. Shares averaged $1,359.46 during the first quarter.
Watsa mentioned in his 2019 annual letter that the FAANG stocks had strong growth over the past 10 years. For example, Alphabet’s revenue has grown approximately 19.40% per year on average over the past 10 years and approximately 21.50% per year on average over the past three years, a rate that outperforms 69.82% of global competitors.
GuruFocus ranks Alphabet’s profitability 10 out of 10 on several positive investing signs, which include a four-star business predictability rank, a return on assets that outperforms 83.27% of global competitors and an operating margin that outperforms 80.12% of global interactive media companies despite contracting over the past 10 years.
Chevron
Fairfax purchased 155,800 shares of Chevron, giving the holding 0.78% weight in the equity portfolio. Shares averaged $99.58 during the first quarter.
The San Ramon, California-based company explores for, produces and refines oil and natural gas products worldwide. GuruFocus ranks Chevron’s profitability 6 out of 10: Operating margins are underperforming 64.65% of global competitors, although the company has net margins and returns on assets outperforming over 63% of global energy companies.
Booking
Fairfax purchased 6,500 shares of Booking, giving the position 0.61% weight in the equity portfolio. Shares averaged $1,767.55 during the first quarter.
GuruFocus ranks the Norwalk, Connecticut-based travel giant’s profitability 10 out of 10 on several positive investing signs, which include a 3.5-star business predictability rank and operating margins that are outperforming over 96% of global competitors.
Disclosure: No positions.
Read more here:
- Seth Klarman’s Top 5 New Buys in the 1st Quarter
- Top 5 Buys of Ray Dalio’s Bridgewater in the 1st Quarter
- Andreas Halvorsen’s Top 5 Buys in the 1st Quarter
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