Canada’s Prem Watsa follows Warren Buffett’s footsteps in many ways. Like Buffett, Watsa built his own empire investing the floats generated by insurance subsidiaries brilliantly. Both men measure their success by the rate of increase of their respective firm’s book value. Buffett compounded Berkshire Hathaway from 1965 to 2009 at an average annual rate of 20.3%; Watsa has a shorter tenure – from 1985 to 2009, he compounded FairFax Financial’s book value per share at a rate of 26%!
But that doesn’t mean Watsa would not deviate from Buffett’s thinking at any giving time. While Buffett has always been bullish towards The U.S. as a country and its economy, Wasta does not share Buffett’s sentiment sometime – what do you expect? Watsa is a Canadian, and you how folks up there think about us.
Recently, CTV of Canada has an article entitled Fairfax's Prem Watsa sees commodity bubble brewing,written by Tim Kiladze. The article contains a segment on Watsa’s view towards US stocks:
GuruFocus tracks Watsa’s US-traded stock holdings. Upon studying his trading activities, we found some interesting shifts.
Before I talk about these trades, I would like to quote some of Watsa’s writing in his annual letters dealing with stock investing.
In the 2008 letter, Wasta stated:
But apparently there has been some shift in his thinking as in the 3Q10, Watsa sold some of the very stocks he vowed to hold for a long time. Here are his top sells during the week:
Frequent readers of GuruFocus would know WFC, USB, KFT, WSC are all Warren Buffett’s holdings. Watsa liked them too, but for some reason, he is ready to move on.
Check out Watsa’s complete US stock portfolio by clicking on Prem Watsa.
Also check out:
But that doesn’t mean Watsa would not deviate from Buffett’s thinking at any giving time. While Buffett has always been bullish towards The U.S. as a country and its economy, Wasta does not share Buffett’s sentiment sometime – what do you expect? Watsa is a Canadian, and you how folks up there think about us.
Recently, CTV of Canada has an article entitled Fairfax's Prem Watsa sees commodity bubble brewing,written by Tim Kiladze. The article contains a segment on Watsa’s view towards US stocks:
Mr. Watsa said there are valid concerns about the U.S. market. He worries, for instance, that U.S. investors are so psychologically battered by a protracted recession that they might not return to equities at all.
His concern stems from Japan’s experience over the past two decades. Even though the Nikkei index has plummeted 75 per cent and some of its companies are trading at less than the value of their cash and liquid assets, the Japanese won’t invest in their own market. They would rather buy government bonds yielding 1 per cent because they can’t forget the initial crash in 1990.
The U.S. stock market isn't in nearly as rough shape, Mr. Watsa said, but the country's house prices have plummeted and that hit on total wealth might take a long time to forget.
Because Fairfax doesn’t like putting all its eggs in one basket, it’s keen on emerging markets over the long term. But Mr. Watsa stressed that in the short run, these countries will fluctuate, whereas “long term in a country like India: massive opportunity.”
GuruFocus tracks Watsa’s US-traded stock holdings. Upon studying his trading activities, we found some interesting shifts.
Before I talk about these trades, I would like to quote some of Watsa’s writing in his annual letters dealing with stock investing.
In the 2008 letter, Wasta stated:
In last year’s Annual Report, we discussed the change in our financial objectives going forward from a return on shareholders’ equity objective to a 15%compounding over time of our mark-to market book value. I mentioned the favorable impact on our rate of compounding of holding some common stock positions for the very long term. 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.Then in the 2009 Letter, he continued his line of thinking of identifying some stocks and holding them for a long time:
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 5.9 million shares at a cost of $62.29 per share with a market value of $370million.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.
In previous annual reports, we have discussed the holding of some common stock positions for the very long term. Last year we identified Johnson & Johnson as one name and said that Mr. Market may give us more opportunities in the future. As shown in the table below, at the end of 2008 we had taken advantage of the major decline in stock prices to purchase additional positions in outstanding companies with excellent long term track records which we contemplate holding for the long term.The table Watsa referred to in the 2009 letter listed Johnson & Johnson, Kraft Foods and Wells Fargo Bank as such candidates for “hoolding for the long term”.
But apparently there has been some shift in his thinking as in the 3Q10, Watsa sold some of the very stocks he vowed to hold for a long time. Here are his top sells during the week:
No. 1: Wells Fargo & Company (WFC, Financial), Reduce: -10.54% of the portfolio - Total: 4,540,530 Shares
Wells Fargo & Company is a diversified financial services company. Wells Fargo & Company has a market cap of $157.57 billion; its shares were traded at around $30.02 with a P/E ratio of 17.4 and P/S ratio of 1.6. The dividend yield of Wells Fargo & Company stocks is 0.7%. Wells Fargo & Company had an annual average earning growth of 5.1% over the past 10 years.No. 2: U.S. Bancorp (USB, Financial), Reduce: -6.52% of the portfolio - Total: 4,448,310 Shares
U.S. Bancorp is a financial services holding company. U.s. Bancorp has a market cap of $50.07 billion; its shares were traded at around $26.1 with a P/E ratio of 16.9 and P/S ratio of 2.6. The dividend yield of U.s. Bancorp stocks is 0.8%. U.s. Bancorp had an annual average earning growth of 2.1% over the past 10 years.No. 3: Kraft Foods Inc. (KFT), Reduce: -6.51% of the portfolio - Total: 5,365,751 Shares
Kraft Foods, Inc. is the largest branded food and beverage company headquartered in the U. Kraft Foods Inc. has a market cap of $55.27 billion; its shares were traded at around $31.64 with a P/E ratio of 15.7 and P/S ratio of 1.3. The dividend yield of Kraft Foods Inc. stocks is 3.7%. Kraft Foods Inc. had an annual average earning growth of 1.7% over the past 5 years.No. 4: 1st Century Bancshares Inc (FCTY, Financial), Sell: 0.01% of the portfolio - Total: 0 Shares
1st Century Bancshares, Inc. is a bank holding company that operates through its wholly owned subsidiary, 1st Century Bank, National Association that provides a range of commercial banking services in California. 1st Century Bancshares Inc has a market cap of $37.3 million; its shares were traded at around $4 .No. 5: Wesco Financial Corp (WSC, Financial), Sell: 0.02% of the portfolio - Total: 0 Shares
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. Wesco Financial Corp has a market cap of $2.6 billion; its shares were traded at around $364.98 with a P/E ratio of 37.1 and P/S ratio of 3.2. The dividend yield of Wesco Financial Corp stocks is 0.5%.Frequent readers of GuruFocus would know WFC, USB, KFT, WSC are all Warren Buffett’s holdings. Watsa liked them too, but for some reason, he is ready to move on.
Check out Watsa’s complete US stock portfolio by clicking on Prem Watsa.
Also check out:
