Billionaire investor Prem Watsa (Trades, Portfolio), the leader of Fairfax Financial Holdings (TSX:FFH, Financial), disclosed his third-quarter equity portfolio on Monday.
Known as “Canada’s Warren Buffett (Trades, Portfolio),” the guru’s investment strategy mimics the practices of the Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) CEO in that his insurance conglomerate purchases entire companies as well as invests its float in publicly traded companies in order to achieve a high rate of return.
For the three months ended Sept. 30, 13F filings show the guru entered seven new positions, sold out of one stock and added to or trimmed a number of other existing investments. His most notable trades included a new stake in Orla Mining Ltd. (ORLA, Financial), increased bets on Micron Technology Inc. (MU, Financial) and Bank of America Corp. (BAC, Financial) as well as reduced holdings of H&R Block Inc. (HRB, Financial) and Crescent Capital BDC Inc. (CCAP, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but the reports can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Orla Mining
The guru invested in 10.22 million shares of Orla Mining (ORLA, Financial), allocating 0.92% of the equity portfolio to the stake. The stock traded for an average price of $3.07 per share during the quarter.
It is now Watsa’s 10th-largest holding.
The Canadian gold miner has a $1.09 billion market cap; its shares were trading around $3.60 on Tuesday with a price-earnings ratio of 447.5, a price-book ratio of 4.37 and a price-sales ratio of 10.76.
The price chart shows the stock has fallen around 7.22% year to date.
The GF Score of 42 out of 100 indicates the company has poor future performance potential based on a low profitability rank, a middling financial strength rating and high marks for momentum. However, the company did not receive growth or GF Value ratings, so its true potential may not be accurately reflected.
Of the gurus invested in Orla Mining, Watsa has the largest stake with 3.39% of its outstanding shares. First Eagle Investment (Trades, Portfolio) also owns the stock.
Micron Technology
Watsa boosted the Micron Technology (MU, Financial) position by 399.29%, picking up 2.76 million shares. The transaction had an impact of 3.91% on the equity portfolio. Shares traded for an average price of $58 each during the quarter.
The investor now holds 3.46 million shares total, which account for 4.89% of the equity portfolio and is now the fifth-largest holding. GuruFocus estimates he has gained 12.25% on the investment so far.
The semiconductor company, which is headquartered in Boise, Idaho, has a market cap of $69.77 billion; its shares were trading around $64.14 on Tuesday with a price-earnings ratio of 8.30, a price-book ratio of 1.41 and a price-sales ratio of 2.34.
According to the GF Value Line, which is based on historical ratios, past financial performance and analysts’ future earnings projections, the stock is modestly undervalued currently.
The GF Score of 93 means the company has high outperformance potential, driven by high marks for financial strength, profitability, growth, GF Value and momentum.
With a 3.66% stake, PRIMECAP Management (Trades, Portfolio) is Micron’s largest guru shareholder. Other top guru investors include Li Lu (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio), Seth Klarman (Trades, Portfolio), Hotchkis & Wiley, Mohnish Pabrai (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio) and the Parnassus Endeavor Fund (Trades, Portfolio).
Bank of America
The investor upped the Bank of America (BAC, Financial) holding by 20.7%, buying 531,771 shares. The transaction impacted the equity portfolio by 0.45%. During the quarter, the stock traded for an average per-share price of $33.43.
Watsa now holds a total of 3.1 million shares, which occupy 2.64% of the equity portfolio and is the sixth-largest holding. GuruFocus says he has gained an estimated 6.89% on the investment since being established in the second quarter.
The Charlotte, North Carolina-based bank has a $305.53 billion market cap; its shares were trading around $38.09 on Tuesday with a price-earnings ratio of 12.05, a price-book ratio of 1.27 and a price-sales ratio of 3.37.
Based on the GF Value Line, the stock appears to be fairly valued currently.
Further, the GF Score of 70 means the company is likely to have poor performance potential. It received high points for momentum, middling marks for GF Value and profitability and low grades for growth and financial strength.
Buffett is Bank of America’s largest guru shareholder with a 12.57% stake. Dodge & Cox, PRIMECAP, Ken Fisher (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Li Lu (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Bill Nygren (Trades, Portfolio) and many other gurus also own the stock.
H&R Block
With an impact of -0.11% on the equity portfolio, the H&R Block (HRB, Financial) stake was trimmed 7.66%, shedding 85,875 shares. The stock traded for an average price of $42.32 per share during the quarter.
Watsa now holds 1.03 million shares total, which make up 1.24% of the equity portfolio and is now the ninth-largest holding. GuruFocus data shows he has gained around 95.89% on the investment over its lifetime.
The tax preparation service provider, which is headquartered in Kansas City, Missouri, has a market cap of $6.39 billion; its shares were trading around $41.12 on Tuesday with a price-earnings ratio of 12.65 and a price-sales ratio of 1.96.
The GF Value Line suggests the stock is significantly overvalued currently.
The company’s GF Score of 72 indicates the company is likely to have average performance going forward based on high points for profitability and growth, middling marks for financial strength and low grades for GF Value and momentum.
Of the gurus invested in H&R Block, Jim Simons (Trades, Portfolio)’ Renaissance Technologies has the largest stake with 0.84% of its outstanding shares. Chuck Royce (Trades, Portfolio), Hotchkis & Wiley, Jeff Auxier (Trades, Portfolio), Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Lee Ainslie (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), John Hussman (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) also own the stock.
Crescent Capital BDC
Impacting the equity portfolio by -0.07%, Watsa curbed the Crescent Capital (CCAP, Financial) position by 6.16%, selling 137,278 shares. During the quarter, shares traded for an average price of $16.87 each.
The guru now holds 2.09 million shares in total, representing 0.88% of the equity portfolio. GuruFocus found he has gained approximately 13.45% on the investment so far.
The Los Angeles-based business development company, which focuses on originating and investing in the debt of private middle-market companies, has a $425.32 million market cap; its shares were trading around $13.91 on Tuesday with a price-earnings ratio of 16.39, a price-book ratio of 0.68 and a price-sales ratio of 12.77.
The price chart shows the stock has tumbled 15.49% since going public in February of 2020 following its acquisition of Alcentra Capital Corp.
Further, the GF Score of 34 indicates the company has weak future performance potential based on middling marks for growth and low ratings for profitability and financial strength. Since it does not have GF Value or momentum ranks, however, the score may not accurately reflect the company’s true potential.
Watsa is currently the only guru invested in the stock with a 6.77% stake.
Additional trades and portfolio composition
During the quarter, Watsa also established positions in American Express Co. (AXP, Financial) and F-Star Therapeutics Inc. (FSTX, Financial), sold out of iRobot Corp. (IRBT, Financial), reduced its holding of the Vanguard S&P 500 ETF (VOO, Financial) and boosted holdings like Pfizer Inc. (PFE, Financial), Bank of Nova Scotia (BNS, Financial) and Occidental Petroleum Corp. (OXY, Financial).
Over half of the guru’s $3.54 billion equity portfolio, which is made up of 72 stocks, was invested in the financial services sector, followed by much smaller positions in the technology, basic materials and real estate spaces.
