FairFax Financial Holdings Ltd. (TSX:FFH, Financial), the insurance conglomerate founded by Prem Watsa (Trades, Portfolio), disclosed in a regulatory filing that its top trades during the fourth quarter included the closure of its positions in H&R Block Inc. (HRB, Financial) and International Seaways Inc. (INSW, Financial) and a reduction to its stake in Tencent Music Entertainment Corp. (TME, Financial). With the proceeds, the firm added to its holding in Orla Mining Ltd. (ORLA, Financial) and entered a position in CI Financial Corp. (CIXXF, Financial).
In 1985, Watsa met Francis Chou (Trades, Portfolio), who told him how Warren Buffett (Trades, Portfolio) made his money using Berkshire Hathaway Inc.’s (BRK.A, Financial)(BRK.B, Financial) insurance float. The Fairfax leader applies a conservative value investing philosophy that stems from Berkshire’s investing approach.
As of December 2022, the firm’s $3.69 billion 13F equity portfolio contains 75 stocks with nine new positions. The top four sectors in terms of weight are financial services, basic materials, technology and real estate, representing 56.75%, 19.06%, 9.58% and 5.73% of the equity portfolio.
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 they 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.
H&R Block
Fairfax sold all 1,035,019 shares of H&R Block (HRB, Financial), trimming 1.24% of its equity portfolio.
Shares of H&R Block averaged $40.64 during the fourth quarter; the stock is modestly overvalued based on its price-to-GF Value ratio of 1.26 as of Tuesday.
The Kansas City, Missouri-based tax return company has a GF Score of 71 out of 100 based on a profitability rank of 8 out of 10, a financial strength rank of 4 out of 10, a GF Value rank of 1 out of 10 and a rank of 6 out of 10 for momentum and growth.
H&R Block’s profitability ranks 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 out of 9 and an operating margin that outperforms approximately 87% of global competitors.
International Seaways
The firm sold all 572,954 shares of International Seaways (INSW, Financial), trimming 0.57% of its equity portfolio.
Shares of International Seaways averaged $40.47 during the fourth quarter; the stock is significantly overvalued based on its price-to-GF Value ratio of 1.40 as of Tuesday.
The New York-based crude oil shipping company has a GF Score of 45 out of 100 based on a financial strength rank of 5 out of 10, a profitability rank of 4 out of 10 and a rank of 1 out of 10 for growth, GF Value and momentum.
International Seaways’ growth ranks 1 out of 10 on several warning signs, which include a three-year revenue decline rate of approximately 8.6% per year on average and a three-year earnings decline rate of approximately 4.5% per year on average. The company’s decline rates underperform over 63% of global competitors.
Tencent Music Entertainment
Fairfax sold 334,000 shares of Tencent Music Entertainment (TME, Financial), slicing 81.66% of the position and 0.04% of its equity portfolio.
Shares of Tencent Music Entertainment averaged $5.62 during the fourth quarter; the stock is significantly undervalued based on its price-to-GF Value ratio of 0.59 as of Tuesday.
The Shenzhen, Guangdong-based music service company has a GF Score of 85 out of 100 based on a growth rank of 9 out of 10, a profitability rank of 7 out of 10, a momentum rank of 3 out of 10 and a rank of 8 out of 10 for profitability and GF Value.
Orla Mining
Fairfax purchased 500,000 shares of Orla Mining (ORLA, Financial), boosting the position by 4.89% and its equity portfolio by 0.05%. Shares averaged $3.59 during the fourth quarter.
The Vancouver-based mineral exploration company has a GF Score of 42 out of 100 based on a momentum rank of 9 out of 10, a financial strength rank of 6 out of 10 and a profitability rank of 2 out of 10. Despite this, there is not enough data to compute a growth rank or GF Value rank and thus, the GF Score may give an incomplete picture of the company's potential.
CI Financial Group
The firm purchased 165,200 shares of CI Financial Group (CIXXF, Financial), giving the position 0.04% of equity portfolio space. Shares averaged $10.09 during the fourth quarter.
GuruFocus’ GF Value Line labeled the Toronto-based wealth management company a possible value trap based on the company’s low price-to-GF Value ratio of 0.69 and low financial strength rank of 4 out of 10. The company’s poor financial strength rank stems from several warning signs, which include a low Altman Z-score of 0.65 and a cash-to-debt ratio that underperforms more than 80% of global competitors.
Despite low financial strength, CI Financial has a GF Score of 95 out of 100, driven by a rank of 10 out of 10 for profitability and growth, a GF Value rank of 8 out of 10 and a momentum rank of 7 out of 10.
