Prem Watsa (Trades, Portfolio), founder of Canadian insurance conglomerate Fairfax Financial Holdings (TSX:FFH, Financial), has been fully hedged on his equity positions since about 2010, reducing his returns as the market increased. In Fairfax’s second quarter financial results, however, Watsa told investors the hedges had decreased, though they were prone to fluctuate:
“In response to the significant appreciation in equity market valuations and uncertainty in the economy, the company has hedged its equity investment exposure. At June 30, 2014, equity hedges represented approximately 85% of the company's equity and equity-related holdings. The hedge ratio decreased from approximately 98% at December 31, 2013 because of the increase in market value of the company's equity and equity-related holdings. The market value and the liquidity of these hedges are volatile and may vary dramatically either up or down in short periods, and their ultimate value will therefore only be known over the long term.”
Watsa bought four new stocks in the first quarter, for a total of 42 in his portfolio valued at $1.46 billion.
The new stocks
Idenix Pharmaceuticals (IDIX, Financial)
Watsa purchased 1,214 shares of Idenix Pharamceuticals Inc. in the second quarter, for 0.083% of the portfolio, making it his largest new holding. The stock’s share price averaged $10 in the second quarter.
Idenix Pharmaceuticals Inc. is a biopharmaceutical company engaged in the discovery and development of drugs for the treatment of human viral diseases with operations in the United States and Europe. Idenix Pharmaceuticals Inc. has a market cap of $3.71 billion; its shares were traded at around $24.50.
Questcor Pharmaceuticals Inc. (QCOR, Financial)
Watsa purchased 6,500 shares of Questcor Pharmaceuticals Inc. for 0.041% of the portfolio. The stock price averaged $86.
Questcor Pharmaceuticals Inc. was incorporated in California in September 1992 as Cypros Pharmaceutical Corporation. Questcor Pharmaceuticals Inc. has a market cap of $5.66 billion; its shares were traded at around $92.08 with a P/E ratio of 16.20 and P/S ratio of 5.80. The dividend yield of Questcor Pharmaceuticals Inc. stocks is 1.30%. Questcor Pharmaceuticals Inc. had an annual average earnings growth of 94.50% over the past five years.
Susser Holdings Corp (SUSS, Financial)
Watsa purchased 6,400 shares of Susser Holdings Corp for 0.035% of the portfolio. The share price averaged $74 for the quarter.
Susser Holdings Corporation is a convenience store operator and a non-refining wholesale gasoline distributor. Susser Holdings Corp has a market cap of $1.76 billion; its shares were traded at around $81.20 with a P/E ratio of 60.90 and P/S ratio of 0.30. Susser Holdings Corp had an annual average earnings growth of 1.80% over the past 10 years.
Navient Corp (NAVI, Financial)
Watsa purchased 15,000 shares of Navient Corp for 0.018% of the portfolio. The stock’s share price averaged $17.
Navient Corp has a market cap of $7.2 billion; its shares were traded at around $17.17. The dividend yield of Navient Corp stocks is 0.90%.
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