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James Li
James Li
Articles (618)  | Author's Website |

Prem Watsa’s Top 5 Positions Ahead of 2nd Half

Guru’s top holdings include BlackBerry and Resolute Forest Products

According to GuruFocus’ top 10 holdings pages, Prem Watsa (Trades, Portfolio)’s top five positions as of June 30 were BlackBerry Ltd. (NYSE:BB), Resolute Forest Products Inc. (NYSE:RFP), Kennedy-Wilson Holdings Inc. (NYSE:KW), USG Corp. (NYSE:USG) and International Business Machines Corp. (NYSE:IBM).

Brief word on Intrepid Potash

Although the Securities and Exchange Commission does not require firms to announce their portfolios until 45 days after quarter ends, Watsa announced on June 6 that he closed his position in Intrepid Potash Inc. (NYSE:IPI), selling 10,418,598 shares for $4.63 per share. Based on GuruFocus estimates, Watsa gained approximately 130% on the stock.

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BlackBerry

BlackBerry, Watsa’s largest position, represents 40.15% of the guru’s portfolio. Based on GuruFocus estimates, Watsa has gained approximately 32% on the stock.

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The Waterloo, Ontario-based company designs and markets handsets, software and services for the mobile communications market. BlackBerry CEO John Chen said on June 22 that “strong double-digit billings and an increase in recurring revenue” contributed to a 14% increase in total software and services revenue for the quarter ending May 31. Despite this, GuruFocus ranks BlackBerry’s profitability a weak 2 out of 10 as the company’s three-year revenue growth rate of -35.20% underperforms 95% of global competitors.

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Among gurus that own positions in BlackBerry, Watsa has the second-largest position with 46,724,700 shares. PRIMECAP Management (Trades, Portfolio) has the largest stake with 73,143,672 shares.

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Resolute Forest Products

Resolute Forest Products, a Montreal-based forest products company, represents 18.84% of Watsa’s portfolio. Based on GuruFocus estimates, the guru has lost about 18% on the stock so far.

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Resolute markets various forest products like market pulp, tissue and newsprint to approximately 80 countries around the world. GuruFocus ranks the company’s profitability a modest 4 out of 10, driven by declining revenues and profit margins that underperform over 80% of global competitors.

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Kennedy-Wilson

Kennedy-Wilson, a global real estate services company, represents 17.33% of Watsa’s portfolio. The guru has lost approximately 10% on the stock based on GuruFocus estimates.

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Kennedy-Wilson owns, operates and invests in real estate, both on its own and through its investment management program. GuruFocus ranks the company’s profitability 6 out of 10: although the company’s profit margins are near 10-year highs, Kennedy-Wilson’s operating margin and return on assets underperform over 60% of global competitors.

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USG

Chicago-based USG represents 4.62% of Watsa’s portfolio. The guru has gained approximately 14% on the stock so far based on GuruFocus estimates.

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Germany-based Gebr. Knauf KG announced on June 11 that it reached a definitive merger agreement with USG in which Knauf will acquire all of USG’s shares for approximately $7 billion, a deal that Berkshire Hathaway Inc. (BRK.A)(BRK.B) CEO Warren Buffett (Trades, Portfolio) supported in a Schedule 13-D filing with the SEC.

GuruFocus ranks USG’s financial strength 6 out of 10: although the company has good interest coverage of 5.11, USG’s Altman Z-score of 2.91 is slightly lower than the safe threshold of 2.99. USG’s profitability ranks 5 out of 10 as net profit margins underperform 65% of global competitors despite operating margins expanding approximately 29.40% per year over the past five years.

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International Business Machines

International Business Machines, a major information technology services company, represents 3.05% of Watsa’s portfolio. Based on GuruFocus estimates, the guru has lost approximately 18% on the stock so far.

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GuruFocus ranks IBM’s profitability 5 out of 10 and lists several red flags, including contracting operating margins and declining revenues. Despite this, IBM’s profit margins still outperform over two-thirds of global competitors.

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See also

Watsa’s other top holdings include CenturyLink Inc. (NYSE:CTL), Helmerich & Payne Inc. (NYSE:HP) and Johnson & Johnson (NYSE:JNJ).

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Disclosure: No positions.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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