Prem Watsa Portfolio Picks

by: The Manual of Ideas

Prem Watsa is the founder, chairman and CEO of Fairfax Financial Holdings (FFH), a Canada-based property/casualty insurance and reinsurance firm. While managing Fairfax’s large investment portfolio over the past couple of decades, Watsa has built a reputation as an astute value-oriented investment manager. Some have called him “Warren Buffett of Canada.” More recently, Watsa’s firm has been embroiled in a suit against short sellers who allegedly conspired to drive down the price of Fairfax stock and hurt the company’s business.

The Manual of Ideas estimates that Watsa’s top three ideas at this time are Kraft Foods (KFT), Wells Fargo (NYSE:WFC) and International Coal Group (NYSE:ICO). Our analysis is based on a recent Form 13F-HR filed by Fairfax Financial Holdings with the SEC. We also consider Fairfax’s past 13F-HR filings, recent 13G and 13D filings as well as the latest market prices of the portfolio holdings. Please see below for an explanation of the MOI Signal Rank™ methodology.

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Sold-Out Positions

  • NewMarket Corp (NYSE:NEU)

New Positions

  • Alcoa (NYSE:AA)
  • Burlington Northern Santa Fe (BNI)
  • Gannett (NYSE:GCI)
  • General Electric (NYSE:GE)
  • Intel (NASDAQ:INTC)
  • Kraft Foods (KFT)
  • Magna International (NYSE:MGA)
  • Progressive Corp (NYSE:PGR)
  • Viacom (VIA/B)
  • Wells Fargo (WFC)
  • Wesco Financial (NYSEMKT:WSC)

About MOI Signal Rank

MOI Signal Rank answers the question, “What are this investor’s top ideas right now?” Rather than simply presenting each investor’s largest holdings as of the recently filed quarter end, MOI’s proprietary methodology ranks the companies based on the investor’s current level of conviction in each holding, as judged by The Manual of Ideas.

Our proprietary methodology takes into account a number of variables, including the size of a position in an investor’s portfolio, the size of a position relative to the market value of the corresponding company, the most recent quarterly change in the number of shares owned, and the change in the stock price of a position since the most recent quarterly filing date.

For example, an investor might have the most conviction in a position that is only the tenth-largest position in such investor’s portfolio. This might be the case if an investor invests in a small company, resulting in a holding that is simply too small to rank highly based on size alone. On the other hand, such a holding might represent 19.9% of the shares outstanding of the subject company, suggesting a high level of conviction. Our estimate of the conviction level would rise further if the subject company has a 20% poison-pill threshold, thereby suggesting that the investor has bought as much of the subject company as is practically feasible.

Disclosures: None