In this piece, we will take a look at the ten stocks that Prem Watsa just bought and sold. If you want to skip our introduction to Mr. Watsa, his hedge fund, and the latest stock market news, then take a look at 5 Stocks Prem Watsa Just Bought and Sold.
Prem Watsa is one of the lower profile fund bosses in the industry. A graduate of the Indian Institute of Technology and the University of Western Ontario, he was born in India and is a classic example of the potential of capitalism to turn one from rags to riches through dedication and the right business decisions. After graduating with an MBA in Canada, Mr. Watsa jumped into the financial world and started his stint at an insurance company. Soon after beginning his finance career, he started his own finance company and acquired an insurance company to rename the new firm Fairfax Financial. The term 'Fairfax' refers to 'fair, friendly acquisitions' and according to Insider Monkey's research, the firm had an investment portfolio worth $1.8 billion as of Q3 2023 end. This marks a sizeable drop over the $3.9 billion that the portfolio was worth as of September 2022.
Prem Watsa's firm, Fairfax Financial Holdings Limited was officially set up in its current form in 1985. The firm's shares are also traded on the Canadian stock exchange under the ticker Fairfax Financial Holdings (TSE:FFH.TO). Being publicly traded is an integral part of Fairfax's financial philosophy and strategy since the firm seeks to deliver a minimum of 15% growth in its book value per share over the long term. Book value per share is defined as a firm's net asset value, i.e. its liabilities subtracted from its assets, per unit of outstanding stock. It is a commonly used financial metric that allows investors and analysts to analyze the worth of a firm or the money that is available to investors in case of a liquidation. Fairfax describes itself as being focused on the long term, and the firm touts that it has written a whopping $229 billion in insurance premiums over the past 37 years.
Since it's a publicly traded firm, SEC filings provide greater working into Fairfax Financial's affairs than would be possible for other hedge funds. The firm filed its earnings report for the third quarter with the SEC in November. The results showed that its insurance revenue during the quarter stood at a cool $7 billion and its non-insurance operations raked in $1 billion for a combined revenue of $7 billion. The insurance industry benefits when interest rates are high, and this was evident in Fairfax's latest earnings results as well since the company's profit after tax stood at $1.1 billion and nearly doubled from the year ago quarter's $582 million.
In terms of assets, Fairfax is quite a sizeable entity as well with total assets of $84 billion. Within this multi-billion-dollar asset pile, a large portion belongs to bonds as the company held a cool $34 billion in bonds. Stocks were its second largest holdings, and in Q3, Fairfax Financial held $8.9 billion in preferred and common stocks.
Shifting gears to analyze Prem Watsa's latest stock portfolio, its five biggest investments in Q3 ranged from energy to semiconductors, consumer electronics, mining, and real estate industries. In descending order, Fairfax Financial's biggest stock holdings in the third quarter were Occidental Petroleum Corporation (NYSE:OXY), Micron Technology, Inc. (NASDAQ:MU), BlackBerry Limited (NYSE:BB), Kennedy-Wilson Holdings, Inc. (NYSE:KW), and Orla Mining Ltd. (NYSE:ORLA). Cumulatively, these account for more than 60% of the $1.8 billion stock portfolio as Mr. Watsa's financial firm owned stakes worth $1.1 billion in the five companies.
Shifting gears to focus on the broader stock market climate during the third quarter, right now, optimism is abound. This is because investors are now making cautious bets that the Federal Reserve might be near the end of its interest rate cycle with some already making bets about when rates will start to come down. However, the road to low rates might be long, with fresh comments from some Fed officials culling optimistic stock rallies. For instance, the Chair of the Boston Fed Susan Collins is unwilling to rule out further rate hikes before additional data convinces her that the central bank has done enough. Speaking to CNBC, the Fed official shared:
In order to get back down to 2% (inflation) in a reasonable amount of time you need to be patient and resolute, and I wouldn't take additional firming off the table.
She went on to add:
I remain focused on really looking at kind of the full complement of information that we're getting and making assessments in real time about the right thing to do.
So, as investors flirt with the new interest rate era, what is one of Canada's richest financial wizards thinking? We took a look at his firm's stock portfolio to find out, and some stocks that caught our eye are Orla Mining Ltd. (NYSE:ORLA), Micron Technology, Inc. (NASDAQ:MU), and General Electric Company (NYSE:GE).
10 Stocks Prem Watsa Just Bought and Sold
Our Methodology
To compile our list of the stocks that Prem Watsa bought and sold, we divided Fairfax Financial's investment portfolio into two sections. The first section consisted of stocks that the firm initiated new positions in or piled more money into. The second was made of stocks that it sold or exited completely. Within these two lists, the stocks were ranked by the latest dollar value as of Q3 2023 or the value during Q2 2023, and the ones with the highest values were chosen as the stocks that Mr. Watsa is buying and selling.
United States Steel Corporation (NYSE:X) is an American steel company headquartered in Pittsburgh, Pennsylvania. Despite an industrial slowdown in 2023 due to high inflation rates, the firm has beaten analyst EPS estimates in all four of its latest quarters.
As of June 2023, 33 out of the 910 hedge funds surveyed by Insider Monkey had held a stake in United States Steel Corporation (NYSE:X). In the following quarter, David Greenspan's Slate Path Capital was the largest stakeholder in our database due to its $233 million investment.
Along with Micron Technology, Inc. (NASDAQ:MU), Orla Mining Ltd. (NYSE:ORLA), and General Electric Company (NYSE:GE), United States Steel Corporation (NYSE:X) is a stock on Prem Wasta's radar.
Telesat Corporation (NASDAQ:TSAT) is a small Canadian telecommunications company. The firm made a big announcement in November 2023, when it revealed that it plans to bring artificial intelligence and machine learning capabilities to its satellite networking.
During this year's second quarter, 11 out of the 910 hedge funds profiled by Insider Monkey's research had invested in the company. During the third quarter, Telesat Corporation (NASDAQ:TSAT)'s biggest investor was Mark Rachesky's MHR Fund Management as it held a $257 million stake.
Arco Platform Limited (NASDAQ:ARCE) is a Brazilian education technology firm that caters to the needs of secondary schools. Its latest financial performance has been rather limited, as the company has beaten analyst EPS estimates in only two out of its four latest quarters.
As of Q2 2023 end, 11 out of the 910 hedge funds part of Insider Monkey's database had held a stake in Arco Platform Limited (NASDAQ:ARCE). In the following quarter, John Addis's FourWorld Capital Management was the firm's largest shareholder as it owned 3.8 million shares that are worth $53 million.
Fairfax Financial's Q3 2023 Investment: $1.3 million
Bought Or Sold: Buy
Percentage Increase or (-)Decrease: New Addition
Capri Holdings Limited (NYSE:CPRI) is a British luxury goods company with several high profile brands in its portfolio such as Michael Kors and Versace. Fairfax's purchase comes at an interesting time for the stock as Guggenheim, Raymond James, Baird, Wells Fargo, and BMO Capital downgraded the shares to Neutral, Market Perform, Netural, Equal Weight, and Market Perform in August 2023.
By the end of this year's second quarter, 37 out of the 910 hedge funds tracked by Insider Monkey were the firm's investors. As of September 2023, Israel Englander's Millennium Management was the biggest stakeholder in our database due to its $229 million stake.
Fairfax Financial's Q3 2023 Investment: $2.1 million
Bought Or Sold: Sold
Percentage Increase or (-)Decrease: -29%
TFI International Inc. (NYSE:TFII) is a Canadian trucking company with operations in the U.S., Canada, and Mexico. Economic slowdown and high costs have led to financial struggles, as it has missed analyst EPS estimates in three out of its four latest quarters. However the average share price target of $144 prices in a substantial upside.
During this year's June quarter, 21 hedge funds out of the 910 part of Insider Monkey's research were TFI International Inc. (NYSE:TFII)'s investors. In the September quarter, the largest hedge fund investor was Ken Griffin's Citadel Investment Group through its $82 million investment.
Orla Mining Ltd. (NYSE:ORLA), TFI International Inc. (NYSE:TFII), Micron Technology, Inc. (NASDAQ:MU), and General Electric Company (NYSE:GE) are some stocks that Prem Watsa bought and sold during Q3 2023.
