Momentum and technology stocks have dominated the markets over the past decade. They have been the catalyst behind valuations in the overall equity markets getting out of hand. Not anymore. A full-blown correction is in play, going by major US indices pulling back by up to 10% from all-time highs. The pullback has mostly been felt in the tech space, where most counters have been trading at premium valuations for years.
The correction being experienced comes on the backdrop of billionaire investor Prem Watsa insisting that value investing has been overshadowed over the past decade. The renowned investor and CEO of Fairfax Financial Holdings insists on patience and discipline in value investing as one of the ways of generating long-term returns.
“In the last 10 years since that 2008, 2009 crash—call it the great financial crash—value investing basically, I think, one, maybe two years we’ve had that value-oriented stocks have done well compared to momentum.”
The dominance of technology stocks led by the “magnificent seven” stocks has tested the resolve of value-focused investors in recent years. The stocks have posted double-digit percentage gains over the past two years, resulting in premium valuations at the back of the artificial intelligence-driven rally. However, the stocks have come under pressure in 2025 amid a string of headwinds, among them the growing concerns about the impact of the US trade war.
Growing concerns that the US Federal Reserve will not cut interest rates as inflation ticks high on the pitfalls of the US trade war and tariffs have also sent tech stocks tumbling the most. With the stocks pulling back, billionaire Watsa insists that now may be the best time to look for value investments, trading at highly discounted valuations with significant upside potential.
For Watsa, the Canadian “Warren Buffett”, focus should always be on value investing, focusing on strong businesses at fair prices.
“We just think value investing—where you’re buying something, a dollar for 50 cents, is the expression—good companies run by good, honest, hardworking presidents, CEOs. And you’re buying them at fair prices. We think over time that should work.”
Watsa has built a reputation for identifying and focusing on undervalued opportunities. He has also cemented his place as one of the most respected figures in global finance with a reputation for navigating crises, such as the one in play amid the US trade war. Fairfax Financial Holdings, the holding company that Watsa founded in 1985, has carved a name over its disciplined underwriting and value-oriented investment strategy. It also focuses on delivering above-average returns over time. With a portfolio value of about $1.5 billion, the holding company portfolio is highly diversified across basic materials technology financials and consumer cyclical sectors.
Our Methodology
We combed Fairfax Financial Holdings Limited SEC Q4 2024 13F filings to identify Billionaire Prem Watsa’s 10 stock picks with highest potential. We then settled on stocks with more than 30% upside potential based on analysts ratings and analyzed why the stocks stand out as solid value investments well poised to generate significant value. Finally, we ranked the stocks in ascending order based on the value of the stock’s upside potential after highlighting hedge fund sentiment on the stocks.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is KKR & Co. Inc. (KKR) the Top Stock to Buy According to Akre Capital Management?
A modern looking financial adviser sitting in front of a trading monitor, gesturing to a group of investors.
KKR & Co. Inc. (NYSE:KKR) is a global investment firm that manages assets across various asset classes, including private equity, credit, infrastructure, real estate, and capital markets. It also generates returns by making strategic investments and providing capital solutions. It is one of billionaire Prem Watsa's top holdings in financial services owing to its aggressive acquisition strategy.
KKR & Co. Inc. (NYSE:KKR) plans to strengthen its prospects in the financial services sector with the acquisition of OSTTRA for $3.1 billion. The acquisition should offer post-trade offerings across interest rates, FX, credit, and equity asset classes, away from central exchanges. It has already agreed to acquire Frankfurt-listed IT services provider Datagroup in a deal valued at $508.32 million.
In addition, KKR & Co. Inc. (NYSE:KKR) is among global asset managers bidding for a district cooling business owned by Abu Dhabi’s Multiply Group. PAL Cooling Holding (PCH) is a unit that specializes in delivering chilled water via insulated pipes to cool offices and industrial and residential buildings. The aggressive acquisition drive comes on the heels of KKR delivering impressive Q4 2024 results that beat analysts’ expectations with adjusted earnings per share of $1.32 and revenue of $3.3 billion. On April 15, HSBC analyst Vikram Gandhi upgraded KKR & Co. Inc. (NYSE:KKR) from Hold to Buy, lowering the price target to $119 from $170 due to a revised valuation approach. Gandhi saw improved risk-reward after a share price decline and removed the premium previously assigned to KKR due to economic uncertainty and moderated growth projections.
Overall KKR ranks 8th on our list of Prem Watsa's stock picks with highest potential. While we acknowledge the potential of KKR as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than KKR but that trades at less than 5 times its earnings check out our report about this cheapest AI stock.
