“Pray as though everything depended on God. Work as though everything depended on you.” – St. Augustine (354-430)
There are icons in every field of human endeavor.
For a mathematician, there is probably no greater compliment than to be compared to Galileo. For a physicist, the iconic figure is Einstein; for a psychiatrist, it may be Freud. In the still-emerging field of computers, it likely is Steve Jobs.
Sometimes it takes awhile for such people to achieve iconic status, but when they do, it is because their ideas and approaches have stood the test of time.
For an investor, comparison to Warren Buffett (Trades, Portfolio) is the ultimate praise – and that is precisely to whom Prem Watsa (Trades, Portfolio), the founder, chairman and CEO of Toronto-based Fairfax Financial Holdings, has been compared during his best investment periods. The Indian-born Watsa has been called “Canada’s Warren Buffett (Trades, Portfolio).”
Consequently, many investors take their cues from him, but Watsa’s style differs from Buffett’s. “Buffett tends to avoid risk and companies in trouble, unlike Watsa,” wrote GuruFocus’ Sheila Dang recently. “The investor is known for a contrarian style and often invests in distressed stocks.”
It isn’t just Watsa’s wealth that attracts followers, although that is certainly part of it. He has retained the common touch. He is able to explain complicated concepts in ways that just about anyone can understand. To many people, he is the embodiment of the famous question from the 2004 presidential campaign in which voters were asked which nominee they would like to share a beer with.
Watsa is seen as a common man – with an uncommon bank account and an equally uncommon ability to pick companies in which to invest.
In August, Canadian Business ranked Watsa #6 on its list of Canada’s 50 most powerful businessmen. “It’s now a cliché to call him Canada’s Warren Buffett (Trades, Portfolio),” observed Canadian Business, “but there’s truth to it.”
In a high-profile move a year ago, Fairfax Financial purchased BlackBerry (BBRY, Financial) for $4.7 billion. For some investors, that was reason enough to make BlackBerry the only tech stock in their portfolios, but some investors may not be familiar with other companies in which Watsa has invested nearly as heavily. At more than 46 million shares, BlackBerry is Watsa’s largest holding. His second-largest holding is Oklahoma City-based oil and natural gas exploration company SandRidge Energy (SD, Financial) at 32.4 million shares; his third-largest holding is Montreal-based pulp and paper manufacturer Resolute Forest Products (RP, Financial) at 29 million shares.
The Watsa magic isn’t always so magical. At SandRidge, whose shares went up in value by 50% after the ouster of its embattled CEO, the stock lost most of its gains. That isn’t being blamed entirely on Watsa, though, as much as it is blamed on “a powerful triumvirate of investors,” wrote Reuters’ Anna Driver – of whom Watsa is one. The signs at SandRidge are more encouraging now.
“The reversals at SandRidge show that activist investors’ pressure for major changes at energy companies don’t always work out,” wrote Driver.
Of course, just like a quarterback who knows he won’t complete a touchdown pass every time he throws a football, Watsa knows – and, perhaps more importantly, those who follow him know – that his track record is solid. He has more hits than misses, which is why many investors will be content to ride his coattails.
BlackBerry, for example, has been gaining momentumin recent months after nearly a year of decline, and many investors who might have been tempted to sell their holdings will stick with it for awhile longer. “With all the buzz around the new BlackBerry Passport,” wrote Michael Ide for ValueWalk, “this could be the opportunity the company has been looking for to prove its skeptics wrong.”
And Resolute Forest Products, while trading for about half what it was in December 2010, is doing better than it was two months ago.
Dang observed recently in another article that Watsa also has extensive holdings in EXCO Resources (XCO), a Texas-based oil and natural gas company, and Overstock.com (OSTK, Financial), an online retailer. EXCO is trading for less than one-tenth what it traded for six years ago, and Overstock.com’s stock sells for less than one-fourth what it sold for nearly a decade ago.
But devotees of Wasta’s methods continue to have faith in them.
One of four children, like his father, Watsa learned the value of education early. Watsa studied chemical engineering in his native India, then relocated to Canada, where his brother lived and where he went on to earn an MBA at Western University. The immigration experience had a profound influence on how Watsa views the world and his place in it.
“Being an immigrant, you develop qualities you never thought you had, you do things you never thought you'd do,” Watsa said. “You work harder because you're at the bottom and the only way is up. I consider my kids less fortunate for not having had the immigrant experience.”
