It seems they don’t call him “Canada’s Warren Buffett” for nothing.
When much of the world financial media was convinced that Research in Motion was destined to become the next PALM, Fairfax Financial’s Prem Watsa was using the deafening negativity as an opportunity to pile into the stock.
Watsa, who now sits on RIM’s board and was rumoured to be the mastermind behind the RIM management change of a year ago, became the company’s largest single shareholder last year, after dabbling in 2011.
In July, Watsa’s Fairfax Financial had to file a 13D (required because it had passed the 5% ownership of the company mark) that showed he owned 51,854,700 shares of the BlackBerry maker. The prices Fairfax paid for RIM before it hit the 5% mark is not public information, but July’s filing details each trade, and revealed that Watsa was loading up when RIM was in the $6-8 dollar range.
Between Fairfax Financial and Hamblin Watsa, Watsa now owns nearly 20% of RIM. Founders Mike Lazaridis and Jim Balsillie own 5.7% and 5.1%, respectively.
RIM closed Wednesday on the Nasdaq at $17.35.
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As our friend and value guru Saj Karsan of the excellent value investing site Barel Karsan points out, the prices Fairfax paid on the first 26 million share purchases can be estimated because each quarter Fairfax has to disclose its holdings in a 13F. One can therefore see each quarter how much RIM was added, and then look at the stock price during the quarter to guesstimate the price.
Any way you slice it, Watsa seems to have timed his RIM investment like a maestro, which shouldn’t be a surprise.
Watsa’s Fairfax Financial, an insurance company with direct investments in other insurance companies and a portfolio of bonds and common stocks, has an average annual return of 17.9% over the past decade. By comparison, the S&P 500 has returned 1.4% per year over the same period. Fairfax was Canada’s most profitable corporation in 2008, and through moves that sometimes puzzled the general public, Watsa kept making money through the worst recession in a generation. Before the market collapse of 2008, Watsa used credit default swaps to bet against the US credit market. His $341 million bet returned more than $2 billion. Underscoring the Buffett comparison, Watsa even sits on the advisory board of the Ben Graham Centre for Value Investing at Western’s Ivey School of Business.
Watsa’s moves on RIM will remnind many value investors of the classic Warren Buffett quote, “Be fearful when others are greedy and greedy when others are fearful”.
Research in Motion will launch devices running on its much anticipated BlackBerry 10 platform on January 30th in New York.