In this article, we will discuss the 10 best stocks to buy according to billionaire Prem Watsa. If you want to read our detailed analysis of Watsa’s history and investment philosophy, go directly to the 10 Best Stocks to Buy According to Billionaire Prem Watsa.
5. Micron Technology, Inc. (NASDAQ:MU)
Prem Watsa’s Fairfax Financial Holdings’ Stake Value: $64,271,000
Percentage of Prem Watsa’s Fairfax Financial Holdings’ 13F Portfolio: 2.05%
Number of Hedge Funds as of December 31: 83
Micron Technology, Inc. (NASDAQ:MU) is a Boise, Idaho-based designer, manufacturer, and seller of memory and storage devices globally. Prem Watsa’s Fairfax Financial Holdings initiated a position in the stock in Q4 2018 with 48,000 shares.
Micron Technology, Inc. (NASDAQ:MU) recorded an EPS of $2.14 in Q2 2022, beating the analysts’ estimates of $1.98. The company also managed to beat the revenue estimates for the quarter by $241.85 million. Going forward, the analysts have a ‘positive stance’ on Micron Technology, Inc. (NASDAQ:MU) stock, as stated by JJ Park at JPMorgan in a note issued to investors on April 5. The analyst anticipates the NAND market to grow by 35% YoY, which will offset the impact of a 3% decline in ASP.
Hazelton Capital Partners discussed its stance on Micron Technology, Inc. (NASDAQ:MU) in its Q3 2021 investor letter. Here’s what the firm said:
“It’s hard to explain how shares of Micron Technology, manufacture of DRAM and NAND semiconductor chips, can fall during a global chip shortage. In most industries, focusing on demand can give you a clear insight into what lays ahead for a company. Today, the memory and storage chip industry is no different. However, in the past, companies focused on market share led to the reckless build out of chip fabrication plants (FABs), oversupply, falling average selling prices (ASPs) of memory and storage chips, lower margins, and declining cash flows. As the industry consolidated – there are now just 3 major producers of DRAM and 5 on the NAND side – rational behavior among the key players began to take hold as competitors began focusing more on R&D. Currently, chip pricing remains cyclical although less so than in the past and that cyclicality has a long-term upward bias. The ongoing transition to newer and more robust platforms (3D 176-layer NAND & 1-Alpha node DRAM) has provided the memory and storage chip industry with improved supply capacity under its current manufacturing footprint, ultimately pressuring ASPs. Over the past three years, as most of the large platform conversions have already taken place, being able to add more bits per wafer has reached a saturation point. With no major FAB build outs planned in the near-term by competitors Samsung or SK Hynix, constrained supply and flattening cost curves should lead to durable and upward sloping ASPs once the recent volatility from the chip shortage subsides.
Currently Micron Technology trades at just 8x 2022 estimate earnings. MU is expecting growth in both DRAM and NAND not just from the supply of more chips to data centers, artificial intelligence, the auto sector, and mobile devices, but also from greater demand for gigabyte capacity per unit within those segments. With a healthy balance sheet, improving return on invested capital, and expanding cash flows, not only should Micron benefit from improving future earnings but its multiple should also reflect the transition to a flattening cost curve.”
Out of the 924 hedge funds in Insider Monkey’s database, 83 reported owning a stake in Micron Technology, Inc. (NASDAQ:MU) at the end of Q4 2021.
4. Kennedy-Wilson Holdings, Inc. (NYSE:KW)
Prem Watsa’s Fairfax Financial Holdings’ Stake Value: $318,130,000
Percentage of Prem Watsa’s Fairfax Financial Holdings’ 13F Portfolio: 10.19%
Number of Hedge Funds as of December 31: 14
Kennedy-Wilson Holdings, Inc. (NYSE:KW) is a Beverly Hills, California-based real estate investment company that operates and invests in real estate of its own and through an investment management platform. The company focuses on multifamily office properties located in the Western US, UK, and Ireland.
Kennedy-Wilson Holdings, Inc. (NYSE:KW) has 12 global offices across Europe and the US. Fairfax Financial Holdings initiated a major stake in the company in Q2 2015, and as of Q4 2021, Fairfax Financial Holdings’ stake in the company is at the highest point with over 13.32 million shares. The current value of the stake is equivalent to 9.74% of the total market capitalization of Kennedy-Wilson Holdings, Inc. (NYSE:KW).
The company is a beneficiary of the increasing rents across the US. As the work-from-culture has gained momentum during the pandemic, some cities have seen a rental boom, with rents in these areas being significantly higher than in the pre-pandemic period. One such example is Boise, Idaho, where rents have increased by 39% since the start of the pandemic.
Out of the 924 hedge funds being tracked by Insider Monkey, 14 held a stake in Kennedy-Wilson Holdings, Inc. (NYSE:KW) at the end of Q4 2021.
3. BlackBerry Limited (NYSE:BB)
Prem Watsa’s Fairfax Financial Holdings’ Stake Value: $436,876,000
Percentage of Prem Watsa’s Fairfax Financial Holdings’ 13F Portfolio: 13.99%
Number of Hedge Funds as of December 31: 15
BlackBerry Limited (NYSE:BB) is a Canada-based provider of cybersecurity software and services to other corporations and governments globally. The company posted Q4 2021 results on March 31. Revenue was reported at $185 million as opposed to the consensus estimate of $208 million. Moreover, BlackBerry Limited (NYSE:BB) was able to outperform the loss per share estimate of 3 cents by reporting a profit per share of 1 cent. T. Michael Walkley at Canaccord termed the Q4 results as inline but highlighted that BlackBerry Limited (NYSE:BB) provided weak guidance for 2023. The analyst has given a Hold rating with a target price of $7. The target price reflects a potential upside of around 4.8% from the last closing price.
Prem Watsa’s Fairfax Financial Holdings has kept a stake in BlackBerry Limited (NYSE:BB) since Q3 2013. Currently, the billionaire’s $436.8 million investment is equivalent to 11.3% of the whole company.
2. Resolute Forest Products Inc. (NYSE:RFP)
Prem Watsa’s Fairfax Financial Holdings’ Stake Value: $465,249,000
Percentage of Prem Watsa’s Fairfax Financial Holdings’ 13F Portfolio: 14.9%
Number of Hedge Funds as of December 31: 15
Resolute Forest Products Inc. (NYSE:RFP) is a Montreal, Canada-based paper and pulp company. It was established in 2007 following the merger of Bowater and Abitibi-Consolidated. Resolute Forest Products Inc. (NYSE:RFP) primarily operates in Canada, the US, and Mexico. Prem Watsa’s Fairfax Financial Holdings’ stake in Resolute Forest Products Inc. (NYSE:RFP) is equivalent to 47.6% of the company’s current market value.
According to analysts, the financial position of Resolute Forest Products Inc. (NYSE:RFP) has been the most stable in the past decade in terms of strong liquidity, leverage, and resource utilization. However, the company is expected to face significant headwinds this year due to rising inflation in commodity prices.
As of Q4 2021, 15 hedge funds held a stake worth over $574 million in Resolute Forest Products Inc. (NYSE:RFP).
1. Atlas Corp. (NYSE:ATCO)
Prem Watsa’s Fairfax Financial Holdings’ Stake Value: $1,416,840,000
Percentage of Prem Watsa’s Fairfax Financial Holdings’ 13F Portfolio: 45.4%
Number of Hedge Funds as of December 31: 15
Atlas Corp. (NYSE:ATCO) is a London, UK-based asset management company that targets infrastructure assets in the maritime sector, energy sector, and other infrastructure-related sectors. The company has two main portfolio companies, namely Seaspan Corporation and APR Energy. Atlas Corp. (NYSE:ATCO) deploys capital in such projects to generate healthy returns for its shareholders.
Fairfax Financial Holdings initiated a position in the company in Q1 2020, and its stake currently stands at around 39.6% of the outstanding shares. The hedge fund revealed that it plans to double down further by exercising warrants to purchase 25 million common shares of Atlas Corp. (NYSE:ATCO) at an exercise price of $8.05 per share. This would generate over $201.25 million for Atlas Corp, which will be used to repay debt and for other corporate purposes. Following this development, Fairfax Financial Holdings’ total stake in Atlas Corp. (NYSE:ATCO) will rise to roughly 125 million shares, equivalent to 45.1% of the issued and outstanding common stock of Atlas Corp. (NYSE:ATCO).
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