Billionaire Prem Watsa’s Fairfax Financial Holdings Boosts Stakes in Kennedy-Wilson, U.S. Bancorp, Johnson & Johnson

Founded in 1985, Fairfax Financial Holdings Ltd. is a Toronto-based financial holding company. It is run by Prem Watsa, who is also known as Canada’s Warren Buffett. Watsa is a value investor and is positive about economic growth in the U.S. under the new president Donald Trump. According to its latest 13F filing, Fairfax had a portfolio value of $1.17 billion at the end of December. The technology sector is the fund’s top sector holding with a 46% allocation. Fairfax Financial Holdings, which is one of the 140 biggest and most famous activist hedge funds, has returned 8.6% annually since inception.

The filing also showed that Fairfax’s top 10 holdings accounted for more than 95% of the total equity portfolio value. Watsa gave an optimistic outlook for the economy under a Donald Trump presidency in December and enhanced his exposure to the financial sector by increasing his US Bancorp (NYSE:USB) position by 1,658%. Fairfax is known for some highly successful investments in depressed markets and in this article, we analyze some the fund’s top holdings as well as companies in which Fairfax significantly boosted its stake during the fourth quarter.

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BlackBerry Ltd (NASDAQ:BBRY) remained Fairfax Financial Holdings Ltd.’s largest holding with the fund holding 46.72 million shares with a value of $321.49 million at the end of December. Another investor bullish on the company is Iridian Asset Management, which also bought 6.5 million shares during the fourth quarter and held 20.9 million shares worth $144 million heading into 2017. BlackBerry Ltd (NASDAQ:BBRY), famous for its high security phones, has been struggling against competitors and is trying to make a comeback by signing licensing deals worldwide. The company has licensed its software to few companies in Asia and is charging a nominal fee of $1 per device. BlackBerry Ltd (NASDAQ:BBRY) reported fiscal 2017 third-quarter earnings of $0.02 per share in-line with the consensus estimate. However, revenues of $301 million missed were lower than expectations of $362.7 million. BlackBerry Ltd (NASDAQ:BBRY)’s stock has gained 6.7% year-to-date, after having lost over 25% in 2016.

During the fourth quarter, Prem Watsa purchased 3.36 million shares of Kennedy-Wilson Holdings Inc (NYSE:KW) last quarter and reported ownership of 12.3 million shares worth $251 million as of the end of 2016. David E. Shaw’s D.E Shaw & Co. also increased its holding in the company by 111,532 shares to 125,897 shares. The company has a diversified portfolio of properties located across Western U.S., UK, Ireland, Spain, Italy and Japan. Kennedy-Wilson Holdings Inc. (NYSE:KW) reported a loss of $0.03 per share on revenue of $174.3 million for the third quarter, compared to the consensus estimates of a loss of $0.08 per share on $176 million in revenue. The real estate investment company has cheered investors by returning more than 31% over the last year.

Fairfax Financial Holdings Ltd. boosted its stake in U.S. Bancorp (NYSE:USB) by 384,800 shares to 408,000 shares valued at $20.9 million during the fourth quarter. Cliff Asness‘ AQR Capital Management also bought 924,292 shares increasing its position to more than 3 million shares. U.S. Bancorp (NYSE:USB) is the parent company of U.S. Bank which is the fifth-largest commercial bank in the US. It recently announced a leadership change where Andy Cecere, (the current President and COO) will succeed Richard Davis as the CEO in April. For its fourth quarter, U.S. Bancorp (NYSE:USB) reported revenue of $5.39 billion which was above the $5.36 billion estimate, while earnings of $0.82 per share was in-line with the consensus estimate. The stock has outperformed the market by returning almost 40% in the last year.

Fairfax Financial Holdings’s holding in Johnson & Johnson’s (NYSE:JNJ) was raised by 82% to 151,250 shares worth $17 million between October and December. Jim Simons’ Renaissance Technologies also added 1.9 million shares to its position containing 3.4 million shares as of the end of December. The US healthcare giant has recently announced that it would acquire the Swiss biotech company Actelion for $30 billion. The acquisition will give Johnson & Johnson (NYSE:JNJ) ownership rights to Actelion’s portfolio of rare disease medicines and will further strengthen J&J’s drug portfolio. Johnson & Johnson (NYSE:JNJ)’s stock has returned over 80% in the last five years and has a dividend yield of 2.75%.

Fairfax Financial Holdings raised its holding in USG Corporation (NYSE:USG) by 970% over the quarter to 351,222 shares worth $10 million held at the end of the fourth quarter. Other investors bullish on USG Corporation (NYSE:USG) include AQR Capital Management and Bluecrest Capital Management, which bought more than 30,000 shares each and reported holding 63,704 shares and 33,566 shares in their latest 13Fs, respectively. The American manufacturer and distributor of building materials could be among the beneficiaries of the proposed multi-billion dollar “Trump’s wall” to be built along the U.S.-Mexico border.  The stock is up by 20% in the last six months and is trading close to its 52-week high. For the most recent fourth quarter, USG Corporation (NYSE:USG) reported earnings of $0.44 per share on revenues of $734 million, beating consensus estimates of $0.35 earnings per share on revenues of $726.6 million.

Disclosure: None