UPDATE: The article was incorrect to assert that Fairfax’s latest 13D filing signaled any change in their ownership of the stock. Fairfax holds 11.1 million of their shares in convertible preferred stock, which is not reported on their 13F filings, which lead to the erroneous assumption of a change in ownership. Their position in Kennedy-Wilson Holdings is unchanged.
Original Article: According to a schedule 13D filing with the SEC yesterday, Kennedy-Wilson Holdings Inc (NYSE:KW) has a new activist investor; sort of. Prem Watsa‘s Fairfax Financial Limited revealed that they have taken an 11.5% activist stake in the company, with ownership of just over 11.5 million shares. That’s a huge increase of more than 11.1 million shares from the mere 400,000 shares they reported ownership of as September 30.
Fairfax Financial is a large financial services holding company based in Canada’s financial capital, Toronto, Ontario. In addition to an equity portfolio that was valued at just under $1.5 billion as of September 30, they also deal in insurance and debt across a broad array of sectors and regions. Watsa, who has been dubbed “the Warren Buffett of Canada” first founded Fairfax in 1985, and it is still under the same management to this day. Fairfax has provided above average returns over the years thanks in part to its investment strategy, which emphasizes disciplined underwriting and conservative investments with an eye on long-term growth.
In separate Fairfax news, it was announced in a 6-K filing yesterday that they have acquired the Ukrainian insurance operations of Australia’s QBE Insurance Group. That move follows similar moves two months prior to acquire that company’s insurance operations in Hungary, Slovakia, and the Czech Republic, as Fairfax expands their insurance business overseas. Further back, we reported on Fairfax acquiring Pethealth Inc., a provider of animal insurance in the United States, Canada, and England.
This is not the first time Fairfax Financial Limited has taken such a position in Kennedy-Wilson Holdings Inc (NYSE:KW). They first filed a 13D related to them in August 2010, declaring ownership of 11.10 million shares, which represented 21.2% of Kennedy-Wilson’s Common Shares at that point. As per their Series B Purchase Agreement, Fairfax nominated the CEO and Chairman of the Board of Zenith, Stanley R. Zax, to the Board of Directors of Kennedy-Wilson. By the middle of 2011 however they had sold off most of their position, maintaining just 400,000 shares in Fairfax for the next three-and-a-half years, until this most recent filing.
During that time Kennedy-Wilson Holdings Inc (NYSE:KW) ended up having quite a run, rising from $12.25 on July 1, 2011 to $26.87 a little over three years later, an increase of over 200%. It was a trend we saw developing in the middle of 2013, when we reported on the increased fund activity in Kennedy-Wilson, and opined that now might be a good time to jump on the stock. Since that report, the stock has risen 64.73%.
Kennedy-Wilson Holdings Inc (NYSE:KW) has enjoyed a particularly strong last couple of weeks, gaining more than 10% since January 21, even as analysts have exhibited caution. Zacks downgraded Kennedy-Wilson to ‘Neutral’ on January 14, while Deutsche Bank cut their price target on the stock to $35.00 in a note to investors on January 26, though that still represents a premium of 25% above current trading levels, and they still had a ‘Buy’ rating on the stock.
One of the biggest beneficiaries of its strong push over the last few years has been Chuck Royce’s Royce & Associates, which purchased 5.17 million shares in the third quarter of 2012, when it was trading around the $14.00 market. Now worth twice as much, Royce still has a huge investment in Kennedy-Wilson, with ownership of 7.97 million shares as of September 30. Other large investors at present include Alan S. Parsow’s Elkhorn Partners with 3.72 million shares, and Seawolf Capital, managed by Porter Collins, Daniel Moses, and Vincent Daniel, which had 803,110 shares.
In their latest earnings report issued on November 5, the Beverly Hills, California-based real-estate and investment services company, reported earnings per share of $0.34 for the third quarter of 2014, walloping analysts estimates of a $0.19 per share loss. Those earnings came courtesy revenue that was up 242.5% from the same year-ago quarter, to $113.70 million. The consensus estimate had predicted just $83.40 million.
With Canada’s Warren Buffett now taking a big interest in Kennedy-Wilson Holdings Inc (NYSE:KW) again (and being in the process of having another chosen member elected to their board), we expect continued big things from this company that continues to outperform expectations.
Disclosure: None
