Tracking Prem Watsa's Fairfax Financial Holdings - Q3 2012 Update

Below is a spreadsheet that shows changes to Prem Watsa's 13F US long holdings as of Q3 2012. To have a look at how the portfolio has progressed, see our previous update:

The portfolio size increased slightly from around $1.91B to $1.97B. There is one new position worth over a million dollars, and that is a very small stake in Nexen Inc. (NXY). The main activity in the quarter include:
  1.  Roughly doubling the large position in Research in Motion (RIMM) at prices between $6.30 and $8.29. The stock currently trades at $9.20. Watsa's original stake in RIMM has a much higher cost basis as he purchased the bulk of that stake in Q4 2011 and Q1 2012 at prices between $12.52 and $24.42. 
  2. The stake in US Bancorp (USB) was reduced by around 30% at prices between $31.90 and $34.93. USB is a long-term holding which was reduced substantially in 2010. The stake reduction indicates a bearish bias. 
  3. USG Corp. (USG) stake was reduced to an insignificantly small stake as of Q3 2012 at prices between $15.76 and $23.72. 
  4. Wells Fargo & Co. (WFC) stake was reduced by around 40% this quarter at prices between $32.85 and $36.13. 
  5. The stake Resolute Forest Products (RFP) was marginally increased.
As a deep value investor that digs for opportunities where the market has mispriced securities, Prem Watsa has said that he expects his holdings to go down in value after his stake initiations. But, he is still able to realize capital gains constantly as other areas of the portfolio outperform as the market values holdings correctly. RIMM and USG are both examples of how the philosophy works in practice: RIMM has gone down drastically since his purchase but he continues to build that position. USG was an underperforming security in the portfolio for a number of years, but this year the stock doubled and Watsa has harvested it.

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