Canada’s ‘Hyderabad-born Buffet’ may buy BlackBerry
15 Aug 2013 11:15 PM GMT
Often called Canada’s version of Warren Buffet, Hyderabad-born Prem Watsa preaches a long view that suggests it may be too early to assess his decision to take on a leading 10 per cent stake in BlackBerry.
Just over a year ago, Prem Watsa said Research in Motion, now re-named BlackBerry, was a ‘Canadian success story,’ a good buy and a likely turnaround story, despite declining market share.
BlackBerry’s fortunes have only deteriorated since then, but Watsa, chief executive of top BlackBerry shareholder Fairfax Financial, is an old hand at looking wrong today and right tomorrow.
Fairfax, both an insurance holding company and Watsa’s investment vehicle, was on the losing end of bets against the market in the mid 2000s as Watsa waited for the US mortgage industry to collapse.
The company’s stock fell by 50 per cent between mid-2003 and mid-2006 as Watsa’s purchases of credit default swaps flattened profits, while rivals feasted on a housing-fed bull market.
But when the market began to weaken in 2007, Fairfax began notching up investment gains, pulling in billion-dollar profits in 2007 and 2008. Then with markets still reeling and other investors licking their wounds, Watsa started to plow money back into equities, bringing another strong year in 2009.
Since their 2006 low of C$100, Fairfax’s shares have more than quadrupled, and the stock is up 100-fold over 28 years. Indeed, Watsa had already shown his investment chops by selling stock ahead of the 1987 stock market crash and buying Japanese puts - or rights to sell stocks at guaranteed prices - ahead of the Tokyo market’s collapse in 1990. As it sits now, BlackBerry has not been a turnaround story under Watsa’s watch.
Just over a year ago, Prem Watsa said Research in Motion, now re-named BlackBerry, was a ‘Canadian success story,’ a good buy and a likely turnaround story, despite declining market share.
BlackBerry’s fortunes have only deteriorated since then, but Watsa, chief executive of top BlackBerry shareholder Fairfax Financial, is an old hand at looking wrong today and right tomorrow.
Fairfax, both an insurance holding company and Watsa’s investment vehicle, was on the losing end of bets against the market in the mid 2000s as Watsa waited for the US mortgage industry to collapse.
The company’s stock fell by 50 per cent between mid-2003 and mid-2006 as Watsa’s purchases of credit default swaps flattened profits, while rivals feasted on a housing-fed bull market.
But when the market began to weaken in 2007, Fairfax began notching up investment gains, pulling in billion-dollar profits in 2007 and 2008. Then with markets still reeling and other investors licking their wounds, Watsa started to plow money back into equities, bringing another strong year in 2009.
Since their 2006 low of C$100, Fairfax’s shares have more than quadrupled, and the stock is up 100-fold over 28 years. Indeed, Watsa had already shown his investment chops by selling stock ahead of the 1987 stock market crash and buying Japanese puts - or rights to sell stocks at guaranteed prices - ahead of the Tokyo market’s collapse in 1990. As it sits now, BlackBerry has not been a turnaround story under Watsa’s watch.
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