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Prem Watsa's Top 4 Buys of the 3rd Quarter

Prem Watsa (Trades, Portfolio), founder of Fairfax Financial Holdings Ltd. (TSX:FFH), disclosed this week that his top four buys for the third quarter included two new holdings and position boosts in two existing holdings.

Watsa earned an MBA at the Richard Ivey School of Business at the University of Western Ontario. In 1985, Francis Chou (Trades, Portfolio) asked Watsa how Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) CEO Warren Buffett (Trades, Portfolio) made his money: investing insurance float. As he also invests Fairfax's insurance float in stocks, Watsa is often called "Canada's Warren Buffett."


The Fairfax CEO said in his March 2018 annual report that the insurance company seeks to achieve its target of 15% returns on its shareholders' equity, including a 7% return on its investment portfolio. Watsa added that he seeks to achieve this goal through a value-oriented approach that selects equities that have potential to contribute greatly to the return.

As of quarter-end, the $1.67 billion equity portfolio contains 32 stocks with a turnover rate of 1%. The top three sectors in terms of weight are industrials, real estate and technology, with weights of 50.64%, 17.51% and 15.92%.


Based on his value-oriented approach, Watsa introduced new positions in MasterCraft Boat Holdings Inc. (NASDAQ:MCFT) and Delek US Holdings Inc. (NYSE:DK). His top two position boosts were in Spark Therapeutics Inc. (NASDAQ:ONCE) and Helmerich & Payne Inc. (NYSE:HP).


Watsa purchased 397,162 shares of MasterCraft, giving the position 0.36% weight in the equity portfolio. Shares averaged $16.35 during the quarter.


The Vonore, Tennessee-based company designs, manufactures and sells premium performance sport boats. GuruFocus ranks MasterCraft's profitability 8 out of 10 on several positive investing signs, which include operating margins that have increased approximately 8.90% per year over the past five years and are outperforming approximately 90% of global competitors.


Jim Simons (Trades, Portfolio)' Renaissance Technologies and Chuck Royce (Trades, Portfolio) also have holdings in MasterCraft.


Watsa purchased 50,000 shares of Delek, giving the holding 0.11% weight in the equity portfolio. Shares averaged $36.81 during the quarter.


The Brentwood, Tennessee-based company refines, transports and wholesales petroleum and crude oil across industrial markets in the U.S. GuruFocus ranks the company's profitability 6 out of 10: Even though the operating margin outperforms just 55.8% of global competitors, Delek's return on equity and Joel Greenblatt (Trades, Portfolio) return on capital are outperforming over 87% of global energy refining and marketing companies.



Watsa added 55,800 shares of Spark, increasing the position 481.03% and the equity portfolio 0.32%. Shares averaged $100.13 during the quarter.


The Philadelphia-based biotech company focuses on gene therapy and orphan disease treatment. According to GuruFocus, Spark's cash-to-debt, equity-to-asset and debt-to-equity ratios underperform over 65% of global competitors.


Helmerich & Payne

Watsa added 85,000 shares of Helmerich & Payne, increasing the holding 60.11% and the equity portfolio 0.20%. Shares averaged $44.09 during the quarter.


GuruFocus ranks the Tulsa, Oklahoma-based energy company's financial strength 7 out of 10 on several positive investing signs, which include debt ratios that outperform over 75% of global competitors. The company has the GuruFocus business predictability rank of 2.5 stars.


Disclosure: No positions.

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This article first appeared on GuruFocus.