Billionaire Prem Watsa’s Top 5 Stock Picks

Billionaire investor Prem Watsa is backing up the truck on BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY), Inc. (NASDAQ:OSTK), and International Business Machines Corp. (NYSE:IBM).

| More on:
The Motley Fool

Billionaire investor Prem Watsa has earned the reputation as the “Warren Buffett of Canada,” and for good reason.

Since taking the helm at Fairfax Financial Holdings Ltd., he sold ahead of the stock market crash in 1987, foresaw the collapse of Japanese equities in 1990, and predicted the mortgage crisis of 2008. And when everyone else was panicking in 2009, Watsa was buying up stocks at rock-bottom prices.

It has been a profitable arrangement for shareholders. If you had invested $1,000 in Fairfax back in 1993, your position would be worth more than $25,000 today—eight times better than the returns you would have received in the S&P/TSX Composite Index. 

Because of his exceptional track record, I always pay close attention to the stocks Watsa is buying. And right now, he’s finding value in some unusual places:


Value of Position

% of Portfolio

BlackBerry Ltd.
$512 million 33.15%
Resolute Forest Products Inc.
$510 million 33.07%
International Business Machines $219 million 14.15%
Sandridge Energy Inc.
$92 million 5.96% Inc.
$77 million 4.99%

Source: SEC filings

Let’s say a few words about these companies.

Prem Watsa is used to challenging the street’s consensus. However, he has never been more alone than he is right now with BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY). Fairfax is the company’s biggest shareholder, but what could he possibly see in the troubled smartphone manufacturer?

For starters, the stock is trading below BlackBerry’s liquidation value. In exchange, investors are getting a great set of assets—including BlackBerry Messenger, mobile device management, and the QNX operating system—that are often overlooked by pundits. If new CEO John Chen can pull off a turnaround, BlackBerry could emerge worth more than it is today.

It’s a similar story at Inc. (NASDAQ:OSTK) and Resolute Forest Products Inc. (TSX:RFP)(NYSE:RFP). Both of these companies have struggled under the onslaught of new competition. However, with new management teams infusing a fresh set of ideas, these firms are starting to turn around. Early investors who get in on the ground floor could make a small fortune.

International Business Machines Corp. (NYSE:IBM) is your classic wide-moat business. As the old saying goes, “Nobody ever got fired for buying IBM.” A vendor’s reputation is a key factor that companies consider when upgrading their I.T. infrastructure. Businesses like Big Blue that can lock in a loyal customer base generate superior cash flows for shareholders.

Finally, the recent crash has turned some energy names into outright bargains. And with valuations hovering just above 10-year lows, now might be a good time to scoop up some blue-chip oil names on the cheap. Prem Watsa has staked out his claim with SandRidge Energy Inc. (NYSE:SD).

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robert Baillieul has no position in any stocks mentioned. The Motley Fool owns shares of International Business Machines.

More on Investing

Airport and plane

Is Air Canada Stock Finally a Buy This Season?

When you are investing in a prospective recovery, it’s a good idea to watch for favourable industry trends.

Read more »

TFSA and coins
Dividend Stocks

TFSA Investors: How to Earn $2,500 Per Year on $40,000

Investors have an opportunity to secure high yields while reducing risk in their TFSA portfolios.

Read more »

Illustration of bull and bear

A Bull Market Is Coming: 3 Growth Stocks That Could Thrive

These growth stocks all trade undervalued and have tonnes of long-term potential, making them some of the best to buy…

Read more »

Volatile market, stock volatility
Metals and Mining Stocks

Weathering Volatility: Strategies for Success With TSX Stocks

The key to handling volatility is changing your asset mix. For example, if you suspect a market downturn, you can…

Read more »

Path to retirement
Dividend Stocks

Retirement Wealth: 2 Top Dividend Stocks for TFSA Investors

Parking a sizable portion of your savings in reliable dividend stocks is a time-tested wealth-building strategy appropriate for a wide…

Read more »

sale discount best price
Tech Stocks

2 Growth Stocks to Buy Every Time They Go on Sale (Like Now)

The right growth stocks are worth buying in almost any market, but they are especially attractive when they come with…

Read more »

Financial technology concept.
Bank Stocks

Canadian Bank Stocks Are Crashing: Should You Buy the Dip?

As bank stocks like Royal Bank of Canada (TSX:RY) are crashing this year, should you go shopping for value plays?

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

CPP Disability Benefits: Are You Eligible?

Fortis Inc (TSX:FTS) stock could provide you with passive income if you can't get CPP disability benefits.

Read more »