Billionaire investor Prem Watsa (Trades, Portfolio), the leader of Fairfax Financial Holdings (TSX:FFH, Financial), disclosed his second-quarter equity portfolio earlier this week.
Known as “Canada’s Warren Buffett (Trades, Portfolio),” the guru’s investment strategy mimics the practices of the Berkshire Hathaway (BRK.A) (BRK.B) CEO in that his insurance conglomerate purchases entire companies as well as invests its float in publicly traded companies in order to achieve a high rate of return.
For the three months ended June 30, 13F filings show the guru entered five new positions, sold out of 11 stocks and added to or trimmed a number of other existing investments. His most notable trades included increased bets on Occidental Petroleum Corp. (OXY, Financial), the Vanguard S&P 500 ETF (VOO, Financial) and Orla Mining Ltd. (ORLA, Financial) as well as the divestment of Bank of America Corp. (BAC, Financial) and Chevron Corp. (CVX, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but the reports can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Occidental Petroleum
Watsa increased his stake in Occidental (OXY, Financial) by 98.67%, investing in 2.98 million shares. The transaction had an impact of 11.48% on the equity portfolio. The stock traded for an average price of $60.03 per share during the quarter.
He now holds 6.02 million shares, which occupy 23.11% of the equity portfolio and is the largest holding. GuruFocus estimates he has gained 4.44% on the investment so far.
The Houston-based oil and gas producer has a $56.62 billion market cap; its shares were trading around $64 on Tuesday with a price-earnings ratio of 10.87, a price-book ratio of 2.76 and a price-sales ratio of 2.
The GF Value Line suggests the stock is modestly overvalued currently based on historical ratios, past financial performance and analysts’ future earnings projections.
At 70 out of 100, the GF Score indicates the company has poor performance potential. While it received high ratings for profitability and momentum, its growth and financial strength ranks are more moderate and value is low.
Of the gurus invested in Occidental, Buffett has the largest stake with 25.33% of its outstanding shares. Dodge & Cox and the Smead Value Fund (Trades, Portfolio) also have notable holdings.
Vanguard S&P 500
The guru boosted his holding of the Vanguard S&P 500 ETF (VOO, Financial) by 5,900%, buying 82,600 shares. The transaction impacted the equity portfolio by 2.19%. Shares traded for an average price of $384.18 each during the quarter.
Watsa now holds 84,000 shares, accounting for 2.23% of the equity portfolio as the seventh-largest position. GuruFocus data shows he has gained around 6.10% on the exchange-traded fund.
The ETF, which tracks the performance of the S&P 500, was trading around $408.72 on Tuesday. Its 14-day relative strength index of 51 indicates the stock is neither overbought nor oversold.
With a 0.18% stake, Ken Fisher (Trades, Portfolio) is the company’s largest guru investor. The ETF is also being held by Buffett, Jefferies Group (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Private Capital (Trades, Portfolio) and Arnold Van Den Berg (Trades, Portfolio).
Orla Mining
The investor upped the Orla Mining (ORLA, Financial) stake by 29.47%, picking up 4.53 million shares. The transaction impacted the equity portfolio by 1.23%. During the quarter, the stock traded for an average per-share price of $4.45.
He now holds 19.92 million shares in total, which represent 5.42% of the equity portfolio as the fifth-largest position. GuruFocus found Watsa has gained an estimated 22.07% on the investment to date.
The Canadian gold miner has a market cap of $1.42 billion; its shares were trading around $4.51 on Tuesday with a price-earnings ratio of 26.50, a price-book ratio of 3.20 and a price-sales ratio of 6.62.
The price chart shows the stock has climbed 8.70% year to date.
The GF Score of 44 implies the company has poor performance potential, driven by a low profitability rank and high ratings for financial strength and momentum. However, the company did not receive growth or value ratings, so its true potential may not be accurately reflected.
Watsa has the largest stake in Orla Mining with 6.35% of its outstanding shares. First Eagle Investment (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies also own the stock.
Bank of America
Impacting the equity portfolio by -6.91%, Watsa dumped all 3.40 million shares of Bank of America (BAC, Financial). The stock traded for an average price of $28.54 per share during the quarter.
GuruFocus says he lost around 19.38% on the investment over its lifetime.
The bank headquartered in Charlotte, North Carolina has a $238.63 billion market cap; its shares were trading around $30.03 on Tuesday with a price-earnings ratio of 8.63, a price-book ratio of 0.94 and a price-sales ratio of 2.45.
According to the GF Value Line, the stock is modestly undervalued currently.
Supported by a high value rank and middling marks for the other four criteria, the GF Score of 77 means the company will likely have average performance going forward.
Holding a 13% stake, Buffett is the largest investor of Bank of America. Other top guru investors include Dodge & Cox, Fisher, Diamond Hill Capital (Trades, Portfolio), Li Lu (Trades, Portfolio), Richard Pzena (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio) and Bill Nygren (Trades, Portfolio).
Chevron
With an impact of -3.64% on the equity portfolio, the guru sold all 314,000 shares of Chevron (CVX, Financial). The shares traded for an average price of $160.37 each during the quarter.
According to GuruFocus, Watsa gained 20.88% on the investment.
The San Ramon, California-based energy giant has a market cap of $306.07 billion; its shares were trading around $160.45 on Tuesday with a price-earnings ratio of 10.17, a price-book ratio of 1.89 and a price-sales ratio of 1.44.
Based on the GF Value Line, the stock appears to be modestly undervalued currently.
The GF Score of 86 indicates the company has good outperformance potential. While it raked in high ratings for profitability, growth, financial strength and momentum, the value rank is more moderate.
Buffett is Chevron’s largest guru shareholder with a 6.5% stake. Fisher, Diamond Hill and Simons’ firm also have significant positions.
Additional trades and portfolio composition
During the quarter, Watsa also established positions in Dice Therapeutics Inc. (DICE, Financial), ATS Corp. (ATS, Financial), EPAM Systems Inc. (EPAM, Financial), Arco Platform Ltd. (ARCE, Financial), Consolidated Communications Holdings Inc. (CNSL, Financial) and Provention Bio Inc. (PRVB, Financial).
A majority of the guru’s $1.53 billion equity portfolio, which is made up of 60 stocks, was invested in the technology and energy sectors, followed by smaller positions in the real estate and basic materials spaces.
