ORLA - Tracking Prem Watsa's Fairfax Financial Holdings Portfolio - Q3 2023 Update

2023-12-17 21:34:47 ET

Summary

• Prem Watsa's 13F portfolio value decreased slightly to $1.86B this quarter.
• The top three positions in the portfolio are Occidental Petroleum, Micron Technology, and Blackberry, accounting for 46% of the entire portfolio.
• Stake increases were seen in Micron Technology and Orla Mining, while General Electric saw a decrease in stake.

This article is part of a series that provides an ongoing analysis of the changes made to Prem Watsa’s 13F portfolio on a quarterly basis. It is based on Watsa’s regulatory 13F Form filed on 11/14/2023. Please visit our Tracking Prem Watsa’s Fairfax Financial Holdings Portfolio series to get an idea of his investment philosophy and our previous update for the fund’s moves during Q2 2023.

This quarter, Watsa’s 13F portfolio value decreased marginally from $1.88B to $1.86B. There are 61 securities in the portfolio, but it is concentrated among a few large stakes. The focus of this article is on the larger (greater than 0.5% of the portfolio each) equity holdings. The top three positions are Occidental Petroleum, Micron Technology, and Blackberry. Together, they account for ~46% of the entire 13F portfolio.

Note 1: Fairfax Financial’s ( FRFHF ) 13F holdings only represent a small portion of their overall investment portfolio. The total size as of Q3 2023 was ~$59B of which ~$6.3B was in cash and short-term positions. FRFHF currently trades at ~$880 compared to Book Value (Q3 2023) of ~$877 per share. The equity portfolio was 100% hedged starting from around 2003 but those were removed in Q4 2016.

Note 2: Prominent equity allocations not in the 13F report include investments in Greece and India (FFXDF). Greek allocation primarily consists of a ~32% ownership of Eurobank ( EGFEY ) (EGFEF). Other prominent stakes include ~27% of Thomas Cook India, 54% of Bangalore International Airport Limited, and 31% of Quess Corp Limited.

Stake Increases:

Micron Technology ( MU ) : MU is currently the second largest 13F position at ~14% of the portfolio. It saw a ~60% stake increase in Q1 2019 at prices between $31 and $44. The position was increased by ~115% in Q1 2020 at prices between $34.50 and $60. That was followed with a whopping ~400% stake increase during Q3 2022 at prices between ~$49 and ~$65. That was followed with a ~12% further increase during Q1 2023. The stock currently trades at $81.41. There was a marginal increase in the last two quarters.

Orla Mining ( ORLA ) : ORLA is a 5.91% of the portfolio stake purchased during Q3 2022 at prices between ~$2.40 and ~$3.70. Q1 2023 saw a ~45% stake increase at prices between ~$3.85 and ~$4.90. That was followed with another ~30% increase last quarter at prices between ~$3.90 and ~$4.85. The position was increased by 56% this quarter at prices between ~$3.57 and ~$4.76. The stock currently trades at $3.08.

Note: Regulatory filings since the quarter ended show them owning ~33.61M shares (10.7% of the business). This is compared to ~31.11M shares in the 13F report.

Stake Decreases:

Blackberry Ltd ( BB ) : BB stake is now at ~12% of the portfolio. The position was first purchased in 2010 at around $50 for 2M shares. The stake was aggressively built up to 46.7M shares in the following years. Their net cost on a fully converted basis is ~$10 per share and the stock currently trades at $4.37. There has only been very minor activity in the last ten years.

Note: In Q4 2013, Fairfax co-sponsored a cash infusion of $1B through convertible debentures ($10 conversion price earning 6% interest) - they financed $500M of that transaction, and the remaining was funded by a consortium of other investment funds. In Q3 2016, those shares were redeemed, and new ones issued ($605M in 3.75% debentures convertible at $10 due 11/13/2020) to the same entities in a private placement. On 9/2/2020, those were redeemed, and new ones issued ($330M in 1.75% debentures convertible at $6 due 11/13/2023). On 11/13/2023, those were redeemed and new ones issued ($150M in 1.75% debentures convertible at $6 due 2/15/2024 with an optional extension possible to 5/15/2024). Assuming full conversion, they would own ~72M shares (~12% of the business).

General Electric ( GE ) : The very small 0.55% stake in GE was reduced by ~5% this quarter.

Kept Steady:

Occidental Petroleum ( OXY ) : OXY is now the largest 13F stake at ~21% of the portfolio. It was built during the last four quarters at prices between ~$57 and ~$67. The stock is now at $58.56.

Kennedy-Wilson Holdings ( KW ) : KW stake is a large (top five) 10.53% of the 13F portfolio position first purchased in 2010. Q4 2016 saw a ~40% increase at prices between $20 and $23 and that was followed with a ~8% increase in Q1 2018. KW currently trades at $12.69.

Note: They also have warrants that they acquired as part of preferred equity investments made in the last two years. Their overall ownership stake in the business is ~20% (31.32M shares).

Alphabet Inc. ( GOOGL ) : GOOG is a 2.35% stake purchased in Q1 2020 at prices between ~$53 and ~$76. There was a ~22% stake increase in Q4 2020 at prices between ~$71 and ~$91. The last quarter saw a marginal reduction. The stock currently trades at ~$134.

Crescent Capital BDC ( CCAP ) : CCAP is a 1.92% of the portfolio stake purchased in Q1 2020 at prices between $6.21 and $17.10 and the stock currently trades at $17.26.

Note: Their ownership stake in the business is ~6.8%.

Franklin Resources ( BEN ) : The 1.32% BEN position was established in Q1 2020 at prices between $15.30 and $26.25 and it is now at $29.39.

Alibaba Group Holding (BABA), Bank of Nova Scotia (BNS), General Motors (GM), Helmerich & Payne (HP), Intel Corp (INTC), Johnson & Johnson (JNJ), Merck (MRK), and Pfizer Inc. (PFE): These small (less than ~1.5% of the portfolio each) stakes were kept steady this quarter.

The spreadsheet below highlights changes to Watsa’s 13F stock holdings in Q3 2023:

Source: John Vincent. Data constructed from Fairfax Financials’ 13F filings for Q2 2023 and Q3 2023.

For further details see: