"Tracking Prem Watsa’s Fairfax Financial Holdings Portfolio – Q4 2014 Update"
"Prem Watsa’s US long portfolio increased from $1.48B to $1.54B this quarter.Fairfax Financial’s largest five positions are Blackberry, Resolute Forest Products, International Business Machines, Sandridge Energy, & Exco Resources. They together account for 89% of the US long assets.Watsa significantly increased stakes in International Business Machines and Sandridge Energy this quarter.This article is part of a series that provides an ongoing analysis of the changes made to Prem Watsa’s US stock portfolio on a quarterly basis. It is based on Watsa’s regulatory  filed on 02/13/20115. Please visit our  to get an idea of his investment philosophy and our  highlighting the fund’s moves during Q3 2014.This quarter, Watsa’s US long portfolio increased 4.41% from $1.48B to $1.54B. Although there are 43 13F securities in the portfolio, it still is very concentrated: a few large stakes and numerous minute positions. The focus of this article is on the larger (greater than 0.5% of the portfolio each) holdings. The top five holdings represent around 89% of the US long assets. The top-two holdings are Blackberry and Resolute Forest Products and they account for around one-third of the entire 13F portfolio each.It should be noted that Fairfax Financial (FRFHF) has a negative view on equities, the stock portfolio is hedged, and the 13F holdings only represent a small portion of the overall $26.2B investment portfolio. Per Q4 2014 , their equity portfolio is 90% hedged - it was 79% hedged last quarter and was 100% hedged before. Fairfax continues to have a fairly large 23% cash allocation ($6.1B) in the overall investment portfolio.Stake Disposals:None.Note: The 13F portfolio listed Intel Corporation (INTC) convertible bonds (cusip:458140AD2, 2.95%, 12/2035, 31.53 strike) till last quarter. It is no longer in the current report.New Stakes:None.Stake Decreases:None.Stake Increases:International Business Machines (IBM): IBM is a large 14.16% of the US long portfolio position established last quarter at prices between $181 and $196. The stake was increased by ~28% this quarter at prices between $151 and $190. The stock currently trades at around $160. It is currently Watsa’s third-largest position after Blackberry and Resolute Forest Products. The substantial stake build-up indicates a clear bullish bias. For investors attempting to follow Watsa, IBM is a very good option to consider for further research.Sandridge Energy (SD): SD is a 5.96% of the US long portfolio stake first purchased in Q4 2008. The bulk of the position was acquired in Q4 2012 at prices between $5.19 and $7.38. This quarter saw a ~57% stake increase at prices between $1.64 and $4.57. The stock currently trades at $2.09. For investors attempting to follow Watsa, SD is a good option to consider for further research.Note: Fairfax has increased the position since the end of the quarter. A 02/13/2015 13G filing shows a share-count of 62.55M shares compared to 50.89M shares in the 13F.Kept Steady:Blackberry Inc. (BBRY): BBRY is Watsa’s largest position at 33.16% of the US long portfolio. The stake was first purchased in 2010 at around $50 for 2M shares. Since then, the position was aggressively built up to the current position of almost 46.65M shares (~9% of the business). His average cost-basis is around $17 and the stock currently trades at $10.09. 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 - the implied dilution takes their ownership up to ~16.5% of the business. Q1 2014 saw a ~10% stake decrease in the 13F position and since then has been kept steady.Exco Resources (XCO): XCO is a 2.46% of the US long portfolio stake first purchased in Q1 2012. The bulk of the current position was purchased in Q4 2012 at prices between $6.77 and $8.93. In January 2014, XCO had a rights offering (one new share at $5 for every four shares of XCO held) and Watsa increased his stake from 10.81M shares to 17.54M shares as a result - Prem Watsa along with Wilbur Ross agreed to backstop the offering thereby acquiring more shares than what he would have received by exercising his rights. The stock currently trades well below the low-end of those ranges at $2.52. Watsa now controls 6.4% of the business. For investors attempting to follow Watsa, XCO is a good option to consider for further research.Johnson & Johnson (JNJ): JNJ is a long-term position that has been in the portfolio since 2007. The original stake was 5.9M shares purchased at an average cost-basis of $62.29. In Q3 2013, roughly half the stake was sold at prices between $85.86 and $94.39. In Q4 2013, the position was almost eliminated at prices between $85.61 and $95.63. The stock currently trades at $99.62. The remaining stake stands at 0.56% of the portfolio.Resolute Forest Products (RFP): RFP is the second-largest holding at 33.08% of the US long portfolio. The stake was first established in Q4 2010 when it was named Abitibi Bowater and the position has since been more than doubled. Watsa’s average cost-basis on RFP is much higher than the current quote of around $19.03. In Q2 2013, the stake was increased by ~17% at prices between $12.70 and $16.49. Since then, the position has remained relatively steady. For investors attempting to follow Watsa, RFP is a good option to consider.  It has returned ~8% so far this year and it is up around 24% from the October 2014 lows.Overstock.com Inc. (OSTK): OSTK is a 5% of the US long portfolio position that was kept steady this quarter. The original stake was purchased in Q4 2008 at prices between $9 and $17 and has since been kept relatively steady. The stock currently trades well outside that range at $22.45.Kennedy-Wilson Holdings (KW): KW is a very small 0.73% of the US long portfolio position established in Q4 2013 at prices between $18 and $22.25. The stock currently trades outside that range at $27.50.Note: Fairfax has increased the position since the end of the quarter. A 02/03/2015 13D/A filing shows a share-count of 11.50M shares (10.80% of the business) compared to 400K shares in the 13F.Baldwin & Lyons Inc. (BWINB), BCE Inc. (BCE), & Cresud (CRESY): These are very small (less than ~1%) positions that were kept steady this quarter.The 13F portfolio also has numerous minutely small positions (less than 0.5% of the US long portfolio each) that add up to a total allocation of 2.08%.  The very small stakes are in BP plc (BP), Berkshire Hathaway (BRK.A) (BRK.B), CSX Corporation (CSX), Citigroup (C ), Colfax Corporation (CFX), Cubist Pharmaceuticals (CBST), Dex Media Inc. (DXM), General Dynamics (GD), Hologic Inc. (HOLX), K12 Inc. (LRN), MBIA Inc. (MBI), Merck & Co. (MRK), Navient Corporation (NAVI), New Oriental Education (EDU), New York Community Bancorp (NYCB), New Tork Times (NYT), Newmarket Corporation (NEU), Old Republic Intl. (ORI), Patterson UTI Energy (PTEN), Penn West Pete. (PWE), Pfizer Inc. (PFE), Precision Castparts (PCP), Rayonier Advanced Materials (RYAM), SLM Corporation (SLM), Sterling Bancorp (STL), Turquoise Hill Resources (TRQ), US Bancorp (USB), USG Corporation (USG), Ultra Petroleum (UPL), Wells Fargo (WFC), and Nam Tai Property (NTP).The spreadsheet below highlights changes to Watsa’s US stock holdings in Q4 2014:"