"Tracking Prem Watsa’s Fairfax Financial Holdings Portfolio – Q1 2015 Update"
"Prem Watsa’s US long portfolio decreased from $1.54B to $1.42B this quarter.Fairfax Financial’s largest five positions are Resolute Forest Products, Blackberry, International Business Machines, Sandridge Energy, & Overstock.com. They together account for ~92% of the US long assets.Watsa marginally increased the huge Blackberry position in the 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 05/14/20115. Please visit our  to get an idea of his investment philosophy and our  highlighting the fund’s moves during Q4 2014.This quarter, Watsa’s US long portfolio decreased 8.07% from $1.54B to $1.42B. 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 92% of the US long assets. The top-two holdings are Resolute Forest Products and Blackberry and together they account for around two-thirds of the entire 13F portfolio.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 ~$25B investment portfolio. As of Q1 2015, their equity portfolio is 94.4% hedged - it was 90% hedged last quarter and was 100% hedged before. Fairfax continues to have a fairly large 22.7% cash allocation ($5.7B) in the overall investment portfolio.Stake Disposals:Cresud (CRESY): CRESY was a very small 0.47% of the US long portfolio position as of last quarter. It was eliminated this quarter at prices between $9.92 and $14.83. The stock currently trades at $13.92. The original position is from Q4 2008 when close to 2M shares were purchased at around $7 cost-basis. The majority of that stake was eliminated in Q4 2010 in the high-teens.New Stakes:None.Note: Please see the last paragraph for details on the minutely small (less than 0.5% of the US long portfolio each) stakes.Stake Decreases:None.Stake Increases:Blackberry Inc. (BBRY): BBRY is Watsa’s second-largest position at 29.33% 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 stake of almost 46.7M shares (~9% of the business). His average cost-basis is around $17 and the stock currently trades at $10.32. 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 while this quarter saw a marginal increase.Kept Steady:International Business Machines (IBM): IBM is a large 15.41% of the US long portfolio position established in Q3 2014 at prices between $181 and $196. The stake was increased by ~28% last quarter at prices between $151 and $190. The stock currently trades at around $174. It is currently Watsa’s third-largest position after Resolute Forest Products and Blackberry. 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 6.38% 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. Last quarter saw a ~57% stake increase at prices between $1.64 and $4.57. The stock currently trades near the low-end of his purchase-price-ranges at $1.33. The share-price dropped by close to one-third this week as news came out about an  with creditors.Note: A 02/13/2015 13G filing showed a share-count of 62.55M shares compared to 50.89M shares in the 13F.Exco Resources (XCO): XCO is a 2.26% 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 $1.69. 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 $102. The remaining stake stands at 0.59% of the portfolio.Resolute Forest Products (RFP): RFP is the largest holding at 35.26% 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 $12.34. 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.  The stock has lost just over 30% in the last month - the company widely missed Q1 estimates on both earnings and revenue.Overstock.com Inc. (OSTK): OSTK is a top-five position at 5.43% of the US long portfolio. 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 $21.71.Kennedy-Wilson Holdings (KW), Baldwin & Lyons Inc. (BWINB) & BCE Inc. (BCE): These are very small (less than ~1%) positions that were kept steady this quarter.Note: In the , Prem Watsa disclosed that his ownership of Kennedy-Wilson is at 10.7% of the business (11.5M shares, $11.90 cost-basis). KW currently trades at $25.10.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 1.64%.  The very small stakes are in Atwood Oceanics Inc. (ATW), BP plc (BP), Berkshire Hathaway (BRK.A) (BRK.B), CSX Corporation (CSX), Citigroup (C ), Colfax Corporation (CFX), Dex Media Inc. (DXM), Dresser-Rand Group Inc. (DRC), General Dynamics (GD), Helmerich & Payne Inc. (HP), Hologic Inc. (HOLX), K12 Inc. (LRN), MBIA Inc. (MBI), Merck & Co. (MRK), 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), Sterling Bancorp (STL), Talisman Energy (TLM), Turquoise Hill Resources (TRQ), US Bancorp (USB), USG Corporation (USG), Ultra Petroleum (UPL), Wells Fargo (WFC), and Nam Tai Property (NTP). Atwood Oceanics Inc. (ATW), Dresser-Rand Group Inc. (DRC), Helmerich & Payne Inc. (HP), and Talisman Energy (TLM) were newly added this quarter while Cubist Pharmaceuticals (CBST), Navient Corporation (NAVI), and SLM Corporation (SLM) were dropped.The spreadsheet below highlights changes to Watsa’s US stock holdings in Q1 2015:: Equity portfolio is 90% hedged - it was 79% hedged last quarter and 100% hedged before but now he has bought more stocks without additional hedging. 23% cash ($6.1B)."