"Tracking Prem Watsa’s Fairfax Financial Holdings Portfolio – Q1 2014 Update"
"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 05/14/2014. Please visit our  to get an idea of his investment philosophy and our  highlighting the fund’s moves during Q4 2013.This quarter, Watsa’s US long portfolio increased ~9% from $1.31B to $1.43B. It should be noted that Fairfax Financials (FRFHF) has a negative view on equities overall and his stock portfolio is hedged. Although, there are 42 14F securities in the portfolio, it still is very concentrated: a few large stakes and numerous minute positions. The top five holdings represent just over 92% of the US long assets. The largest holding is Resolute Forest Products followed by Blackberry accounting for 40.88% and 26.42% of the US long portfolio respectively.Stake Disposals:None.New Stakes:None.Stake Decreases:Blackberry Inc. (BBRY): BBRY is Watsa’s second-largest position at 26.42% 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 $7.33. Watsa announced a $4.7B going-private transaction in Q3 2013 but the plans were later abandoned. Instead, he went for a cash-infusion of $1B through convertible debentures ($10 conversion price earning 6% interest) - Watsa financed $500M of that transaction and the remaining was funded by a consortium of other investment funds - the implied dilution takes his ownership up to ~16.5% of the business. This quarter saw a ~10% stake decrease in the 13F position.Stake Increases:Exco Resources (XCO): XCO is a 6.89% 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. The stock currently trades below that range at $5.29. 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 the right. Watsa now controls 6.4% of the business. For investors attempting to follow Watsa, XCO is a good option to consider.Kept Steady:Resolute Forest Products (RFP): RFP is the largest holding at 40.88% 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 $15.73. In Q2 2013, the stake was increased by ~17% at prices between $12.70 and $16.49 and Q3 2013 saw a marginal increase. For investors attempting to follow Watsa, RFP is a good option to consider.  The stock spiked ~25% in the beginning of the year but has since retreated.Sandridge Energy (SD): SD is a 13.99% 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. The stock currently trades near the middle of that range at $6.83. For investors attempting to follow Watsa, SD is a good option to consider.Overstock.com Inc. (OSTK): OSTK is a 7.51% of the US long portfolio position that was reduced by ~6% in Q2 2013 at prices between $11.46 and $28.20. The original stake was purchased in Q4 2008 at prices between $9 and $17 and had since been kept steady. The stock currently trades at $15.51.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. Since then, the position was adjusted with the net effect that Watsa owned slightly more than 5.9M shares at a cost-basis of around $60 as of Q2 2013. In Q3 2013, roughly half the stake was sold at prices between $85.86 and $94.39 and most of the remaining stake was eliminated last quarter at prices between $85.61 and $95.63. The stock currently trades at $101. Watsa harvested long-term gains from this position and the remaining stake stands at 0.58% of the portfolio.Kennedy-Wilson Holdings (KW): KW is a very small 0.68% of the US long portfolio position established last quarter at prices between $18 and $22.25. The stock currently trades just outside that range at $23.57.Baldwin & Lyons Inc. (BWINB), & BCE Inc. (BCE): These are very small (less than ~2%) positions that were kept steady this quarter.The 13F portfolio also has Intel Corporation (INTC) convertible bonds (cusip:458140AD2, 2.95%, 12/2035, 31.53 strike) and numerous minute positions (less than 0.5% of the US long portfolio each) that add up to a total allocation of 3.61%.The spreadsheet below highlights changes to Watsa’s US stock holdings in Q1 2014:"