"Tracking Prem Watsa’s Fairfax Financial Holdings Portfolio – Q2 2023 Update"
"….….….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  filed on 8/14/2023. Please visit our  to get an idea of his investment philosophy and our  for the fund’s moves during Q1 2023.This quarter, Watsa’s 13F portfolio value increased from $1.75B to $1.88B. 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, Blackberry, and Micron Technology. Together, they account for ~46% of the entire 13F portfolio.Note 1: Fairfax Financials’ (FRFHF) 13F holdings only represent a small portion of their overall investment portfolio. The total size as of Q2 2023 was ~$58B of which ~$6.5B was in cash and short-term positions. FRFHF currently trades at ~$846 compared to Book Value (Q2 2023) of ~$834 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 Disposals:Bank of America (BAC): The 5.55% BAC stake was established during Q2 and Q3 2022 at prices between ~$27 and ~$37. It was sold this quarter at prices between ~$27 and ~$31. The stock currently trades at $28.84.Chevron Inc. (CVX): The ~3% of the portfolio CVX stake was doubled in Q2 2022 at prices between ~$142 and ~$181. The disposal this quarter was at prices between ~$151 and ~$172. The stock is now at ~$167.Stake Increases:Occidental Petroleum (OXY): OXY is now the largest 13F stake at ~19% of the portfolio. It was built during the last four quarters at prices between ~$57 and ~$67. The stock is now at $66.15.Micron Technology (MU): MU is currently the third largest 13F position at ~13% 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 last quarter. The stock currently trades at ~$70. There was a marginal increase this quarter.Orla Mining (ORLA): ORLA is a 4.41% of the portfolio stake purchased during Q3 2022 at prices between ~$2.40 and ~$3.70. The last quarter saw a ~45% stake increase at prices between ~$3.85 and ~$4.90. That was followed with another ~30% increase this quarter at prices between ~$3.90 and ~$4.85. The stock currently trades at $4.50.Stake Decreases:Alphabet Inc. (GOOGL): GOOG is a ~2% 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. This quarter saw a marginal reduction. The stock currently trades at ~$138.General Electric (GE): The very small 0.58% stake in GE was reduced by ~45% this quarter.Kept Steady:Blackberry Ltd (BB): BB stake is now at ~14% 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 $5.39. 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). Assuming full conversion of these debentures, Fairfax would beneficially own ~16.4% of the business (~102M shares).Kennedy-Wilson Holdings (KW): KW stake is a large (top five) 11.54% 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 $16.54.Note 1: They also have a 13M share stake in the warrants (7-year term, $23 strike) that they received as part of a $300M investment in perpetual preferred stock (4.5% dividend) made last February. Their overall ownership stake in the business is ~20%.Note 2: The original 2010 stake was from a private placement for Kennedy Wilson convertible preferred stock. The total investment from that point through Q3 2016 was $645M. Since then, they invested another ~$85M. By EOY 2015, they had already received distributions of $625M and so the net investment was ~$105M. That is compared to the current market value of ~$225M.Crescent Capital BDC (CCAP): CCAP is a 1.68% of the portfolio stake purchased in Q1 2020 at prices between $6.21 and $17.10 and the stock currently trades at $16.78.Note: Their ownership stake in the business is ~6.8%.Franklin Resources (BEN): The 1.42% BEN position was established in Q1 2020 at prices between $15.30 and $26.25 and it is now at $26.25.Alibaba Group Holdings (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 ~1.50% of the portfolio each) stakes were kept steady this quarter.The spreadsheet below highlights changes to Watsa’s 13F stock holdings in Q2 2023:Source: John Vincent. Data constructed from Fairfax Financials’ 13F filings for Q1 2023 and Q2 2023.Note: Long-term Book Value & PPS growth is in the annual letter that comes around March 10th: Fairfax has compounded Book Value at 17.8% and PPS at 16.1% annually over a period of 37 years (1985-2022).2023 Q1 Interim Report: Book Value: ~$804 per share as of Q1 2023 compared to ~$762 per share in EOY 2022 – there was an adjustment higher in the Q4 2022 book value from ~$658 per share. Investments: $56.64B total with $7.5B in cash-and-short-term – search for “Consolidated Balance Sheet” in the report and get the following information under “Portfolio Investments” section – Total from this section and the first line item which is cash-and-short-term.My Bullish Rating Text: “A business that compounded book value at ~18% over 37 years trading near book value is a compelling valuation.”Regulatory filings from 2/15/2023 to 6/19/2023: 13D/A – 6/7 – KW -26.37M shares – 17.3% of business."