"Tracking Prem Watsa’s Fairfax Financial Holdings Portfolio – Q3 2021 Update"
"Prem Watsa’s 13F portfolio value decreased from $3.11B to $3.07B this quarter.Fairfax Financials’ largest three stakes are Atlas Corp, Blackberry, and Resolute Forest Products. They together account for ~76% of the 13F assets.The 13F securities form a small portion of their overall investment portfolio.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 11/17/2021. Please visit our  to get an idea of his investment philosophy and our  for the fund’s moves during Q2 2021.This quarter, Watsa’s 13F portfolio value decreased marginally from $3.11B to $3.07B. 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 Atlas Corp, Blackberry, and Resolute Forest Products. Together, they account for ~76% of the entire 13F portfolio.Note: Fairfax Financials’ (FRFHF) 13F holdings only represent a small portion of their overall investment portfolio. The total size as of Q3 2021 was ~$52B of which around one-third is in cash and short-term positions. Prominent equity allocations include investments in Greece, India (FFXDF) and Africa (FFXXF). They have a huge position in CPI linked derivative contracts ($62.2B notional amount, $0.1M fair value, ~2 years average maturity) designed to protect against global deflation. FRFHF currently trades at ~$445 compared to Book Value (Q3 2021) of ~$562 per share. The equity portfolio was 100% hedged starting from around 2003 but those were removed in Q4 2016.Stake Disposals:Lumen Technologies (LUMN) previously CenturyLink: LUMN was a small 0.62% of the portfolio stake established in Q4 2017 at prices between $13.50 and $20.50 and increased by ~30% next quarter at prices between $15.50 and $19. Q2 2019 saw another ~20% stake increase at prices between $11.50 and $16.75. Q1 2021 saw a ~35% selling at prices between ~$9.75 and ~$15.50. The remaining stake was sold this quarter at prices between ~$11.30 and ~$13.75. The stock currently trades at $12.95.Stake Increases:Atlas Corp (ATCO) previously Seaspan Corp: ATCO is currently the largest 13F stake at ~50% of the portfolio. It came about because of exercising 38.46M in warrants in July 2018 and the same amount in January 2019 at $6.50 per share. The stock currently trades at $13.85. Q1 2020 saw a ~30% stake increase due to Atlas Corp’s reorganization and acquisition of APR Energy. Last three quarters have seen minor increases. They have a 	~48% ownership stake in the business. There was a marginal increase this quarter.Note: In January 2019, Fairfax added $500M more in a structure like the first tranche made in March 2018 (debt + warrants converted early). Total investment is $1B - $500M each in equity (38.46M warrants * 2 converted at $6.50 per share) and debt. The early conversion of warrants in July 2019 resulted in Fairfax also getting 25M in 7-year warrants exercisable at $8.05 per share.H&R Block (HRB): HRB is a small 0.91% of the portfolio position established in Q1 2021 at prices between ~$15.50 and ~$22. This quarter saw a ~45% stake increase at prices between $23.35 and $26.30. The stock is now at ~$24.45.Stake Decreases:None.Kept Steady:Blackberry Ltd (BB): BB is Watsa’s second-largest position at ~15% of the portfolio. The stake was first purchased in 2010 at around $50 for 2M shares. The position 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 $9.85. There has only been very minor activity in the last eight 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).Resolute Forest Products (RFP): The large (top three) RFP stake is now at ~12% of the portfolio. The position was first established in Q4 2010 when it was named Abitibi Bowater and the stake has since been more than doubled. Over the years, their net investment in RFP was $745M ($24.39 per share) and the current value is ~$350M ($11.51 per share). Their ownership stake is just under ~39% of the business.Kennedy-Wilson Holdings (KW): KW stake is a large (top five) ~9% of the 13F portfolio position. 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 $22.41. Watsa’s ownership stake in the business is ~9%.Note: The original 2010 stake was from a private placement for Kennedy Wilson convertible preferred stock. The total investment from that point thru Q3 2016 was $645M. Since then, they have invested another ~$85M. By EOY 2015, they had already received distributions of $625M and so the net investment was ~$105M. That is compared to current market value of ~$300M.Crescent Capital BDC (CCAP) and Franklin Resources (BEN): These two positions were established in Q1 2020. CCAP is a 2.36% of the portfolio stake purchased at prices between $6.21 and $17.10 and the stock currently trades at $18.62. The ~1% BEN position was established at prices between $15.30 and $26.25 and it is now at $33.75.Note: They have a ~13.5% ownership stake in CCAP.Micron Technology (MU): MU is a 1.60% portfolio position that 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. The stock currently trades at $86.14. Q1 2021 saw marginal trimming while last quarter there was a minor increase.Alphabet Inc. (GOOGL): GOOG is a 1.46% stake purchased in Q1 2020 at prices between $1057 and $1527 and it now goes for ~$2922. There was a ~22% stake increase in Q4 2020 at prices between $1415 and $1827.General Motors (GM): GM is a small 0.65% position. Q3 2018 saw a huge ~370% stake increase at prices between $33.50 and $40. The stock is now well above that range at $59.86.General Electric (GE): GE was a minutely small stake as of Q1 2018. Q2 2018 saw a ~160% stake increase at prices between ~$102 and ~$122 and that was followed with a one-third further increase next quarter at prices between ~$90 and ~$114. Q4 2018 saw another ~30% increase at prices between ~$54 and ~$110. The stock currently trades at $98.40 and the stake is at 0.58%.Note: The prices quoted above are adjusted for the 1-for-8 reverse-stock-split in July.Helmerich & Payne (HP): The very small 0.50% position in HP saw a 30% stake increase in Q1 2021 at prices between ~$23 and ~$33. The stock currently trades at $23.26.Bank of Nova Scotia (BNS): BNS is a small 0.50% of the portfolio position established in Q4 2018 at prices between $49 and $60 and the stock currently trades at $63.84.Chevron Inc. (CVX) and Pfizer Inc. (PFE): These two very small ~0.55% stakes were kept steady this quarter.Note: Greek allocation in the investment portfolio primarily consists of Eurobank (EGFEY) (EGFEF) and Praktiker. Grivalia Properties merged into Eurobank in Q2 2019 and Watsa’s 52.4% stake got converted to Eurobank shares. Fairfax now owns ~31% of Eurobank. Their overall investment was ~$1.16B.The 13F portfolio also has numerous very small equity positions (less than ~0.5% of the portfolio each) that add up to a total allocation of less than 5%.  The stakes are Argan Inc. (AGX), Berkshire Hathaway (BRK.A), Brookfield Asset Management (BAM), Cannae Holdings (CNNE), Change Healthcare (CHNG), Colliers International (CIGI), CVS Health (CVS), Darling Ingredients (DAR), Denny’s Corp (DENN), Devon Energy (DVN), Dine Brands Global (DIN), Facebook (FB), Fidelity National Financial (FNF), Garrett Motion (GTX), Granite Real Estate (GRP.U), Helmerich & Payne (HP), Imax Corp (IMAX), IMAX Corp (IMAX), International Seaways (INSW), iRobot Corp (IRBT), Jacobs Engineering (J), Kansas City Southern (KSU), KKR & Company (KKR), Liberty Broadband (LBRDK), Liberty Trip Advisor ((LTRPA), Loral Space & Communications (LORL), Magnachip Semi (MX), Mastercraft Boat Holdings (MCFT), Merck (MRK), Middleby Corp (MIDD), Nuance Communications (NUAN), Osisko Gold (OR), Pioneer Natural Resources (PNQ), PNM Resources (PNM), PPD Inc. (PPD), Restaurant Brands (QSR), Soliton Inc. (SOLY), Strongbridge Biopharma (SBBP), Taiwan Semi (TSM), Trillium Therapeutics (TRIL), US Silica Holdings (SLCA), Under Armour (UA), Vanguard S&P ETF (VOO), Viemed Healthcare (VMD), and WW International (WW).The spreadsheet below highlights changes to Watsa’s 13F stock holdings in Q3 2021:Source: John Vincent. Data constructed from Fairfax Financial’s 13F filings for Q2 2021 and Q3 2021.Note: 9/2/2020 – Debenture conversion details that were used to do the Q3 2020 tracking update -  - Together with common shares already owned by Fairfax and its subsidiaries and assuming full conversion of the purchased debentures, Fairfax would own 101.7M common shares, or ~16.5%-16.6% of BlackBerry's shares outstanding as of Aug. 28.Q2 2021 Report: Book Value: $540.62  per share as of 3/31/2021 compared to $478 as of EOY 2020.My Bullish Rating Text: “A business that compounded book value at ~18% over 35 years trading at a discount to book value is a compelling valuation.”Regulatory filings from 5/16/2021 thru 8/26/2021: 13D/A – 8/25 – BB – 101.85M shares – 16.4% of business. 13D/A – 8/25 – RFP – 30.55M shares – 38.6% of business. 13D/A – 8/25 – KW – 13.32M shares – 8.7% of business. 13D/A – 8/25 – Atlas Corp – ATCO – 131.61M shares – 47.4% of business, 13D/A – 6/15 - same."