Bets on debt-ravaged Greece or ailing phone maker BlackBerry would make many investors flee, but for Prem Watsa both are part of a “cautious” strategy he employs to manage Fairfax Financial’s $23.3-billion portfolio. Indian-born Watsa, 63, often compared to US investor Warren Buffet, another self-made man, prides himself on a strategy of investing in stocks and markets others avoid.
In 1990, he was on the right side of the Tokyo market crash, and 17 years later, his bet against the US housing market bubble left him with billions of dollars in profits while less prescient peers took a battering.
His 2011 investment in Bank of Ireland — the only domestic Irish bank not forced into state ownership after a financial crisis — has almost trebled in value to 845 million euros ($1.15 billion).
Investments in Greece and a $4.7-billion bid for BlackBerry, which has faded almost to irrelevance in a competitive smartphone market, fit the pattern of contrarian investments, but it’s too early to say if they will succeed.
“We’ve got lots of cash, we’ve got 30% cash,” Watsa told Reuters in a rare interview by telephone, referring to the portion of his fund that is invested in cash.
Reticent about what many investors have seen as the bet of the year in US equities, where the broad S&P500 index of leading shares has gained more than 26% so far in 2013, Watsa said the market was overstretched.
“We’re quite concerned about the US markets in terms of how high they have gone. It’s not often that we put our money at risk. We’re very cautious, broadly speaking, in the investment business,” he said.
“At least in the US and Europe, inflation has yet to come up in any significant way... In both areas it’s close to 50-year lows in spite of all of the central bank action. We worry about those kinds of things.”
Watsa spends considerably less time worrying about Ireland, where he said he had invested about $700 million on property investments and his Bank of Ireland stake (at a cost of about 300 million euros, or $407.63 million).
The country was in the first year of its sovereign bailout when Watsa and Bill McMorrow, head of US-headquartered real estate investor Kennedy Wilson, brought together five investors who pumped 1.1 billion euros into the bank’s 2011 bailout.
The yield on Ireland’s benchmark 10-year bond topped 13% and Bank of Ireland’s main rival AIB had to accept a