Fairfax Financial (FFH.TO)

(Market Call Minute.) You never know what Prem Watsa is going to be doing, he either makes $500 a share in profit or zero.

This has Prem Watsa, which is what you are investing in. He has the ability to navigate markets. Central Banks are fighting deflation and he knows it. This is one that you will have to be slightly patient with. His technical target is $765. Dividend yield of 2.09%.

This has always been a very defensive investment, because Prem Watsa is a very conservative investor. He created an enormous amount of wealth for shareholders over the long-term. Has followed the model of Warren Buffett, which is owning an insurance company and using the proceeds to float to buy other companies. He has done a wonderful job. Doesn’t think you can go too far wrong owning and buying this company.

The core of their business is insurance, but as everyone knows, Prem Watsa is a very active investor. He would regard him as an active Bear. Because of that, they have a lot of derivatives on their books, and benefits when the market declines. Because of this, the company becomes negatively correlated with the index. As other insurance companies go down, this one tends to rise. It scores quite poorly on valuation. Has a Short on this. 2.2% yield.

(Market Call Minute.) This is a long term play and a proven investor.

(Market Call Minute) Step back and see how the next couple of quarters go.

(Market Call Minute.) Led by Prem Watsa, who is bearish and has had some bets against the market. If the market has a downturn, those bets will turn out well.

They had a lot of dogs of insurance companies that they acquired, but they have all turned around and are firing on all cylinders now. It is a great hedge to any portfolio.

Likes this a lot. Has a lot of respect for management. The company has been cashed up to take advantage of the economic problems coming. Thinks it will be one of the safe haven Longs over the next 18-24 months.

Holds insurance and reinsurance companies. (Owns the preferreds). Doesn’t like what they have done with the share structure that started in September. It effectively gives management control. They said it was to avoid a takeover, but as a shareholder if somebody comes in with an offer, it is usually at a premium, and gives him an option to accept or reject. Stock price is a bit high, so he wouldn’t Buy at this point. Just did a couple of deals, one in India and another in Greece. This is a contrarian thing which he thinks is a good thing.

You have some sector tailwinds. It is extremely well managed with interesting investment strategies. It is a great name to buy and hold.

(Trying to be conservative on his Top Picks this time.) Trading at a reasonable multiple and close to its BV. Prem Watsa has been really good at executing both on an organic growth, but also managing its portfolio. The portfolio is one that is really hedged and structurally set up to perform well in rough markets. Dividend yield of 2.09%.

A little bit of a black box. What they have really tried to do over time has been to break even on the insurance, take all of the funds and invest in various things. It really gets priced off of book value, so the investment side is big and that is why it has dipped, because all of the public investments are down.

You would expect this would be holding up a little better in this turmoil because Prem Watsa had some Put options on the market that was created on a sort of private large basis. What bothers him is that it has really broken down. There is something going on and he doesn’t know what it is. Be very cautious at this point. It is a very complicated company.

Has a lot of respect for Prem Watsa, a truly great investor and has created a great company with this. Has probably done better on the investment side of the equation than on the underwriting side. Long-term this is a fairly good investment, but is controversial right now, as he has come to the market and asked them to lock in his voting control of around 41%. That has been diluted over the years from 85%. Because his control has slipped, he has had to come to the market time and time again to raise capital. As long as there is a sunset clause on that control block, it is probably all right. He does not like to see control blocks that can go generation to generation. If you can ever buy the stock at close to Book Value, it is a very good buy.