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Watsa’s BlackBerry move shows he’s no Oracle of Omaha

Fairfax Financial Holdings chief Prem Watsa gestures while speaking during the company’s annual meeting in Toronto, April 11, 2013. The deal by Fairfax to buy BlackBerry Ltd. makes one thing clear: Prem Watsa is no Warren Buffett.

AARON HARRIS/REUTERS

The deal by Fairfax Financial Holdings Ltd. to buy BlackBerry Ltd. makes one thing clear: Prem Watsa is no Warren Buffett.

Mr. Watsa, Fairfax's chairman and chief executive officer, has been compared to the Oracle many times during his career. That's because he runs an insurance empire (like Mr. Buffett) and invests his company's cash in out-of-favour opportunities (also like Mr. Buffett).

But it is growing increasingly obvious that the similarities stop there, and that should give investors pause before following Mr. Watsa into any of his investing ideas, including BlackBerry.

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Through Berkshire Hathaway Inc., Mr. Buffett has consistently targeted stable, profitable companies that can be bought on the cheap. Standouts include Coca-Cola Co., American Express Co. and Burlington Northern Santa Fe Corp., powerful cash-generators that offer steady returns.

Copying his moves has become a popular strategy among many investors, who can probably point to some success riding his coattails.

On the other hand, Mr. Watsa appears to have a weakness for floundering companies whose shares have fallen on hard times but whose value is a bit of a head-scratcher. In recent years, he has taken nasty hits from investments in Canwest Global Communications Corp. and AbitibiBowater Inc., which fell victim to long-term deterioration in their respective industries.

And now he is doubling down on BlackBerry, a stock he liked in 2011, when the shares traded in Toronto for more than $25, and loved in 2012, when they fell below $8. At that point, Fairfax became the smartphone maker's biggest investor, with nearly 52 million shares.

Even though the $4.7-billion (U.S.) offer to take BlackBerry private at $9 a share is backed by a consortium, Mr. Watsa looks awfully alone on this bet – and not only because the members of his consortium are staying out of the limelight for the time being.

BlackBerry's revenues, profits and market share have crumbled, sending its shares careening 94 per cent from their high, raising questions about the company's ability to survive and making bears of just about everyone.

As well, the big names formerly associated with a BlackBerry takeover, including Microsoft Corp. and Samsung Electronics Co. Ltd., have failed to materialize.

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So rather than looking like a shrewd investor who is scooping up a great company at a bargain price, Mr. Watsa looks like BlackBerry's last hope – unfortunately, reinforcing a reputation for chasing stocks into the gutter when other, more risk-averse investors have walked away.

That's certainly not Mr. Buffett's style.

That said, not being Mr. Buffett has been serving Mr. Watsa relatively well: While he might not be inspiring the legions of copycat investors that follow Mr. Buffett's every move, Mr. Watsa's own stock should be attracting some attention.

In U.S.-dollar terms, Fairfax has risen 88 per cent over the past five years and 146 per cent over the past 10 years, demolishing the S&P 500 over the same periods and even outperforming Mr. Buffett's Berkshire Hathaway.

Clearly, Mr. Watsa gets full marks for making some prescient bigger calls, including his bearish bet on the stock market heading into the 2008 financial crisis.

As for his stock picks, it is hard to find much encouragement from his recent track record. And those Buffett comparisons? There is only one Warren Buffett.

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About the Author
Investing Reporter

David Berman has been writing about business and investing since 1995. He has written for a number of magazines, including Canadian Business and MoneySense. He worked at the Financial Post as an investing writer and daily columnist before moving to the Globe and Mail in 2008. More

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