What happens when one of your respected friends goes against your investment advice? If you are Fairfax Financial (TSE:FFH) (OTCMKTS:FRFHF) Chief Executive Prem Watsa, you stick to your guns.
Watsa and Ross purchased together
On Monday Watsa’s investment buddy, Wilbur Ross, announced he was selling his exposure to the Bank of Ireland (ADR) (NYSE:IRE). Watsa, which holds 5.8 percent of the stock, is the banks second largest shareholder. Watsa and Ross purchased the bank together in 2011.
The Bank of Ireland (ADR) (NYSE:IRE), which is not the government’s central bank, is the oldest continuous operating bank in Ireland (excluding the four times the bank was closed due to strikes.) In 2009 the Irish government put together a €7 billion euro rescue package for that and Allied Irish Banks plc (ADR) (OTCMKTS:AIBYY). Consultants Oliver Wyman had validated Bank of Ireland’s bad debt levels at €6 billion over three years to March 2011, but that level was exceeded by almost €1 billion months after the estimate was announced.
“We will continue to hold our shares of the bank for the long-term,” Watsa told Reuters. “It is our understanding that Wilbur’s decision to sell is entirely unrelated to the business or future prospects of Bank of Ireland.”
Fairfax Financial manged $1.4 billion with 42 stocks, according to GuruFocus. Watsa recently acced Steel partner holdings LP (NYSE:SPLP), Morgan Stanley (NYSE:MS) Asia and Harvest Natural Resources, Inc. (NYSE:HNR) and recently added BP PLC (ADR) (NYSE:BP) to the portfolio. He recently sold Edwards Group Ltd, ViroPharma and Hewlett Packard.
ValueWalk had previously noted Watsa investments in Greek financial firms, which were trading near a scant 1 times their 2014 earnings estimates and trade at a discount to their European peers despite their strong capitalization. The Euroxx report particularly cited an increase in 2016 earnings per share increase in Alpha Bank A.E. (ADR) (OTCMKTS:ALBKY) and Piraeus Bank SA (OTCMKTS:BPIRY) by 11 percent to 28 percent, with Piraeus potentially benefiting most due to its size. A mitigating factor could be the Greek political situation.
Wilbur Ross of Invesco Private Capital manages $1.4 billion in 11 stocks. He recently added Talmer Bancorp and Chimerix while existing holdings in Bank United, Callidus Software and Zip Reality were reduced.