Fairfax Financial Holdings Ltd. (FFH), run by one ofCanada’s best known value investors, Prem Watsa, substantially increased their stake in Research In Motion Ltd. (RIM). Watsa joined the RIM’s board on January 22, this year, and was named a director, in a major management revamp, that saw the replacement of co-Chief Executive Officers Jim Balsillie and Mike Lazaridis with former operating chief Thorsten Heins. According to a regulatory filing today,Fairfaxcurrently owns 26.85 million RIM shares, up from 11.8 million shares in September. Based on yesterday’s closing price, the company’s stake of 5.12 percent is worth about $437 million. According to filings with US securities regulators, 6,499,500 shares of RIM were bought by Watsa, Fairfax, and other related companies on Wednesday and a further 7,550,700 shares on Thursday. Primecap Management Co., with a stake of 5.5 percent is the largest shareholder in RIM. Lazaridis and Balsillie own 5.4 percent and 5.1 percent, respectively, in the company.
According toFairfax, since RIM is trading at less than book value and has free cash flow and a still growing subscriber base, it is an attractive investment. In an interview last week, Watsa suggested that he was looking at buying more shares of RIM, and was confident of RIM’s ability to compete in future and increase its market-share. Analysts viewed the development as a vote of confidence in the current trajectory of the company.
RIM had a miserable last year, in which its stock lost three-quarters of its value. This was in addition to a series of mishaps, like the black-out in October and the disappointing launch of its tablet computer, which hurt the company. Its share of the smartphone market was down to 11 percent in the third quarter of 2011, from 21 percent two years earlier. Steady market-share loss to Apple Inc. (AAPL)’s iPhone and devices that run on Google’s Android platform, has forced the company to rebuild its product line. The situation in US is worse. RIM’sU.S.market share of smartphones dropped from 44 percent in 2009 to 10 percent in 2011. The company was hopeful that the growing sales in the emerging economies would offset the slide in US, but according to many analysts, it is just a matter of time before the company begins to lose market share internationally.
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RIM’s stock fell as low as $14.77 this week, in a sign that the market did not take theFairfaxnews positively.
Prem might plan on going activist, although this is not his usual investment style.