Prem Watsa Plans Further Investment In India


Prem Watsa, chairman and CEO of Fairfax Financial Holdings Ltd (TSE:FFH) and considered by some people in the investment industry to be the “Warren Buffett of Canada” is bullish on the economic growth of India.

Indian companies doing well

During an interview with the Economic Times, Watsa emphasized that many companies in India “have done very well” and there is not much difference compared with the story in North America. According to him, one will understand his positive conviction about India’s growth story by looking the annual report of businesses in the country.

“India has good companies, English as a link language, democracy, rule of law and very positive demographic trends. That’s the big advantage of India,” said Watsa.

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Thomas Cook as investment vehicle

Watsa stated his plans to make more investments in India, and he will use Thomas Cook India Ltd (BOM:500413), the largest fully integrated, and highly profitable foreign exchange and travel operator in the country as an investment vehicle.

Fairfax Financial Holdings Ltd (TSE:FFH) acquired the foreign exchange and travel operator in 2012. Watsa plans to reinvest in India the free cash flows that will be generated by Thomas Cook India Ltd (BOM:500413). According to him, “Thomas Cook is a free cash flow business. As the cash flow comes and we invest it in India, we might bring some additional money from abroad into India.”

Last year, Thomas Cook Ltd (BOM:500413) acquired Ikya Human Capital Solutions, a human resources solutions firm based in Bangalore for approximately Rs 256 crore. Watsa went to Inida last week to meet the employees of Ikya and Thomas Cook. Watsa also owns a 10% stake in India Infoline, a financial services firm.

Prem Watsa looking for value

During the interview Watsa emphasized that he is a value investor. According to him, he learned value investing as a young man when he was introduced to the book, The Intelligent Investor written by legendary investor, Benjamin Graham.

He emphasized that learning from the book “was like a road to Damascus moment and I became a value investor.” He added, “I’ve been value investing for a long time, the approach is not so much contrarian as we are looking for value.”

Watsa explained, “To find value investments, you must focus on price.” According to him, although he likes Inc (NASDAQ:AMZN) as a company, he does not consider it as a value investment, and will not buy a stake in the e-commerce giant. He said, “We like Amazon as a company, but it makes very little money. We wouldn’t buy Amazon as a value investment.”

Furthermore, Watsa said, “If you would have had this interview with me 4-5 years ago, I’d say I would not buy BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) because it was priced too high relative to its value ($70 billion to 50 billion). We take a long-term view and we make sure we get paid for the risk that we take based on the price we pay for the stock.”

In 2012, Watsa acquired a 10% stake in BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB). Last year, Fairfax Financial Holdings Ltd (TSE:FFH) together with other investors invested $1 billion in the smartphone manufacturer to help revive its business. He is currently serving on the board of BlackBerry as lead director and chairperson of the compensation, nomination and governance committee.

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