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Watsa Making A Value Investment In BlackBerry

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Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH) CEO Prem Watsa shocked markets by offering to buy BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) at $9 per share yesterday, and speculation has already started about what he might really be up to. People have suggested that the move is about everything from bolstering BlackBerry prices before selling to cashing in on the $150 million break fee by shaking out other buyers (if there are any). But looking at Watsa’s past, the most likely explanation is the obvious one – he really thinks he’s getting a deal.

“Trees don’t grow to the sky and markets don’t fall to the floor,” Watsa reportedly likes to say, and at its current price BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) doesn’t have much further to fall. Most people figure it will never recover, but Watsa is used to betting against the crowd, and he has been right often enough to earn him the nickname, “Canada’s Warrant Buffett”.

Watsa’s business model is similar to Buffett’s

Watsa’s business model is similar to Buffett’s, he uses an insurance company to finance investments, and Fairfax has decades of strong growth under his belt. He bet against U.S. housing before the crash, pulling in a couple billion dollars, and then bet on the Bank of Ireland a few years ago, again raking in big profits. Watsa has the kind of track record that would make anyone trust their instincts, no matter what the markets say.

But he also has a personal connection to BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB). Not only is BlackBerry a Canadian company, it’s based and employs people in Waterloo, where Watsa lives. He probably sees the company as something as a national champion worthy of being saved.

Watsa seems sincere in his belief that BlackBerry is still a player

Watsa has also been completely consistent in his statements that BlackBerry (and RIM previously) was undervalued, but that its turnaround would take years, not months or quarters. He has always looked at the medium to long-term in the past, and he’s almost certainly doing the same now. Of course he might be wrong, and plenty of analysts are still recommending that people sell at $7, betting that the deal outlined in Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH)’s letter of intent won’t survive due diligence, but Watsa seems sincere in his belief that BlackBerry is still a player in the mobile market, primed to retake its corporate niche.

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Michael Ide

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