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 Indian-born Watsa, 63, often compared to U.S. investor Warren
Buffet, another self-made man, prides himself on a strategy of
investing in stocks and markets others avoid.
In 1990, he was on the right side of the Tokyo market crash, and
seventeen years later, his bet against the U.S. housing market
bubble left him with billions of dollars in profits while less
prescient peers took a battering.
His 2011 investment in Bank of Ireland <BKIR.I> the only domestic
Irish bank not forced into state ownership after a financial crisis<p>has almost trebled in value to 845 million euros ($1.15 billion).
Investments in Greece and a $4.7 billion bid for BlackBerry, which
has faded almost to irrelevance in a competitive smartphone market,
fit the pattern of contrarian investments, but it's too early to say
if they will succeed.
"We've got lots of cash, we've got 30 percent cash," Watsa told
Reuters in a rare interview by telephone on Friday, referring to the
portion of his fund that is invested in cash.
The high cash exposure comes despite record low interest rates as
central banks on both sides of the Atlantic implement quantitative
easing (QE) to pump economies with cheap money.
Reticent about what many investors have seen as the bet of the year
in U.S. equities, where the broad S&P500 index of leading shares has
gained more than 26 percent so far in 2013, Watsa said the market
was overstretched.
"We're quite concerned about the U.S. markets in terms of how high
they have gone. It's not often that we put our money at risk. We're
very cautious, broadly speaking, in the investment business," he
said.
"At least in the United States and Europe, inflation has yet to come
up in any significant way ... in both areas it's close to 50 year
lows in spite of all of the central bank action. We worry about
those kinds of things."
HIGH HOPES FOR IRELAND
Watsa spends considerably less time worrying about Ireland, where he
said he had invested about 700 million dollars on property
investments and his Bank of Ireland stake (at a cost of about 300
million euros, or $407.63 million).
The country was in the first year of its sovereign bailout when
Watsa and Bill McMorrow, head of U.S.-headquartered real estate
investor Kennedy Wilson, brought together five investors who pumped
1.1 billion euros into the bank's 2011 bailout.
The yield on Ireland's benchmark 10 year bond topped 13 percent and
Bank of Ireland's main rival AIB <ALBK.I> had to accept a bailout
that left it 99.8 percent state-owned as the country plumbed the
depths of its financial crisis.
Less than three years after, Ireland is within days of exiting its
sovereign bailout, its 10-year bonds are commanding an interest rate
of about 3.5 percent, unemployment is falling and property prices
are starting to creep higher.
Watsa said he was not concerned about the country's decision to go
it alone and exit its bailout without a safety net or
precautionary credit line.
"The Irish have taken the tough medicine without any riots, without
any noise, and have really done it very well," he said.
"We continue to look at the possibilities. We met many business
people in Ireland, we have huge admiration for the business
community in Ireland."
Watsa, who's only experience in Ireland prior to the bank deal was
serving as best man at a friend's wedding in the five-star K Club
golf resort an hour from Dublin, traveled to Dublin monthly for
Bank of Ireland board meetings while a director.
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He stepped down in July, passing the baton to a Fairfax colleague
Bradley Martin, with fond memories.
"I rarely get on boards and I don't stay on them for long I have
enough things to do in Fairfax," he said, adding that he enjoyed the
jokes. "The Irish people never lose a moment to have a good laugh.
Even if it's on their own account."
AUDACIOUS PICKS
Ireland may have the humor, but it is not the only crisis-hit
eurozone economy that has taken Watsa's fancy.
"We like Ireland and we also like Greece," he said, adding that
Prime Minister Antonis Samaras was doing a very good job.
Fairfax was linked with an investment in National Bank of Greece in
March, when the bank said the Canadian investor had "expressed
interest" in the recapitalization.
Fairfax did not ultimately participate, but in October Watsa's
company announced it would increase its stake in property company
Eurobank Properties from 19 to 41 percent in a share issue expected
to be carried out in April 2014.
Fairfax has been tipped as a possible investor in its parent company
Eurobank <EURBr.AT>, where the Greek authorities are trying to find
anchor investors to take part in a 2 billion euros capital raise.
"We've made many investments in common stock in Greece, and Eurobank
Properties ... and of course we'll look at other opportunities in
Greece," said Watsa, declining to comment on Eurobank specifically.
The bid for BlackBerry was by far his most audacious play of 2013.
He failed to raise enough finance for the $4.7 billion bid to take
the firm private, and instead led a consortium that funded a $1
billion loan to fund a turn-around.
Management has been overhauled including the Nov. 25 appointment
of an interim chief executive John Chen who Watsa said would be
there for the "long haul".
"You never look back, you deal with the hand that you have, there's
no use looking at whether you can get four aces or a flush, you deal
with the hand that you have," he said.
"We think BlackBerry is an iconic company, an iconic brand, it's
known worldwide ... it's a company that deserves to exist and with
John Chen it will."
But he may have to persuade some of his Irish friends. Richie
Boucher, chief executive of the Bank of Ireland, who Watsa
effusively praises, for one is a devoted iPhone user. "I guess the
Bank of Ireland are not perfect," Watsa laughed. ($1 = 0.7345 euros)
[REUTERS MEDIA; By
Laura Noonan]
(Reporting by Laura Noonan; additional
reporting by Janet Guttsman in Tornoto; editing by Elizabeth Piper)
Copyright 2013 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
