Fairfax Financial Holdings

Prem Watsa

V. Prem Watsa, who has run Fairfax Financial Holdings since founding it in 1985, was born in Hyderabad, India, in 1950. He studied engineering at the Indian Institute of Technology Madras, then moved to Canada for an MBA from the Richard Ivey School of Business. He started his career in 1974 as a research analyst at Confederation Life in Toronto, where he was introduced to value investing. In 1984, with colleague Tony Hamblin, he co-founded the asset management firm Hamblin Watsa Investment Counsel; the following year he took control of a struggling trucking insurer, refinanced it, and renamed it Fairfax — from "fair and friendly acquisitions," reflecting his principle of treating people well. Watsa runs Fairfax on the ideas of Benjamin Graham and Warren Buffett: hunt for undervalued businesses, hold them for the long run, and put the insurance "float" — premiums collected before claims are paid — to work in a stock portfolio, in the way Berkshire Hathaway does. He is a confirmed contrarian who stresses capital preservation and positions for the downside. That stubbornness produced his signature trade. Starting in 2003, Fairfax quietly bought credit default swaps, a kind of insurance on other companies' bonds, on the belief that a credit bubble would burst. For years the premiums looked like wasted money. When markets collapsed in 2008, the trades paid off: over $4.6 billion in profits through the crisis.

based on 100 of 346 closed positions