FINANCIAL SERVICES REPORTER
Fairfax Financial Holdings Ltd. CEO Prem Watsa not only predicted a financial storm was coming - he put his company's money where his mouth was. While other companies struggled during the crash, Fairfax, an insurance and investment firm, turned a tidy profit thanks to its decision to buy credit default swaps that would make money if a number of financial institutions fell on hard times. So it's not surprising that members of the audience at a private equity conference in Toronto yesterday were eager to pick his brain on investing strategies as well as the insurance market. Here are some excerpts:
On where he might invest Fairfax's money next:
"Commercial real estate is interesting. Of course it's got the refinancing risk that's coming in, particularly in the United States.... We're value investors ... so in the next few years, we think that that might be an area that you might want to invest in. In the United States they've got these ... commercial mortgage-backed bonds and they're selling at huge discounts but it's difficult to figure out what it is that you own. And so, if you can, they might be good investments."
On the current valuation of the stock market:
"In 2008 the stock market dropped 50 per cent. When something drops 50 per cent you have a ton ... of stocks selling at good values.... Now it's gone up 50, 60 per cent from March, and so it's a little more tricky.... A year ago there were many, many opportunities.... There's many less today."
On banks getting into the insurance business:
"One of the reasons we're in commercial lines of insurance, trucking insurance, business insurance for buildings and for factory operations and for lumber operations, is that we think the banks will have a difficult time competing ... it's not an area they would want to get into. But in personal lines, automobile insurance, home insurance ... that, they'd be very good at.... We're fine with competition."
© The Globe and Mail
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