Last year, Report on Business magazine named Fairfax Financial Holdings chairman and CEO Prem Watsa as CEO of the year, in part because of his gutsy decision to hold on to investments in credit default swaps, the volatile instruments that helped trigger last fall's market meltdown. Fairfax's swaps actually soared in value during the crash, and so did its share price-from less than $240 in the summer of 2008 to more than $380 by year-end.
This year didn't start out so well. Two of Fairfax's high-profile holdings, shares in CanWest Global Communications and AbitibiBowater, sank and the stocks were later delisted. Shares in Torstar, which Watsa had begun buying in quantity in 2007, also skidded. Fairfax's share price dipped below $280 in March.
All three investments were classic value plays-looking for $1 of value in each 50 cents of a troubled company's share price. At Fairfax's annual meeting in April, Watsa apologized to shareholders: "We should have been a lot more careful, both about the newspaper business as well as the ability of management to navigate."
But as the end of 2009 approaches, Watsa's fortunes have reversed yet again. Fairfax's core reinsurance business has posted solid results, and the company raised $1 billion (U.S.) in a share issue in September, which it used to buy back the 27% of its subsidiary, Odyssey Re, that it didn't already own. Fairfax shares are back above $380.
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