By Tom Bradley

There was a story in the ROB today about how Prem Watsa’s investment acumen has made a huge difference to the Sick Kids Hospital Foundation. By reducing equities to 35% of the portfolio in 2007, the foundation held up well when markets were crashing in 2008. After increasing the weighting to 75% in 2009 (plus holding lots of corporate bonds), the portfolio also performed extremely well in the recovery - it had a 41% return for the year ending March 31, 2010. As a result of these moves, the $659 million foundation is one of the best performers in its category in North America.

Prem is one of Canada’s eminent investors. He was hired and trained by Tony Hamblin at Confederation Life, a factory in the 70’s and 80’s for many of our greats. Prem and Tony later partnered up to start Hamblin Watsa Investment Counsel, which was the foundation of Fairfax Financial, the insurance conglomerate (which is modeled after Warren Buffett’s Berkshire Hathaway). Fairfax has grown to be what it is today as a result of Prem and his team’s investment skill. To steal an expression from the late sportswriter Jim Coleman, as insurers, they’re good investors.

Note: Tony provided inspiration and counsel to me when we started Steadyhand (as he has done with many entrepreneurs). The early days of Hamblin Watsa provided much fodder for our discussions.

So, could more investors be like Prem? Should they try to make significant shifts in their asset mix to reflect their views? I’d like to say yes, and include myself on the list, but I can’t.

It’s important to understand that the moves described above are significant. Shifting from 25% to 75% (with a credit kicker) is aggressive. If it works, it’s a huge win. If it doesn’t, serious damage could result.

We also need to remember that Prem is as ‘non-benchmark’ as they come. He goes where he finds value, regardless of what others are doing. He can be seriously out of sync with the overall market for long periods of time, which would be psychological agony for a lesser investor. Being wrong is one thing, but being wrong alone is quite another.

Prem has been successful with his bold style because he’s DISCIPLINED, PATIENT and has an IRON WILL. Oh, and did I say he’s also a skilled, experienced analyst. There aren’t many Prem Watsa’s around.