Because the purchase was so enormous, Fairfax was obligated to issue a press release in which Watsa explained why he had gorged himself on shares of his own company... At our [annual general meeting] and on our first quarter earnings release call, I said that our shares are "ridiculously cheap." That statement reflected my recognition that in the 35 years since Fairfax began, I have never seen Fairfax shares sell at a bigger discount to their intrinsic value than they have recently. I have now backed up my strong words by purchasing close to US$150 million of Fairfax shares in the market over the last few days, as I believe that this will be an excellent long-term investment.
Watsa's average purchase price for this massive buy was $308 per share. In the chart below, we can see, one year later, that Watsa's purchase was most definitely a buy signal for the rest of us. He made a huge profit from his aggressive insider purchase. Fairfax shares are up 45% from his average purchase price. That means Watsa has made a staggering $67.5 million from his investment. That's already an incredible amount of money, and I don't think this trade is even close to being done... A Hidden Value Fairfax Financial has a secret hidden within its balance sheet... That secret is Fairfax's investment in a booming Indian digital insurance company called Digit Insurance. Fairfax owns 49% of Digit's common shares, plus a further interest in Digit's convertible preference shares. With those convertible preference shares, Fairfax effectively owns 74% of Digit. Currently, Fairfax carries this Digit investment on its balance sheet at a value of $532 million. I am certain that's a massive undervaluation of this investment's true worth. Early in July, we got a major data point that confirmed my hunch. Digit went directly to the public markets and raised $200 million by issuing new shares. The price that these shares were issued at implies that Digit's worth is actually $3.5 billion. That same price also gives us an objective valuation of what Fairfax's interest in Digit is truly worth. Instead of the $532 million that Fairfax carries its Digit investment at, the true value is closer to $2.3 billion. Currently, the stock market seems unaware of this. That's going to change. When Fairfax revalues its investment upward by $1.8 billion in the third quarter and records a gain in the process, it's going to be a major catalyst for the stock. In doing so, Fairfax is going to make Prem Watsa's $150 million insider buy an even bigger win. Good investing, Jody | 
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