Now That is Conviction

A people know, I follow a handful of investing gurus. I use the website Gurufocus.com which I find to be easy to use.  One of my favorites is Prem Watsa (keeping with yesterday's Canadian theme). I actually bought a good chunk of SD yesterday as I saw he has taken a ten percent stake in the company.

One of his "mistakes" has been RIMM. He has been buying them since 2010. I think it is fair to say he was early. However, I do admire his conviction, and in the end it may work out pretty well for him.

For 2010 and 2011 he bought 12.8 million shares at an average price of 38.15. Disaster right?  Lick your wounds, sulk away and live to fight another day.... Right? For most investors that would be the case.  But Watsa then bought in the first quarter of 2012 another 14 million shares (more than doubling his stake) at 15.05. S at that point, he had 26.8 million shares at 26.08 per share as he a aged down.

Of course RIMM continued to fall. What does he do?  He doubles down AGAIN!  That takes courage!  In the third quarter he bought 25 million MORE shares at an average price of 7.22. So know he has 51.8 million shares at an average cost of 16.98. And guess what?  Goldman Sachs today upgraded Research in Motion to. Buy with a sixteen dollar target price.

We have all seen stock positions that we like tumble. Sme of us even buy more shares on a drop. But it takes a great deal of conviction to double down twice after an eighty percent drop (from 38 to $7).  Tip of the hat to Mr. Prem Watsa for showing us how it is done.