Greater than the parts

Mark Zuckerberg says WhatsApp is worth more than what he paid for, he probably has a plan.

Toronto-based financier Prem Watsa has established himself as an astute investor and has a track record to prove it. While the investment style of Fairfax Financial Holdings mirrors that of market legend Warren Buffett’s Berkshire Hathaway, there is one key difference. Buffett has shied away from making investments in India. Even his brief entry into the Indian general insurance market through a corporate agency was eventually wound-up. Watsa’s Fairfax, on the other hand, has made a major investment in each of the past three years.

Watsa is replicating his holding company model in India through Thomas Cook and that provides an opportunity for Indian investors who subscribe to his investment philosophy. Our cover story this issue tries to understand how Fairfax’s investee companies in India fit together. Thomas Cook, itself a powerful brand in the travel space, has bought two companies that have the potential to grow with capable managers steering them. How these three companies intend to grow independently while also benefiting from each other is the focus of the story What's Cooking At Thomas Cook.

Another interesting read in this issue is about Facebook’s acquisition of WhatsApp. The price paid for the deal is audacious but when Mark Zuckerberg says WhatsApp is worth more than what he paid for, he probably has a plan. Last year, telecom companies, worldwide, generated $120 billion in revenue from text messaging. In contrast, WhatsApp, which is wildly popula, reportedly earned only about $20 million. After all, it is a free application. But it also implies that the app has room to pull in future revenue by introducing a minuscule tariff. 

There’s more. At the Mobile World Congress in Barcelona, WhatsApp CEO Jan Koum said that the text messaging service will allow users to make calls, which could end up expanding its reach to a billion users. Well, one can imagine what kind of disruption that will cause in the telecom space. Even if a piece of that pie falls into Facebook’s kitty, it will be sizeable. To read what Venky Harinarayan, a Silicon Valley professional and an early investor in Facebook, and valuation guru Aswath Damodaran have to say about the deal check out the article Foresight Or Foolhardy?