Canada's Warren Buffett Drops $129 Million on Under Armour Stock

When one of the world's most respected value investors drops $129 million on a struggling company in three weeks, you need to understand what's happening.

V. Prem Watsa just made that bet on Under Armour.

And $UA ( ▼ 2.03% ) jumped 14% in response.

Watsa runs Fairfax Financial Holdings, a Canadian investment firm with a track record that earned him the nickname "Canada's Warren Buffett."

His strategy is simple. Find good companies trading way below their value. Buy massive positions. Wait for the market to wake up.

He's done this before. And he's made billions doing it.

So when Watsa personally directs over $129 million into $UA in less than a month, smart investors take notice.

Here's what happened:

Total investment: Over $129 million 

Total shares acquired: More than 24 million 

Average price paid: Around $5.31 per share

Current stock price: $6.21

That means Watsa is already sitting on paper gains. But here's the thing: he's not buying for a quick flip.

Before you understand why Watsa is buying, you need to know what Under Armour actually does.

The company designs, manufactures, and sells athletic apparel, footwear, and accessories. Think performance gear for athletes and fitness enthusiasts.

Revenue comes from four main channels:

Wholesale: Selling to retailers like Dick's Sporting Goods and Academy Sports. This is still the biggest chunk of sales.

Direct-to-consumer: Their own stores and e-commerce site. Higher margins but requires significant marketing investment.

Licensing: Letting other companies make UA-branded products for a royalty fee.

International: Sales outside North America, particularly in Asia and Europe.

The business model depends on brand strength. When athletes and everyday people want to wear your logo, you can charge premium prices. When they don't, you're stuck competing on price.

That's exactly where Under Armour has been struggling.

Let's look at what the numbers actually say about Under Armour's current health:

Revenue (TTM): $5.05 billion 
Net Income: -$87.7 million (loss) 
Operating Margin: 1.9% 
Gross Margin: 47.3% 
Current Ratio: 2.1 
Debt-to-Equity: 0.58

Here's what this tells us:

The company still generates over $5 billion in sales. That's not small. But profitability is the problem.

Gross margins of 47% are actually decent for apparel. The issue is operating expenses eating up everything. Marketing costs, store operations, and restructuring charges are crushing the bottom line.

The current ratio of 2.1 is healthy. Under Armour has enough short-term assets to cover short-term debts. They're not facing a liquidity crisis.

Debt levels are manageable at 0.58. For context, Nike's debt-to-equity is around 0.70. Under Armour isn't over-leveraged.

So why is the stock so cheap? Because investors don't believe the turnaround story yet. They see declining revenue, weak margins, and no clear path back to consistent profitability.

Watsa sees something different.

To understand Under Armour's potential, you need to compare it to the market leader.

Here's how Under Armour stacks up against Nike:

What jumps out?

Under Armour generates 11% of Nike's revenue but trades at less than 3% of Nike's market value.

Gross margins are actually comparable. Under Armour's 47.3% beats Nike's 44.8%. The product economics work.

The problem is operating margin. Nike runs a 12.1% operating margin. Under Armour barely scratches 2%. That's where the entire valuation gap lives.

If Under Armour could improve operating margins from 2% to just 8-10%, the stock would re-rate significantly. You wouldn't see a $2.6 billion market cap on $5 billion in revenue with healthy profitability.

That's the bet Watsa is making. He's not betting on revenue growth. He's betting on margin improvement through better cost management.

Under Armour is struggling. No question about it.

The company lost $19 million last quarter. Revenue dropped 5% year-over-year. Margins are shrinking. Competition from Nike and Lululemon is brutal.

So why is Watsa buying?

Because the stock is priced for disaster, not difficulty.

Under Armour has a market cap of just $2.6 billion. That's tiny for a brand everyone knows.

The company still generates over $5 billion in annual revenue. It has loyal customers, quality products, and global distribution.

But the market has given up on it.

Watsa hasn't.

Under Armour isn't sitting still.

Management expanded its restructuring plan in November and raised the operating income outlook to $95 million to $110 million for fiscal 2026.

CEO Kevin Plank, who founded the company and returned to lead it, calls 2026 a "reset year." The plan is to stabilize operations, cut costs, improve margins, and set up for growth in 2027.

Will it work? Nobody knows for sure.

But Watsa clearly thinks the odds are in his favor at these prices.

Let's be honest. This is not a safe stock.

Under Armour is still losing money. Sales are declining. The brand has lost some of its cool factor to competitors.

Turnarounds take time. And they don't always work.

If you buy Under Armour today, you're betting on execution. You're betting that management can cut costs, stabilize revenue, and eventually return to profitability.

That's a bet with real downside risk.

But here's what makes this interesting.

If Under Armour gets back to where it was in 2021-2022, the math changes completely.

Back then, the company had revenue around $5.8-6 billion with operating margins of 12-14%. The market valued it at $8-12 billion.

Today, it's worth $2.6 billion.

If the turnaround works, if revenue stabilizes and margins improve, $UA could easily triple or quadruple from current levels.

That's the bet Watsa is making.

And when you look at the valuation gap vs Nike, it's not crazy. Under Armour doesn't need to beat Nike. It just needs to run a profitable business with decent margins.

At 8-10% operating margins on $5 billion revenue, you're looking at $400-500 million in operating income. Put a 15-20x multiple on that, and you get a $6-10 billion market cap.

From $2.6 billion today, that's 2-4x upside.

Under Armour is not for everyone.

If you need stable cash flow, dividends, or predictable earnings, look elsewhere.

But if you have a long time horizon, can stomach volatility, and want exposure to a potential turnaround backed by one of the best value investors in the world, this deserves serious consideration.

The signal from Watsa's buying is clear: he sees value where others see only problems.

When a billionaire investor with Watsa's track record puts this much money into a beaten-down stock, you can't ignore it.

Under Armour is risky. It's volatile. 

But at $6.21 per share with gross margins that work and a brand people still recognize, it might be one of the most undervalued names in athletic apparel.

The math is simple. Improve operating margins from 2% to 8-10%. That's it. You don't need explosive revenue growth. You don't need to beat Nike. You just need to run a profitable business.

For patient investors who believe in the turnaround story and trust Watsa's judgment, the current price could be a gift.

For everyone else, it's a reminder: sometimes the best opportunities come when everyone else has given up.

P.S. Personally, I’m putting 5% of my portfolio into Under Armour — because moves like this don’t happen often, and if this turnaround story is real, I don’t want to be watching from the sidelines.