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Fairholme Fund's Bruce Berkowitz On This Weekend's Wealthtrack

edited September 2014 in Fund Discussions
http://wealthtrack.com/

"His largest holding is insurer AIG (AIG), which makes up about half of the fund’s portfolio. His second largest position is Bank of America (BAC) at 14.5%. Next are the two so called government sponsored entities, GSE’s known as Fannie Mae (FNMA) and Freddie Mac (FMCC), which he started purchasing over the past year. Combined they add up to 15% of the portfolio."

"He’ll explain why nearly 80% of his portfolio is in four financial stocks shunned by most investors."

"If you are unable to join us for the show on television, you can watch it on our website, WealthTrack.com, starting over the weekend. If you’d like to see it earlier, it is available to our PREMIUM subscribers right now. We also have an EXTRA interview with Berkowitz about a new venture he is undertaking in Miami, exclusively on our website."
+++++++++++
He also has 6.97% in Sears (SHLD), and 6.35% in St. Joe (JOE)

That's the bulk of the portfolio.



Comments

  • I've found you can generally view Wealthtrack on the website on Friday or Saturday
  • Bruce Berkowitz's interview is now on the Wealthtrack website, http://wealthtrack.com/
    He doesn't talk about Sears or St. Joe, but talks a lot about AIG, Bank of America, Fannie and Freddie. Interesting interview. And in the Extra interview, about 2 minutes long.......He's getting into Art.....Sculpture.......
  • Fantastic.

    Nice and even summary by Conseulo. Full disclosure,

    Classic, deep value investor.

    Time will tell...should know in next few years whether he was right.

    Trust he's applying same process to SHLD.

    Fingers-crossed.

    Still a BB fan.

    c
  • I was impressed with BB and his case for AIG.
    Why is the forward P/E for AIG higher than the trailing P/E? I don't recall seeing forward P/E's lower than trailing P/E's.
    Why is the market only valuing AIG at 0.7x book value?
    M* has a fair value estimate of AIG of $60. BB thinks it is worth $75-100
    His case for Fannie and Freddie is interesting too. I guess the courts and the gov't will decide that.
  • edited September 2014
    "Why is the market only valuing AIG at 0.7x book value?"

    Maybe they're still thinking in the manner that Berkowitz did in 2009.

    "Maybe it's because I don't invest in things I can't understand. Eighteen years ago, after the financial stocks got killed, I was a big buyer of Wells Fargo, Freddie Mac and MBIA. They were simpler businesses then -- and they were cheap and understandable. You could read an annual report or a 10-K and you knew what you were getting.

    Or take American International Group. If you looked at an AIG annual report six or seven years ago, you saw one paragraph on derivatives. You look at an AIG annual report today and you see 15 pages on derivatives. I don't think company insiders fully understand what's going on, let alone outsiders. So if I don't understand something, I've learned to walk away." (http://www.kiplinger.com/article/investing/T041-C000-S002-a-bargain-hunter-stands-tall.html)

    From the same interview:

    "What's the worst that could happen to Sears, one of your biggest holdings?

    It gets slowly liquidated, or Eddie Lampert, its chairman, takes the company private. But I don't think he'd do that to shareholders.

    "We didn't buy Sears based on the business. There's too much retail in the U.S. (note: my emphasis, and my curiosity as to where the demand for retail space will come from for large Sears spaces if there's already too much retail in the US, which is something I agree with....)If the retail works, then it's a grand slam home run. We invested because of the company's real estate holdings. It has some fabulous locations -- a Kmart in Bridgehampton, N.Y., and a Sears on PGA Boulevard in West Palm Beach, Fla., for instance. The real estate alone is conservatively -- and I mean conservatively -- worth $90 per share [the stock traded at $53 in mid November]."

  • I looked up some analyst reports on AIG.
    Almost all analysts had basically a neutral rating.
    Morningstar has a fair value estimate of $60.
    The only strongly positive rating I saw was the Schwab Equity rating, which was the highest rating category they have.

    Is Bruce Berkowitz seeing what other analysts are not?

    I know there are some prominent value funds that own AIG, but don't recall them off the top of my head. Possibly some of the Oakmark funds?

    image
  • edited September 2014
    Ultimately, the only way to outperform the crowd is to think differently. To see value where others do not. Probably harder to do today more than ever. But stakeholders in Fairholme are paying BB do attempt to do just that...as improbable as it may be. If other active funds were also piling into AIG, I'd be concerned. That said, value investors will look wrong until rest of the crowd begins to see what they see. It comes with the territory.
  • Charles said:

    Fantastic.

    Nice and even summary by Conseulo. Full disclosure,

    Classic, deep value investor.

    Time will tell...should know in next few years whether he was right.

    Trust he's applying same process to SHLD.

    c

    FAIRX is one of 3 funds I hold in both pre and after tax accounts, and so it is one of my largest fund holdings. I am quite comfortable with the AIG position. I do believe that the Fannie and Freddie outcome could serve to place a pretty long-lasting label on BB...for better or worse.

    It was a good interview with BB, but to be realistic, I can't really say it was a "nice and even summary" if she didn't even mention SHLD. That was a startling omission.
  • Another fund with few stocks is Cobyx (I think) which is Cook and Bynum. Last time I looked at its website the fund was holding 8 stocks. Take COBYN and Fairholme and you can be a portfolio manager - - just keep up with their website postings and read this forum for updates.
  • varmint said:

    Another fund with few stocks is Cobyx (I think) which is Cook and Bynum. Last time I looked at its website the fund was holding 8 stocks. Take COBYN and Fairholme and you can be a portfolio manager - - just keep up with their website postings and read this forum for updates.

    Found it, COBYX, 7 stocks.....

    image
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