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CNBC: Berkowitz talks strategy as Fairholme reopens to investors

CharlesCharles
edited September 2013 in Off-Topic
From Seeking Alpha this morning:

The government is an "unbelievable hedge fund," says Bruce Berkowitz (on CNBC), regarding what is turning out to be the state's quite profitable stakes in Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB).

Turning to two of his other big investments, Berkowitz says Bank of America (BAC +0.7%) is going to look like Wells Fargo in a few years and CEO Moynihan is a genius. A bank analyst in the early 90s, Berkowitz made his bones touting the value in Wells Fargo when most thought it was going to collapse under the weight of the California housing bust. On AIG, Berkowitz says book value is currently about $60 per share (price now is $48).

Of his penchant for having a small, concentrated portfolio: "I don't understand this argument about diversification upon diversification. It's just going to lead to an average performance ... the price you're going to pay for above average performance is short-term volatility."

Comments

  • davidrmorandavidrmoran
    Oh, sure, he's totally right, except it's all in the judgment and the choices. Many are now newly talking concentration (e.g., Benz in her personal accounts), or have been for years (Buffet, Heebner, Yacktmans, et alia). It's the standard and solid argument against the Boglehead indexing view of life. Buy AAPL, to heck with SPY. So Berk can pretend not to understand, and can concentrate in a very few stocks, and it's all good ... only, duh, provided that the few stocks are smart choices and do really well. If they flame out, then having bought the haystack looks awfully smarter.
  • [Deleted User]
    The user and all related content has been deleted.
  • WaltJ
    Thanks Charles, interesting as always.
  • InvestorInvestor
    edited September 2013
    Reply to @davidrmoran:
    only, duh, provided that the few stocks are smart choices and do really well. If they flame out, then having bought the haystack looks awfully smarter.
    Very true, unless you have an "edge" over others, it is smarter to diversify.

    Now, I do have an edge but it is a Ford Edge SUV which does not help for investing:)
  • MikeW
    Hi Maurice,
    I encourage you to take a look at the FPA International fund and to read his quarterly reports. Very bright manager, has almost all of his wealth invested in the fund, and sticks to his beliefs. He currently believes the market is overvalued and has about 40% in cash, but has taken that number down when he sees good valuation.
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