Priceless Insight From a Guru Investor

Source: fool.com

In today's world of value investing, Fairholme Capital chief Bruce Berkowitz needs no introduction. The hedge fund manager is known for his downside-focused, heavily consolidated positions, often numbering at fewer than 10 companies. Earlier this week, Berkowitz gave a talk at my alma mater, the University of Miami, where he is a major donor. As frustrating as it is that this did not occur during my time at the school, it was nonetheless a great, casual conversation with the famed fund manager about the economy, his investing strategies, and how you can be a better investor with a few simple guidelines. Here are the top takeaways from Bruce Berkowitz's talk at the U.
Executive in residenceI don't even remember if we had an "executive in residence" during my time at UM, but I do recall that my graduation speaker was Gloria Estefan. With that in mind, on a casual Tuesday afternoon, Bruce stopped  by the school to give a talk to a group of alumni, students, university board members, and the usual press group. Berkowitz is a tremendous force in the value investing world, earning Morningstar's Domestic Stock Fund Manager  of the Decade from 2000 to 2010. While the fund stumbled in 2011 with an overexaggerated redemption run, it has since made a strong recovery and put to rest the doubts of many naysayers.
Berkowitz has averaged over 13 % compounded annual returns since the beginning of last decade. Whether you agree with his investments or not, he is a proven master of his craft. So let's get to it.
On the economyIt's always fun to hear people ask value investors about the state of the economy (i.e., an exercise in futility). Berkowitz was quick to establish  that his fund rarely looks at macroeconomic trends, as they just don't matter over the long run when you buy great companies. He did mention, though, that things are "obviously" recovering from the depths of the financial crisis, and that even with the hiccups we have experienced along the way, we are still on an upward trend.
When asked about the presidential  election impact, Berkowitz again made it clear that he and his staff pay little attention to such factors when evaluating a company. CNBC (and, admittedly, many Fool writers) could learn a lot from this half-hour interview.
The big kahunaOnce the professor conducting the interview realized she was talking to someone who really didn't care about the economy in terms of investing and would likely scoff at nearly 100% of what is taught in academic finance (efficient market theory, anyone?), the conversation headed toward Fairholme's No. 1 holding, and one that makes up greater that a third of the entire portfolio -- AIG (NYSE: AIG  ) . For those with serious short-term memory issues, AIG was possibly the biggest uh-oh of the financial crisis. Before the music stopped, AIG was trading well over $1,000 per share. It sank to $7 in early 2009. Shortly after that, Berkowitz stepped in and has since become the second largest shareholder of the company, after the United States government.
While it was certainly a complicated mess, Berkowitz gave a simple reason why he took the position when no one else would. He noted  that the company traded for less than its cash value, and that downside risk was about as close to zero as possible, given that the company would never go under while the United States still existed, as it was systemically important to the country and the world as a whole.
This led right into one of Berkowitz's main investing principles -- try  to kill the company. When looking at an investment, Berkowitz believes the most important thing one can do is figure out the downside. Once you know what's at stake, and if the company is still a viable investment, figuring out the upside of the stock is less important. Berkowitz went as far to say that he didn't try to model a company's profits years and years out. If he saw that he couldn't lose money, then that only left one option -- that he could make money. Of course, this is an oversimplification, but the theory is sound.
In good companyMoving on from AIG and how Fairholme looks at companies, the topic shifted to another big bet for the fund -- Sears Holdings (Nasdaq: SHLD  ) . There aren't too many Sears bulls out there these days, but you can count Berkowitz as at least one; his position takes up 11% of assets under management.
Again, using Warren Buffett-esque simple reasoning, Berkowitz argued  that Sears is a free real estate play. The current value of the company represents the liquidation value of the retail operation. This is a fancy way of saying the retail business isn't going anywhere, and that the market reflects this in its pricing of the company. The real estate, according to Berkowitz, is basically free. This is meaningful because Sears has a lot of real estate. He notes that Sears holds more retail square footage than Simons Property Group (NYSE: SPG  ) . Simons, though, has a market cap of roughly $47  billion, whereas Sears is apparently only worth $5  billion. This is the crux of Berkowitz's thesis.
Deep convoAs things went on, and after a useful bit regarding  balance sheets versus income statements, the conversation wandered toward behavioral finance, which was certainly interesting, but isn't quite as relevant as the points already mentioned.
All in all, the talk was fascinating, and I highly recommend viewing it  if you'd like to hear some rare, useful insight directly from a value-investing superstar.

INsider: Follow Berkowitz's lead, don't buy his fund

Source: investmentnews.com

Bruce Berkowitz's journey from worst to first is nearly complete, but what got him there is exactly why advisers should keep away.

 One year after finishing in the bottom percentile of large-cap funds, his flagship Fairholme Fund (FAIRX) is set to finish in the top percentile of funds in 2012 with a return of nearly 30%.

The turnaround has been fueled by a strategy Mr. Berkowitz has described as “embrace the hated,” according to Bloomberg. Boiled down, it means buying stocks that no one else wants. So while top holdings like American International Group Inc. (AIG), Bank of America Corp. (BAC) and Sears Holdings Corp. (SHLD) were dragging Fairholme Fund to a jaw-dropping 32% loss in a year when the S&P 500 was flat, Mr. Berkowitz held steady.

The patience paid off big-time, as all three have posted stirring returns. The fund's largest holding, AIG, is up 42%, while both Bank of America and Sears are up more than 50%.

Unfortunately, investors in the Fairholme Fund didn't show the same resolve as Mr. Berkowitz. As the fund showed signs of struggling early last year, investors began to bail.

The fund has had 20 straight months of net withdrawals since February 2011. In total, investors have pulled out more than $9.8 billion over that time, according to Lipper Inc.

With the Fairholme Fund back on top of the investment world, now may seem like the time to get back in. Sadly, that's the opposite of the buy-low, sell-high mentality that led to its turnaround.

Mr. Berkowitz's “embrace the hated” approach shouldn't be limited to picking stocks but also used when picking mutual funds, some investment pros say.

Cliff Asness, founder of AQR Capital Management, spoke to advisers about the strategy's benefits at the Schwab Impact Conference in Chicago in November — whether he knew it or not.

Mr. Asness told his audience that the best way to pick funds was to find the best managers, then to wait until they were out of favor to buy them.

Of cource, embracing the hated is a lot easier said than done. It takes conviction and a strong stomach. But as Mr. Berkowitz has shown, it can lead to major rewards.

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Source: NASDAQ

Investor names have flooded the nominations for GuruFocus' 2012 Guru of the Year . Big names like Tom Russo , David Tepper , Mohnish Pabrai and Donald Yacktman have all been the topic of discussions about who to award the infamous title to. Among the Guru names that have been passed around is none other than Fairholme Fund's Bruce Berkowitz.

After the Fairholme Fund got slammed in 2011 for its disappointing performance, Berkowitz's reputation bounced back this year, as he produced an average rate of return of 6.5 percent in the last 12 months, according to the GuruFocus Score Board.

In a Fortune interview in November with reporter Scott Cendrowski, Berkowitz addressed people's criticisms about his previous year performance:

"I think it's fair. What's not fair is to believe that a manager or a businessperson is in such control of companies that they can control any one-year period or two-year period. I've not seen it done. There's a reason Warren Buffett judges Berkshire Hathaway's (BRKA) book value against the S&P 500. He doesn't use Berkshire's stock price. My question to you is, Can someone like me or anyone else avoid a 2011?" (Read the rest of the article at The Return of a Star Fund Manager)

Berkowitz's 20-stock portfolio is worth almost $7 billion. His top holdings are American International Group Inc. ( AIG ) which is 40 percent of his portfolio, Sears Holdings Corp. ( SHLD ) which is 13.4 percent of his portfolio and Bank of America Corp. ( BAC ) which is 12.9 percent of his portfolio.

As his top holdings, all three have consequently performed at topnotch levels, achieving the highest change in market values in 52 weeks.

Bank of America has topped all his holdings as it appreciated 91.55 percent year to date. It is trading at $10.57, and its stock is up 0.05 percent today.

BAC data by GuruFocus.com

In second place in Berkowitz's portfolio would be American International Group Inc. , which rose 50 percent in market value, year to date. It traded its highest in October around $37, and its current trade price now is $33.94.

Berkowitz referred to AIG in his second quarter shareholder letter as one his best ideas.

AIG data by GuruFocus.com

Sears Holdings does not trail too far back from AIG, surging in market value by 48 percent year to date.

In the second quarter, Sears only represented 11 percent of Berkowitz's portfolio, compared to today's 13. In his shareholder letter, Berkowitz stated:

"Sears Holdings is one of the largest corporate real estate organizations in the world, with a portfolio of retail locations that is second to none. Generally Accepted Accounting Principles mandate valuing their real estate at the lower of cost or market. GAAP would force the Dutch settlers to value Manhattan today at the 1626 purchase price of $23.70. The company's reported book value of $43 understates real values."

Sears is priced at $42.28. It traded its highest in March at $82.

 SHLD data by GuruFocus.com

Though Berkowitz's Wells Fargo & Co. ( WFC ) holding represents only 0.19 percent of his portfolio, the stock's market value rose 24.75 percent year to date.

Trading at $33, the stock was at its highest in September at $36. Berkowitz owns 1.3 million shares of Wells Fargo.

  WFC data by GuruFocus.com

See Bruce Berkowitz's portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Bruce Berkowitz.


GuruFocus 2012 Guru of the Year

If you have not turned in your GuruFocus nominations, make sure to do so in the comments section of Nominate Guru of the Year 2012. Voting polls will be posted soon, and inevitably, the revealing of the results. Stay tuned!About GuruFocus: GuruFocus.com tracks the stocks picks and portfolio holdings of the world's best investors. This value investing site offers stock screeners and valuation tools. And publishes daily articles tracking the latest moves of the world's best investors. GuruFocus also provides promising stock ideas in 3 monthly newsletters sent to Premium Members .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Bruce Berkowitz: The return of a star fund manager

Bruce Berkowitz and his Fairholme Fund have made a comeback - relying on the same stocks that cost his fund so dearly in 2011.

FORTUNE -- Only a handful of mutual fund managers have ever had the sort of epic run that Bruce Berkowitz (and his investors) enjoyed. In the first decade of this century, his 13.2% annual returns obliterated the S&P 500 (SPX), which averaged 1% yearly losses. He was crowned U.S. stock manager of the decade by Morningstar, and Fortune anointed him "the Megamind of Miami" in a late-2010 profile. Then came 2011. Berkowitz's Fairholme Fund (FAIRX) plunged 32% amid huge losses in stocks like AIG, Sears, and Bank of America. Clients yanked $7 billion, and critics said Berkowitz, 54, was finished. But instead of retreating in 2012, he doubled down on his favorite stocks. Today he looks like a genius again: Fairholme has roared to a 37% return this year, tops among U.S. stock mutual funds. Is his comeback for real? Berkowitz made his case by phone from his home near Miami. Edited excerpts:
You were criticized last year for poor performance. Was that fair?
I think it's fair. What's not fair is to believe that a manager or a businessperson is in such control of companies that they can control any one-year period or two-year period. I've not seen it done. There's a reason Warren Buffett judges Berkshire Hathaway's (BRKA) book value against the S&P 500. He doesn't use Berkshire's stock price. My question to you is, Can someone like me or anyone else avoid a 2011?
What were you expecting?
I always knew we'd have our day of negative performance. I'd be foolish not to think that day would arrive. So we had billions in cash, and the fund was chastised somewhat for keeping so much cash. But that cash was used to pay the outflows, and then when the cash started to get to a certain level, I began to liquidate other positions.
Was 2011 beyond your worst-case scenario?
The down year was definitely not outside of what I thought possible. I was not as surprised by the reaction and the money going out as I was by the money coming in. When you tally it all up, we attracted $5.4 billion in 2009 and 2010 into the fund and $7 billion went out in 2011. It moves fast.
AIG's stock, which makes up 40% of your fund, has returned 50% this year. What does it need to do to deliver the 20% a year you think is possible? Will Hurricane Sandy claims prevent that?
It's too soon to tell, but it's not critical. AIG (AIG) is priced for 10 Sandys. More broadly, the company needs to reduce expenses, which will naturally occur. There's been a huge amount of time and energy placed in dealing with the Federal Reserve and the U.S. Treasury, and building new information systems. So you'll start to see significant cost reductions over time.
They're also moving away from low-frequency, high-severity insurance, which, in my opinion, is picking up pennies in front of a steamroller. But I think Peter Hancock, who runs their property-and-casualty business, understands that the one-in-100-year storm happens every five years.

Lately you've begun talking about the real estate value of Sears, which accounts for 10% of your fund.
The value of Sears (SHLD) [which trades near $60] would be over $160 a share if the land on the books was fully valued. You can look back at recent transactions and ask a question: How can Sears close stores and generate hundreds of millions of dollars of cash? It gets at the inventory. The liquidation value of its inventory approaches its stock price. Forget the real estate.
You make Sears sound like a liquidation play, not a retail recovery.
The retail recovery is a potential upside. Regardless, you'll see gigantic cash flows from the closing of locations, the pulling-out of the cash from inventory, work in process, and distribution centers. They're not idiots when it comes to real estate. They understand that today's standalone store can be tomorrow's multi-use hotel/residential-retail center. I think Eddie Lampert will end up being one of a few unbelievable case studies on what it means to be a long-term investor.
You own shares of both Bank of America and MBIA. When will they settle their multibillion-dollar lawsuit?
Bank of America's legal issues are the only thing stopping its rise right now. [MBIA's suit accuses BofA (BAC) of fraud related to bad home loans underwritten by BofA's Countrywide unit; BofA denies the allegations.] I know BofA doesn't want shareholders to overpay, but I'm one large shareholder who says, "Settle up!" And yes, it's in part because I'm a large MBIA (MBI) shareholder, but it's also because it's time to move on. I've e-mailed [BofA CEO] Brian Moynihan and said, "Settle." BofA is now the best capitalized bank in the U.S. It generates $5 billion of cash every three months. Its book value is $20 a share, but the stock trades near $10. Everything else is pretty obvious. Moynihan has done a really good job of moving to the Wells Fargo (WFC) model: client-centered. BofA has a huge franchise in the form of a trillion-dollar deposit base. They are America's bank.
Your portfolio is concentrated [see chart, above]. If you get new money to invest, will you buy different stocks?
Are there other investments out there? Yes. Better than what's in the fund today? No.

Source:  http://finance.fortune.cnn.com/

Berkowitz Paring Financials: Berkshire Cut, Goldman Eliminated

Bruce Berkowitz’s Fairholme Capital pared back some bets on financial stocks including eliminating a holding in Goldman Sachs and slashing stakes in Citigroup and Berkshire Hathaway.
Berkowitz maintained hardly moved his stakes in American International Group and Bank of America, two stocks he has defended over the past year as being oversold. But his bets on other bank stocks were trimmed, according to the filing.
A stake of 21,300 shares in Goldman, which would have been worth over $2 million at Tuesday’s close, no longer appears.
His stake in Berkshire Hathaway A shares was pared by 2,449 shares, a sale that would amount to some $300 million. About another $141 million in Berkshire Hathaway class B shares were sold.
And about $48 million of Citigroup, at Tuesday prices was eliminated as well.
Fairholme was also trimming financial stocks last quarter.
Two new stocks did appear in Fairholme’s filing: auto insurer Mercury General and home-improvement retailer Orchard Supply Hardware Stores.  The stake in Mercury General would be worth about $3.2 million as of Tuesday’s close while the Orchard Supply stake is worth about $14.3 million.

Investing: Fairholme Fund bounces back

Both Berkowitz and his fund suffered through a miserable 2011, as many of the concentrated fund's biggest holdings cratered. Fairholme finished 2011 with a 32-percent decline, lagging Standard & Poor's 500-stock index by a staggering 35 percentage points. Many of Fairholme's shareholders decided that the Miami heat had gotten the best of Berkowitz and pulled billions from his fund.

But the same stocks that performed so poorly last year have rebounded dramatically this year, and Fairholme has benefited. In the first four months, the fund gained 31.4 percent, beating the S&P 500 by 20 points.

So is it time to buy shares of Fairholme again? With just over $8 billion in assets as of last February, the fund is now half the size it was in late 2010. But we still have doubts about the wisdom of buying shares now. Beyond the matter of size, Fairholme has had a string of staff departures. Co-manager Charles Fernandez abruptly resigned last October for personal reasons, and that parting followed the 2008 exits of co-managers Keith Trauner and Larry Pitkowsky, who went on to launch the GoodHaven Fund.

Berkowitz has hired two new executives: Dan Schmerin, a former Treasury Department official, and Fred Fraenkel, former chairman of investment policy at money manager Beacon Trust. Both have experience with financial outfits -- a bonus, given that 72 percent of Fairholme's assets were invested in financial companies at last report.

Which brings us to the fund's still-outsize stake in financials. A bet like that isn't out of character for Fairholme -- in 2000, nearly 70 percent of the fund was invested in that sector. Plus, Berkowitz said in a recent video interview that financial-services companies are "what I know best" and that the sector is on the verge of a turnaround.

Before Fairholme's 2011 misadventure, it had performed brilliantly. From 2000, its first full calendar year, through 2010, Fairholme beat the S&P 500 ten years out of 11. The fund's long-term record remains superb; over the past ten years, it gained 9.1 percent annualized, topping the S&P 500 by an average of 4.8 points per year.

We were once among Berkowitz's biggest fans. But after his nerve-racking flop in 2011, our confidence in him is shaken. He may go on to post strong results in the years to come, but is that worth the risk of suffering another disaster? For most investors, we think the answer is no.

Bruce Berkowitz Sells More St. Joe

Bruce Berkowitz , founder of the Fairholme Fund ( FAIRX ), reduced his holding of St. Joe Co. ( JOE ), one of the largest landholders in Florida, by 2.44 percent, according to GuruFocus Real Time Picks . Berkowitz had also reduced his St. Joe position for the last four consecutive quarters.

The shares sold were held in an account that was managed by the Fairholme Fund at the direction of the client. A total of three sales were made on May 7, 8 and 9, at prices of $18.06, $17.60 and $17.18, respectively.

Days before the transaction, on May 3, St. Joe announced its first quarter results. The company reported a net loss of $0.9 million, compared to net income of $14.1 million for the first quarter of 2011. Revenue declined to $30.5 million, compared to $73.4 million the previous year, as the company had a one-time timber deed transaction in the first quarter of 2011 that boosted revenues by $54.5 million.

Berkowitz spoke about his St. Joe investment with Bloomberg on February 13. "St. Joe is really about real estate. In recessions real estate is worth very little. When it's in demand, it's worth a lot more," he said.

A deeper-than-expected downturn in Florida real estate has plagued the company, which has approximately 573,000 acres of land primarily in Northwest, with approximately 70 percent within 15 miles of the coast of the Gulf of Mexico. Incorporated in 1936, St. Joe acquired most of the land decades ago at very low cost. It has sought to increase the value of its assets by enhancing it for better uses.

In 2011, St. Joe reassessed the carrying value of its real estate which led to non-cash impairment charges of $377.3 million and a full-year net loss of $330.3 million, compared to a net loss of $35.9 million for 2010. In January 2012, the company adopted a new real estate investment strategy to reduce capital outlays and employ new risk-adjusted investment return criteria for evaluating its properties and future investments in the properties. Consequently it will spend less on infrastructure, amenities and master-planned community development, as well as reposition some of its assets to sell in order to preserve capital, improve cash flow and reduce risk for the remainder of the real estate downturn.

Berkowitz tried in 2011 to replace all of the members of St. Joe's board with nominees from the Fairholme Fund , which the company opposed, saying it was trying to take control of the company without paying shareholders. A month later, in February, St. Joe added four of Fairholme's candidates to its board, including Bruce Berkowitz.

Berkowitz initiated his position in St. Joe in the fourth quarter of 2007 when the share price was approximately $31. He has lost approximately 38 percent on the investment so far, based on the average price he paid for all of his shares.

The long-term investor still seemed satisfied with the St. Joe investment regardless of macroeconomic conditions when he reiterated some of the main points of his thesis on Bloomberg in February.

"I'm very proud of what's going on at St. Joe in that the bleeding has stopped," he said. "The company is now structured for whatever the future may be in real estate and will be ready to take advantage of the tail winds that will eventually come. So, it's a lot of land in the last sparse spot in Florida. St. Joe is nothing more than the history of real estate development in the United States."

David Einhorn has fared better so far with St. Joe. He shorted the company in 2010, based on a thesis he explained in a 160-slide presentation at the Value Investor Congress that year.

Bruce Berkowitz Buys Mercury General, Sears, Jefferies and Wells Fargo Warrants

Facing redemption pressure, it has been a while since Bruce Berkowitz bought his last new position. But in the quarter ended on March 31, he initiated a new position in insurance company Mercury General ( MCY ). He also added to his positions in Sears ( SHLD ), Jeffries ( JEF ) and Wells Fargo Warrants. He reduced Berkshire Hathaway ( BRK.A )( BRK.B ), Citigroup ( C ) and Goodman Sachs ( GS ).

Of course Bruce Berkowitz still has more than 80% of his portfolio in financials. His largest holding is AIG ( AIG ), which is 36% of all his stocks. Will AIG make or break Bruce Berkowitz ? We will wait to see.

Bruce Berkowitz initiated holdings in Mercury General Corp. His purchase prices were between $42.88 and $45.63, with an estimated average price of $41.32. The impact to his portfolio due to this purchase was 0.04%. His holdings were 70,900 shares as of March 31, 2012. Mercury General Corp. is engaged primarily in writing all risk classifications of automobile insurance in a number of states, principally California. He owned this stock before in Fairholme Focused Income Fund, but sold later. The stock now has a dividend yield of 5.4%.

Mercury released its first quarter results recently. Its net premiums written is almost flat from the same period last year, but its combined ratio declined to 97.6% from 98.2% in 2011, an important increase of 60 basis points.

Due to the improvement in the combined ratio, Mercury had net income of $73.4 million in the first quarter, compared to $58.2 million for the same period a year ago. The company declared a quarterly dividend of $0.61 per share.

Bruce Berkowitz continues to add to Sears, as the stock price declined. He now owns 156 million shares of Sears. He also added to Jefferies ( JEF ), which he has a lot of confidence in due to the investment of Leucadia ( LUK ).

He reduced his positions in St. Joe. ( JOE ), and sold out Goldman Sachs ( GS ).

Here's What Bruce Berkowitz at Fairholme Is Buying

Every quarter, many money managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.
Today let's look at investing giant Bruce Berkowitz. He's the founder of Fairholme Capital Management, which oversees three mutual funds of interest: the flagship Fairholme Fund (FAIRX) seeks long-term growth of capital, the Fairholme Focused Income Fund (FOCIX) seeks current income, and the Fairholme Allocation Fund (FAAFX) seeks long-term total return. The funds are all rather focused, each owning less than two dozen holdings, instead of the hundreds that many funds own.
The Fairholme fund has many admirers, and Berkowitz was named Morningstar's fund manager of the decade. But the fund has faltered a bit recently, having made some seemingly risky big bets. Berkowitz has some controversial holdings, such as Florida real estate company St. Joe (NYS: JOE) . The stock got a lift a few months ago on some executive turnover and speculation about a buyout, but it's still down for the year.

Berkowitz's portfolio featured about 20 entries and totaled $7.5 billion in value as of March 31. The top three holdings were AIG, representing a whopping 38% of the portfolio, Sears Holdings, with 15%, and Bank of America (NYS: BAC) , at 13%.
Interesting developmentsSo what does Fairholme's latest quarterly 13-F filing tell us? Here are a few interesting details:
New holdings include auto insurer Mercury General (NYS: MCY) , which has a long dividend-paying history and a recent yield of 5.4%. In its latest quarter, net income jumped 26% over year-ago levels, mostly on investment gains, as premiums and operating income were basically flat.
Among holdings in which Fairholme increased its stake was global financial firm Jefferies Group (NYS: JEF) . The company has seen its shares drop nearly 40% over the past year, but in its favor, its CEO recently took a pay cut and several executives gave back bonuses -- not every Wall Street firm has behaved that way. It was also prescient enough to have shorted some Spanish investments in the recent past.
Fairholme reduced its stake in several companies, including Warren Buffett's Berkshire Hathaway (NYS: BRK.B) . It can be hard sometimes to find people who aren't bullish on Buffett, but in concentrated portfolios, a manager might sell a promising holding simply to buy into something seemingly more promising. My colleague Alex Planes offered some downsides to Berkshire earlier this year -- such as a somewhat lackluster performance in recent years. Others will point out that it's the long run that matters for many of us Foolish investors, and Berkshire does offer a lot to like. Fairholme also unloaded all of its stock in Goldman Sachs.
One interesting move Berkowitz made was to sell shares of Bank of America but boost his holdings of B of A warrants. Bank of America has been digesting some $200 billion of toxic assets it received when it bought Countrywide Financial, and it has been gradually turning itself around, selling off non-core assets and improving its overall health, despite continuing mortgage-related losses. My colleague Anand Chokkavelu thinks the stock may well double from recent levels in the not-too-distant future, and that might push warrant prices up even further.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13-F forms can be great places to find intriguing candidates for our portfolios.
While Fairholme is unloading some financial stocks, our analysts have found some compelling banking stocks. Click into our special free report, "The Stocks Only the Smartest Investors Are Buying," to meet a handful of impressive stocks.