Fairholme Capital Management’s overall portfolio can be seen in the following two charts. A comparative analysis of both quarters demonstrates the core focus of the portfolio situated in the financial sector. In addition, a position in the oil and gas sector was recently initialized.
Overall Portfolio Composition
Oil & Gas
The top five holdings of Fairholme Capital Management can be seen in the following table. These five stocks make up approximately 49.17% of the overall portfolio.
Top Five Holdings
American International Group
Bank of America
Sears Holding Corporation
Total Value of Portfolio
New Portfolio Position
1. AT&T (NYSE:T)
AT&T is the largest addition to Fairholme’s portfolio. AT&T provides numerous telecommunications services ranging from internet services to comprehensive phone plans for their clients. Recently, they announced plans to acquire T-Mobile, thus solidifying their position in the wireless communication sector. Their shares trade at $30.53, with a market capitalization of $180.48 billion. They have a 5.63% dividend yield along with a P/E ratio of 9.49.
The average price per share paid by Fairholme Capital is estimated at $28.66 in 9,380,700 shares. Since their purchase, the trading value of the stock has increased by 6.5%. Their overall position is reported at $275 million, which comprises 1.75% of the overall portfolio. For the last 10 years, on an annual basis, AT&T has grown its EPS by 3.4%.
GuruFocus rated T with the business predictability rank of 1 star.
2. Verizon (NYSE:VZ)
Verizon is the second largest addition to Fairholme’s portfolio. Verizon is currently the largest provider of both wired and wireless communications in the United States. Verizon currently trades at $37.76, with a market capitalization of $105.73 billion. Verizon has a 5.16% dividend yield, and a P/E ratio of 41.94.
Berkowitz purchased Verizon at an estimated average price of $33.20 which is 14% less then Verizon’s current trading price. 7,402,400 shares were purchased for a total net position reported at $264 million which comprises 1.68% of the overall portfolio. For the last 10 years, Verizon has grown its EPS annually by 11.5%.
GuruFocus rated VZ with the business predictability rank of 2.5 stars.
3. Banco Santander (STD)
Banco Santander is an international bank headquartered in Madrid, Spain. They offer a diverse range of banking services, from retail banking to asset management. Banco Santander currently trades at $12.45 with a market capitalization at $105 billion. They have a dividend yield of 6.56%, and a P/E ratio of 9.14. For the most recent fiscal year, they reported earnings at $1.36 per share.
Fairholme purchased STD at an average price at $11.74, which is 6% less then the current trading price. The aggregate position comprises of 4,741,200 shares for a net value at $50 million.
GuruFocus rated STD with the business predictability rank of 1 star.
4. Royal Dutch Shell (NYSE:RDS.A).
Royal Dutch Shell is a oil and gas company that is vertically integrated in its operations. Royal Dutch Shell operates under 3 business units: Upstream, Downstream, and Corporate. Their shares trade at $75.18, with a market capitalization at $236.25 billion. They have a 4.47% dividend yield and a P/E ratio at 11.46.
4,741,200 shares of Royal Dutch Shell were accumulated at an estimated price of $64.3. This overall position valued at $11.6 million has a potential capital gain of 16.8%. For the last 10 years, Royal Dutch Shell has grown its EPS annually by 3.1%.
GuruFocus rated RDS.A with the business predictability rank of 2.5 stars.
1. American International Group (NYSE:AIG)
American International Group is a international insurance and financial services firm with operations spanning over 130 countries. Their shares trade at $34.50, with a market capitalization at $61.94 billion. AIG has a P/E ratio of 2.44, with reported earnings at $14.11 for their fiscal year ending in 2010.
AIG holdings increased by 98% with the purchase of 11,376,486 shares to yield a new net position valued at $2.5 billion. The average estimated price paid per share was $44.93, which represents a 23% capital loss. By large, AIG is the largest holding in Fairholme’s portfolio, comprising 16% of the overall portfolio.
Guru focus rated AIG with the business predictability rank of 1-star.
2. Regions Financial Corporation (NYSE:RF)
Regions Financial Corporation is a national banking services firm, offering services to both individuals and large scale clients. Their shares trade at $7.30, with a total market capitalization at $9.18 billion. They reported negative earnings of $.63 per share for their fiscal year ending in 12/31.
Regions holdings were increased by 67% with the purchase of 52,730,800 shares yielding a value at $871 million. Berkowitz purchased Regions at a estimated average price of $6.45 which is a potential capital gain of 13.2%.
GuruFocus rated RF with the business predictability rank of 1-star.
3. Bank of America (NYSE:BAC)
Bank of America is a global financial services firm, catering to a diverse range of clients with a even larger range of products. Their shares trade at $13.52, with a market capitalization of $136.84 billion. They reported negative earnings of $.33, and have a .30% dividend yield.
Fairholme Capital increased its overall holding of Bank of America by 32.6% with the purchase of 21,461,500 shares. This overall position is reported at $1.22 billion with purchase price estimated at $12.20. This represents a 10.8% capital gain. Bank of America is the third largest holding of Fairholme’s portfolio, coming in at approximately 7.79% of the aggregate portfolio.
GuruFocus rated BAC with the business predictability rank of 1-star.
1. General Growth Properties (NYSE:GGP)
General Growth Properties was the second largest holding of Fairholme Capital before 113 million shares were sold to Brookfield Asset Management in a $1.7 billion block transaction. Fairholme Capital now maintains a small position of 600,256 shares in GGP.
GGP at its very core is a real estate trust that owns, develops, and operates major shopping malls across the United States. Their shares trade for $15.07, with a market capitalization of $14.53 billion. They have a dividend yield of 2.65%, with negative earnings reported for their last two fiscal years.
Guru focus rated GGP with the business predictability rank of 1-star.
2. Humana INC (NYSE:HUM)
Humana’s net position was reduced by $174 million to a net position of $454,000. This is the second largest reduction in equity in Fairholme’s portfolio.
Humana is a health care services company that provides full-service benefits and wellness solutions for large groups and individuals through their medical centers. Their shares trade for $70.56, with a market capitalization of $11.90 billion. They reported earnings at $6.47 per share, with a P/E ratio of 10.91. On an annual basis, Humana has grown its EPS by 29.3% each year for the last ten years.
GuruFocus rated HUM with the business predictability rank of 4 stars.
3. Wellcare Health Plans Inc. (NYSE:WCG)
Fairholme reduced its holdings of Wellcare Health Plan by $62 million from $169 million to $107 million.
Wellcare provides Medicare and Medicaid managed health care plans for its members in Florida, New York, Connecticut, Illinois, and Indiana. Wellcare trades at $43.36 with a market capitalization of $1.84 billion. Wellcare reported negative earnings for its fiscal year ending in 2010, at $-1.28 per share.
4. Winthrop Realty Trust (NYSE:FUR)
Winthrop Realty Trust’s overall position was reduced from $44 million to $31 million, a net decline of $13 million.
Winthrop Realty is a Boston-based REIT who primarily utilizes real-estate backed loans, and ownership of several investment properties. Winthrop currently trades at $12.19, with a market capitalization of $391 million. They have a P/E ratio of 14.87, and a dividend yield at 5.33%.
GuruFocus rated FUR with the business predictability rank of 1-star.
Complete Position Close-Out
1. Tal International Group (NYSE:TAL)
Tal International Group is an international storage container leasing company. Their shares trade for $36.00, with a market capitalization of $1.20 billion. They offer a 5% dividend yield, and a P/E ratio of 19.20.
Fairholme completely eliminated Tal International’s $35 million position from their portfolio. This position was sold at an average of $28.16, which is 27% less then the current trading price.
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