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Bruce Berkowitz Is Now All In with Financials; Sold Almost Everything Else

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gurufocus

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We have heard a lot lately about the underperformance of Bruce Berkowitz, due to his overweight in financials. His fund has seen large amount of redemptions. He is now close to fully invested with his funds, which usually hold at least 20% of cash. He just reported his second quarter portfolio. The most notable move with his portfolio is that he sold almost every non-financial companies he has owned except Sears (SHLD). High dividend yield companies such as AT&T (T), Verizon (VZ) and pharmaceuticals Bristol-Myers (BMY) and GlaxoSmithKline (GSK) were held in Fairholme Focused Income Fund. Now they are all gone.

That does show his conviction with financials, which he bought more. He bought buys AIG, Berkshire Hathaway B, Jefferies Group Inc., Bank Of America Corp., MBIA Inc., Assured Guaranty Ltd., Citigroup Inc., Vodafone Group Plc. As of 06/30/2011, Fairholme Capital Management owns 20 stocks with a total value of $12.9 billion. These are the details of the buys and sells.

This is the portfolio chart of Bruce Berkowitz. You can click on the legend of the chart to show/hide buys, sells, or holdings. Each ball on the chart represents a position in the portfolio. You can move your mouse on the balls to see the details of each position and click to see the details of all guru trades with this position.



For the details of Bruce Berkowitz's stock buys and sells, go to http://www.gurufocus.com/StockBuy.php?GuruName=Bruce+Berkowitz

This is the sector weightings of his portfolio:

Financials 90.7%
Consumer Services 9.1%
Not Assigned 0.1%
Health Care 0.1%
Telecommunications 0.1%


These are the top 5 holdings of Bruce Berkowitz

  1. American International Group Inc. (AIG) - 103,164,517 shares, 23.4255% of the total portfolio. Shares added by 133.41%
  2. Sears Holdings Corp. (SHLD) - 16,380,680 shares, 9.063% of the total portfolio. Shares added by 0.41%
  3. Citigroup Inc. (C) - 26,387,898 shares, 8.5096% of the total portfolio. Shares added by 2.1%
  4. Bank Of America Corp. (BAC) - 99,647,755 shares, 8.4581% of the total portfolio. Shares added by 7.55%
  5. Brookfield Asset Management (BAM) - 27,269,500 shares, 7.0052% of the total portfolio. Shares reduced by 0.84%


Added: AIG (AIG)

Bruce Berkowitz added to his holdings in American International Group Inc. by 133.41%. His purchase prices were between $27.23 and $35, with an estimated average price of $30.45. The impact to his portfolio due to this purchase was 13.39%. His holdings were 103,164,517 shares as of 06/30/2011.

Added: Berkshire Hathaway B (BRK.B)

Bruce Berkowitz added to his holdings in Berkshire Hathaway B by 19.88%. His purchase prices were between $73.83 and $83.68, with an estimated average price of $78.95. The impact to his portfolio due to this purchase was 0.94%. His holdings were 9,428,019 shares as of 06/30/2011.

Added: Bank Of America Corp. (BAC)

Bruce Berkowitz added to his holdings in Bank Of America Corp. by 7.55%. His purchase prices were between $10.5 and $13.72, with an estimated average price of $11.84. The impact to his portfolio due to this purchase was 0.59%. His holdings were 99,647,755 shares as of 06/30/2011.

Added: Mbia Inc. (MBI)

Bruce Berkowitz added to his holdings in Mbia Inc. by 13.52%. His purchase prices were between $7.77 and $10.92, with an estimated average price of $9.15. The impact to his portfolio due to this purchase was 0.38%. His holdings were 46,832,270 shares as of 06/30/2011.

Added: Citigroup Inc. (C)

Bruce Berkowitz added to his holdings in Citigroup Inc. by 2.1%. His purchase prices were between $36.81 and $45.9, with an estimated average price of $41.99. The impact to his portfolio due to this purchase was 0.18%. His holdings were 26,387,898 shares as of 06/30/2011.

New Purchase: Jefferies Group Inc. (JEF)

Bruce Berkowitz initiated holdings in Jefferies Group Inc.. His purchase prices were between $20 and $25.17, with an estimated average price of $22.61. The impact to his portfolio due to this purchase was 0.65%. His holdings were 4,123,711 shares as of 06/30/2011.

New Purchase: Assured Guaranty Ltd. (AGO)

Bruce Berkowitz initiated holdings in Assured Guaranty Ltd.. His purchase prices were between $14.17 and $17.83, with an estimated average price of $16.05. The impact to his portfolio due to this purchase was 0.18%. His holdings were 1,451,600 shares as of 06/30/2011.

New Purchase: Vodafone Group Plc (VOD)

Bruce Berkowitz initiated holdings in Vodafone Group Plc. His purchase prices were between $25.75 and $29.39, with an estimated average price of $27.71. The impact to his portfolio due to this purchase was 0.06%. His holdings were 280,000 shares as of 06/30/2011.

Reduced: Morgan Stanley (MS)

Bruce Berkowitz reduced to his holdings in Morgan Stanley by 69.24%. His sale prices were between $21.93 and $27.76, with an estimated average price of $24.47. The impact to his portfolio due to this sale was -5.1%. Bruce Berkowitz still held 11,964,700 shares as of 06/30/2011.

Reduced: RSC Holdings (RRR)

Bruce Berkowitz reduced to his holdings in Rsc Holdings by 99.24%. His sale prices were between $10.89 and $14.57, with an estimated average price of $12.45. The impact to his portfolio due to this sale was -1.17%. Bruce Berkowitz still held 90,000 shares as of 06/30/2011.

Sold Out: Cisco Systems Inc. (CSCO)

Bruce Berkowitz sold out his holdings in Cisco Systems Inc.. His sale prices were between $14.84 and $18.07, with an estimated average price of $16.49.

Sold Out: Spirit Aerosystems Holdings Inc. Cl A (SPR)

Bruce Berkowitz sold out his holdings in Spirit Aerosystems Holdings Inc. Cl A. His sale prices were between $20.5 and $25.9, with an estimated average price of $22.73.

Sold Out: American International Group Inc. Warrants (AIG.WS)

Bruce Berkowitz sold out his holdings in American International Group Inc. Warrants. His sale prices were between $8.55 and $11.17, with an estimated average price of $9.48.

Sold Out: At&t (T)

Bruce Berkowitz sold out his holdings in At&t. His sale prices were between $30.13 and $31.86, with an estimated average price of $30.9.

Sold Out: Telefonica S.a. Ads (TEF)

Bruce Berkowitz sold out his holdings in Telefonica S.a. Ads. His sale prices were between $22.63 and $26.99, with an estimated average price of $24.55.

Sold Out: Verizon Communications Inc. (VZ)

Bruce Berkowitz sold out his holdings in Verizon Communications Inc.. His sale prices were between $35.12 and $38.61, with an estimated average price of $36.87.

Sold Out: Banco Santander S.a. Ads (STD)

Bruce Berkowitz sold out his holdings in Banco Santander S.a. Ads. His sale prices were between $10.66 and $12.48, with an estimated average price of $11.59.

Sold Out: Royal Dutch Shell Ads Cl A (RDS.A)

Bruce Berkowitz sold out his holdings in Royal Dutch Shell Ads Cl A. His sale prices were between $67.36 and $77.61, with an estimated average price of $71.39.

Sold Out: GlaxoSmithkline Plc Ads (GSK)

Bruce Berkowitz sold out his holdings in Glaxosmithkline Plc Ads. His sale prices were between $38.78 and $43.74, with an estimated average price of $42.02.

Sold Out: AstraZeneca Plc Ads (AZN)

Bruce Berkowitz sold out his holdings in Astrazeneca Plc Ads. His sale prices were between $46.6 and $52.4, with an estimated average price of $50.2.

Sold Out: Bristol-Myers Squibb Co. (BMY)

Bruce Berkowitz sold out his holdings in Bristolmyers Squibb Co.. His sale prices were between $26.46 and $29.33, with an estimated average price of $28.07.

About the author:

gurufocus
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 4.0/5 (11 votes)

Comments

Sivaram
Sivaram - 3 years ago


wow... even for a concentrated investor, betting on financials is very risky. If the economy weakens, this portfolio can easily blow up...
cm1750
Cm1750 premium member - 3 years ago
I usually have 50% of my portfolio in my top 5 positions but have no financials given their leveraged model and dependence on financial markets and the economy. I could understand having a 25% basket of financials but FAIRX's concentration seems insane to me.

I think it's very interesting that two of Fairholme's analysts left to start their own fund (GOODX) after 10 years at Fairholme and they said that they own no financials at all.

There is a possibility that these two (and other) analysts may have been the real brains behind the Fairholme operation and they left after realizing that Berkowitz went crazy with his hellbent focus on financials.

Just my thoughts.
paulwitt
Paulwitt - 3 years ago
A couple of thoughts

1) Are the companies that Bruce Berkowitz invested in going away?

2) What is the downside and upside of the following stocks:

AIG vs. CSCO

BAC vs. T

C vs. VZ

MBI vs. GSK

3) time frames: entering the abyss - the abyss - exiting the abyss : where are we?

cm1750
Cm1750 premium member - 3 years ago
The problem is that most large banks like BAC has suspended mark-to-market accounting for much of their balance sheets.

Many second mortgages may be worth zero as they get wiped out before primary mortgages. Plus, BAC has all kinds of lawsuits with Countrywide.

BAC etc. might be OK for a speculative position, but to own almost all financials is insane.

If the housing market keeps going down and we experience a major global recession, BAC is insolvent. No time horizon solves that problem - just ask Bill Nygren about his experience with his 20% position in Washington Mutual. He kept adding to that position with complete confidence.
Cowboy77
Cowboy77 - 3 years ago


..."I think it's very interesting that two of Fairholme's analysts left to start their own fund (GOODX) after 10 years at Fairholme and they said that they own no financials at all.

There is a possibility that these two (and other) analysts may have been the real brains behind the Fairholme operation and they left after realizing that Berkowitz went crazy with his hellbent focus on financials."
....

I didn't know that about Goodhaven Funds. Very interesting. Anybody else know anything about how instrumental those guys were with the Fairholme Fund?

I'm a huge Berkowitz fan but I must admit that this "all in" on the financials is testing my resolve. Doubt that there's a middle ground on the ending here. This bet will either make him a legend or a goat. Not sure which. His track record makes me want to hang in there with him but I'm not as sure as I once was.

One more thing, last week Berkowitz had the CEO of Bank of America on his conference call. The last time he had a CEO on it was the CEO of Pfizer. Shortly after that call, he sold out his entire Pfizer position. That struck me as very odd.
fareastwarriors
Fareastwarriors - 3 years ago
Hero or zero....
tighanx
Tighanx - 3 years ago
He could be right, by luck.

The current housing price is not really cheap, there is a chance that the price could go down another 20% or more and if it happens, it will be a disaster for those banks and of course for FAIRX.

However if you want to put a portion of your money betting on financials, FAIRX has a good collection.
clm10
Clm10 - 3 years ago
"Be Fearful When Others Are Greedy and Greedy When Others Are Fearful"

Warren Buffett

"Ignore the Crowd."

--Fairholme

"Buy when there's blood in the streets"

--Warren Buffett

You are either a deep value investor or you're not. If you are not then that is o.k. but understand that to go against "conventional wisdom" takes true guts.

REAL money is made when everybody is throwing out the baby with the bathwater.

[u][/u]
ranjitsudan
Ranjitsudan - 3 years ago
I think financials are buy, even if economy weakens from here onwards, its already been discounted in the price. BOA is back to 2009 lows, Citigroup is also down substantially. I know people are wary about their assets on balance sheet, but realistically they are in much better position then in 2008-09.

A basket approach to big bank will be yield good capital growth in 2 years.

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