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Bruce Berkowitz's Fairholme Fund Just Sells in the First Quarter: New Portfolio Out

Holly LaFon

Holly LaFon

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Bruce Berkowitz still seems comfortable with Fairholme Fund (FAIRX)'s portfolio of 90% financials, as he made no new purchases in the first quarter, and only sold likely to meet redemptions. This year has been a vindication for the money manager, as he ranks in the top 1% of performance year to date with a return of 26.18%, after ranking in the bottom 99% last year.

Berkowitz’s redemptions were probably near $1 billion in the first quarter if his total portfolio value grew approximately $1 billion and his total assets under management remained about the same. The fund has about $8 billion in assets under management.

His top holdings are still AIG (AIG), AIA Group Ltd. (AAIGF), Sears Holdings Corp. (SHLD), CIT Group (CIT) and Bank of America (BAC).

In the first quarter he reduced American International Group (AIG) and Berkshire Hathaway A (BRK.A), and sold out of Berkshire Hathaway B (BRK.B), Citigroup (C) and China Pacific Insurance (CHPXF).

Reductions

Berkowitz sold 0.34% of his holding of AIG, and now owns 4.44% of shares outstanding. AIG is the multinational insurance corporation that required a $182.5 billion bailout from the federal government during the 2008 financial crisis. From the second quarter of 2010 to the second quarter of 2011, Berkowitz amassed a position of 94,832,939 shares in the company.

In 2011, AIG posted its second profitable year and more than $1.2 billion in earnings, as revenue fell for the third year running. The company also repaid its debt to the Federal Reserve Bank of New York in full in 2011 and has no debt remaining to the U.S. government. Year to date, the stock has increased 41.5%, greatly helping Berkowitz’s performance as his largest holding.

Berkowitz has an in-depth thesis on AIG here.

He also reduced his holding of Berkshire Hathaway A shares by 36.95%. He had acquired his shares at an average price of $101,850 and today shares opened at $119,900 after increasing 4.4% year to date.

Sells

Berkowitz sold all of his 5,180,480 shares in Citigroup Inc. (C) in the first quarter, after reducing 15,606,080 shares in the previous quarter. He bought the majority of his shares from the fourth quarter of 2009 to the third quarter of 2010 at average prices ranging from $35.70 to $47.30. The stock opened at $34.04 Wednesday.

Citigroup’s first-quarter net income fell 2%, and it said that more than a quarter of its balance sheet was comprised of cash or liquid securities. The bank is also planning to resubmit plans to the Federal Reserve which could result in a higher dividend. In March the Fed rejected its dividend increase request saying it was concerned the bank’s cash reserves were not high enough to withstand the most severe level economic crisis.

Berkowitz eliminated his 109,922,300-share position in China Pacific Insurance Group Co. Ltd. (CHPXF.PK), the fourth-largest life insurer in the country. China Pacific Insurance’s stock has traded in a 52-week range of $2.58 to $4.51. The insurer had a difficult first quarter as premium incomes fell 7.5% and first-quarter profit fell 29.4% to 5.63 billion yuan ($892.62 million) on lower investment returns and weaker sales of insurance policies. The previous quarter, its profit fell a company-record 82%.

Finally, he closed his position in Berkshire Hathaway B shares (BRK.B). He owned 3,438,350 shares in the fourth quarter after making reductions in the third and fourth quarters.

Berkowitz has produced 8.45% annualized returns over the last 10 years, and a continued recovery of the U.S. financial system will push his fund higher for the long-term gains toward which he aimed his investments.

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


Rating: 4.6/5 (9 votes)

Comments

AlbertaSunwapta
AlbertaSunwapta - 1 year ago
"This year has been a vindication for the money manager, as he ranks in the top 1% of performance year to date with a return of 26.18%, after ranking in the bottom 99% last year. "

Really? He's been "vindicated"? I imagine one could go bankrupt by ranking in the top 1% of performance every two years. If an investor bought into the fund on Jan 2011 is that investor's position above water?

Actually what I'm insinuating is very unfair, but I hope you're starting to understand my point. As Buffett and Berkowitz have both said; 'the time it take for the earth to go around the sun seems an odd way to measure performance'.
wamoore84
Wamoore84 - 1 year ago
Does that 1 bad year mean we should ignore the 10 years before that? What about people who bought in before 2011?

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