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His largest holdings are AIG (AIG), Sears (SHLD), Bank of America (BAC). These three account for 50% of the portfolio. Asset under management climbed to $23 billion at the beginning of 2011, but has since declined to $7 billion. Fairholme averaged 10% over the past 10 years.
Why so concentrated: the history of success shows that you need to focus on your best ideas when you are confident. You only a few ideas of lifetime to do extremely well.
Why financials? This is similar to what happened in the early 90s. It was a few years of rocky road. Today they continue to be priced at liquidation levels. "Investors did not believe the facts." The companies are making great money. This is what I do.
What to say to the shareholders of last 3 years who lost money? Investors should look at the long term. They should look at least 5 years period.
AIG (AIG): A victim of an extraordinary environment. Fairholme is the largest owner after the government. Huge amount of asset. Still a terrific buy. Book value is around $70. It will eventually reach the book value. I will wait until the book value.
BAC (BAC): $20 book value. they are more than half way through its problem. The uncertainly is the catalyst. Traded at less than the cash in the bank.
Sears (SHLD): the largest mall operator in the US. Extremely value in real estimate. It is worth multiple of what it is traded today.
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Great interview! Thanks for posting