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Berkowitz: 'It Doesn’t Pay to Bet Against America' – Low P/E Stocks

October 15, 2013 | About:
Sally Jones

Sally Jones

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In his July 2013 letter to shareholders, Bruce Berkowitz demonstrated his signature communication gift, to explain-inspire at the same time. Guru Berkowitz wrote: “Eighty-five percent of net assets are invested in AIG, Bank of America, and others damaged by our country’s residential real estate bubble. We bought when most thought them dead. Clearly, they were not and we helped prove the point. Our initial investments reaffirmed a deeply held – and historically profitable – belief that it doesn’t pay to bet against America.”

The current portfolio of Bruce Berkowitz’s Fairholme Capital Management lists 19 stocks, 2 of them new, a total value at $7.69 billion, and a quarter-over-quarter turnover of 1%. The portfolio is weighted with top three sectors: financial services at 68.4%, consumer cyclical at 11.2% and ETF, options, preferred at 7.2%. Guru Berkowitz has averaged a return of 18.73% over 12 months, according to the GuruFocus Score Board of Gurus.

Here’s a review of investor phenom Bruce Berkowitz’s lowest P/E stocks in the Fairholme Capital Management portfolio.

Leucadia National Corporation (LUK) – P/E Ratio: 8.70

Up 32% over 12 months, Leucadia National Corporation has a market cap of $10.41 billion; its shares were traded at around $28.56 with a P/B ratio of 1.00.

Organized in 1968, Leucadia National Corporation is a conglomerate with very diverse interests. The company invests in beef processing, manufacturing, telecommunications, gaming, real estate, energy, medical product development, and winery operations. One of its medical product development companies, Sangart Inc., is developing an intravenously-delivered product to provide rapid oxygen delivery to oxygen-deprived tissues.

For the six months ending June 30, 2013, the company reported a net income $357,715,000, up from $293,626,000 in the same period of 2012. Earnings per diluted share were reported as $1.10 for the same period of 2013, down from $1.18 per diluted share in the same period a year ago.

Guru Action: As of June 30, 2013, Bruce Berkowitz holds 18,664,999 shares valued at $489.3 million, and 6.4% of the portfolio weight.

Berkowitz reduced his position by 0.56% in the second quarter of 2013, selling 105,479 shares at an average price of $29.36, taking a loss of 2.7%.

Across a five-year history, he has averaged a loss of 13% buying 11,060,090 shares at an average price of $32.69 per share, but he gained 17% selling 2,789,094 shares at an average price of $24.45 per share.

Check out the numerous gurus holding LUK and some recent insider trading.

Track historical pricing, revenue and net income:

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Genworth Financial Inc. (GNW) – P/E Ratio: 9.10

Up 136% over 12 months, Genworth Financial Inc. has a market cap of $6.45 billion; its shares were traded at around $13.03 with a P/B ratio of 0.44.

Incorporated in 2003, Genworth Financial Inc. is a financial services company providing insurance, wealth management, investment and financial solutions to more than 15 million customers, with a presence in more than 25 countries. The company’s three operating divisions are: U.S. Life Insurance, Global Mortgage Insurance and Corporate and Other.

For the second quarter of 2013, the company reported a net income $141 million, up from $76 million in the same quarter of 2012. Earnings per diluted share were $0.28, up from $0.16 per diluted share in the same quarter a year ago.

Guru Action: As of June 30, 2013, Bruce Berkowitz holds 1,075,200 shares valued at $12.26 million, and representing 0.16% of the portfolio weight.

He increased his position by 19.63% in the second quarter of 2013, buying 176,400 shares at an average price of $10.41 per share, and making a gain of 25.2%. Holding for only two quarters, Berkowitz has averaged a gain of 39% buying 1,075,200 shares at an average price of $9.38 per share.

Check out other gurus holding GNW along with active insider trading.

Track historical pricing, revenue and net income:

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Lincoln National Corp –Radnor, PA (LNC) – P/E Ratio: 9.80

Up 83% over 12 months, Lincoln National Corp. (Radnor, PA) has a market cap of $11.62 billion; its shares were traded at around $43.94 with a P/B ratio of 0.90.

Organized in 1968, Lincoln National Corp. (Radnor, PA) is a holding company operating multiple insurance and retirement businesses through subsidiary companies. Through its business segments, the company sells wealth protection, accumulation and retirement income products and solutions. The company provides products and services through four business segments: Annuities, Retirement Plan Services, Life Insurance, and Group Protection.

As of June 30, 2013, Lincoln Financial Group had assets under management of $189 billion.

For the second quarter of 2013, the company reported a net income $317 million, down from $321 million in the same quarter of 2012. Earnings per diluted share were posted as $1.15, up from $1.09 per diluted share in the same quarter a year ago. The company’s income from operations was $351 million for the second quarter of 2013, up from $319 million in the same quarter of 2012.

Guru Action: As of June 30, 2013, Bruce Berkowitz holds a new buy of 45,600 shares valued at $1.66 million, with 0.022% of the portfolio weight. He bought 45,600 shares at an average price of $34.10 for a gain of 28.4%.

Check out the numerous gurus holding LNC (Radnor, PA) and very active insider trading.

Track historical pricing, revenue and net income:

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Bruce Berkowitz is the founder and the Managing Member of Fairholme Capital Management.

Here is the complete portfolio of Bruce Berkowitz.



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About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 3.7/5 (10 votes)

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