The latest SEC filing of Bruce Kerkowitz’s Fairholme Fund shows a buying of heavy dose of financial stocks (see list below). Businessweek had a good discussion about the pro’s and con’s of buying into financials after the sector more than doubled since its market lows.
The article listed Berkowitz on the bullish side and summarized his financial holdings:
And the article mentioned Mohamed El-Erian of PIMCO and Jeremy Grantham of GMO:
Berkowitz has bet big in financials. Time will tell whether this move will yield the desired results.
Here are the top purchases of Berkowitz in the quarter ended on February 28, 2010.
No. 1: Bank of America Corp. (BAC, Financial), Buy: 7.19% of the portfolio - Total: 35,815,100 Shares
Bank of America Corp. is one of the world's financial services companies. Bank Of America Corp. has a market cap of $156.39 billion; its shares were traded at around $18.06 with and P/S ratio of 1. The dividend yield of Bank Of America Corp. stocks is 0.2%.
No. 2: Citigroup Inc. (C, Financial), Add: 3.5% of the portfolio - Total: 193,731,200 Shares
Citigroup Inc. is a global financial services company. Citigroup Inc. has a market cap of $125.58 billion; its shares were traded at around $4.41 with and P/S ratio of 1.4.
No. 3: CIT Group Inc. (CIT, Financial), Buy: 4.86% of the portfolio - Total: 11,059,429 Shares
CIT Group Inc. is a bank holding company that provides financing and leasing capital for commercial companies throughout the world. Cit Group Inc. has a market cap of $16.9 billion; its shares were traded at around $41.75 with and P/S ratio of 4.2.
No. 4: Comcast Corp. Special (CMCSK, Financial), Buy: 3.82% of the portfolio - Total: 20,429,800 Shares
Comcast Corporation is principally involved in the development, management and operation of broadband cable networks, and in the provision of electronic commerce and programming content. Comcast Corp. Special has a market cap of $56.41 billion; its shares were traded at around $19.33 with and P/S ratio of 1.6. The dividend yield of Comcast Corp. Special stocks is 2%. Comcast Corp. Special had an annual average earning growth of 14.6% over the past 10 years.
No. 5: Regions Financial Corp. (RF, Financial), Buy: 5.5% of the portfolio - Total: 67,636,004 Shares
Regions Financial Corporation is a regional bank holding company and hasbanking-related subsidiaries engaged in mortgage banking, credit life insurance, leasing, and securities brokerage activities with offices in various Southeastern states. Regions Financial Corp. has a market cap of $10.56 billion; its shares were traded at around $8.84 with and P/S ratio of 1.2. The dividend yield of Regions Financial Corp. stocks is 0.4%.
Conclusion
Bruce Berkowitz continued to seek extra return in financials through February 28, 2010.
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The article listed Berkowitz on the bullish side and summarized his financial holdings:
Berkowitz is the largest shareholder in Regions Financial Corp., a regional bank based in Birmingham, Alabama, and small- business lender CIT Group Inc., Bloomberg data show. He’s the second-largest holder of insurer American International Group Inc. His stakes in Citigroup Inc. and Bank of America Corp. are valued at $855 million and $645 million.Berkowitz calculated his risk of owning financials:
“We didn’t buy the stocks at 22 cents like some smart people,” said Berkowitz. “We bought at crisis prices, not death prices.”But there are plenty of people consider owning financials at this time is too risky. The article cited Robert Rodriguez’s FPA Capital Fund:
Berkowitz waited until he was confident federal and state regulators had carefully vetted the major banks and insurers. The stress tests amounted to a free analysis performed by “some of the best and brightest people,” he said.
Berkowitz, 51, looks for businesses that are cheap relative to the cash they generate. He then puts potential investments through his own stress test, a process he calls “killing the company,” to see what might disrupt the cash flow.
Under portfolio manager Robert Rodriguez, the $1.1 billion FPA Capital Fund returned 15 percent a year for the 25 years ended March 31, best among U.S. diversified mutual funds, according to Morningstar. Rodriguez is on sabbatical this year and the Los Angeles-based fund is run by long-time deputies Dennis Bryan and Rikard Ekstrand.
FPA Capital owns one financial stock, Mercury General Corp., a Los Angeles auto insurer, Bryan said in a telephone interview. The fund has avoided banks because the prospect of changes in financial regulation has created too much risk.
“When we don’t understand what the rules are going to be, we don’t want to invest our clients’ capital,” said Bryan.
And the article mentioned Mohamed El-Erian of PIMCO and Jeremy Grantham of GMO:
Mohamed El-Erian, CEO of Pacific Investment Management Co., has said that investors should think of banks as utilities because stricter regulation will mute their returns and limit their ability to use leverage. Pimco, based in Newport Beach, California, manages $1.1 trillion.
GMO’s Grantham last month recommended investors buy U.S. stocks with high, stable returns and low debt. The $15.2 billion GMO Quality Fund’s top 25 holdings didn’t include any financial stocks as of Nov. 30, Morningstar data show.
Berkowitz has bet big in financials. Time will tell whether this move will yield the desired results.
Here are the top purchases of Berkowitz in the quarter ended on February 28, 2010.
No. 1: Bank of America Corp. (BAC, Financial), Buy: 7.19% of the portfolio - Total: 35,815,100 Shares
Bank of America Corp. is one of the world's financial services companies. Bank Of America Corp. has a market cap of $156.39 billion; its shares were traded at around $18.06 with and P/S ratio of 1. The dividend yield of Bank Of America Corp. stocks is 0.2%.
No. 2: Citigroup Inc. (C, Financial), Add: 3.5% of the portfolio - Total: 193,731,200 Shares
Citigroup Inc. is a global financial services company. Citigroup Inc. has a market cap of $125.58 billion; its shares were traded at around $4.41 with and P/S ratio of 1.4.
No. 3: CIT Group Inc. (CIT, Financial), Buy: 4.86% of the portfolio - Total: 11,059,429 Shares
CIT Group Inc. is a bank holding company that provides financing and leasing capital for commercial companies throughout the world. Cit Group Inc. has a market cap of $16.9 billion; its shares were traded at around $41.75 with and P/S ratio of 4.2.
No. 4: Comcast Corp. Special (CMCSK, Financial), Buy: 3.82% of the portfolio - Total: 20,429,800 Shares
Comcast Corporation is principally involved in the development, management and operation of broadband cable networks, and in the provision of electronic commerce and programming content. Comcast Corp. Special has a market cap of $56.41 billion; its shares were traded at around $19.33 with and P/S ratio of 1.6. The dividend yield of Comcast Corp. Special stocks is 2%. Comcast Corp. Special had an annual average earning growth of 14.6% over the past 10 years.
No. 5: Regions Financial Corp. (RF, Financial), Buy: 5.5% of the portfolio - Total: 67,636,004 Shares
Regions Financial Corporation is a regional bank holding company and hasbanking-related subsidiaries engaged in mortgage banking, credit life insurance, leasing, and securities brokerage activities with offices in various Southeastern states. Regions Financial Corp. has a market cap of $10.56 billion; its shares were traded at around $8.84 with and P/S ratio of 1.2. The dividend yield of Regions Financial Corp. stocks is 0.4%.
Conclusion
Bruce Berkowitz continued to seek extra return in financials through February 28, 2010.
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