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James Li
James Li
Articles (1438)  | Author's Website |

Bruce Berkowitz's Top 4 Buys in the 3rd Quarter

Fairholme's top buys include stake in major Berkshire bank holding

Bruce Berkowitz (Trades, Portfolio), founder and managing member of the Fairholme Fund (Trades, Portfolio), disclosed this week that his top four buys during the third quarter were Bank of America Corp. (NYSE:BAC), AT&T Inc. (NYSE:T), Canadian Natural Resources Ltd. (NYSE:CNQ) and Kinder Morgan Inc. (NYSE:KMI).

Managing a portfolio of just 13 stocks, Berkowitz believes that the more diversified the portfolio is, the more likely that the portfolio performance will be average. The guru follows Benjamin Graham's investing philosophy by purchasing stocks of companies with strong management teams, high potential of free cash flow generation and deeply-low valuations. Berkowitz may sometimes also purchase the stock of companies in which a catalyst could narrow the gap between its market price and intrinsic value.

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Fairholme's $653 million equity portfolio had a 4% turnover ratio during the quarter, with an 84.11% weight in real estate and a 11.63% weight in financial services.

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Bank of America

Berkowitz purchased 337,400 shares of Bank of America, giving the holding 1.25% weight in the equity portfolio. Shares averaged $24.90 during the third quarter.

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GuruFocus ranks the Charlotte-based bank's financial strength 3 out of 10 on the back of cash-to-debt and debt-to-equity ratios underperforming more than half of global competitors, suggesting high financial leverage compared to stocks from other market sectors.

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Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) owns over 1 billion shares of Bank of America as of third-quarter-end, giving the position 10.63% weight in its $229 billion equity portfolio.

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Other gurus with holdings in Bank of America include Dodge & Cox and PRIMECAP Management (Trades, Portfolio).

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AT&T

Berkowitz purchased 229,500 shares of AT&T, giving the position 1% equity portfolio weight. Shares averaged $29.59 during the third quarter.

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GuruFocus ranks the Dallas-based telecom company's profitability 6 out of 10 on the back of a high Piotroski F-score of 7 and an operating margin that has increased approximately 5% per year on average over the past five years and is outperforming over 69% of global competitors.

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Gurus with large holdings in AT&T include Pioneer Investments (Trades, Portfolio) and David Tepper (Trades, Portfolio)'s Appaloosa Management.

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Canadian Natural Resources

Berkowitz purchased 290,500 shares of Canadian Natural Resources, giving the position 0.71% weight in the equity portfolio. Shares averaged $18.40 during the third quarter.

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GuruFocus ranks the Calgary, Alberta-based energy company's profitability 6 out of 10 on the back of returns and three-year revenue and earnings growth rates outperforming over 60% of global competitors.

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Kinder Morgan

Berkowitz purchased 196,600 shares of Kinder Morgan, giving the holding 0.37% equity portfolio weight. Shares averaged $13.95 during the third quarter.

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GuruFocus ranks the Houston-based energy company's profitability 6 out of 10 on the back of operating margins outperforming over 88.23% of global competitors, yet offset by a three-year revenue decline rate of 0.1%, which underperforms over 65% of global energy companies.

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Disclosure: No positions.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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