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Bruce Berkowitz Cuts Vistra Position in 3rd Quarter

Fairholme leader reports quarterly portfolio

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Nov 19, 2021
Summary
  • Fairholme exits stake in Vistra.
  • Firm establishes a small holding in Nutrien.
  • Position boosts took place in Enterprise Products Partners, Commercial Metals and Intel.
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Bruce Berkowitz (Trades, Portfolio), leader of Fairholme Capital Management, disclosed this week that his firm’s top trades during the third quarter included the closure of its position in Vistra Corp. (VST, Financial), a new holding in Nutrien Ltd. (NTR, Financial) and boosts to its investments in Enterprise Products Partners LP (EPD, Financial), Commercial Metals Co. (CMC, Financial) and Intel Corp. (INTC, Financial).

The Miami-based firm concentrates its investments in a relatively small number of companies: Berkowitz believes the more diversified the portfolio is, the more likely the performance will be average. Fairholme seeks companies that meet Benjamin Graham’s criteria of deep valuations; further, the firm also considers companies that have strong management teams or which a catalyst event can narrow the gap between share price and intrinsic value.

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As of Sept. 30, the firm’s $1.24 billion equity portfolio contains 15 stocks, with one new position and a turnover ratio of 6%. The portfolio has a 85.54% weight in real estate, followed by a 7.76% weight in energy and a 2.87% weight in basic materials.

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Vistra

Fairholme sold all 552,900 shares of Vistra (

VST, Financial), trimming 0.81% of its equity portfolio.

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Shares of Vistra averaged $18.50 during the third quarter; the stock is fairly valued based on Friday’s price-to-GF Value ratio of approximately 1.

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GuruFocus ranks the Irving, Texas-based utility company’s financial strength 2 out of 10 on several warning signs, which include a low Piotroski F-score of 3, a weak Altman Z-score of 0.26 and a debt-to-equity ratio that underperforms approximately 75% of global competitors.

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Gurus with holdings in Vistra include

Howard Marks (Trades, Portfolio)’ Oaktree Capital Management and Steven Cohen (Trades, Portfolio)’s Point72 Asset Management.

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Nutrien

The firm invested in 20,000 shares of Nutrien (

NTR, Financial), giving the position 0.10% of equity portfolio space. Shares averaged $61.13 during the third quarter; the stock is fairly valued based on Friday’s price-to-GF Value ratio of 1.07.

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GuruFocus ranks the Canadian agriculture company’s financial strength 4 out of 10 on the back of a low Altman Z-score of 2 and interest coverage and debt ratios that underperform over 60% of global competitors despite having a high Piotroski F-score of 7.

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Enterprise Partners

The firm added 1,518,400 shares of Enterprise Partners (

EPD, Financial), allocating 2.65% of its equity portfolio to the stake.

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Shares averaged $22.74 during the third quarter; the stock is modestly undervalued based on Friday’s price-to-GF Value ratio of 0.75.

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GuruFocus ranks the Houston-based energy company’s profitability 7 out of 10 on several positive investing signs, which include profit margins and returns that are outperforming more than 68% of global competitors.

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Commercial Metals

Fairholme purchased 572,100 shares of Commercial Metals (

CMC, Financial), expanding the position by 102.51% and its equity portfolio by 1.40%.

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Shares of Commercial Metals averaged $31.83 during the third quarter; the stock is significantly overvalued based on Friday’s price-to-GF Value ratio of 1.42.

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GuruFocus ranks the Irving, Texas-based steel company’s profitability 7 out of 10 on several positive investing signs, which include profit margins and returns that outperform more than 63% of global competitors.

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Intel

Fairholme added 261,100 shares of Intel (

INTC, Financial), boosting the position by 165.78% and its equity portfolio by 1.12%.

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Shares of Intel averaged $54.24 during the third quarter; the stock is modestly undervalued based on Friday’s price-to-GF Value ratio of 0.82.

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GuruFocus ranks the Santa Clara, California-based semiconductor company’s profitability 8 out of 10 on several positive investing signs, which include a 3.5-star business predictability rank and an operating margin that has increased approximately 4.7% per year on average over the past five years and outperforms more than 90% of global competitors.

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