Fairholme Capital Management recently disclosed its 13F portfolio updates for the fourth quarter of 2021, which ended on Dec. 31.
Bruce Berkowitz (Trades, Portfolio) founded Fairholme Capital Management in 1999. From 2000-2010, Fairholme’s funds achieved strong returns that outpaced the S&P 500, and Berkowitz was named Domestic Stock Fund Manager of the Decade by Morningstar in 2010. Berkowitz holds a concentrated value-based portfolio, inspired by Benjamin Graham's "The Intelligent Investor." He focuses on companies that have exceptional management, generate free cash and are cheaply priced compared to intrinsic value, as well as those that have an upcoming catalyst.
According to the latest 13F report, Fairholme’s top five trades for the quarter were additions to Commercial Metals Co. (CMC, Financial), Enterprise Products Partners LP (EPD, Financial) and Intel Corp. (INTC, Financial) and reductions to The St. Joe Co. (JOE, Financial) and Western Midstream Partners LP (WES, Financial).
Investors should be aware that 13F reports do not provide a complete picture of a guru’s holdings. They include only a snapshot of long equity positions in U.S.-listed stocks and American Depository Receipts (ADRs) as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. However, even this limited filing can provide valuable information.
Commercial Metals Co.
The firm increased its Commercial Metals Co. (CMC, Financial) stake by 56.74% for a total holding of 1,771,500 shares, adding 1.52% to the equity portfolio. During the quarter, shares traded for an average price of $33.19.
Commercial Metals is an Irving, Texas-based company that operates metal recycling centers, steel mills, steel fabrication facilities and heat-treating facilities in the U.S. and Europe. It also provides construction-related product services.
On March 9, shares of Commercial Metals traded around $39.27 for a market cap of $4.74 billion. According to the GuruFocus Value chart, the stock is significantly overvalued.
The company has a GuruFocus financial strength rating of 7 out of 10 and a profitability rating of 8 out of 10. The interest coverage ratio of 16 and Altman Z-Score of 4.52 show a sturdy balance sheet. The three-year revenue per share growth rate is 12%, while the three-year Ebitda per share growth rate is 29.2%.
Enterprise Products Partners LP
The firm also increased its investment in Enterprise Products Partners LP (EPD, Financial) by 32.79%, giving it a total stake of 2,115,900 shares and adding 0.75% to the equity portfolio. Shares averaged $22.42 apiece for the quarter.
Based in Houston, Texas, Enterprise Products Partners is a natural gas and crude oil pipeline company. Its services include the transportation, fractionation and storage of energy assets, as well as providing import and export terminals.
On March 9, shares of Enterprise Products Partners traded around $25.43 for a market cap of $55.33 billion. According to the GuruFocus Value chart, the stock is modestly undervalued.
The company has a GuruFocus financial strength rating of 5 out of 10 and a profitability rating of 8 out of 10. While the cash-debt of 0.09 is low, the Piotroski F-Score of 8 out of 9 implies a healthy financial situation. The return on invested capital (ROIC) is typically higher than the weighted average cost of capital (WACC), indicating the company is creating value for shareholders.
Intel Corp
The firm added another 25.99% to its Intel Corp. (INTC, Financial) holding, bringing the total number of shares owned to 527,400. The trade had a 0.37% impact on the equity portfolio. During the quarter, shares changed hands for an average price of $51.07.
Intel Corp. is a semiconductor technology company based in Santa Clara, California. The company is the world’s largest producer of PC microprocessors, and its mobile processors have been a key driver of growth in recent years. It is also aiming to become a chip foundry in efforts to revive growth.
On March 9, shares of Intel traded around $47.49 for a market cap of $192.20 billion. According to the GuruFocus Value chart, the stock is modestly undervalued.
The company has a GuruFocus financial strength rating of 7 out of 10 and a profitability rating of 9 out of 10. The Piotroski F-Score of 6 out of 9 and interest coverage ratio of 36.99 show the company should not have issues meeting its debt obligations. The operating and net margins have been trending up over time to surpass more than 88% of peers in the semiconductors industry.
The St. Joe Co.
The firm trimmed its largest holding, The St. Joe Co. (JOE, Financial), by 0.62% to end the quarter with 25,087,490 shares. The trade shaved 0.53% off the equity portfolio at the quarter’s average price of $48.65 per share.
St. Joe is a real estate operation in Northwest Florida. It is building out the growing area that Forbes calls “The Hamptons of the South,” aiming to reach a yearly run rate of 1,000 home and home lot sales, 1,300 apartment rentals, 900 hotel rooms and 1.5 million square feet of commercial space.
On March 9, shares of St. Joe traded around $55.72 for a market cap of $3.27 billion. According to the GuruFocus Value chart, the stock is fairly valued.
The company has a GuruFocus financial strength rating of 6 out of 10 and a profitability rating of 8 out of 10. The Piotroski F-Score of 5 out of 9 and Altman Z-Score of 4.35 show a stable balance sheet. The company has a three-year revenue per share growth rate of 37.1% and a three-year Ebitda per share growth rate of 40.2%.
Western Midstream Partners LP
The firm slashed its Western Midstream Partners LP (WES, Financial) stake by 73.71%, leaving a remaining holding of 98,800 shares and reducing the equity portfolio by 0.46%. Shares traded for an average price of $21.38 during the quarter.
Based in The Woodlands, Texas, Western Midstream Partners is a natural gas midstream service provider that focuses on the gathering, compressing, treating, processing and transporting of natural gas liquids in Texas, New Mexico and Colorado.
On March 9, shares of Western Midstream Partners traded around $25.07 for a market cap of $10.15 billion. According to the GuruFocus Value chart, the stock is significantly overvalued.
The company has a GuruFocus financial strength rating of 4 out of 10 and a profitability rating of 8 out of 10. The current ratio of 0.6 and Altman Z-Score of 1.33 indicate the company could face trouble making payments on its debt. The WACC has risen above ROIC in recent years, indicating growth is not profitable.
Portfolio overview
As of the quarter’s end, the firm held 18 stocks in an equity portfolio valued at $1.53 billion. The turnover for the period was 3%.
The top holdings were The St. Joe Co. with 85.40% of the equity portfolio, Commercial Metals with 4.20% and Enterprise Products Partners with 3.04%.
In terms of sector weighting, the firm was most invested in real estate via The St. Joe Co., followed distantly by energy and basic materials.
