Consuelo Mack WealthTrack, a rare interview with Morningstar’s Fund Manager of the Decade. Great Investor Bruce Berkowitz discusses The Fairholme Fund’s controversial concentration in financial stocks and other unloved securities.
His largest holdings are AIG (AIG, Financial), Sears (SHLD, Financial), Bank of America (BAC, Financial). These three account for 50% of the portfolio. Asset under management climbed to $23 billion at the beginning of 2011, but has since declined to $7 billion. Fairholme averaged 10% over the past 10 years.
Why so concentrated: the history of success shows that you need to focus on your best ideas when you are confident. You only a few ideas of lifetime to do extremely well.
Why financials? This is similar to what happened in the early 90s. It was a few years of rocky road. Today they continue to be priced at liquidation levels. "Investors did not believe the facts." The companies are making great money. This is what I do.
What to say to the shareholders of last 3 years who lost money? Investors should look at the long term. They should look at least 5 years period.
AIG (AIG): A victim of an extraordinary environment. Fairholme is the largest owner after the government. Huge amount of asset. Still a terrific buy. Book value is around $70. It will eventually reach the book value. I will wait until the book value.
BAC (BAC): $20 book value. they are more than half way through its problem. The uncertainly is the catalyst. Traded at less than the cash in the bank.
Sears (SHLD): the largest mall operator in the US. Extremely value in real estimate. It is worth multiple of what it is traded today.
His largest holdings are AIG (AIG, Financial), Sears (SHLD, Financial), Bank of America (BAC, Financial). These three account for 50% of the portfolio. Asset under management climbed to $23 billion at the beginning of 2011, but has since declined to $7 billion. Fairholme averaged 10% over the past 10 years.
Why so concentrated: the history of success shows that you need to focus on your best ideas when you are confident. You only a few ideas of lifetime to do extremely well.
Why financials? This is similar to what happened in the early 90s. It was a few years of rocky road. Today they continue to be priced at liquidation levels. "Investors did not believe the facts." The companies are making great money. This is what I do.
What to say to the shareholders of last 3 years who lost money? Investors should look at the long term. They should look at least 5 years period.
AIG (AIG): A victim of an extraordinary environment. Fairholme is the largest owner after the government. Huge amount of asset. Still a terrific buy. Book value is around $70. It will eventually reach the book value. I will wait until the book value.
BAC (BAC): $20 book value. they are more than half way through its problem. The uncertainly is the catalyst. Traded at less than the cash in the bank.
Sears (SHLD): the largest mall operator in the US. Extremely value in real estimate. It is worth multiple of what it is traded today.
