Bruce Berkowitz shareholder letter: For instance, as energy stocks surged this year, we took profits in Canadian Natural Resources, reducing our position to about 7% of net assets as of May 31, down from 15% on Nov. 30, 2007. Oil and gas prices have multiplied since our initial purchases and are now high enough to increase supply and slow demand. Alternative sources such as solar and wind are booming while sales of SUVs and other gas hogs have plunged.
We also halved our position in Berkshire Hathaway in the November-May period. While we have the greatest respect for Chairman Warren Buffett, we made this move because we cannot see how the company can replicate its past stellar performance given its current size and the age of its key personnel. Berkshire should still make good money for shareholders, but not enough to justify so large an investment at prices sold.
On May 31, global pharmaceutical giant Pfizer was about 10% of net assets, making it the Fund’s second largest holding. Also in the top ten is WellPoint, a provider of health maintenance organizations and other forms of medical insurance. These fundamentally sound businesses have become fallen angels, as slowing growth, rising costs, and election-year politics stoke investor fear. Still, these are companies with essential products and services and large free cash flows relative to purchase prices. We expect them to rise again.
The Fund has added to significant investments in housing-related industries, which are facing perhaps the worst headwinds since the Great Depression of the 1930s. While anticipating a downturn, older and higher-priced purchases now seem premature in the light of current conditions. Nevertheless, buildings and equipment need repair and replacement, and the population continues to grow.
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We also halved our position in Berkshire Hathaway in the November-May period. While we have the greatest respect for Chairman Warren Buffett, we made this move because we cannot see how the company can replicate its past stellar performance given its current size and the age of its key personnel. Berkshire should still make good money for shareholders, but not enough to justify so large an investment at prices sold.
On May 31, global pharmaceutical giant Pfizer was about 10% of net assets, making it the Fund’s second largest holding. Also in the top ten is WellPoint, a provider of health maintenance organizations and other forms of medical insurance. These fundamentally sound businesses have become fallen angels, as slowing growth, rising costs, and election-year politics stoke investor fear. Still, these are companies with essential products and services and large free cash flows relative to purchase prices. We expect them to rise again.
The Fund has added to significant investments in housing-related industries, which are facing perhaps the worst headwinds since the Great Depression of the 1930s. While anticipating a downturn, older and higher-priced purchases now seem premature in the light of current conditions. Nevertheless, buildings and equipment need repair and replacement, and the population continues to grow.
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