Bruce Berkowitz (Trades, Portfolio)’s Fairholme Capital Management introduced one new stock into its portfolio in the first quarter, Washington Prime Group Inc. (WPG, Financial).
The money manager has not bought a new one in more than a year, staying with his higher-concentration ideas, such as troubled Sears Holdings (SHLD) and The St. Joe Co. (JOE, Financial). The portfolio contains only nine stocks, valued at $1.03 billion at quarter-end as most of the positions slumped year to date. A strong quarter for his flagship strategy, the Fairholme Fund (Trades, Portfolio), though, led to a one-year gain of 28.02%, helping raise his suffering long-term performance.
The new position, Washington Prime Group Inc., reflects 0.29% of the portfolio at 340,500 shares and an average first-quarter share price of around $9. Shares have since declined 19% to $7.52 Tuesday afternoon.
Washington Prime Group is a spin-off of Simon Property Group (SPG, Financial), which does business with another Berkowitz holding, Seritage Growth Properties (SRG, Financial). Structured as a real estate investment trust, it owns, manages, buys and develops retail properties, particularly shopping malls – an area that has spooked investors.
Financially, the company has had one year of net losses since 2012, as well as an 8.45% year-over-year decrease in revenue in 2016. It also ended the first quarter with $94.5 million of cash and $3.49 billion in debt.
Berkowitz is often attracted to out-of-favor situations. In addition to its 62% drop in price over five years, GuruFocus tags Washington Prime Group with warning signs for poor financial strength, a bankruptcy indicator in a distress zone, issuance of new debt, operating losses and low interest coverage. On the positive side, it is trading near its three-year low stock price and has P/B and P/S ratios near respective one-year lows. In the first quarter, it also raised its guidance for earnings for 2017.
See Bruce Berkowitz (Trades, Portfolio)’s Fairholme Capital Management portfolio here.
