Bruce Berkowitz (Trades, Portfolio) disclosed Thursday that he added to a Spectrum Brands Holdings Inc. SPB position and exited AT&T Inc. T among several other changes in his $1.1 billion Fairholme Fund (Trades, Portfolio) during the third quarter.
Berkowitz has 42.8% of the fund in cash and cash equivalents, he said in a shareholder letter this week. Although the fund has outperformed since inception, Berkowitz acknowledged “Any single investment that experiences adverse consequences can bring long periods of underperformance,” likely referring to its stake in Sears Holdings SHLD, which filed for bankruptcy last month. Its Sears holding, which once formed a large portion of its assets, has dwindled to 0.1% of the fund, Berkowitz said.
Prefacing his third-quarter disclosure of sparse buying activity, Berkowitz said in his letter that he was taking a cautious stance.
“Interest rates are rising. Stock markets are not cheap. Cash and cash equivalents are at historically high levels in each of the Fairholme Fund, the Fairholme Focused Income Fund, and the Fairholme Allocation Fund given investment performance and being more fearful than greedy when balancing market opportunities and risks,” he said.
Berkowitz also made a quick exit from telecommunications giant AT&T, selling all of his 875,000 shares after establishing the position in the second quarter. AT&T had an average second-quarter share price of $34 and a third-quarter average of $32.
AT&T has a market cap of $220.15 billion; its shares were traded around $30.49 Thursday with a price-earnings ratio of 5.96 and price-sales ratio of 1.22. AT&T’s trailing 12-month dividend yield is 6.56%.
In his only purchase, Berkowitz increased by 82.61% his position in Spectrum Brands Holdings, buying 170,340 shares. The owner of brands like Armor All and Nature’s Miracle traded at an average price around $85 in the third quarter, down slightly from the $88 average price of the second quarter when Berkowitz started the position. At third quarter-end, Fairholme Fund (Trades, Portfolio)’s holding of the company totaled 376,540 shares, worth 4.56% of the stock portfolio.
Back in August, Berkowitz wrote of Spectrum Brands Holdings, which merged with its controlling shareholder, “We expect that the combined company will generate much higher levels of cash, sell non-core assets, and apply proceeds to reduce debt and repurchase common shares.”
Spectrum Brands Holdings has a market cap of $3.53 billion; its shares were traded around $66.17 Thursday with a price-earnings ratio of 2.64 and price-sales ratio of 0.42. The trailing 12-month dividend yield of Spectrum Brands Holdings is 0.64%.
In other sales, Berkowitz further reduced his position in Sears Holdings SHLDQ by 19% during the quarter, shrinking it to 7,402,091 shares. He also whittled down Vista Outdoor Inc. VSTO, another position started in the second quarter, by 23% to 3,279,900 shares. The company’s stock price averaged around $17 in the quarter, and the position measured 8.45% of the stock portfolio.
See more of Bruce Berkowitz (Trades, Portfolio)’s holdings in the Fairholme Fund (Trades, Portfolio) portfolio here.
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