Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Here's What Bruce Berkowitz at Fairholme Is Buying

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Every quarter, many money managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.

Today let's look at investing giant Bruce Berkowitz. He's the founder of Fairholme Capital Management, which oversees three mutual funds of interest: the flagship Fairholme Fund (FAIRX) seeks long-term growth of capital, the Fairholme Focused Income Fund (FOCIX) seeks current income, and the Fairholme Allocation Fund (FAAFX) seeks long-term total return. The funds are all rather focused, each owning less than two dozen holdings, instead of the hundreds that many funds own.

The Fairholme fund has many admirers, and Berkowitz was named Morningstar's fund manager of the decade. But the fund has faltered a bit recently, having made some seemingly risky big bets. Berkowitz has some controversial holdings, such as Florida real estate company St. Joe (NYSE: JOE  ) . The stock got a lift a few months ago on some executive turnover and speculation about a buyout, but it's still down for the year. 

Berkowitz's portfolio featured about 20 entries and totaled $7.5 billion in value as of March 31. The top three holdings were AIG, representing a whopping 38% of the portfolio, Sears Holdings, with 15%, and Bank of America (NYSE: BAC  ) , at 13%.

Interesting developments
So what does Fairholme's latest quarterly 13-F filing tell us? Here are a few interesting details:

New holdings include auto insurer Mercury General (NYSE: MCY  ) , which has a long dividend-paying history and a recent yield of 5.4%. In its latest quarter, net income jumped 26% over year-ago levels, mostly on investment gains, as premiums and operating income were basically flat.

Among holdings in which Fairholme increased its stake was global financial firm Jefferies Group (NYSE: JEF  ) . The company has seen its shares drop nearly 40% over the past year, but in its favor, its CEO recently took a pay cut and several executives gave back bonuses -- not every Wall Street firm has behaved that way. It was also prescient enough to have shorted some Spanish investments in the recent past.

Fairholme reduced its stake in several companies, including Warren Buffett's Berkshire Hathaway (NYSE: BRK-B  ) . It can be hard sometimes to find people who aren't bullish on Buffett, but in concentrated portfolios, a manager might sell a promising holding simply to buy into something seemingly more promising. My colleague Alex Planes offered some downsides to Berkshire earlier this year -- such as a somewhat lackluster performance in recent years. Others will point out that it's the long run that matters for many of us Foolish investors, and Berkshire does offer a lot to like. Fairholme also unloaded all of its stock in Goldman Sachs.

One interesting move Berkowitz made was to sell shares of Bank of America but boost his holdings of B of A warrants. Bank of America has been digesting some $200 billion of toxic assets it received when it bought Countrywide Financial, and it has been gradually turning itself around, selling off non-core assets and improving its overall health, despite continuing mortgage-related losses. My colleague Anand Chokkavelu thinks the stock may well double from recent levels in the not-too-distant future, and that might push warrant prices up even further.

We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13-F forms can be great places to find intriguing candidates for our portfolios.

While Fairholme is unloading some financial stocks, our analysts have found some compelling banking stocks. Click into our special free report, "The Stocks Only the Smartest Investors Are Buying," to meet a handful of impressive stocks.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Fairholme, but she holds no other position in any company mentioned. Check out her holdings and a short bio. The Motley Fool owns shares of Berkshire Hathaway and Bank of America. Motley Fool newsletter services have recommended buying shares of Goldman Sachs and Berkshire Hathaway. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1889717, ~/Articles/ArticleHandler.aspx, 10/28/2016 5:07:16 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 7 hours ago Sponsored by:
DOW 18,169.68 -29.65 -0.16%
S&P 500 2,133.04 -6.39 -0.30%
NASD 5,215.97 -34.29 -0.65%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/27/2016 4:00 PM
BAC $16.91 Up +0.04 +0.24%
Bank of America CAPS Rating: ****
BRK-B $144.45 Up +0.51 +0.35%
Berkshire Hathaway… CAPS Rating: *****
JEF.DL $0.00 Down +0.00 +0.00%
Jefferies Group CAPS Rating: **
JOE $17.55 Down -0.30 -1.68%
The St. Joe Compan… CAPS Rating: **
MCY $51.00 Down +0.00 +0.00%
Mercury General CAPS Rating: ****