Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. 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 stock 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 in 2010. Berkowitz has some controversial holdings, such as St. Joe (NYSE:JOE), the largest private landowner in Florida. While Berkowitz favors it, others, such as prominent hedge fund manager David Einhorn, have shorted it. In its last quarter, revenue shrank and net losses widened, but my colleague Matt Koppenheffer doesn't see a huge problem there, as he focuses more on the company's balance sheet.
Fairholme's reportable stock portfolio totaled $7.9 billion in value as of March 31. Its biggest holdings are AIG, Bank of America, Sears Holdings (OTC:SHLDQ), St. Joe, and Leucadia National.
So what does Fairholme's latest quarterly 13F filing tell us? Here are a few interesting details.
The biggest new holdings are Chesapeake Energy (NYSE:CHK) and Canadian Natural Resources (NYSE:CNQ). Long assailed for questionable and regrettable management moves, Chesapeake has been selling assets to pay down its significant debt -- but it hasn't been getting top dollar for them. It's not a lost cause, though, as the company's major presence in the Utica shale field, among other places, is promising, and the asset sales do make good sense.
Canadian Natural Resources is Canada's second-largest energy concern. It owns a lot of land but has suffered because of low prices for Canadian heavy crude and steep operating costs. Analysts at Zacks downgraded the stock in March, citing operational challenges and natural gas weakness as some concerns. Some see it as a possible takeover target. It stands to benefit if the controversial Keystone XL pipeline gets approved.
Among holdings in which Fairholme Capital Management increased its stake were Berkshire Hathaway and Sears Holdings, whose Kmart stores made a splash with its recent commercial for its shipping services. But many investors just don't see enough value in Sears Holdings, with its generally declining revenue and persistently negative free cash flow. Some have more faith in the new Sears Hometown and Outlets company.
Fairholme Capital Management reduced its stake in Wells Fargo and MBIA (NYSE:MBI). MBIA recently won a court decision against Bank of America, with damages awarded likely to be a nice boost to MBIA and not devastating for Bank of America. MBIA's losses narrowed in its last quarter.
Finally, Fairholme's biggest closed positions included CIT Group and Jefferies Group, which was bought by Leucadia.
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 13F forms can be great places to find intriguing candidates for our portfolios.