In Bruce Berkowitz of the Fairholme Fund put 18% of his portfolio into AIG. Investors should have been paying attention as it subsequently. FORTUNE — With AIG stock cratering nearly 50% this year, all eyes have turned to investor Bruce Berkowitz, AIG’s largest private shareholder. Bruce Berkowitz (Trades, Portfolio): As we have written in all of our letters, we bought AIG at substantial discount to tangible book value.

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Check out our H2 hedge fund letters here. Bruce Berkowitz is the founder and president of Fairholme Funds and a well-known value investor. While bberkowitz performance between and was lauded, he, along with other value investors have also struggled since then. Berkowitz graduated from the University of Massachusetts Amherst in He then joined consulting firm Strategic Planning Institute.

He moved to London in to join Merrill Lynch. In he moved to Lehman Brothers and then relocated back to New York with the same firm. Berkowitz was a senior portfolio manager at Lehman Brothers. In he moved to Smith Barney Investment Advisors where he was a managing director. He founded Fairholme Capital in to manage a hedge fund. In he set up Fairholme Funds, which managed three mutual funds and acted as an investment advisor to long-only institutional funds.

Fairholme Funds now manages the The Fairholme Fundan equity fund, as aih as an income fund and a multi-asset fund. However, since his fortunes have not faired as well, and he has suffered long periods of underperformance. Berkowitz is a contrarian investor and invests in companies with reliable cashflows that are trading at attractive levels relative to those cashflows. He is a strong believer in business cyclesand looks for companies that are out of favor due to the current business cycle.


He is not afraid to make regular changes to the portfolio as market conditions change. He also uses relatively high cash holdings to limit volatility.

This helped him outperform his peers in Essentially, he looks for free cashflows that he can buy very cheaply. Bduce a interviewBerkowitz said. He, therefore, tends to hold highly concentrated portfolios — in his positions in Fannie Mae and Freddie Mac made up 36 percent of the fund.

This strategy worked well in the mid s when he held outsize positions in energy stocks, but has hurt performance since then. Berkowitz bets on the jockey as much as on the horse; he looks for companies that are built to survive in any environment with strong management.

He favors simple business models and has tended to stick to financials, retailers, energy companies, metal producers and real estate stocks.

He often sticks with specific stocks for very long periods, something that has also hurt performance. SHLD for many years, having first invested in By October he had stepped down from the board and became highly critical of the company.

The Rise And Fall Of Bruce Berkowitz’s Fairholme Capital

Another problematic investment for Berkowitz was AIG. He built a large position in when the US Treasury owned 92 percent of the company. He expected the Treasury stake to be sold at book value, but it was ultimately sold back to the market at a deep discount.


Firstly, he has avoided the technology sector which is where most of the index gains have accrued. And secondly, many value investors have struggled in a market fuelled by easy money which has favored momentum and growth stocks. The list value of stock holdings is down The Ideas section of finbox. You can get the latest data on the holdings discussed below at the Fairholme Capital page. Beriowitz five positions above represent Sears Holdings Corporation Nasdaq: Qualifying assets include long positions in U.

Shorts, cash positions, foreign investments and other assets are not included.

Berkowitz’s AIG Sale To Result In Huge Taxable Distribution

It is important to note that these filings are due 45 days after the quarter end date. Article by Brian Dentino, Finbox.

Cashflow is King Berkowitz is a contrarian investor and invests in companies with reliable cashflows that are trading at attractive levels relative to those cashflows. Never Miss A Story!

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