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Berkshire Coverage

Being Like Buffett May Mean Parting Ways with Him

Why the Buffett-inspired Fairholme Fund just ditched Berkshire Hathaway.

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It's not often you give one of your idols his walking papers. But that's what happened in late 2008 when Bruce Berkowitz of  Fairholme (FAIRX) eliminated his stake--once as high as 20% of assets--in  Berkshire Hathaway (BRK.B) (see Page 9 of Fairholme's Feb. 11 conference call). Berkowitz doesn't think Buffett is washed up. Far from it. But he's taking the Oracle of Omaha at his word. Buffett himself says Berkshire's size makes it unlikely the firm will return better than a percentage point or so more than the S&P 500 going forward. Berkowitz thinks Fairholme can do better.

That's not hubris. Berkowitz says he's not smarter than Buffett--just smaller. And that gives him a wider range of opportunities in a target-rich environment than Berkshire has due to its girth. The same goes for most Buffett-inspired funds.

Michael Breen has a position in the following securities mentioned above: JEF, PFE. Find out about Morningstar’s editorial policies.