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Fairholme's Cash Stake: What's Next?

Fairholme's Bruce Berkowitz says the fund's cash position is in the mid- to high teens, and he's optimistic about today's opportunities.

Michael Breen: [It's] obviously a very target rich environment for you. You typically have cash levels around 20, and they'd gone down, I think maybe even below 10, which for most managers is high, but for you it's low. Where is that at now? Are you still seeing...

Bruce Berkowitz: As I publicly stated, we're back to sort of our historic ranges of mid- to high teens. Right now, we feel very good. The Fairholme Fund, as we talked, we're up about 9%. We're coming up on our 10th anniversary. Even with a bad year last year, we've averaged about 11.5% per annum.

Michael: And for context the S&P is down about 2% per annum in that period, and so that's pretty substantial.

Bruce: That's yesterday's news; I'm thinking about what are we going to do for our shareholders tomorrow? Given the significant cash we have and the flexibility we now have, as we changed our charter last summer to give us the ability to do private debt, the ability to reach and buy senior bonds, and to mix and match with the equity, I'm feeling very good about environment. We have the time, we have the cash, we have the flexibility, we have the patience. What I hope is to take advantage of this environment, and I'm OK if this kind of environment stays as it is for quite a bit of time, because you can really show your stuff in this environment.


Michael Breen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.