Fairholme Continues to Find Values in Financials

The latest portfolio of Bruce Berkowitz's  Fairholme Fund (FAIRX) indicates the successful value investor is still finding values in the financial sector. Fairholme is up 7.9% year-to-date through July 28, defying the direction of the U.S. stock market, which is at a slight loss for the year.

While Berkowitz had disclosed new stakes in  AIG (AIG),  MBIA (MBI), and  Goldman Sachs (GS) in recent weeks, the fund's new stake in  Morgan Stanley (MS) hadn't yet been disclosed until this week.

The portfolio, dated May 31, shows a 6.8% position in AIG stock and 5.4% position in Goldman Sachs. Berkowitz is now one of the largest shareholders of MBIA; that stake makes up just 1% of the $15 billion mutual fund. Morgan Stanley is also a small position at this point, constituting less than 1% of assets. Over half of the fund's assets are in financial services and real estate related companies. 

Fairholme's 10 Largest Equity Positions and Notable New Positions

Name Ticker Weight % (5/31) Weight % (2/28) Sears Holdings SHLD 7.7 9.5 AIG AIG 6.8   Citigroup C 5.4 4.9 Goldman Sachs GS 5.4   Berkshire Hathaway A BRK.A 4.7 5.7 Bank of America BAC 4.4 4.4 St. Joe JOE 4.3 4.7 Humana HUM 4.0 4.5 AmeriCredit ACF 3.6 5.2 Regions Financial RF 3.5 3.4 Spirit AeroSystems SPR 2.7 3.3 Hertz Global Holdings HTZ 2.6 3.5 MBIA MBI 1.0   Morgan Stanley MS >1  

Data as of May 31, 2010; Bold Indicates New Positions

 
Berkowitz and the other officers and directors of the fund are certainly not shying away from these financial sector bets, which others in the mutual fund industry consider bold. Officers and directors of the fund hold about 5.5 million shares of the fund, valued at over $150 million, as of May 31. That's considerably more than the roughly $27 million they have invested in the new and less risky  Focused Income Fund (FOCIX).

Berkowitz continues to keep a lot of dry powder on hand. The fund had 14.9% of assets in cash and cash equivalents. It also has more than 15% of assets in corporate and convertible bonds, including more than 10% of assets in various General Growth Properties debt.

Meanwhile, Berkowitz's new Focused Income Fund had 66% of assets in cash as of May 31.

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