A List of Bruce Berkowitz's Stock Picks

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Includes: AIG, AZN, BAC, BAM, BMY, BRK.A, BRK.B, C, CIT, CSCO, FUR, GE, GGP, GS, GSK, HUM, JOE, LLY, LUK, MBI, MS, RDS.A, RF, RRR-OLD, SAN, SHLD, SPR, T, TEF, VZ, WCG
by: Insider Monkey

Bruce Berkowitz, founder of the once $19 billion Fairholme Fund, was named “Stock Manager of the Decade” by Morningstar for his performance from 2001 to 2010. Fairholme’s average annual return was almost 13% during that time. The fund outperformed the S&P 500 every year in that period except 2003. The performance was especially impressive considering the fund’s age; Berkowitz launched the Fairholme Fund in 1999. Berkowitz’s performance in 2010 appeared to be on track for another record year, returning 25.5% to beat the S&P 500 by 10 percentage points. But that was then.

Berkowitz, who explains his investing philosophy as focused on maintaining a margin of safety and the importance of “counting the money," has been producing serious losses, so much so that the Fairholme Fund has one of the worst performances of any large fund this year. Berkowitz’s stock picks have lost more than 23% since March 31, vs. a 9% loss for the SPY.

CompanyName

Ticker

Value (x1000)

Return

AIG Class 1

AIG

1553118

-28.6%

SEARS HOLDINGS CORP

SHLD

1348350

-18.9%

BANK OF AMERICA CORP

BAC

1235007

-38.7%

CITIGROUP INC

C

1142316

-24.3%

MORGAN STANLEY

MS

1062510

-26.4%

GOLDMAN SACHS GROUP

GS

1062113

-20.9%

REGIONS FINANCIAL

RF

900496

-29.7%

BROOKFIELD ASSET MAN

BAM

892650

-11.5%

C I T GROUP INC NEW

CIT

845146

-18.8%

LEUCADIA NATIONAL

LUK

706911

-21.7%

BERKSHIRE HATHAWAY

BRK.B

657687

-14.8%

ST JOE CO

JOE

649965

-32.6%

CISCO SYSTEMS INC

CSCO

614289

-12.6%

BERKSHIRE HATHAWAY

BRK.A

503957

-14.4%

M B I A INC

MBI

414189

-25.5%

SPIRIT AEROSYSTEMS

SPR

281084

-34.2%

AIG Class 2

AIG

264028

-28.6%

R S C HOLDINGS INC

RRR-OLD

170399

-37.2%

VERIZON COMM

VZ

20916

-6.7%

TELEFONICA S A

TEF

20617

-11.9%

WINTHROP REALTY TRUST

FUR

20089

-21.0%

A T & T INC

T

19667

-2.8%

BANCO SANTANDER S A

STD

13156

-16.2%

ROYAL DUTCH SHELL PLC

RDS.A

12743

-9.5%

LILLY ELI & CO

LLY

7351

4.4%

BRISTOL MYERS SQUIBB

BMY

7321

5.0%

GLAXOSMITHKLINE PLC

GSK

7298

11.5%

ASTRAZENECA PLC

AZN

7149

-2.4%

GENERAL ELECTRIC CO

GE

0

-17.0%

GENERAL GROWTH PPTYS

GGP

0

-9.7%

HUMANA INC

HUM

0

1.7%

WELLCARE HEALTH PLANS

WCG

0

-7.9%

Click to enlarge

One of Berkowitz’s largest losses in a single position since March 31 has been the land subdivider and developer JOE. His position in the company lost 32.6% during the past four months in spite of the fact that he installed himself on the board there (See the details of his fight with St. Joe’s previous board.)

However, as great as his losses in St. Joe are, Berkowitz’s greatest losses overall have been in his financial stocks. He lost 39% on Bank of America Corp., 37% on R S C Holdings Inc., 26% on Morgan Stanley, 29% on AIG and 30% on Regions Financial Corp. Berkowitz avoided some of the losses in RRR by selling half of his stake in early May.

Berkowitz also lost 24%, 21% and 19% on his positions in Citigroup, Goldman Sachs Group and Sears Holding, respectively. Berkowitz increased his positions in these companies during the first quarter. John Paulson had similar outsized bets on financials and he is having a terrible year as well.

Berkowitz’s only gains since March 31 have been in pharmaceuticals: He gained 11.5% through a new and very small position in GlaxoSmithKline Plc, 4.4% on Eli Lilly and 5% on Bristol Myers Squibb. Ken Fisher had the largest position in GSK among the 300+ funds we are tracking.

We like Berkowitz and have high hopes for the future but investors are cautioned against mirroring his positions, at least for now. Fairholme had major losses in 2000 before bouncing back to become one of the top performers of the decade but the stakes are much larger now and confidence is lacking. Since the first of the year, investors have pulled over $5 billion from the Fairholme Fund.

Critics argue that Fairholme has grown too big with too few analysts, and that Berkowitz should have closed the fund. Berkowitz counters that he was prepared for the recent losses and that it was to that end that he held so much cash (over $4 billion). Moreover, he explains that his strategy is to buy undervalued stocks early, so low returns are common in the short-term. In early June he talked to Bloomberg TV and revealed that he is extremely bullish about Bank of America (see the details).

Disclosure: I am long C, MS, T.