Bruce Berkowitz launched Fairholme (FAIRX) in 1999, which earned him the title of “Stock Manager of the Decade” from Morningstar. The fund managed to return 1.02% per month since September 2000. It beat the market every year except in 2003. In 2010, Fairholme returned 25.5%, beating the S&P 500 (SPY) by more than 10 percentage points.
Murray Stahl, the Chief Investment Officer of Horizon Asset Management, Inc, founded the company in 1994. During the past decade Horizon outperformed the market in eight years and has a cumulative excess return of 65.1%.
Stahl and Berkowitz are among the smartest investors in the world. We believe that by imitating their stock picks and investment strategies, investors are more likely to beat the market.
The average return of these 11 stocks since the end of June is -16.06% vs. -9.80 for SPY. Although most of the stocks underperformed the market, we still believe in these two hedge funds as they are more focused on long-term investing. Here are the 11 stocks held by both funds at the end of June:
Brookfield Asset Management (BAM): Brookfield Asset Management is a global asset management company focused on property, power and infrastructure assets. BAM lost 12.5% since the end of June. It has a market cap of $17.23 billion and a P/E ratio of 7.51. Horizon invested $219 million in BAM and Fairholme invested $905 million (check out other hedge funds in BAM).
Sears Holdings Corp (SHLD): Sears Holdings is broad line retailer with 2,201 full-line and 1,354 specialty retail stores in the United States. SHLD lost 23.8% since the end of June and has a market cap of $5.69 billion. Horizon invested $209 million in SHLD and Fairholme invested $1.2 Billion.
Leucadia National Corp (LUK): Leucadia is a diversified holding company engaged in a variety of businesses, including manufacturing, land based contract oil and gas drilling, gaming entertainment, real estate activities, medical product development, and winery operations. LUK lost 18.1% since the end of June. It has a market cap of $6.58 billion and a P/E ratio of 3.12. Horizon invested $238 million in LUK and Fairholme invested $638 million.
Berkshire Hathaway Inc Del (BRK.B): Berkshire is a holding company owning subsidiaries engaged in a number of diverse business activities. Berkshire’s Insurance businesses are conducted on both a primary basis and a reinsurance basis. BRK-B lost -10.3% since the end of June. Horizon invested $102 million in BRK-B and Fairholme invested $730 million.
Berkshire Hathaway Inc Del (BRK.A): BRK-A lost 10% since the end of June. It has a market cap of $169.36 billion and a P/E ratio of 13.72. Horizon invested $7.8 million in BRK-A and Fairholme invested $467 million.
Winthrop Realty Trust (FUR): Winthrop Realty Trust is a real estate investment trust engaged in the business of owning real property and real estate related assets. FUR has a return of -20.8% since the end of June. It has a market cap of $306.85 million and a P/E ratio of 12.19. Horizon invested $8.7 million in FUR and Fairholme invested $16 million.
Jefferies Group Inc (JEF): Jefferies is a securities and investment banking firm. JEF lost-28.2% since the end of June. It has a market cap of $2.86 billion and a P/E ratio of 10.96. Horizon invested $3.7 million in JEF and Fairholme invested $84 million.
Lilly Eli & Co (LLY): Eli Lilly and Company discovers, develops, manufactures and sells products in one business segment, pharmaceutical products. It also has an animal health business segment. LLY has a return of 0.03% since the end of June. It has a market cap of $41.73 billion and a P/E ratio of 8.47. Horizon invested $0.64 million in LLY and Fairholme invested $7.8 million. Billionaire Jim Simons had nearly $400 million invested in LLY at the end of June (see Simons’ favorite stocks).
Bank of America Corp (BAC): Bank of America is a financial institution, serving individual consumers, small and middle market businesses, corporations and governments with a range of banking, investing, asset management and other financial and risk management products and services. BAC lost -34.25% since the end of June and a market cap of $70.79 billion. Horizon invested $0.28 million in BAC and Fairholme invested $1.1 Billion.
Vodafone Group Plc New (VOD): Vodafone is a mobile communications company operating across the globe providing a range of communications services. VOD has a return of -2.58% since the end of June. It has a market cap of $131.13 billion and a P/E ratio of 10.70. Horizon invested $0.12 million in VOD and Fairholme invested $7.5 Million.
American International Group (AIG): AIG is an international insurance organization, serving customers in more than 130 countries. It provides life insurance and retirement services in the United States. AIG lost -16.1% since the end of June. It has a market cap of $44.43 billion. Horizon invested $47,000 in AIG and Fairholme invested $3.0 Billion. Larry Robbins’ Glenview Capital had a $286 million brand new position in AIG (see Robbins’ top stock picks).
Disclosure: I am long VOD.