Bruce Berkowitz is a force to be reckoned with. He started his Fairholme fund in 1999 and has managed to outperform the S&P 500 (SPY) every year since, with the exception of 2003. Berkowitz’s average annual return is around 12.9%, or 1.02% per month. In fact, Berkowitz’s performance has been so strong that he earned Morningstar’s Stock Manager of the Decade Award for his first 10 years in business. His strategy is to rely on long-term capital growth.
Murray Stahl, who founded Horizon Kinetics Asset Management in 1996, is also a fan of the long position. Stahl bases his investment philosophy on the belief that short-term investments produce suboptimal returns; instead, Stahl likes to take advantage of the benefits of compounding returns.
Owing largely to their similar investment styles, Stahl and Berkowitz have several positions in common, although they differ somewhat in the percentage of their portfolios allocated thereto. A good example of this is their American International Group, Inc. (AIG) positions. AIG is Berkowitz’s largest position; he holds over $3 billion in the company, making it 23.42% of his portfolio. Stahl, on the other hand, is not nearly as bullish on AIG; he holds just $32,000 in the company. The consensus seems to be on Berkowitz’s side; dozens of fund managers bought a new position or increased their stakes in AIG during the second quarter (see who’s buying AIG). This may be a perfect time to imitate hedge funds’ positions, because AIG has lost over 25% since June.
The pair is also disparate regarding Bank of America Corp (BAC), which has lost even more than AIG. Stahl holds a position worth just $281,000, as opposed to Berkowitz, who is notoriously confident that the financial stocks will rebound soon, and holds a $1.1 billion position in the company. John Paulson, of Paulson & Co is also bullish over Bank of America (check out Paulson’s top stock picks).
Berkowitz and Stahl are a little closer on their positions in Leucadia National Corp (LUK). Stahl owns $238 million in the company, while Berkowitz holds $638 million. Opinion among fund managers seems to be somewhat divided; nearly just as many fund managers divested their positions last quarter as those that bought in or increased their positions. However, Leucadia’s performance to date has been lacking, losing over 33% since the end of June.
The two did marginally better on Brookfield Asset Management (BAM). Brookfield lost 16.59% since the end of June, which is only a few percentage points more than the market for the same period (just under 14%). Stahl owns $219 million in the company, while Berkowitz holds $904 million. Third Avenue Management’s Martin Whitman is also a fan (see Marty Whitman’s top picks).
Stahl and Berkowitz are also bullish on Sears Holdings Corp (SHLD). Berkowitz has a $1.1 billion position, while Stahl owns $208 million. The retail company lost almost 20% since the end of June, but it has also been a top choice among fund managers.
There are five other stocks both fund managers are bullish on: Berkshire Hathaway (BRK.A), Jefferies (JEF), Winthrop Realty (FUR), Eli Lilly (LLY), and Vodafone (VOD). Berkowitz had more than $1 billion in BRK.A and BRK.B, and Stahl's combined position exceeded $100 million at the end of June. The other stock Berkowitz had a large position was JEF. Berkowitz had $84 million in JEF and Stahl had $4 million in the stock. Both fund managers had less than $10 million in VOD and LLY.