Tracking Bruce Berkowitz's Fairholme Portfolio - Q1 2019 Update

|
Includes: BRK.A, BRK.B, FAAFX, FAIRX, FMCC, FMCKJ, FNMA, FNMAS, FOCIX, IPMLF, JEF, JOE, VSTO
by: John Vincent
Summary

Bruce Berkowitz’s 13F stock portfolio value increased ~29% this quarter from $367M to $473M.

Fairholme added Berkshire Hathaway while dropping Jefferies Financial Group and reducing Vista Outdoor.

The 13F portfolio has 92% invested in St. Joe Company.

This article is part of a series that provides an ongoing analysis of the changes made to Fairholme’s 13F stock portfolio on a quarterly basis. It is based on Fairholme’s regulatory 13F Form filed on 05/15/2019. Please visit our Tracking Bruce Berkowitz's Fairholme Fund Holdings article for an idea on how his holdings have progressed over the years and our previous update for the fund’s moves during Q4 2018.

Berkowitz’s 13F stock portfolio value increased ~29% from $367M to $473M this quarter. The 13F portfolio currently has 92.44% invested in St. Joe Company.

Berkowitz’s flagship Fairholme Fund (FAIRX) has generated significant alpha since its December 1999 inception: through 2018, the fund returned at an annualized rate of 7.99% compared to 4.89% for S&P 500 index. FAIRX has, however, underperformed over the most recent 10-year period. Of the $1.1B AUM, Cash and Equivalents are at ~37%, St. Joe stock at ~34%, and Fannie/Freddie Pfds at ~17%. The other funds under the Fairholme umbrella are Fairholme Focused Income Fund (FOCIX) and Fairholme Allocation Fund (FAAFX). Large equity holdings that are not in the 13F report include Fannie Mae (OTCQB:FNMA) pfds (OTCQB:FNMAS), Freddie Mac (OTCQB:FMCC) pfds (OTCQB:FMCKJ), and Imperial Metals (OTCPK:IPMLF).

Note: Fairholme’s 2018 Letter had the following regarding Fannie/Freddie: they believe that despite the 35% jump in January, the preferred shares continue to trade at large discounts to redemption values and realistic future outcomes.

Stake Disposals:

Jefferies Financial Group (JEF) previously Leucadia National: JEF was a very long-term holding that was built over several years. The position had seen reductions since Q2 2013. Q4 2015 and Q1 2016 saw the position almost eliminated at prices between $14.50 and $21. It currently trades at ~$18. The minutely small 0.1% of the portfolio remainder stake was disposed this quarter.

New Stakes:

Berkshire Hathaway (BRK.B) (NYSE:BRK.A): BRK.B is back in the portfolio after a quarter’s gap. It was a minutely small 0.34% of the portfolio stake established in Q3 2018 at prices between $186 and $222 and disposed last quarter at prices between $188 and $224. This quarter saw a 5.6% of the portfolio stake purchased at prices between $188 and $209. The stock currently trades at ~$205.

Stake Increases:

None.

Stake Decreases:

St. Joe Company (JOE): JOE is the largest stake by far at 92.44% of the 13F portfolio. The bulk of the position was purchased in the 2008-2009 time frame and there have only been minor adjustments since. Last three quarters of 2017 had seen a combined ~14% increase at prices between $16.35 and $19.55. Currently, it trades at $16.33. Berkowitz’s ownership stake is at ~44% of the business. Last five quarters saw minor trimming.

Vista Outdoor (VSTO): VSTO is a ~2% portfolio stake established in Q1 2018 at prices between $14 and $20 and increased by ~80% next quarter at prices between $13 and $18. The stock currently trades well below those ranges at $8.11. Q3 2018 saw a ~30% selling at prices between $15.50 and $19 and that was followed with a ~60% selling last quarter at prices between $10 and $17.50. There was another ~22% selling this quarter at prices between $8 and $12.25.

Note: Vista Outdoor is a 2015 spinoff from Alliant Techsystems which in turn was spun off from Honeywell (NYSE:HON). It is a dominant producer of ammunition that is purchased by military, police, and governments around the world.

Kept Steady:

None.

The spreadsheet below highlights changes to Fairholme’s 13F stock holdings in Q1 2019:

Bruce Berkowitz - Fairholme Fund - Q1 2019 13F Report Q/Q Comparison

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long Fannie/Freddie pfds.