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A Quiet Quarter For Berkowitz's Fairholme
Posted: Aug 19, 2009 11:51 AM by Sham Gad
Bruce Berkowitz at the Fairholme Funds has always been on my radar screen. A true value investor inspired by the Graham and Buffett value-oriented philosophies, Berkowitz is definitely one to watch and garner ideas from. Not to mention Fairholme's returns have handedly beaten the market year after year. Fairholme is already up 30% for the first six months of this year.
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Stick to Your Knitting
During the second quarter of 2009, Fairholme's quarterly 13F filing showed a relatively quiet quarter for Fairholme. Most of the activity was adding to already existing positions and trimming stakes in other positions. I find it notable that no new positions were made. The value guys at Fairholme are sticking to their knitting by buying more of what they know best. More so, after a market rallies nearly 50%, the opportunity for value investments tends to evaporate.
Dirt Cheap
One of Fairholme's biggest positions now is Florida land developer St. Joe (NYSE:JOE) company. It's not hard to see why. With real estate in a funk, St. Joe's land is selling dirt cheap. And this is not just any land, but lots of waterfront acreage. Plus with a major airport being developed right in the heart of Joe's territory, surrounding land values should spike up. The recent surge in shares has taken Joe out of ultra bargain territory, but long-term investors still have a shot.
Other positions that Fairholme added to included car rental firm Hertz (NYSE:HTZ), and aircraft parts supplier Spirit Aero Systems (NYSE:SPR).
Cheap to Buy Cheaper
The quarter also saw Fairholme reduce positions in its largest holding Pfizer (NYSE:PFE). Still, Pfizer remains the group's largest position. My guess is that during the second quarter, Fairholme was being served many numerous bargains and had to simply sell a "50 cent dollar" to buy a "30 cent dollar".
Other stakes that were trimmed in the quarter included conglomerate Leucadia (NYSE:LUK) and credit card company American Express (NYSE:AXP). Amex has nearly quadrupled in price from its March lows, so there's no mystery as to why that stake was reduced.
The Bottom Line
It's a very good idea for investors to pay attention to what more experienced and skillful pros are doing. The biggest move in Fairholme is very little movement: no new positions. This could be a sign that after being up 50%, very little value is left. (For further reading, check out The Greatest Investors tutorial.)
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By Sham Gad
Sham Gad is the Managing Partner of Gad Partners Fund's, value inspired investment partnerships modeled after the Buffett Partnerships of the 1950's. Previously, Gad ran the Gad Investment Group and delivered annualized returns of 22% from 2002 to 2005. Gad is also the author of "The Business of Value Investing" which will be out in the fall of 2009. Gad earned his MBA at the University of Georgia in May of 2007. Gad runs a value investing blog. He can also be reached by visiting the Gad Partners Funds site. When not writing or analyzing businesses, Gad enjoys hanging out with his wife Maggie, reading, golf, and yoga
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