Bruce Berkowitz's Fairholme Buys Bank of America, Sells Pfizer: 13F Filing Q1 2010 ~ market folly

Friday, May 21, 2010

Bruce Berkowitz's Fairholme Buys Bank of America, Sells Pfizer: 13F Filing Q1 2010

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund filings.)

Next up in our series is Bruce Berkowitz's Fairholme Capital Management. While not a hedge fund, we track Berkowitz because despite managing over $10 billion, he runs quite a concentrated portfolio. Not to mention, he was named fund manager of the decade by Morningstar. In activity that was reported after this most recent 13F filing, we see that Berkowitz has actually boosted his AIG holdings. Additionally, he recently revealed a brand new stake in Goldman Sachs (GS) at the Value Investing Congress (see detailed notes from the event here). Also, you'll remember that Fairholme has a large debt position in General Growth Properties (GGP) as they've been an integral part of the winning bid (along with Bill Ackman's Pershing Square and Brookfield) that will help to restructure the company. Lastly, note that Berkowitz typically discloses his positions for his Fairholme Fund (mutual fund: FAIRX) on an individual basis, but we are examining the holdings of his entire firm, Fairholme Capital Management. With that in mind, let's take a look at the rest of Fairholme's portfolio.

The positions listed below were their long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:

Brand New Positions
Bank of America (BAC)
American International Group (AIG)

Increased Positions
Berkshire Hathaway (BRK.B): Increased position by 1,458% ~ mainly due to Berkshire's 50/1 stock split
Regions Financial (RF): Increased by 74.8%
Comcast (CMCSK): Increased by 46.1%
Citigroup (C): Increased by 5.94%

Reduced Positions
Daily Journal (DJCO): Reduced position by 26.6%
Spirit AeroSystems (SPR): Reduced by 15.9%
CIT Group (CIT): Reduced by 14.5%
Americredit (ACF): Reduced by 13.2%

Positions They Sold Out of Completely
Pfizer (PFE)
WellPoint (WLP)
Burlington Northern Santa Fe (BNI) ~ bought out by Warren Buffett's Berkshire Hathaway
United Rentals (URI)
White Mountains Insurance (WTM)
Penn West Energy (PWE)
Forest Laboratories (FRX)
Coca Cola (KO)
Bristol Myers Squibb (BMY)
Marshall & Ilsley

Top 15 Holdings (by percentage of assets reported on 13F filing)

1. Sears Holdings (SHLD): 14.91%
2. Citigroup (C): 8.61%
3. St. Joe (JOE): 8.1%
4. Humana (HUM): 6.9%
5. Americredit (ACF): 6.81%

6. Bank of America (BAC): 6.56%
7. Regions Financial (RF): 5.57%
8. Hertz Global (HTZ): 5.24%
9. Spirit AeroSystems (SPR): 5.04%
10. American International Group (AIG): 4.8%
11. Leucadia (LUK): 4.71%
12. CIT Group (CIT): 4.46%
13. Berkshire Hathaway (BRK.A): 4.21%
14. Comcast (CMCSK): 3.56%
15. Berkshire Hathaway (BRK.B): 2.86%

Overall, it appears as though Berkowitz is sticking with his 'recovery' play on financials. He added new stakes in Bank of America and AIG (the latter of which we already knew about) and increased holdings in Regions Financial. Additionally, as we mentioned at the very beginning of this article, Berkowitz has just started a new stake in Goldman Sachs and he has been since adding to his AIG position as well.

In the past we detailed how Berkowitz liked health plays but it appears he is now less fond of some of them. After previously holding a massive stake in Pfizer (PFE), he has now completely sold out. This is the exact opposite of what we've seen David Einhorn do, as he's been building a Pfizer stake. Sticking with the Berkowitz/Einhorn dichotomy, we see that Berkowitz was selling some shares of CIT Group while Einhorn was buying. That said, they both own sizable positions.

We also highlight Berkowitz's sale of WellPoint (WLP) as Warren Buffett's Berkshire Hathaway also completely sold out of this position. While these two notable investors have sold out, we've seen various other hedge funds still owning this name. And speaking of Warren Buffett, you'll note that Fairholme Fund drastically increased their position in the B shares of Berkshire Hathaway (BRK.B).

Lastly, we want to bring to your attention that Fairholme also recently filed an amended 13D on shares of TAL International (TAL) due to activity on May 17th. Per the filing, Fairholme now shows a 6.2% ownership stake in the company with 1,890,453 shares. This is a decrease in their position as they've been selling shares throughout the month of May. Those interested in the specifics of the sales can view the SEC filing here. So, keep in mind that the data posted up in the 13F analysis article above is already stale.

Assets reported on Fairholme Fund's 13F filing were $10.7 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, and Lee Ainslie's Maverick Capital. Be sure to check back daily for new hedge fund updates.

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