As of the quarter ending Sept. 30,
, founder of Fairholme Capital Management, has reported three
updates to his portfolio, which include an increase in his stake
of Wells Fargo (
) and stake reductions in CIT Group (
) and Jefferies Group (
Berkowitz's investment philosophy targets undervalued stocks that
have exceptional management, continuously generating free cash
and a cheap price, especially compared to the stock's intrinsic
In his shareholder letter written in July referencing the six
months ending in July for the
s, Berkowitz writes:
"Great investment ideas start with disasters. Liquidity
disappears. Assets are marked to mayhem. Intangibles are written
off. Companies with fixable problems become unusually cheap and
again profitable. Yet, they remain hated for past sins and sell
for less than assets minus liabilities, reported as book value.
They have little, if any, investment risk. This is when we focus
on buying. This is also when we look dead wrong and have periods
of underperformance. This is also how The
has outperformed the S&P 500 Index in ten of the past twelve
has 20 stocks in its portfolio, with a total value of almost $7
billion and a 0% quarter-over-quarter turnover rate. About 80.8%
of the stocks belong to the financials sector, and the consumer
services sector comes second at 13.4%. (See sector weighting)
Berkowitz's top holdings as of the end of the third quarter are:
1. American International Group Inc. (
) representing 40.6% of his portfolio, and 5.31% of shares
2. Sears Holdings Corp. (
) representing 13.4% of his portfolio and 15.91% of shares
3. Bank of America Corp. (BAC) representing 12.9% of his
portfolio and 0.95% of shares outstanding.
4. St. Joe Corp. (JOE) representing 7.1% of his portfolio and
0.95% of shares outstanding.
5. MBIA Inc. (MBI) representing 6.4% of his portfolio and 22.86%
of shares outstanding.
Below are Berkowitz's latest reported trade activities for the
Wells Fargo & Co. (
Berkowitz's most recent investment move to his Wells Fargo stock:
a staggering increase in shares by 542.99%.
The diversified financial services company has a market cap of
$170.85 billion, and trades at $31.57 per share, about 20 below
its intrinsic value (DCF) of $51.29.
Since acquiring the stock in the third quarter of 2011, Berkowitz
maintained his shareholding of the company at 31,400 shares,
before purchasing about 170,500 shares recently at an average
price of $32.77, placing his current shareholding at 201,900
Wells Fargo has a Profitability and Growth rank of 8 out of 10 on
GuruFocus. Despite its declining free cash flow in the past 12
months, Wells Fargo's revenue growth sports a positive trend line
as it seeks stability, with a growth rate of 1.1% in the past 12
months, and 4.2% in the past five years.
Its two Good Signs indicate a dividend yield close to its
two-year high and a P/E ratio close to a three-year low. Wells
Fargo has a P/B Ratio of 1.2, close to its one-year high and a
P/S ratio of 2 close to a three-year high
Additionally, Wells Fargo also has a pretty active insider trade
activity - its most recent trade occurred on Oct. 26 by Executive
Vice President Michael J. Heid, selling about 37,000 of his
shares of the company.
View the rest of Wells Fargo's financial data on 10-Year
CIT Group Inc. (
In the third quarter, Berkowitz decreased his shares in bank
holding company CIT Group (
) by more than 2.9 million shares, placing his current
shareholding at 11,153,729. The transaction accounted for a
20.65% reduction, and is the second largest reduction since
Berkowitz acquired the stock in the first quarter of 2010.
CIT Group provides financing, lending and insurance services
worldwide, and has a market cap of $7.44 billion. It is currently
trading at $36.35, a P/E (ttm) ratio of 205, a P/B ratio of 0.9
and a P/S ratio of 1.5.
CIT Group's revenue has been in decline at a rate of 19.6 percent
in the past 12 months, and its EBITDA growth is also seeing a
negative slope at 19.8 percent rate. On the other hand, its
operating margin, after taking a dip in 2009, has picked up in a
hopefully steady increase in its following years.
View more of CIT Group's financial data on 10-Year Financials.
Jefferies Group Inc. (
Berkowitz's reduction in global investment banking firm Jefferies
Group Inc. (
) was 37.22% of his current holding, which brings his share count
down to 1,728,050. He sold about a little over a million shares,
at an average price of $13.51 per share.
Berkowitz first acquired Jefferies in the second quarter of 2008,
starting with 1,978,565 shares, which he completely sold out by
the following quarter. He practiced the same move for the next
two consecutive quarters.
In the second quarter of 2011, he picked the stock back up, and
began consistently trading in the five quarters that followed.
Jefferies has a current share price of $15.76, and a market cap
of $2.9 billion. Its Financial Strength is 4 out of 10. Its
Profitability and Growth is in the upper half at 7 out of 10. The
contrasting rankings in both places Jefferies in low Business
JEF data by GuruFocus.com
Its two Severe Warning Signs reveal revenue in decline for the
last five years, and an increasing trend of issuing long-term
Jefferies has a P/E ratio of 12.7, and both P/B and P/S ratios at
View the rest of its financial data on 10-Year Financials.
See Bruce Berkowitz's Fairholme Fund portfolio here. Also check
out the undervalued stocks, top growth companies and high yield
stocks of Fairholme Fund.
To read more about Bruce Berkowitz, visit GuruFocus article
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