Closely watched mutual fund investor
has revealed that he made few changes to his
in the third quarter. His biggest move was a 27.8% reduction to
his CIT Group (
) holding, followed by a marginal reduction of top holding
American International Group (
). The portfolio remains, as it has since late 2009 and early
2010, all financials battered in the financial crisis, with the
exception of Sears Holdings Corp. (
), a retail stock.
CIT Group (
Berkowitz sold 3,779,400 shares of CIT Group for $37.50 per share
on average in the third quarter. It was his fourth consecutive
quarter to sell shares of the company. He initiated in the
position with over 11 million shares in the first quarter of
2010, when the price was $34 per share on average. At the end of
the third quarter 2012, he owned a total of 9,817,629 shares,
equivalent to 6.5% of his portfolio.
CIT is a bank holding company that provides financing and leasing
capital to small business and middle market clients in more than
30 industries, as well as operates its primary bank subsidiary,
"The facts are we bought companies after they turned. Their
values, their book values, liquidate values, bad debt ratios,
ROEs, ROAs, whatever you want to look at, were improving. The
fundamentals, the facts. AIG, Bank of America, CIT - all of the
financials that we've invested in," Berkowitz said in an Oct. 13
WealthTrack with Consuelo Mack
In the quarter Berkowitz began to invest in CIT, the first of
2010, the company's total cash and deposits had increased to $10
billion from $9.8 billion the previous quarter, book value
increased to $42.63 per share from $41.99 per share the previous
quarter, and total liabilities declined to $49.5 billion from
$51.6 billion the previous quarter.
The company's Tier1 and Total Capital ratios increased to 15.5%
and 15.8% from 14.2% at Dec. 31, 2009.
In the third quarter results announced Oct. 23, 2012, CIT
reported a net loss of $305 million or $1.52 per diluted share,
compared to a net loss of $32.8 million or $0.16 per diluted
share the previous year. The results were affected by $471
million in charges for the redemption of $4.6 billion of
high-cost debt, which officially paid off its
restructuring-related debt totaling $31 billion since 2010. The
year-ago period had charges of $169 million for the redemption of
$4.5 billion in loans and debt.
The company's total cash and deposits increased to $6.5 billion
from $6.1 billion the previous year, book value declined to
$40.26 from $41.73 per share, and total liabilities increased to
$35.5 billion from $24.4 billion over the same period.
The company's Preliminary Tier 1 and Total Capital ratios were
16.7% and 17.5%, respectively, down from 18.0% and 18.9%,
respectively, at June 30, 2012.
The company's stock has gained 6% year to date.
Berkowitz's lone other move in his Fairholme Fund was to shave
946,600 shares of his AIG holding for $33 per share on average.
At quarter end, he owned more than 80 million shares of the
company, equivalent to 37.4% of his portfolio. He amassed the
position from the second quarter of 2010 to the second quarter of
2011 and is the second largest owner, after the government.
AIG is the massive insurance corporation that was rescued from
collapse by the U.S. government during the 2008 financial crisis.
In its most recent second quarter results, the company announced
a 13.9% year-over-year increase in net income to $2.34 billion
from $2.1 billion, a 5% increase in book value to $60.58, and
return on equity of 7.7%, increased from 6.6% the previous year.
After rising almost 50% this year to trade for $34.72 on Monday,
AIG still sells at a fraction of book value. It does not appear
that Berkowitz's positioning in the company, or any of his other
financials, will be changing any time soon. When asked on
WealthTrack when he would consider selling, Berkowitz responded:
"The book value is near $70, it's going to continue to grow. The
price less than $35 will eventually reach book value. Maybe that
happens in the $70s or the $80s. When it gets about there we'll
see. But companies such as AIG can trade at a multiple of book
value. But I don't want to go there yet. Just getting to book
value will be a very nice return for shareholders. It's a very
similar case for Bank of America (
). It's a similar case for Sears."
Berkowitz's other top holdings remain: Sears Holdings (where he
is the second largest owner), Bank of America, St. Joe Corp. (
), Leucadia (
) and MBIA (
See Bruce Berkowitz's Fairholme Fund portfolio here. Also check
out the undervalued stocks, top growth companies and high yield
stocks of Fairholme Fund.About GuruFocus: GuruFocus.com tracks
the stocks picks and portfolio holdings of the world's best
investors. This value investing site offers stock screeners and
valuation tools. And publishes daily articles tracking the latest
moves of the world's best investors. GuruFocus also provides
promising stock ideas in 3 monthly newsletters sent to