Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Bruce Berkowitz’s Noteworthy Q1 Moves in Financial Stocks

Page 1 of 2

Bruce Berkowitz was recently in the spotlight for his strong criticism of how the U.S government has managed the Fannie Mae and Freddie Mac situation, over which he filed a lawsuit against the government in 2013. However, Berkowitz is used to the attention; back in 2010, Morningstar named him the Domestic-Stock Fund Manager of the Decade for the 2000-to-2009 period, mostly for his work at Fairholme. Talking about Fairholme, the Florida-based mutual fund recently filed its latest 13F, disclosing its long equity stakes as of March 31, which were valued at more than $1.65 billion, down from $2.43 billion at the end of 2015. While the portfolio was heavily focused on real estate (35%) and consumer discretionary (33%) stocks, some of the most interesting moves made by the renowned fund manager in the first quarter were related to its stock picks in the financial sector. Let’s take a look at some of those moves and see which stocks Mr. Berkowitz is bullish on and which he may have lost faith in.

FAIRHOLME (FAIRX) Bruce Berkowitz

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).

Berkowitz Disposes of American International Group Inc (NYSE:AIG)

Let’s start with American International Group Inc (NYSE:AIG), a company in which Fairholme trimed its position in every quarter since the third quarter of 2013. During the first quarter of 2016, the firm finally sold off its remaining 271,560 shares of the insurer, though it still holds 10.67 million stock warrants valued at almost $200 million. It should be noted, nonetheless, that over the January-to-March period, Mr. Berkowitz sold 11.32 million warrants, cutting his fund’s stake by 51%.

For the time being, the sales do not seem to have been a wise decision, as shares of AIG have gained 8% in the second quarter. On Tuesday, the stock gained more than 1.3% on the news that the company will enter the crowdfunding scene, not to raise money, but rather to offer insurance for investors putting their money into such projects. The company said it will soon launch “Crowdfunding Fidelity,” an insurance product aimed at protecting investors using equity crowdfunding platforms against fraud.

Fairholme was not the only fund that we track to have closed a position in AIG during the quarter, as the number of funds in our database long the stock fell by almost 7% to 94. Among the other funds that closed out their stakes in AIG, we can count Barry Rosenstein’s JANA Partners, which disposed of its 4.25 million shares of the company.

Follow American International Group Inc (NYSE:AIG)
Trade (NYSE:AIG) Now!

Fairholme Exits Positions in Berkshire Hathaway Inc. (NYSE:BRK.A)/(NYSE:BRK.B)

Next up are two other closed stakes, in Berkshire Hathaway Inc. (NYSE:BRK.A) and Berkshire Hathaway Inc. (NYSE:BRK.B). On December 31, Fairholme held stakes in both classes of Berkshire’s shares. During the first quarter of 2016, the firm sold all of its 135,242 Class B shares and its 3 Class A shares, which had a combined value of more than $18 million at the end of 2015.

Shares of Berkshire Hathaway have done pretty well in 2016, posting gains of roughly 9%, including gains of about 1% in the second quarter, outperforming the major U.S stock indexes. On May 20, the company’s General Re (reinsurance) unit named Kara Raiguel as its new chief executive officer, to replace the retiring Tad Montross. Shares of Berkshire Hathaway rose by roughly 0.75% on that day.

Another firm that seemed bearish on Mr. Warren Buffett’s holding company was Ray Dalio’s Bridgewater Associates, which disposed of its 77,044 Class B shares over the first quarter.

Follow Berkshire Hathaway Inc (NYSE:BRK.A)
Trade (NYSE:BRK.A) Now!

We’ll take a look at two other big first quarter moves by Mr. Berkowitz on the next page.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...
X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!