One of the most prominent hedge fund managers on Wall Street and founder of Fairholme Capital Management, billionaire Bruce Berkowitz’s track record and unique investing approach make his portfolio choices well worth a closer look. Berkowitz is renowned for his bold bets on unloved assets, his high-conviction investment style, and his rare ability to spot dollar bills being sold for pennies- and the guts to hold them until the market catches up.
His ability to focus on facts and ignore the market chatter has helped him deliver strong results and earned him strong accolades in the industry. Named Morningstar’s Domestic-Stock Fund Manager in 2009 and Institutional Investor Magazine’s Money Manager of the Year in 2013, his honors underscore his reputation as a value investor worth following.
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Berkowitz has always believed in owning a handful of stocks. These stocks, however, are those in which he believes deeply. After all, high-conviction investing is the name of the game.
“You only need a few ideas in a lifetime to do unbelievably well.”
-Bruce Berkowitz
He is also a staunch believer in reality. Hated assets usually have hidden value, and the trick, he believes, is to look at the facts instead of reacting to trauma like others do.
“Ignore the crowd. Count what matters.”
-Bruce Berkowitz
In an interview with Bill Brewster from the Business Brew, Bruce Berkowitz talked about how he started Fairholme with a simple mission: managing his family’s money. From the very beginning, Fairholme wasn’t a marketing organization. Rather, the fund’s unique approach was vested in value creation rather than asset gathering. Focusing solely on deep research and concentrated positions, Berkowitz often ran portfolios with only a few ideas.
Over the years, Berkowitz learned how financial metrics, on which he relied with much conviction in the early years, weren’t the only factors to consider. Rather, management quality and ownership culture were equally important. This shift in perspective has made him more selective as he strongly believes that the right leadership can make or break an organization, particularly during tough times. That said, Berkowitz highlighted in the interview how he now avoids doing business with executives he doesn’t trust, regardless of how shiny the financials may seem.
Moreover, Berkowitz’s investments are almost entirely US-focused. The sole reason for this strategy has been his commitment to deep understanding and control. According to him, sound investing requires a good grasp of the company’s regulatory environment, tax structure, supply chain, and other related factors. Building that level of expertise made him limit his universe to the US, where he is comfortably focused on a few three to six positions where he tries to fully understand the industry, the competitors, the suppliers, and more. According to him, the US is a sound market to operate in, especially for a value investor dreaming of capital appreciation and preservation.
“His aptitude for picking stocks sets him apart from his peers, and Fairholme’s portfolio is filled with attractively priced firms that generate high free cash flow. Berkowitz’s strategy has led to a stellar long-term record, and his large cash stakes have helped limit volatility.”
– Then director of mutual fund analysis for Morningstar, Karen Dolan, said of Berkowitz
For this list, we picked stocks from Fairholme Capital Management’s 13F portfolio as of the end of the fourth quarter of 2024. We listed them in the ascending order of analysts’ average upside potential, as of May 9. These equities are also popular among other hedge funds. The hedge fund data is as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
6. Bank OZK (NASDAQ:OZK)
Fairholme Capital Management’s Stake: $28,650,699
Number of Hedge Fund Holders: 37
Average Upside Potential: 10.42%
Bank OZK is an Arkansas state-chartered bank that offers retail and commercial banking services in the United States. Of the concentrated 10 holdings in Bruce Berkowitz’s portfolio, Bank OZK is the sixth top pick with the highest upside potential.
The company recently reported its Q1 2025 earnings in April, offering a mix of strong operational performance, particularly in loan growth and strategic deposit cost management, as well as challenges posed by macroeconomic uncertainties and specific loan portfolio issues. The bank reported first quarter 2025 net income of $167.9 million, 2.1% lower compared to the year-ago period. Meanwhile, earnings per share for the bank were $1.47, beating the consensus estimate of $1.40. It reported strong loan growth in the first quarter, with a 3.8% increase not annualized.
Following the earnings report, Stephens’s analyst Matt Olney lowered the firm’s price target on the stock to $54 from $59 and kept an “Equal Weight” rating on the shares. The firm believes that disclosures related to the bank’s Real Estate Specialties Group (RESG) appraisals are likely to boost investor confidence about the bank’s financial health. The analyst further revealed how its updated forecast includes a modest upward revision in the bank’s earnings per share (EPS) and pre-provision net revenue.
5. Occidental Petroleum Corporation (NYSE:OXY)
Fairholme Capital Management’s Stake: $444,690
Number of Hedge Fund Holders: 68
Average Upside Potential: 14.53%
Occidental Petroleum Corporation (NYSE:OXY) is engaged in the acquisition, exploration, and development of oil and gas properties in the United States and internationally. Occidental is one of Billionaire Bruce Berkowitz’s top stock picks with the highest upside potential. Even though the stock is down 18.25% year-to-date, analysts believe it has an upside potential of 15%.
On May 8, J.P. Morgan analyst Arun Jayaram maintained their neutral stance on the stock, giving a Hold rating. Occidental Petroleum delivered strong financial performance in the first quarter of 2025, characterized by significant debt reduction and better-than-expected free cash flow. There have also been positive developments in Oman operations, which have further contributed to the company’s financial success.
Despite these positives, the firm is skeptical that, due to potential risks associated with U.S. operating costs and production volumes, particularly in the Gulf of Mexico, it may not be able to meet its full-year guidance. The firm also pointed to second-quarter guidance, which was slightly below expectations, with lower production volumes anticipated. This has the potential to impact overall performance. Even though Occidental’s cost reduction initiatives are promising, the need for increased production in the latter half of 2025 is a challenge in itself. Together, these positive and negative factors have led to a hold rating.
4. Apple Inc. (NASDAQ:AAPL)
Fairholme Capital Management’s Stake: $601,008
Number of Hedge Fund Holders: 166
Average Upside Potential: 20.01%
Apple Inc. (NASDAQ:AAPL) is a technology company. Like many other stocks, Apple has also been facing tariffs and overall macroeconomic uncertainty. The company recently reported fiscal second quarter earnings that beat Wall Street expectations, with sales up 5.1% year on year to $95.36 billion, while non-GAAP profit of $1.65 per share was 1.7% above analysts’ consensus estimates. Despite earnings beating consensus estimates, Apple’s services revenue of $26.65 billion for the quarter came in below the expected $26.70 billion.
According to CEO Tim Cook, Apple saw “limited impact” from tariffs in its March quarter because of supply chain optimization. However, he estimated that tariffs would add $900 million in costs for the current quarter, but that he remained “confident” looking ahead. On May 5th, Morgan Stanley reiterated the stock as “Overweight” and said that it remains range-bound for now. It also said that it believes Apple’s efforts to diversify production outside of China are working.
“The fact that Apple only faces $900M of tariff costs in the June Q, despite being over-indexed to China, shows SE Asia production diversification is working. That said, mgmt wasn’t able to provide any segment-level guidance for the June Q (not even Services, which they effectively always do), couldn’t commit to how much Product would come from India/Vietnam in the September quarter and beyond (leaving the tariff cost impact open-ended), didn’t address pricing or other tariff mitigation tools, and didn’t provide an updated timeline for the new Siri introduction.”
-Morgan Stanley analysts, led by Erik Woodring, in a Friday investor note.
3. Enterprise Products Partners L.P. (NYSE:EPD)
Fairholme Capital Management’s Stake: $170,877,504
Number of Hedge Fund Holders: 29
Average Upside Potential: 23.46%
Enterprise Products Partners L.P. (NYSE:EPD) is one of the largest midstream energy services providers in the United States. It provides energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. Midstream companies like EPD help move oil and natural gas around from the places where it is drilled to the places where it is processed and/or consumed.
In a market largely impacted by tariffs and other macroeconomic uncertainty, EPD remains an exception, considering that it generates its revenue by charging upstream extraction companies and downstream refining companies what are known as “tolls” to use its pipes. This business model makes it well-insulated from tariffs, inflation, and other macro headwinds largely because fluctuating gas prices don’t affect it.
Several analysts are bullish on Enterprise Products Partners L.P. owing to its strong fundamentals, attractive valuation, and future growth. In particular, its toll-taking business and insulation from macroeconomic headwinds make it particularly attractive. On May 1, Jean Ann Salisbury from Bank of America Securities maintained a “Buy” rating on the stock with a price target of $38.00. Salisbury has a buy rating on the stock despite the company slightly missing its first-quarter earnings on the back of its strong future potential.
While first-quarter earnings were a miss due to lower marketing margins and chemical outputs, the firm noted that the company’s backlog remains stable and that it has also reiterated its commitment to a stock buyback by 2026. The strategy will be supported by the company’s capital expenditure plans, which imply that a significant portion of free cash flow will be directed towards buybacks. Enterprise also enjoys several advantages, such as its brownfield cost advantages and robust export contracts. It also has a competitive edge in expanding its LPG export capacity at a lower cost compared to greenfield projects. The company also sports a stable revenue stream on the back of its take-or-pay contracts, which make up a significant portion of its exports. Together with a strong dividend yield, Enterprise seems to be a company defensively positioned in an uncertain macro environment.
2. EOG Resources, Inc. (NYSE:EOG)
Fairholme Capital Management’s Stake: $245,160
Number of Hedge Fund Holders: 62
Average Upside Potential: 25.18%
EOG Resources, Inc is engaged in the exploration, development, production, and marketing of crude oil, natural gas liquids, and natural gas in producing basins in the United States and internationally. On May 2nd, Gabriele Sorbara from Siebert Williams Shank & Co reiterated a “Buy” rating on the stock with the associated price target lowered to $139.00.
EOG Resources delivered a strong first-quarter 2025 performance, with solid results in production, cash flow, and earnings. The company posted adjusted net income of $1.6 billion, translating to $2.87 per share. It also generated $1.3 billion in free cash flow, showcasing its strong operational efficiency. The company’s oil production of 502,100 barrels per day surpassed guidance, and it also announced a new oil discovery in Trinidad.
EOG Resources also announced a more efficient 2025 plan, comprising a reduction in capital expenditures by 4.8% while maintaining almost the same level of oil production. This strategic move is anticipated to enhance free cash flow generation and shareholder returns.
Moreover, significant acquisitions and discoveries, such as the Eagle Ford bolt-on and the Beryl Oil Discovery in Trinidad, are quite likely to contribute positively to its future performance. The stock’s appeal is further strengthened by its commitment to returning nearly 100% of its free cash flow to shareholders through dividends and buybacks. The firm believes that EOG Resources is well-positioned for continued outperformance.
1. Energy Transfer LP (NYSE:ET)
Fairholme Capital Management’s Stake: $16,708,311
Number of Hedge Fund Holders: 37
Average Upside Potential: 34.5%
Energy Transfer LP offers energy-related services in the United States. The company is in a great position near the Permian Basin, and has expanded operations through key acquisitions and mergers such as the Lotus Midstream, Crestwood Equity Partners, and the purchase of WTG Midstream, which operated the largest private Permian gas gathering and processing business with assets located in the core of the Midland Basin. These deals have significantly enhanced its position in the Permian region.
On May 7, analyst Michael Blum from Wells Fargo maintained an “Overweight” rating on the stock but lowered its price target from $22.00 to $21.00. The rating signifies continued optimism for Energy Transfer LP and that the firm expects better-than-average performance compared to other stocks in the sector. The company recently reported its first-quarter earnings for 2025, revealing mixed performance against market expectations.
It surpassed earnings per share (EPS) forecasts, reporting $0.37 compared to the projected $0.36. However, revenue fell short of expectations, generating $21.02 billion against a forecast of $22.42 billion. The company maintains an attractive 7.54% dividend yield and has raised its dividend for three consecutive years.
While we acknowledge the potential of ET as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than ET but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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