Jan 29, 2010
Portfolio Changes: Bruce Berkowitz
Bruce Berkowitz of the Fairholme Fund recently disclosed his portfolio positions and there are some changes:
via
1. Citigroup (NYSE:): Citi is a new position, but not entirely unfamiliar to most readers of this blog. A number of famous investors have taken positions in Citi, most likely due to the fact that on a normalized basis, the earnings power of Citi is pretty strong relative to where the company is currently trading. In the past, Berkowitz has professed no edge in being able to analyze financial companies but we saw him take a stake in American Express (NYSE:) in the middle of the crisis. He may find that the balance sheets are a lot easier to analyze now than pre-crisis.
2. Pfizer (NYSE:): Berkowitz has pared down his Pfizer stake. There could be a number of reasons for this, he has increased stakes in Humana and WellPoint, which will expose him to increased healthcare spending so it could be a relative valuation issue where he sells something trading for 50 cents on the dollar for a company trading at 25 cents on the dollar. In addition, there was also Pfizer’s acquisition of Wyeth, which I don’t believe Berkowitz really envisioned. From his previous talks, Berkowitz had hoped Pfizer would become a merchant bank for the Pharma sector, acquiring small but innovative drug makers. The Wyeth acquisition sort of equated to one big acquisition which had the potential to be less efficient use of free cash flow from an investor perspective.
3. Berkshire Hathaway (NYSE:): In the past, Berkowitz has actually reduced his Berkshire position. He is never one to get too comfortable. So the fact that he has been buying shares indicates that he may see Berkshire as undervalued right now — a sentiment that I have been hearing a lot.