Bruce Berkowitz’s comments from the latest shareholder letter are below. He talks at length about why the company is loading up on financials. I have criticized his complete change of strategy from one that focuses on free cash flow to one that seems more like a macro bet on the financial sector, and is more akin to distress investing.
Inc. (“GGP”) and others that are perceived to be or are in actual financial stress. Underlying equities lead us to believe that all are “money good.” Nearly two-thirds of the Fund is invested in cash and what we consider to be cash equivalents. You should also note our large and growing debt and equity holdings of AIG and GGP. Like their industry brethren, both were in critical condition from last year’s credit freeze and both appear to be thawing from near-death experiences. We believe a moderate climate will allow AIG to repay U.S. taxpayers and GGP to emerge from its self-induced bankruptcy. Further, Fairholme Funds has agreed to buy new GGP trust shares, subject to numerous terms and conditions. Portfolios are positioned for today’s nascent recovery with its fits and starts. Don’t
Lose remains Rule #1 as we strive to be greedy when most remain fearful about the