Bruce Berkowitz’ Fairholme Capital filed a N-Q form for the third fiscal quarter ending on August 31 2013 which enlists holdings of Fairholme Fund, Fairholme Allocation Fund and Fairholme Focused Income Fund.
According to the filing made public today, the Fairholme Fund has close to 79% exposure in domestic equities which were valued at $6.2 billion at the end of August. Fairholme Fund has the highest equity exposure in American International Group Inc (NYSE:AIG) where it owns 79.28 million shares which are worth 3.68 billion.
Fairholme also has exposure in American International Group Inc (NYSE:AIG) through 21.5 million warrants with a strike price of $45 which is set to expire on Jan 19 2021. Other Fairholme funds also hold a position in American International Group Inc (NYSE:AIG).
Fairholme Fund’s other large holdings include Bank of America Corp (NYSE:BAC), where it holds 81.6 million shares which were worth $1.15 billion. One of Fairholme’s oldest investment is in The St. Joe Company (NYSE:JOE) where it owns 23.1 million shares, Berkowitz is the independent chairman of St. Joe’s board. Fairholme also holds 14.2 million shares of Sears Holdings Corp (NASDAQ:SHLD) and 12.22 million shares of Leucadia National Corp. (NYSE:LUK).
Fairholme Fund’s exposure in U.S. treasuries is equal to 7.9% of the fund’s assets, which is a major cut from 15.3% of assets that the fund held until the end of first fiscal quarter of this year. Fairholme’s total government obligations are worth $820 million across the three funds.
Fairholme buys Fannie and Freddie prefs
Berkowitz’s most widely publicized position in the last few months was the preferred shares he bought of Fannie Mae and Freddie Mac. Berkowitz is known for his big bets on financials and has said on many occasions that the shares are greatly undervalued. The filing shows that Fairholme Fund added this new position which amounts to 7.2% of the fund’s assets, 10% of Fairholme Allocation Fund’s assets and 6.3% of Fairholme Focused Income Fund’s assets.
The total worth of the preferred shares of Federal Home Loan Mortgage Corp. and Federal National Mortgage Association that the funds held till end of August was $586.67 million.
Fairholme buys J.C.Penney bonds
The Fairholme Focused Income Fund has a long position in J.C. Penney Company, Inc. (NYSE:JCP) bonds; the fund holds JCP bonds which have a face value of $11 million at different yields, due to mature between 2015-2017. The Focused Income Fund also has a position in bonds of Sears Holdings, at a par value of 59.06 million.
Other than positions in Sears and AIG, the Fairholme Allocation Fund also has small positions in HomeFed Corporation (OTCMKTS:HOFD) and Imperial Metals Corporation (TSE:III). The Allocation Fund also holds warrants of JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC) and Bank of America Corp (NYSE:BAC) .
Fairholme sells MBIA, Sears Canada
The filing also shows that the Fairholme Fund has wrapped up its position in MBIA Inc. (NYSE:MBI). Fairholme held 16.3% of the insurer’s shares which were cut to a mere 1.2% position in June and then exited altogether later. Fairholme has also sold out the $34 million in MBIA bonds it had held. The fund has exited the position entirely as MBIA is not listed on the new filing. Fairholme’s 13f also corroborates this information, as the new filing also shows that the fund exited position in ordinary shares of Orchard Supply Hardware Stores Corp (OTCMKTS:OSHWQ), however the fund still holds 240k preferred shares of Orchard Supply. Fairholme also sold its position in Sears Canada Inc (TSE:SCC) where it owned 6 million shares till the end of April.