Fairholme Reduces Stakes in AIG, St. Joe, CIT Group, and MBIA

Bruce Berkowitz of the Miami-based Fairholme Capital Management made several changes in his portfolio during the third quarter, according to the fund’s 13F filing with Securities and Exchange Commission. He added two new stocks to the portfolio, made additional purchases in nine stocks, and reduced holdings in 9 companies.

The firm has $6.9 billion worth of assets under management. 94 percent of Fairholme’s money is concentrated in the top ten holdings.

Fairholme Reduces Stakes in AIG, St. Joe, CIT Group, and MBIA

Top Positions

American International Group is the biggest holding of Fairholme (40.55 percent of its portfolio), according to the third quarter 13F filing. The fund owns 86,545,718 American International Group, Inc. (NYSE:AIG) shares worth $2.83 billion, as of September 30, 2012. This is the position size after the sale of 1.44 million shares during Q3. Fairholme is the largest shareholder of American International Group, Inc. (NYSE:AIG), after the United States Government.

Sears Holdings Corporation (NASDAQ:SHLD) makes up 13.43 percent of Berkowitz’s portfolio. Fairholme purchased an additional 104,200 shares of Sears Holdings Corporation (NASDAQ:SHLD) in the third quarter. By the end of Q3, the fund owned 16,934,080 Sears Holdings’ shares worth $939.6 million. Bruce Berkowitz believes that the largest shareholder of Sears Holdings Corporation (NASDAQ:SHLD), Eddie Lampert, can turn the troubled retailer around.

Another big chunk of Fairholme’s money (12.9 percent of the portfolio) is invested in Bank of America Corp (NYSE:BAC). The fund made no change in its  Bank of America Corp (NYSE:BAC) holding during the quarter. Fairholme owns 102,215,255  Bank of America Corp (NYSE:BAC) shares worth $902.5 million.

Fairholme sold 187,800 shares of the real estate development firm The St. Joe Company (NYSE:JOE). Berkowitz has 7.06 percent of his portfolio invested in The St. Joe Company (NYSE:JOE). According to the 13F filing, Fairholme owns 25,351,628 shares of The St. Joe Company (NYSE:JOE) that are now valued at $494.3 million. Bruce Berkowitz is the largest shareholder of JOE. David Einhorn has questioned the value of the company’s real estate in Florida.

MBIA Inc. (NYSE:MBI) is the next favorite of Bruce Berkowitz in which he owns 44,287,170 shares valued at $448.6 million. Fairholme sold 1,114,700 shares of MBIA Inc. (NYSE:MBI) during the third quarter.

Fairholme has placed 6.29 percent of its portfolio in CIT Group Inc. (NYSE:CIT). The fund sold 2,901,900 shares of CIT Group Inc. (NYSE:CIT) in the third quarter. At the end of Q3, Fairholme owned 11,153,729 CIT Group Inc. (NYSE:CIT) shares that are currently valued at $439 million.

Some of these sales were likely due to forced redemptions. Bruce Berkowitz has re-iterated why he likes his top three holdings in a recent interview.

Additional Purchases

Fairholme bought 409,500 shares of Hartford Financial Services Group Inc (NYSE:HIG) in the third quarter. Wells Fargo & Company (NYSE:WFC), where Berkowitz had only 31,900 shares at the end of the second quarter, attracted Fairholme to buy additional 170,000 shares in Q3. Fairholme also bought 280,300 shares of JPMorgan Chase & Co. (NYSE:JPM) Though Fairholme already has a stake in Berkshire Hathaway Inc. (NYSE:BRK.A) (BRK.B), its holding in Berkshire Hathaway Inc. (NYSE:BRK.A) (BRK.B) remains unchanged.

New Purchases

The two new purchases in Q3 were Lincoln National Corporation (NYSE:LNC) Warrants and General Motors Company (NYSE:GM) Warrant (expires 07/10/2019). The fund purchased 181,610 shares of LNC/WS and 232,700 shares of GM-WTB.

About the Author

Vikas Shukla
Although he has a background in finance and holds an MBA, Vikas Shukla is a technology reporter. He has a strong interest in gadgets, gizmos, and science. He writes regularly on these topics. - He can be contacted by email at vshukla@valuewalk.com