Thursday, July 1, 2010

Fairholm's Bruce Berkowitz: Banks worth a second look (BAC; C)

I agree on Citi, disagree on AIG.
From InvestmentNews:
Bruce Berkowitz is the founder and managing member of Fairholme Capital Management LLC, and is president and a director of Fairholme Funds Inc.

What is your outlook for the economy in the second half of the year? Where do you see the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite Index finishing the year? Also, what is your outlook on interest rates?
We don't try to predict the future of a given company, industry or economy. Instead, we try to price securities and their underlying businesses for difficult times so that we can survive those one-in-100-year catastrophes that appear to happen every decade, and prosper during more-normal times.

What worries you most about the markets and the economy over the remainder of the year?
Company-specific factors that I may underweight or overweight in my assessment of a company. Good capital allocation policies are determined by the intelligence, energy and integrity of management. Long-term profitability is a function of all stakeholders in a company, including government agencies that tax or regulate.

Which areas of the equities market look attractive to you?
Investors have lost much of their wealth from financial institutions over the past couple of years and are not prepared to risk more. Meanwhile, the Great Recession has forced our surviving institutions to fortify their balance sheets and practices in preparation for continued stress. Thus, they are priced for more stress and prepared for more stress. We try to protect against the downside and let the upside take care of itself. Such is the case with our holdings in large banks and brokers.... 

May 11 
"Berkowitz’s Fairholme Increases Bet on AIG Recovery" as Some Analysts Question Results (AIG)

March 19 
"AN INTERVIEW WITH BRUCE BERKOWITZ: Why the Fairholme founder finds AIG, Bank of America and Citi very attractive now." (AIG; BAC; C)

March 10 
Who Scores Big on a Move in Citigroup? John Paulson, Bruce Berkowitz, George Soros; the usual suspects

Note: Soros liquidated his ~100mil. share position