BRUCE BERKOWITZ, PRESIDENT OF FAIRHOLME FUND and CEO of Fairholme Capital Management in Miami, runs concentrated portfolios -- and keeps a lot of powder dry to pounce on opportunities as he looks for companies that throw off a lot of free cash. This approach has paid off nicely for the firm, which now oversees about $9 billion, the vast majority of it in the no-load Fairholme Fund (ticker: FAIRX), of which Berkowitz is president. Since its launch at the end of 1999, the fund has finished near the top of its Morningstar category, with an annual "since-inception" return of 16.27%, trouncing the S&P 500's performance of minus 0.03% over the same period. The fund also bests most of its peers based on one-, three- and five-year returns.
Barron's: You run a very concentrated portfolio, with the top 10 holdings of the Fairholme Fund accounting for roughly 70% of the assets. Why is that?
Berkowitz: If you can buy more of your best idea, why put [the money] into your 10th-best idea or your 20th-best idea? If we're confident in what we do, then that's the way we should do it. The only reason not to is a fear of being wrong. The more positions you have, the more average you are.
How do you go about mitigating risk in such a concentrated portfolio?
We consider risk to be the chance of permanent loss, as opposed to volatility. Volatility is more of an opportunity. There's nothing better than a one-time event that allows you to buy a reasonable company at a great price. So we are looking at the chance -- in terms of risk -- of a permanent loss, based upon our own security research.
Knowledge grows through sharing! To be the best, learn from the best! May all your dreams come true! Collections of Value Investing articles, interviews and videos, especially on Warren Buffett and Charlie Munger and articles from various disciplines to build "Latticework of Mental Models"
Tuesday, March 18, 2008
Betting Big, Winning Big: Interview With Bruce Berkowitz, CEO of Fairholme Capital Management
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment