“Stock Manager of the Decade” Shares Investing Experience with Students and Alumni
November 27, 2012
Few people can say that they are one of the best in the country in their field. But for Bruce Berkowitz, who Morningstar named U.S. stock manager of the decade in 2010, there is no denying that claim is warranted.
Berkowitz, the founder of Fairholme Capital Management, shared his experience in becoming one of today’s most preeminent value investors with students and alumni on Nov. 8 in Storer Auditorium as part of the School’s Executive-in-Residence program.
Through his investment fund, Berkowitz advocates a focused approach to investing. More than 90 percent of the money invested in the fund is placed in ten securities.
“For me, I am most comfortable to make money where I have already made money,” said Berkowitz. “Money doesn't know how it is made. It is okay if you use the same trick over and over again.”
Of the over $9 billion the fund invests, more than 30 percent is concentrated in American International Group (AIG).
“Would you rather buy your 10th best idea when you could buy more of your top idea?” Berkowitz said.
Berkowitz holds to a model of investment he calls “the fixable cancer model” in which he invests in a company that he sees has potential to grow after removing what is hurting it. He also decides what companies to invest in by determining if there is a margin of safety.
“We are very much focused on the idea of ‘what is the worst thing that can happen?’” said Berkowitz. “Can we make money? And if we don't think about how much money we're going to make, great things happen.”
He also advises not to take shortcuts when it comes to investment because it is not a simple process.
“There is no free lunch,” said Berkowitz. “Either it is not free or it is not lunch.”
To be successful, Berkowitz says that investors need to set themselves apart and take risks that go against the trend.
“You need to be comfortable with making your own decisions and doing your own homework and not listening to your dentists,” said Berkowitz.
Nearly 20 percent of the Fairholme Fund’s profits go their foundation that supports those that Berkowitz says has helped Fairholme. Among the places the foundation extends its generosity to is the construction of the University’s new student union.
“You can’t take your money with you when you die,” joked Berkowitz. “Everything we do, something really wonderful happens. The more you give, the more you get.”
In addition to being the founder, managing member, and chief investment officer of Fairholme Capital Management and president and a director of Fairholme Funds, Berkowitz is also a director and chairman of the board of The St. Joe Company. He has served as a director at AmeriCredit Corporation, White Mountains Insurance Group, Winthrop Realty Trust, and TAL International Group.