market folly

Bruce Berkowitz's Fairholme Capital has quite the appetite for financial companies and this partially (mainly?) stems from his confidence in a United States recovery. While he acknowledges that a double-dip recession is possible, his bets say otherwise. His Fairholme Fund (FAIRX) recently revealed its latest portfolio and here is the portfolio breakdown as of May 31st, 2010:

1. Sears Holdings (SHLD): 7.7% of the portfolio
2. AIG (AIG): 6.8%
3. Citigroup (C): 5.4%
4. Goldman Sachs (GS): 5.4%
5. Berkshire Hathaway (BRK.A): 4.7%
6. Bank of America (BAC): 4.4%
7. St. Joe (JOE): 4.3%
8. Humana (HUM): 4.0%
9. AmeriCredit (ACF): 3.6%
10. Regions Financial (RF): 3.5%
11. Spirit AeroSystems (SPR): 2.7%
12. Hertz Global (HTZ): 2.6%
13. MBIA (MBIA): 1.0%
14. Morgan Stanley (MS): < 1.0%

Keep in mind that the latest portfolio update above only reflects equity positions. As we've highlighted before, he has a large debt position in General Growth Properties as well as other corporate and convertible bond stakes. And of recent news regarding the positions above, he surely has to be happy that AmeriCredit is set to be purchased by General Motors.

We've previously detailed Berkowitz's new MBIA stake as well as the fact that he has been adding to his AIG position. What's interesting here is that Berkowitz is now one of the largest shareholders in MBIA and yet it is only a 1% position for his mutual fund. Specifically regarding his MBIA stake, Berkowitz believes that the firm will survive as it honors its guarantees and has a confident CEO in the form of Joseph Brown. Berkowitz also is fond of the move that separated the municipal bond insurance arm into a new unit. Circling back to his economic recovery theme, he thinks that policies MBIA writes now and in the near future will be lucrative.

Regarding his position in AIG, Berkowitz feels that at the end of 2011 the company will be free and clear of the government's stake and you can read his full AIG thesis here. Also, we pointed out his new position in Goldman Sachs back when he revealed it at the Value Investing Congress. Back then, it was unclear as to how large of a stake he had purchased but now we can see it's quite a sizable one at 5.4% of his fund's capital. Lastly, it's worth noting that the Fairholme Fund still has just under a 15% cash position. If opportunities arise, we'll assume that Berkowitz won't be shy. As you can see, it's quite clear: Fairholme fancies financials.