Fairholme Capital's Bruce Berkowitz recently sat down for a conversation with the "Executive in Residence" program at University of Miami's business school. Here are some key takeaways and select quotes from him:
On the macro: "At Fairholme, we tend not to think too much about the macro picture... but it's clear: a recovery."
On his approach: "We buy that which is hated. When it's hated, it's usually cheap. We usually are too early, we suffer from premature accumulation ... We want to make sure that when we invest in something, that there's a big margin of safety."
On why he focuses less on the income statement: "There are less ways to cheat on a balance sheet than on an income statement."
On a question he asks: "What's the worst thing that can happen, and can we still make money?" (assuming that bad thing happens)
On mistakes: "Why do so many people make the same mistake over and over again? One of the reasons has to do with biology ... with how your brain is wired. In the last couple of years, you've had to be more a psychologist than an accountant. That's where the behavioral finance issue comes in. You get into all the issues how people can be their own worst enemy."
His last point is one of the most important as so many great investors have talked about setting aside emotion when managing money. We've also highlighted Blue Ridge Capital's behavioral finance reading list which is recommended.
On permanent capital: "That is the secret sauce: permanent capital. That is essential. I think that's the reason Buffett gave up his partnership. You need it, because when push comes to shove, people run ... That's why we keep a lot of cash around."
Embedded below is the video of Berkowitz's full interview:
More resources on this investor: an additional interview with Berkowitz on portfolio concentration as well as Berkowitz's checklist for investing.
Friday, November 30, 2012
Bruce Berkowitz Interview at University of Miami
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