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Fairholme Quarterly Portfolio


txlaw
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http://www.sec.gov/Archives/edgar/data/1096344/000119312511285663/d245904dnq.htm

 

Some interesting developments from the allocation fund, as of Aug. 31, which I kind of view as the portfolio that hedge fund Berkowitz might run:

 

Appears to have swapped BAC common for BAC Series A warrants.

 

MBIA at 29% of the portfolio.

 

AIG at 25%.

 

BAC, WFC, and AIG warrants (majority of position is BAC Series A warrants) at 8.8%.

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I thought it was interesting that not only did he add to his LUK position but initiated a position in JEF - which is LUK's largest holding (by far).

 

Yeah, I have to believe he actually bought quite a bit more JEF since the as of date on the report.  It just got too cheap, as did most financials. 

 

I missed out on picking JEF up at the lows, although I initiated a LUK position, so I benefited from the run up.  But to see JEF up like 18% yesterday was painful :)

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  DIVERSIFIED BANKS — 7.0%  

3,010,900    

Bank of America Corp.,

    Vested, Strike Price $13.30,

        Expire 01/16/2019 (a)

 

Where do you see the B warrants?

 

My bad.  I meant Series A warrants.  I'll edit.

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Txlaw - I initiated a LUK position recently too so the recovery in JEF is nice to see even from a 2nd tier position (finally!).  I'm not exactly sure what they're seeing in JEF to give it that much of the portfolio - or what I'm missing - but now having Berkowitz on board helps reiterate it.  I wonder how much discussion goes on between Bruce and guys at LUK.

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Txlaw - I initiated a LUK position recently too so the recovery in JEF is nice to see even from a 2nd tier position (finally!).  I'm not exactly sure what they're seeing in JEF to give it that much of the portfolio - or what I'm missing - but now having Berkowitz on board helps reiterate it.  I wonder how much discussion goes on between Bruce and guys at LUK.

 

I think valuegeek basically spelled it out for everyone.

 

http://www.cornerofberkshireandfairfax.ca/forum/index.php?topic=5483" data-ipsquote-contentclass="forums_Topic" 59240#msg59240

 

The high level thesis is that JEF is an investment bank in the beginnings of a growth phase, where the comp ratio is much higher than it will be years out, particularly given C&S's involvement on the comp committee.  So if you believe JEF can take market share from the other guys and expand its portfolio, it was a steal at the bottom, and is still trading at an attractive level at this point.

 

C&S seem to always see the cyclical bottom in certain sectors of the market and make investments that effectively become platforms for future growth.  A while back it was basic commodities -- Fortescue and IMN.  Now it's Jefferies and Berkadia.  Throw in some MLI for good measure with respect to the housing industry.

 

I mean, these guys are unfreaking believable.  I'm glad that they are thinking about succession because it would be a shame if they just liquidated the company at the end.

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Another interesting tidbit with regards to MLI- I live in Columbus, Oh and every single metal cap on the water-main lines (located on all the streets, lawns, and sidewalks) is stamped "Mueller Industries." I noticed this the other day and thought that maybe part of Leucadia's thesis is a play on the aging water and sewer infrastructure in the United States.  Maybe I am giving them to much credit.

 

Thoughts? Comments?

 

 

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