Bruce Berkowitz’s Big AIG Bet

By on August 3, 2011

Gurufocus reports that American International Group (AIG) is a whopping 18% of Bruce Berkowitz’s Fairholme Fund.

The fund had a spectacular period of outperformance gaining over 300% from 12/29/99 through 6/30/11, however, the first six months of this year have been sub-par with a 9.4% loss. Much of the underperformance can be attributed to Berkowitz’s big bet on financials, the worst performing sector year to date.

Berkowitz explains the big AIG bet:

AIG common stock is similarly cheap, due mostly to market pressures caused by the U.S. Treasury’s desire to sell its 77% ownership. When a recovering icon trades at half of our understanding of intrinsic value for a reason that has nothing to do with its prospects, we swing big.

Berkowitz has also been in the news for his interest in the real estate company St. Joe (JOE), although it is not listed as a top ten holding. His fund is very concentrated as the top ten holdings compose 71.2% of assets.

Fairholme’s Top Ten Holdings:

American International (AIG) 18.2%
Berkshire Hathaway (BRK.A) 7.2%
AIA Group 6.7%
Sears Holding Corp (SHLD) 6.4%
Bank of America Corp (BAC) 5.7%
Brookfield Asset Management (BAM) 5.6%
Goldman Sachs (GS) 5.5%
Citigroup (C) 5.5%
Morgan Stanley (MS) 5.3%
Regions Financial (RF) 5.3%

Here is a chart of AIG compared to the S&P 500 over the past year.

Source: Gurufocus

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