Why Bruce Berkowitz Still Likes Stocks Others Hate

Jun.19 -- Bruce Berkowitz, founder and chief investment officer of Fairholme Capital Management, explains his value-based, contrarian approach and the reasons he still owns shares of Sears, Fannie Mae, and Freddie Mac after several years of underperformance by his Fairholme Fund. He speaks with Erik Schatzker in New York.

[@peterquinn6097]

I'm a huge Bruce Berkowitz fan. His thesis on Wells Fargo in the early 1990's was an absolute masterclass on value investing. Sadly, I have to say his fastball has left him. Sears was not an investment in the enterprise but a bet based upon Eddie Lampert. He has the balls to justify his investment in Sears then says Seritage is great because its making money off all the Sears that are closing. WTF? FNMA was another crap shoot. Not based upon investment merits but his personal philosophy on the government paying it's debts. Even his bets on BAC and AIG that worked out were based upon his sentiment that "this has happened before". Glad it worked out but it was not of the same rigorous assessments that he used to make.on undervalued companies. I hope he turns it around. He is a legend.

[@lorenzmuller3542]

I hope so as well and am really looking forward to his new contrarian stock positions.

[@evancoles]

Check again, this guy is back to outperforming everyone.

[@BLUEGENE13]

10 years of buying sears? jesus... that's rough

[@mariuspm]

its just above 2 dollars today

[@georgesotiriou7051]

Brutal.

[@lorenzmuller3542]

Ouch! Is he still in?

[@philschwartz6874]

SHLD? Interesting that the value may be $90 to 100/share but at fire sale prices? Is your valuation based on fair market value of fire sale prices when the stock goes to $0?

[@wildreams]

If you buy based on asset value, you must be sure that there is a catalyst such that the stock price will change to reflect that; if not, the longer you hold, the worse your returns, assuming the underlying business itself is not growing or worse, declining. If you wish to buy and hold for the long term, you have to invest in secular growth stock, growing faster than the overall market, at a reasonable entry price.

[@HamedAdefuwa]

For Sears to go from 2.59 to 90 would be probably one of the greatest bounce backs ever lol

[@Voltaire805]

"I suffer from Pre-Mature Accumulation" @23:59 LMFAO!! No way I just heard that!

[@mikhaillindan9091]

Brilliant Man is Berkowitz- " I am in that which is hated, or deemed to fail, and that is where I like to be!!!"

[@olganatzowski]

It’s about time.. Sears & Seritage Growth Properties. Listen again to Bruce’s valuation…

[@lorenzmuller3542]

Seritage is in the process of liquidating...

[@m1k3wh1t3]

​@@lorenzmuller3542restructuring... transforming... and still innovating.

[@dubbled7286]

Fairholme Funds still in business? Looking at the portfolios, it looks like Berkowitz has lost interest (40% cash?).

[@mithra2396]

Love the confidence and the authority......

[@TWWIW]

Sears balance sheet is just not desirable, making it already not an attractive stock. I agree that the management is good....for stagnation... but see if it was as good as he says, they wouldn't be where they are today. The stock is a good candidate to be short against tremendously.

[@Juanro_7]

I’m from the future. “Let me tell you something”

[@lionels839]

On CNBC on 2016 BB gold if hé could buy more of one stock it would be Sears...Time has changed

[@ElGancho08]

Watching this now Sears at .17 cents

[@TwelveGaugePump]

I thought this whole investing thing was about making $$...This guy is too smart for his own good ...

[@javiertrevino5535]

he must be doing something right, he is worth 130 million dollars

[@petecheng1]

Boy, he lost his shirt on SEARS, this tells you, it's smart to diversify. He said he is a balance sheet buyer, the old buffett's cigar butt method, it doesn't work well in today's investing world i guess.

[@EvanBlekerThusSpokeZarathustra]

It actually works really well today but on a diversified basis when buying tiny companies below net net value, or well below NTA. It's enormously more difficult with larger companies.

[@lorenzmuller3542]

Did he ever recover those losses?

[@tradergyan24]

The stock is at $2.33 today as of feb 2018!! stock is down over 50% more from the time of this interview. Although there is def value in sears. its gonna be a tough call.

[@tygaclericuzio4130]

And now completely gone ...

[@asdfwer930]

@@tygaclericuzio4130 and now brought back from the dead sitting at over $10!!!!

[@tygaclericuzio4130]

asdfwer source ?

[@stevenupton7825]

maybe he s purely looking at land value

[@lorenzmuller3542]

Yes, that was his point on Sears. Should stick to Seritage, who still owns the Sears real estate.

[@brookswilliams2576]

Look at Sears' assets. Computers suck, K-mart computers are still from like 1990's.

[@seahagg69]

8:45 - "shows you what I know about the future. I'm strictly about the present and the past."' ... not a confidence-inspiring statement from a portfolio manager.

[@frankyfourfingers1382]

His statement is exactly what I want to hear from someone that manages money.

[@ksydyk]

At least he is honest

[@maurorotunno3763]

Great interview, great and tough questions to a controversial character of modern value investing. A great investor anyway.

[@lyndellmoore1696]

Bruce is right about the real estate value at Sears Holdings

[@Harihar_Patel]

Why the fuck would you want to own sears?

[@pmcMatilda]

Berkowittz is like a man trying to fix a Rolls Royce when the government is forcing the shutdown of the company. Possible but unlikely.

[@asmrcreep8697]

severe premature accumulation hehe very clever

[@jonnes__4657]

Sears... OMG Sorry, but thats for me never ever value! Thats a pure speculation... .

[@johnnydam8671]

Bruce "when I buy a company it's around when it's going to keep going down" LOL

[@ws2k1]

lol

[@sergemoshenkov8768]

Man this guy is depressed

[@zatarawood3588]

thats what most investors look like (in the long run) ... he's made his money but his ego which was built on being smart (post 2009 crisis) has deflated ... realisation has dawned he doesn't really understand the market despite thinking he was a genius years ago. he thinks valuation and price will converge like an old financial analysis textbook would suggest ... hmm nice theory ... over what time frame will that occur? also forgetting that value itself is driven by perceptions as Soros explains in AoF (in his trademark gobbledegook style). Physical stores are being crushed because they are uncompetitive in an age of online retail. Simple as that. Bruce thinks that Online (eg Amazon) will needs physical locations (like Sears stores). He's right online need physical presence BUT not in the same places as old retail store! In other words warehouse and distribution doesn't require prime retail locations. Why would they want to pay for this. Prediction: Sears will accrue more debt to keep this dying company alive year after year. Earnings will continue to decline until there is a breaking point and they can no longer service the debt. At this stage the company will be driven into bankruptcy. All the creditors will pick over the bones of the company, the debt holders will be first in line before Bruce. After that Bruce will collect whats left of the 'value' here. He probably realises this but he's so deep into this stock now he cant get out which explains the tone in his voice. Market is a fickle mistress. All young prospective finance wannabes should watch this video ... then chose to do something else!

[@memalos1]

All value investors are like that!

[@memalos1]

zatara wood Very well written

[@lorenzmuller3542]

Depressed? I think he has not changed.

[@BLUEGENE13]

his 2000-2023 track record has been terrible, i could done much better and a lot of teachers and other people wouldn't of had their retirement's cut in half (or more)

[@jholid6y]

$fnma all the way

[@lorenzmuller3542]

s

[@wildreams]

That tie and that socks is.. a bad look.

[@user-yq6cu2hu5z]

wildreams

[@christianhinnekeuser7606]

haha what a joke

[@javiertrevino5535]

he is worth 130 Million, it's not that bad of a joke

[@lorenzmuller3542]

@@javiertrevino5535 That's not much, at least in finance.

[@24theMoney]

"$90-$100/share" SHLDQ - "The most shorted stock in the Russel 3000"