HOMB - Tracking Bruce Berkowitz's Fairholme Portfolio - Q3 2023 Update

2023-12-11 21:49:06 ET

Summary

• Fairholme's 13F stock portfolio value increased by 7% to $1.41 billion this quarter, with most assets invested in St. Joe Company.
• Fairholme Fund has generated significant alpha since its inception but has underperformed over the past 10 years.
• New stakes include Bank OZK and Home Bancshares, while stake disposals include Commercial Metals and Comerica.

This article is part of a series that provides an ongoing analysis of the changes made to Fairholme’s 13F stock portfolio on a quarterly basis. It is based on Fairholme’s regulatory 13F Form filed on 11/14/2023. Please visit our Tracking Bruce Berkowitz's Fairholme Fund Holdings article for an idea of how his holdings have progressed over the years and our previous update for the fund’s moves during Q2 2023.

Berkowitz’s 13F stock portfolio value increased ~7% from $1.32B to $1.41B this quarter. The 13F portfolio currently has most of the assets invested in St. Joe Companies.

Berkowitz’s flagship Fairholme Fund ( FAIRX ) has generated significant alpha since its December 1999 inception: the fund returned at an annualized rate of 9.58% compared to 6.85% for the S&P 500 index through June 30, 2023. FAIRX has, however, underperformed over the most recent 10-year period. The other funds under the Fairholme umbrella are the Fairholme Focused Income Fund ( FOCIX ) and Fairholme Allocation Fund (FAAFX). Equity holdings that are not in the 13F report include Fannie Mae ( FNMA ) pfds, Freddie Mac ( FMCC ) pfds, and Imperial Metals (IPMLF). The stake in Fannie/Freddie pfds was reduced by ~40% during H1 2023 following a court loss in January.

New Stakes:

Bank OZK (OZK), and Home Bancshares (HOMB): These are very small (less than ~0.50% of the portfolio each) new stakes established this quarter. The 0.39% OZK stake was purchased at prices between $35.94 and $44.23 and it is now just above that range at $45.17. HOMB is a 0.15% position established at prices between $20.44 and $24.57 and it now goes for $23.80.

Stake Disposals:

Commercial Metals (CMC): The 0.52% of the portfolio stake in CMC was built over the five quarters through Q2 2022 at prices between ~$29 and ~$44. There was a ~43% selling during Q1 2023 at prices between ~$43 and ~$57. That was followed by a ~90% reduction last quarter at prices between ~$43 and ~$54. The disposal this quarter was at prices between $49.07 and $57.63. The stock currently trades at $45.89.

Comerica (CMA), Energy Transfer LP (ET), U.S. Bancorp (USB), and KeyCorp (KEY): These very small (less than ~0.20% of the portfolio each) stakes were disposed during the quarter.

Stake Increases:

Enterprise Products Partners (EPD): EPD is a ~10% of the portfolio position primarily built over the four quarters through Q2 2022 at prices between ~$21 and ~$28. There were minor increases in the last four quarters. That was followed by a ~15% increase this quarter at prices between $25.38 and $26.91. The stock is now at $26.17.

Note: Bruce Berkowitz gave a bullish take on EPD in a WealthTrack interview on November 2 ^nd 2023.

Stake Decreases:

St. Joe Company (JOE): ~88% of Fairholme’s 13F assets are in St. Joe stock. The bulk of the position was purchased in the 2008-2009 timeframe and there have only been minor adjustments since. The last three quarters of 2017 had seen a combined ~14% increase at prices between $16.35 and $19.55. Since then, the activity has been minor. The stock is now at $56.33. There was minor trimming in the last seven quarters. They control ~35% of the business.

Berkshire Hathaway ( BRK.A ) (BRK.B): Q1 2019 saw a 5.6% of the portfolio stake purchased at prices between $188 and $209. The position was reduced by ~85% to a very small 0.84% portfolio stake next quarter at prices between $197 and $219. Q1 2020 saw a ~9% portfolio stake built at prices between ~$162 and ~$230. There was a one-third increase in the next quarter at prices between $170 and $202. Q4 2020 saw a ~80% selling at prices between ~$201 and ~$234. That was followed by a ~15% reduction in the next quarter at prices between ~$227 and ~$265. Q3 2022 saw the stake almost double at prices between ~$264 and ~$307. There was a roughly one-third reduction in the next quarter at prices between ~$264 and ~$319. That was followed by a ~22% selling this quarter at prices between ~$341 and ~$371. The stock currently trades at ~$357 and the stake is now at 1.32% of the portfolio.

W. R. Berkley (WRB), and Apple Inc. (AAPL): These two very small (less than ~0.60% of the portfolio each) stakes were reduced during the quarter.

The spreadsheet below highlights changes to Fairholme’s 13F stock holdings in Q3 2023:

Source: John Vincent. Data constructed from Fairholme's 13F filings for Q2 2023 and Q3 2023.

For further details see: