It’s refreshing to see Bruce Berkowitz fighting with David Einhorn over the St. Joe, not just because they have opposing positions on the stock, but because it’s refreshing for a mutual fund manager to be taking a stand on anything.
At a time when so many fund managers are just index huggers — with slight variations depending on how “overweight” or “underweight” they are various names — Berkowitz actually takes big decisive positions in only a handful of stocks and he even times the market.
And it’s paid off. In August, Brett Arends at the WSJ pointed out that he’s been the best fund manager for 10 years.
How has he done it? Morningstar analyst Mike Breen explains that Mr. Berkowitz–like another famous contrarian investor, Warren Buffett–likes to take big bets on a few names he feels strongly about. He puts those names through tough stress tests–”he tries to kill the company,” as Mr. Breen puts it–before buying. (Mr. Berkowitz could not be reached for comment.) Unlike Mr. Buffett, he’s willing to switch around a lot. With remarkable timing, he jumped out of energy stocks near the peak two years ago, hunkered down in defensives for much of the crash, and bought financials last year. “He’s reinvented the portfolio three or four times,” says Mr. Breen.
Mebane Faber — via whom we discovered the Arends article — created this chart to show just how well Berkowitz’s Fairholme Fund has performed.
Don’t miss: David Einhorn’s presentation on St. Joe >
Photo: Mebane Faber