This morning Bruce Berkowitz made an admission to his investors: I was wrong about AIG.Berkowitz’s Fairholme Fund has a massive stake in the insurer and the share price has been tumbling.
As of 4Q2010, Fairholme’s second largest stake was over 37.5 million shares in the insurer, worth about $1.55 billion. The holding accounted for 9.6% of the portfolio.
If Berkowitz still owns the same amount of stock now, that he did in Q4 last, losses may amount to about $435 million.
“For a time, Mr. Berkowitz looked like a genius with his bet on AIG,” MarketBeat notes.
“He waded into the stock in the first quarter of 2010, when it was largely a plaything for day-traders, and amid huge purchases by his fund, rode it from the $22-$34 range up toward $60.”
That was then. At the close of trade today, AIG stock is worth $29.70.
According to the MarketBeat at the WSJ,
In a conference call with shareholders Monday morning, Mr. Berkowitz addressed his AIG stake:
Today AIG is about 2% of its market price 10 years ago. The government wants to sell 1.6 billion shares with their cost basis around $29 per share. Well, I ask you, guess where the public offering will come, given the government is not in the business of making profits. My guess is around $27 to $29.
You could ask, why do we hold? Well, I was wrong. I found it very hard to believe the government would sell its stake below book value and right now AIG is trading at two-thirds of book value.
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