The Obsessive Habits Of Bruce Berkowitz, Morningstar's Manager Of The Decade

Bruce Berkowitz

Photo: BloombergTV screenshot

Famed mutual fund manager Bruce Berkowitz, founder of the Fairholme Capital Management, has seen his share of success and failures.The mutual fund manager was named the U.S. stock manager of the decade by Morningstar in 2010, but saw huge losses in 2011 due to his big bet on financials.

However, there’s no denying that Berkowitz was once one of the most successful managers in his field. From 2000 to 2010, the fund had an annualized return of 11.6% compared to an average yearly return of 0.7% for the S&P. Known for his contrarian investment style. And seeing as he’s only about two years into his big bet on financials, there’s a chance that in the long run the investor may still see success.

We wanted to know why he’s done so well, so we collected some of the habits that made Berkowitz so successful.

Berkowitz works 7 days a week, and is often up by 4am sending out emails

It helped that his former right-hand man, Charles Fernandez, is his next-door neighbour and that he works from home.

He takes a small break after markets close and is usually in bed by 9pm. When his eyes get tired from reading filings, he uses his ears and listens to company conference calls.

Source: Fortune

He spent 2 years studying banks to ready for his next big bet.

In 2008 and 2009, Berkowitz prepared for his biggest bet yet on financials. To do so, he read through congressional testimony from Wall execs, tracked bank balance sheets and Fed loan data, and familiarized himself with TARP.

Source: Fortune

He's listened to some company conference calls up up to 10 times.

Berkowitz uses a Bowers & Wilkins headphone to listen to conference calls because it picks up the different intonations in voices very well. The one conference call he listened at least 9 times to was Bank of America's in 2010, and after he thought CEO Brian Moynihan's ideas for responding to financial reform were impressive.

Source: Fortune

Always start each day off with a pre-dawn walk.

Berkowitz always takes a brisk hour-long walk around his neighbourhood before the sun rises. He says it's the best time for him to think.

Source: Fortune

For its first 6 years, Fairholme was run out of a New Jersey office, but he moved his family and fund to Florida, where the sunny weather and lack of state income tax appealed to him.

Source: Fortune

He has hobbies (two guitars and over 2,000 vinyl records) but he totally forgets about them.

Berkowitz tried golf--a favourite of big financiers--at his wife's urging and hated it because he couldn't hit the ball straight. He has to often remind himself to take 15 to 20 minutes from work, and even then it seems forced. The man loves investing.

Source: Fortune

Simple as that.

Source: Fortune

Unlike other mutual fund managers, he has feuds — most famously, with David Einhorn.

Berkowitz had a very public disagreement with hedge fund manager David Einhorn over Florida real estate company St. Joe's in 2010. The two investors had opposing positions on the company--Einhorn was noted for his presentation on why he was shorting the company, was Berkowitz had a huge stake in St. Joe's and was trying to turn the company around.

The two feuded over the viability of St. Joe's, and Berkowitz even called Einhorn an idiot in an SEC filing. Oof.

Source: BI, BI2

He's not that keen on moving into the hedge fund industry.

With all of Berkowitz's success in mutual funds, many have approached him with the question of why not go into hedge funds and take the bigger payday--Berkowitz has said that he does not like the high maintenance hedge fund investors and is himself not a 'fast money type.'

Source: Fortune

Berkowitz usually keeps about 25% of Fairholme's assets under management in cash

He's doing this for two reasons--first, it shows that he's aware of the rocky road the US economy may face in the near future and second, he's interested in moving his firm to focus on more distressed investments, an arena few mutual funds have stepped foot in.

Source: Fortune

Which should be helpful because his bet on banks hasn't really paid off...

As has been evident in 2011, financials took a punch to the gut and Berkowitz, who had loaded up his fund with huge stakes in AIG, Bank of America, Citigroup and Goldman Sachs, didn't fare too well.

Berkowitz has already admitted that his bet on AIG was wrong--his fund suffered a $435 million hit

But he's still very bullish on Bank of America, saying he has confidence in CEO Brian Moynihan's leadership.

Source: BI, BI2

Berkowitz may not be into it but what about you... Are you ready for Wall Street?

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