Bruce Berkowitz’s Fairholme Portfolio – Q1 2022 Update (MUTF:FAAFX)

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 5/16/2022. Please visit our Tracking Bruce Berkowitz’s Fairholme Fund Holdings article for an idea on how his holdings have progressed over the years and our previous update for the fund’s moves during Q4 2021.

Berkowitz’s 13F stock portfolio value increased ~13% from $1.53B to $1.72B this quarter. The 13F portfolio currently has most of the assets invested in St. Joe Company.

Berkowitz’s flagship Fairholme Fund (MUTF:FAIRX) has generated significant alpha since its December 1999 inception: the fund returned at an annualized rate of 10.20% compared to 7.36% for S&P 500 index through 2021. FAIRX has however underperformed over the most recent 10-year period. The other funds under Fairholme umbrella are Fairholme Focused Income Fund (MUTF:FOCIX) and Fairholme Allocation Fund (MUTF:FAAFX). Equity holdings that are not in the 13F report include Fannie Mae (OTCQB:FNMA) pfds, Freddie Mac (OTCQB:FMCC) pfds, and Imperial Metals (OTCPK:IPMLF).

New Stakes:

Sanderson Farms (SAFM): SAFM is a minutely small 0.08% of the portfolio position established this quarter.

Stake Disposals:

Dow Inc. (DOW), Enbridge Inc. (ENB), Lyondellbasell Industries (LYB), Williams Companies (WMB), and Western Midstream Partners (WES): These very small (less than 0.75% of the portfolio each) positions were dropped this quarter.

Stake Increases:

Commercial Metals (CMC), Enterprise Products Partners (EPD), and Intel Corp. (INTC): These three positions were increased substantially over the last three quarters. The ~5% of the portfolio stake in CMC was built over the last four quarters at prices between ~$29 and ~$44 and the stock currently trades at $37.27. EPD is a 4.82% of the portfolio position primarily built over the last three quarters at prices between ~$21 and ~$26. The stock is now at $25.46. The 1.69% INTC stake was purchased over the last four quarters at prices between ~$45 and ~$68. The stock currently trades below that range at $38.65.

Walgreens Boots Alliance (WBA) and Citigroup (C): These two very small (less than ~0.50% of the portfolio each) positions were increased this quarter.

Stake Decreases:

St. Joe Company (JOE): ~85% 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. 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 $41.55. There was marginal trimming in the last two quarters. They control ~42% of the business.

Note: Fairholme’s 2021 annual report had the following on St. Joe: Although profits have grown, the share price is still not reflecting long-run growth potential.

Kinder Morgan (KMI) and Energy Transfer LP (ET): The 0.88% KMI position saw a ~220% stake increase in Q4 2020 at prices between ~$11.50 and ~$15 and it currently trades above that range at $17.60. Last two quarters also saw a ~57% stake increase at prices between ~$15.25 and ~$18.70. There was a ~25% selling this quarter at prices between $16.35 and $19.25. ET is a 0.55% of the portfolio position purchased at prices between ~$5 and ~$8.60 and it is now at $10.72. There was a ~45% stake increase in Q3 2021 at prices between ~$8.75 and ~$10.70 while this quarter there was a similar reduction at prices between ~$8.70 and ~$11.50.

Old Republic International (ORI): The very small 0.56% stake in ORI was increased by ~60% last quarter at prices between ~$23 and ~$26. The stock currently trades at $21.90. There was marginal trimming this quarter.

Apple Inc. (AAPL): The minutely small 0.04% of the portfolio stake in AAPL saw a ~70% selling this quarter.

Kept Steady:

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 next quarter at prices between $170 and $202. Q4 2020 saw a ~80% selling at prices between ~$201 and ~$234. That was followed with a ~15% reduction next quarter at prices between ~$227 and ~$265. The stock currently trades at ~$279 and the stake is now very small at ~1% of the portfolio.

Alibaba Group Holding (BABA): The minutely small 0.05% of the portfolio stake in BABA was kept steady this quarter.

The spreadsheet below highlights changes to Fairholme’s 13F stock holdings in Q1 2022: