Why you need to know Bruce Berkowitz
The Fairholme Fund headed up by Bruce Berkowitz has made its own bit of history with recent moves in purchasing Citigroup and selling other holdings like Pfizer and UnitedHealth Group. As much like Warren Buffett in their strategy of acquiring companies with strong cash securities outlooks, the Fairholme Fund prefers to focus on a core group of companies and a bare minimum of bonds.
In recent news, the fund had bought up not just Citigroup, but Burlington Northern Santa Fe and others, leaving followers of the Berkowitz led fund to wonder what the logic behind the moves was. The acquisitions seem to fly in the face of the long term strategies of the company, especially after having had so much hope for companies like Pfizer, which by all accounts would seem to be a cash-generating cow.
The justification for thinning out their positions with Pfizer have to with the low tax rates for the pharmaceutical companies, which will be heavily taxed on return to the U.S. these actions, according to Bruce Berkowitz are also based on the existence of recurring/non-recurring expenses.
More importantly, Bruce Berkowitz sited the degeneration of the potential future cash generation versus the prices they were buying the companies at. Because the fund is always on the look out for golden opportunities, a better proposition will trump a degrading profit.
The bottom line according to Bruce, is that business and investing decisions should be made with an emphasis on value for your money; what you get for what you are paying. The Fairholme Fund and Bruce Berkowitz are applying solid analytics and experience, with a common sense approach to creating profits and finding hidden opportunities.
To stay on top of the game, he is constantly studying the companies he invests in, or may in the future, identifying and understanding the underlying capital structure at each one.
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