Another black eye for Bruce Berkowitz

December 27, 2011

By Katya Wachtel

This year has been cruel to many money managers, and one stock-picker giving John Paulson a run for his money as the worst performing manager of 2011, is Fairholme Capital Management’s Bruce Berkowitz.

Berkowitz’s flagship Fairholme Fund has suffered huge losses on AIG, The St. Joe Company, Bank of America and Regions Financial. His bet on Sears can now be added to that laundry list of losers.

Today the struggling retailer announced plans to close up to 120 stores, the share-price tanked, and as one of Sears’ largest shareholders, Berkowitz is likely nursing some ugly wounds.

At September 30, Fairholme owned about 16.3 million shares of Sears common stock. That stake is worth about $570 million today, which amounts to potential losses of almost $180 million since the end of the third quarter, when the holding was worth about $746 million.

The retailer was Berkowitz’s third largest holding at the end of Q3.

Fairholme Capital Management’s $8 billion flagship portfolio has been one of the top performing U.S. mutual funds over the past decade, but unfortunately for Berkowitz, the Sears story does not represent an anomaly this year. The Fairholme fund has shed about 30 percent this year.

His bet on AIG, the bailed-out insurer  in which he remains the largest private share holder, has faltered as the share-price tumbled throughout 2011. He also lost millions on real estate company St. Joe in the wake of hedge fund manager David Einhorn’s announcement that his firm, Greenlight Capital, was shorting the stock.

And Bank of America has done Berkowitz no favors, either.  The stock – which for the moment is hovering above $5 – has tumbled about 60 percent this year. Fairholme held about 105 million shares in the company as of September 30.

For Berkowitz, 2012 can’t come soon enough.

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