Out Fox The $treet

Very interesting interview with Bruce Berkowitz on CNBC today. Bruce is the famous founder and manager of Fairholme Capital Management. The interview is mostly regarding the bets on Fannie Mae and Freddie Mac preferreds, but he does confirm that the Sears Holdings (SHLD) investment thesis remains intact. He still sees a 10x increase in the value of Sears to match the value of the real estate holdings. He makes some compelling statements regarding investing in Fannie and Freddie. Maybe we need to check those out considering some our investments match his. Instead of American Int'l Group (AIG) , we chose to invest in Hartford Financial (HIG) and Lincoln Financial (LNC) to obtain exposure to insurers trading under book value. After all, investing in stocks trading below the long-term value is a core position of Stone Fox Capital. Disclosure: Long HIG, LNC, and SHLD. Please review the disclaimer page for more details. 

Great interview with Bruce Berkowitz of Fairholme Capital Management. Berkowitz was named Mutual Fund Manager of the Decade and has some interesting long term views on the market. Interesting that he shares some of the same stock picks as our more aggressive Opportunistic models. Both Sears Holdings (SHLD) and Regions Financial (RF) appear in his top 10 holdings. His fund has suffered this year and with his voice suffering in the interview he made possibly the quote of the day "suffering from premature accumulation". Any portfolio manager knows that being early is the same as being wrong. Even if you eventually end up long term, being a year or two early can significantly hurt performance. Berkowitz does seem too bullish on financials for us. Typically a market leader over one decade becomes a laggard the next. Similar to how the tech sector soared in the 90s, then struggled after the internet bust. Stone Fox remains bullish on financials such as Hartford Financial (HIG) ...

Somebody keeps forgetting to tell investors/traders that earnings reports hardly matter at Sears Holdings (SHLD). At least the earnings per share or loss in this case. SHLD is all about cash flow, real estate, and share buybacks. Over time, Eddie Lampert will continue to shrink the shares outstanding to the point where he controls all of the company. Currently RBS Partners (Lampert) and Fairholme Capital Management (Berkowitz) control roughly 70% of the outstanding shares in SHLD. The lower the share price the easier it will be for him to buy shares and dramatically increase his ownership control. Highlights from Q2 report : Significantly improved profitability in the Kmart format as gross margin increased 230 basis points over the second quarter last year; Adjusted loss per diluted share for the second quarter of $0.19 in 2010 and $0.17 in 2009, and adjusted EBITDA for the quarter of $254 million in 2010 and $268 million in 2009. Share Repurchase During the 13- and 26- week...

Sears Holdings (SHLD) remains one of the most debated stocks in the universe of investing. Shorts claim that the PE is too high. Longs (like Stone Fox Capital) claim that the assets (those on and off the balance sheet) are so valuable that the stock is very cheap. Who is right? In situations like this its key to research the involvement of bigger investors. Would you short a stock that Buffet is buying or buy a stock that Buffett is selling? The main investors in SHLD are Eddie Lampert whose ESL hedge fund via RBS Partners owns a whopping 57% or 66M shares and Bruce Berkowitz's Fairholme Funds that owns 13% or 15M shares. It is the 2nd largest holding in his fund. The fund has done so well that Berkowitz was just named the Morningstar Domestic Fund Manager of the Year. Both are guys that investors should be happy to invest along side. Ironically though SHLD has a ton of shorts. In the below interview on CNBC today, Bruce was gleaming from ear to ear on his SHLD investment. Today th...