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. 

Whew! That is a complex header. According to InvestmentNews   investors fled actively managed US equity funds at the same level as the March 2009 generational low. Naturally the market has doubled since then so the percentage of the total market isn't comparable, but it does highlight the fear factor in the market. In a way, this backs up the market selling cyclicals very hard and consumer staples rallying. What was really staggering is that Fairholme Fund (FAIRX) had outflows of $1B. After being the manager of the decade, investors were very quick to flee Bruce Berkowitz in June. What a tough industry! Maybe I should reconsider. Via InvestmentNews: U.S. investors pulled $19 billion more out of actively managed U.S. stock funds in June than they put in, while U.S. index stock funds saw $1.1 billion in net inflows.   March 2009 -  investors pulled $18.3 billion out of actively managed U.S. stock funds than they put in, and passively managed equity funds saw $2...

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...