Value Investing

Interview with Bruce Berkowitz on Wealthtrack

Consuelo Mack from Wealthtrack had a show where they invited value manager Bruce Berkowitz, founder and co-manager of FairholmeFund. You can find the video here. Here’s a summary of what Berkowitz said, and what he looks out for:

  • Love serial winners -good management teams. People with
    • Great paper trials
    • Family networth on the line
    • Give shareholders a level playing field
    • Done well in all price environments including difficult environments before
  • At least 10% FCF yield (he defines FCF as what is left in the cash register after the company spends what it needs to maintain its franchise without growing)
  • FCF growing at twice the risk-free rate of U.S. Treasuries
  • He typically averages around 20% of his portfolio in cash (was at 0% only in 2002 at the bottom of the dot-com cash)
  • Cash is a strategic asset. Black swans (stressful points) do occur, they are unknowable when they occur, that is the time to buy very good companies at reasonable prices. When the fear is big, that is the time to get greedy.
  • Thinks that the market has not yet bottomed (as of 3 Aug 2007)


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