Fairholme Fund (NASDAQ: FAIRX - News) manager Bruce Berkowitz recently shared news of what he described as a "giant stake" in scrutinized investment bank Goldman Sachs (NYSE: GS - News). "It's the first time I've told anyone," Berkowitz explained at the Value Investing Congress in Pasadena, California, according to coverage by Bloomberg. Berkowitz, who arrived late to the financial party in 2009 has been vocally supportive of his stakes in Citigroup (NSYE: C) and AIG (NYSE: AIG - News) so far this year, and he is one of a growing number of market experts jumping on the Goldman bandwagon as fraud allegations put shares on the sale rack.
A look at Fairholme Capital Management's top U.S.-listed equity holdings from the end of 2009 shows that the firm's AIG stake wasn't large enough to break into its largest 15 holdings, however the Citi position broke the $1 billion mark when the stock made a brief venture above the $5 mark last month.
Bloomberg notes that Fairholme bought financial stocks after they had already more than doubled from their lows in March of 2009. However Berkowitz likened current circumstances to those of the 1990's, when financials rose sevenfold -- this pending continued economic recovery. On Goldman's investigation by the SEC, Berkowitz said, "I just don't get the case," echoing sentiment from Berkshire Hathaway (NYSE: BRK-A - News, BRK-B - News) CEO Warren Buffett, who dumped billions into the firm back in 2008.
On the afternoon of the SEC's initial allegation, Rochdale analyst Richard Bove told Fox Business he didn't see the case costing Goldman business. Blackstone Group CEO Stephen Schwartzman later noted that his firm would remain a "major client" of the Goldman's, adding that he's never doubted the company's ethics, according to Bloomberg.
Morningstar speculates that the context of Berkowitz's Goldman stake suggests he bought in following the SEC's accusation. If this is the case, the position won't appear among Fairholme's end-of-Q1 holdings, which are due to the SEC later this month. It will be interesting to see whether any more financial names break into Berkowitz's biggest bets as disclosed in the regulatory filings. At the end of 2009 the fund was also adjusting its stakes in healthcare plays Humana (NYSE: HUM - News), WellCare Health Plans (NYSE: WCG - News), and WellPoint (NYSE: WLP - News), another sector in focus during 2010.
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