Bruce Berkowitzs Fairholme Fund is poised to post its best year in a decade, led by the rebound of financial firms that fueled what he called a horrible 2011.
The fund had advanced 30 percent this year through last week. Holdings in American International Group Inc. contributed about half of that gain, while Charlotte, North Carolina-based Bank of America Corp. accounted for approximately 20 percent of the climb, according to data compiled by Bloomberg.
Berkowitz, 54, has cited the companies as examples of a strategy to embrace the hated and bet on the recovery of stocks that fell out of favor. The approach spooked some investors who withdrew funds as the lender and AIG plunged more than 50 percent in 2011. Bank of America had surged 78 percent this year through last week as capital levels rose, while AIG gained 42 percent as it bought back shares acquired by the
U.S. in a 2008 bailout.
In the long run, and Berkowitz is a long-run kind of guy, hell be thrilled to own what will be the dominant property- casualty insurer, said Josh Stirling, an analyst at Sanford C. Bernstein & Co. who predicts AIG will beat the Standard & Poors 500 Index by more than 15 percentage points in the next year.
Berkowitz avoided the industry groups that underperformed this year through Nov. 23, like energy, which advanced 2.5 percent, or utilities, which slumped 5.9 percent. His greatest concentration is in financials, the leading performer in the Standard & Poors 500 Index with a 22 percent gain.
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