"Tracking Bruce Berkowitz’s Fairholme Portfolio – Q1 2017 Update"
"Bruce Berkowitz’s 13F stock portfolio value increased this quarter from $983M to $1.03B.Sears Holdings and Seritage Growth Properties saw minor increases during the quarter.The portfolio is very concentrated with St. Joe Companies, Sears Holdings & its spinoffs forming almost the entire portfolio.This article is part of a series that provides an ongoing analysis of the changes made to Fairholme’s US stock portfolio on a quarterly basis. It is based on Fairholme’s (FAIRX) (FOCIX) (FAAFX) regulatory  filed on 05/15/2017. Please visit our  article for an idea on how his holdings have progressed over the years and our  for the fund’s moves during Q4 2016.Berkowitz’s 13F stock portfolio value increased ~5% from $983M to $1.03B this quarter. The portfolio continues to be very concentrated with almost the entire portfolio invested in St. Joe Companies, Sears Holdings & its spinoffs.Berkowitz’s flagship Fairholme Fund (FAIRX) has generated significant alpha since its December 1999 inception: thru Q1 2017, the fund’s annual returns are at 10.47% compared to 4.82% for the S&P 500 index. FAIRX has however underperformed over the most recent 10-year period. Equity holdings that are not in the 13F report include Fannie Mae pfds (FNMAS), Freddie Mac pfds (FMCKJ), and Imperial Metals (IPMLF). Stocks and Preferreds together account for ~61% of the AUM. The rest are in cash (~16%) and bonds (~23%). Fannie/Freddie Pfds are at a whopping ~38% of AUM.New Stakes:Washington Prime Group (WPG): WPG is a minutely small ~0.3% portfolio position established this quarter at prices between $8 and $11 and the stock is now below that range at $7.56.Stake Increases:Sears Holdings Corp (SHLD): Sears is Berkowitz’s second-largest 13F position at ~32% of the portfolio. The original stake was established in 2007 although the position size has fluctuated over the years. The current stock price ($8.32) is far below Fairholme’s cost-basis. He controls ~25% of the business. There was a minor ~4% increase this quarter.Seritage Growth Properties (SRG): SRG is a top-three ~15% position. It was spun-off from Sears Holdings through a Rights Offering in July 2015 and Fairholme participated in the transaction. Trading started at $37 per share and it currently trades at $38.76. This quarter saw a ~7% increase.Sears Canada (SRSC): The ~2.7% SRSC position was established in Q4 2014 as a result of Fairholme participating in a rights offering from Sears Holdings. They distributed one subscription right for each share of Sears Holdings held and it allowed the purchase of 0.375643 shares of Sears Canada at $9.50 per share. The rights would have resulted in the purchase of around 10M shares but Berkowitz ended up with ~40% more (oversubscription privilege). The position was increased since. Last few quarters have also seen minor increases. The stock is now at $0.914.Note: Fairholme controls ~21% of Sears Canada.Stake Decreases:St Joe Companies (JOE): JOE is the largest stake at 40.26% of the 13F portfolio. The bulk of the position was purchased in the 2008-2009 timeframe and there have only been minor adjustments since. Currently, it trades at $17.85. Last three quarters have seen marginal trimming.Note: Fairholme controls just over one-third of St Joe Companies.Lands’ End (LE): The ~7% LE stake was purchased in Q3 2015 at prices between $21 and $29 and increased by 63% the following quarter at prices between $21 and $28. There was a ~12% increase in Q3 2016 at prices between $14.21 and $19.36. The stock is currently at $19.40. Last two quarters saw marginal trimming.Note: Lands’ End is an April 2014 spinoff from Sears Holding. Berkowitz received ~7.35M shares but that stake was sold out by the end of that year. The current position is ~10% of the business.Sears WTS 28.41 Strike: The very small ~2% position in Sears WTS saw marginal trimming this quarter.Kept Steady:Leucadia National (LUK): LUK is a very long-term holding that was built-up over several years. The position had seen large reductions since Q2 2013. Recent activity follow: Q4 2015 saw a ~55% reduction at prices between $16 and $21 and the remaining stake was almost eliminated the following quarter at prices between $14.50 and $17.50. It currently trades at $25.36.Sears Hometown & Outlet Stores (SHOS): SHOS is a minutely small 0.29% position. It saw a ~89% increase in Q4 2015 but the relative sizing is still very small.Note: Sears Hometown and Outlet Stores is a spinoff from Sears Holdings (mid-October 2012 rights offering).The spreadsheet below highlights changes to Fairholme’s US stock holdings in Q1 2017:Regulatory Filings thru 2/16/2017: 13G/As thru 2/14-15: LE - 3.34M shares - 10.4%, SRG - 3.43M shares - 12.3%, DNOW-0, 11/30/2017 13D - SRSC - 20M shares - 19.7%.10/1/2016:  summary: His pick was Chesapeake Bonds maturing 2017 to 2020 - he said they are “money good” and has a good yield. Also, bullish on JOE/SHLD/Fannie/Freddie - believes they are sitting on very valuable assets. Views increase in interest rate as a risk and so real-estate holdings can be very valuable as their values should increase in a rising rate environment."