"Tracking Bruce Berkowitz’s Fairholme Portfolio – Q2 2017 Update"
"Bruce Berkowitz’s 13F stock portfolio value decreased this quarter from $1.03B to $982M.Washington Prime Group was increased significantly 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 08/14/2017. Please visit our  article for an idea on how his holdings have progressed over the years and our  for the fund’s moves during Q1 2017.Berkowitz’s 13F stock portfolio value decreased ~5% from $1.03B to $982M 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 Q2 2017, the fund’s annual returns are at 9.94% compared to 4.93% 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 ~63% of the AUM. The rest are in cash (~23%) and bonds (~14%). Fannie/Freddie Pfds are at a whopping ~33% of AUM.Stake Increases:St Joe Companies (JOE): JOE is the largest stake at 48.67% 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 $19.45. Last three quarters had seen marginal trimming while this quarter saw a ~4% increase.Note: Fairholme controls ~36% of St Joe Companies. Bruce Berkowitz recently stated that JOE would be his pick “to buy more of one stock right now”.Seritage Growth Properties (SRG): SRG is a top-three ~16% 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 $47.61. Last quarter saw a ~7% increase while this quarter saw another ~4% increase.Sears Canada (SRSCQ): The 1.76% 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 $0.23.Note: Regulatory filings from earlier this month show them owning 19M shares (18.7% of business). This is compared to 21.6M shares in the 13F.Washington Prime Group (WPG): WPG is a small ~1% portfolio position. It was established last quarter at prices between $8 and $11 and increased by ~300% this quarter at prices between $7.50 and $9.35. The stock is now at $8.90.Stake Decreases:Sears Holdings Corp (SHLD): Sears is Berkowitz’s second-largest 13F position at ~26% of the portfolio. The original stake was established in 2007 although the position size has fluctuated over the years. The current stock price ($8.61) is far below Fairholme’s cost-basis of ~$61. He controls ~25% of the business. There was marginal trimming this quarter.Note: In their Q2 report, Faiholme indicated that their NAV estimate on SHLD is now $90 per share.  They are aligned with equity & unsecured debt holders - owns 27% of common stock, 30% of warrants, and 58% of 8% unsecured 2019 bonds.Lands’ End (LE): The 4.33% 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 $13.10. This quarter saw a ~13% selling.Note 1: Regulatory filings from earlier this month show Fairholme owning ~850K shares (2.7% of business). This is compared to 2.9M shares in the 13F.Note 2: 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.Sears WTS 28.41 Strike: The very small 1.39% 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 $24.91.Sears Hometown & Outlet Stores (SHOS): SHOS is a minutely small 0.21% 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 Q2 2017:Regulatory Filings thru 5/17/2017: 13D/A - 5/2 - SRSC - 21.5M shares - 21.1%. 13D/A - 4/26 - JOE - 24.4M shares - 33.7%. Form 4s: SHLD - 3/27, 3/22, 3/17 - 28.8M shares - small purchases in the high-7s to the high-8s price range.Fairholme Fund’s  to investors has commentary on the holdings."