Profiting from Hedge Funds: Winning Strategies for the Little Guy

Chapter 3

Bruce Berkowitz

Virtually no member of the Forbes 400 list of wealthiest Americans accumulated significant wealth by being widely diversified.

—Bruce Berkowitz

Bruce R. Berkowitz is founder and managing member of money management firm Fairholme Capital Management LLC, established in 1997. Its flagship product, the Fairholme Fund (FAIRX), was floated on December 29, 1999. More recently, two other smaller funds were launched: the Fairholme Focused Income Fund (FOCIX) on December 29, 2009 and the Fairholme Allocation Fund (FAAFX), which followed exactly one year later. FAIRX consistently outperformed the S&P 500 index by very wide margins from 2000 to 2009. This performance was brought into the limelight when Morningstar1 honored Berkowitz with the Domestic-Stock Fund Manager of the Decade and the Domestic-Stock Fund Manager of the Year awards in 2010.

Berkowitz, the first in his family to attend college, graduated with a bachelor’s degree in economics from University of Massachusetts, Amherst, in 1980. He started his career as a data analyst at Strategic Planning Institute in Cambridge, Massachusetts, and he was soon transferred to Manchester, England. In 1983, he joined Merrill Lynch, London, and, by 1989, was the financial consultant and portfolio manager for Shearson Lehman Brothers in the United States. Concentrated portfolios were his trademark, so much so that, in 1994, he held just two stocks: Berkshire Hathaway and Fireman’s Fund Insurance Company. Berkowitz went ...