Bruce Berkowitz Beating Wall Street & Taking Names (C, MBI, AIG, GGP)

Most mutual funds don't time the market. Then again, most mutual funds aren't Fairholme Fund, run by Bruce Berkowitz writes the Wall Street Journal.

A typical mutual fund has many holdings, not much of its assets in cash and doesn't time the market. Berkowitz listens to none of these rules and has outperformed the market consistently in the past decade. According to Morningstar, investors have added about $3 billion into the fund so far this year, raising its total assets to nearly $15 billion. This is in stark contrast with the rest of the mutual fund industry, which has seen outlays on a comprehensive basis.

Berkowitz typically takes big positions on a few companies that he feels extremely strong about. He puts them through a type of stress test. Unlike some other managers, Berkowitz moves his positions around a lot. He has changed the portfolio around three or four times, according to Morningstar analyst Mike Breen. Right now Fairholme Fund has about 67% of its assets in 10 stocks. Some of its top holdings are AIG (NYSE: AIG), Citigroup (NYSE: C), Bank of America (NYSE: BAC), MBIA (NYSE: MBI), General Growth Properties (NYSE: GGP), and The St. Joe Co. (NYSE: STJ). Approximately 15% of the fund is in cash.

The results don't lie, with Fairholme averaging an annual return of about 13%, says Lipper, Inc. Over the same period, the S&P 500 is negative. Fairholme is up another 10% or so this year, while the S&P 500 is up just 2%.