Berkowitz Talks Financials, Europe, and His Mistakes

In a lengthy joint interview with Advisor Perspectives and GuruFocus.com, Morningstar Fund Manager of the Decade Bruce Berkowitz offers his take on the market and several of his main holdings.

Berkowitz, who went heavy into financial stocks after the financial crisis, says he remains confident in his financial holdings. “Loans created and underwritten since 2009, or even at the very tail end of 2008, are good loans, well documented, with better credit quality, better yields, and better fees,” he explains. “You have this digestive period of bad loans, and at the same time you have the ingestion of good loans. …What I’m getting at is enough time has gone by for seasoning. The banks have better balance sheets than I can remember.”

Berkowitz also talks about Europe and its debt problems. He says there isn’t a scenario for Europe that particularly scares him. “There isn’t, given the companies,” he says.

“The investment process is having an understanding of the securities you’ve purchased and the cash flows that security can generate from beginning to end, and then comparing that to other securities and comparing it to the price you have to pay for that security. The prices that we paid had a significant margin of safety, and they were priced to continue to fall, and they are not priced for any kind of normalcy. The risk is it takes longer than I thought for it to return to normalcy, but I can’t predict the future. Our purchases were priced to take into account that it could take longer.”

Other topics Berkowitz covers include his take on some of his biggest positions, including AIG, MBIA, and Sears; his thoughts on the big St. Joe battle; and his assessment of some of the mistakes he’s made throughout his career.

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