One of my favorite investors to follow is Bruce Berkowitz, founder and portfolio manager of Fairholme Capital Management. In this WealthTrack interview, I’ve pulled out some of his most valuable lessons for investors.
First, focus on facts, not fear. As Berkowitz puts it: “The negatives are all uncertainty about the future. What I try to do is focus on the facts of today.”
When everyone was running from financial stocks post-2008, he saw companies with “the strongest balance sheets they’ve probably had in their histories” trading at half their liquidation value. The lesson? Panic distorts prices. Cool-headed analysis finds opportunity.
Second, concentration beats diversification—if you know what you own. “Why would you possibly want to buy your tenth best idea if you can buy more of your best idea?”
Berkowitz’s fund held just a handful of stocks, like AIG and Bank of America, because he believed in them deeply. This isn’t about reckless bets; it’s about high-conviction investing. As he says, “You only need a few ideas in a lifetime to do unbelievably well.”
Third, volatility is the price of admission. Berkowitz admits his strategy isn’t for the faint-hearted: “If I see a dollar bill on the floor, and I can buy it for 20 cents… I’m going to buy as much as I possibly can.”
That mindset led to a brutal 2011, but also long-term outperformance. His takeaway? “Look at any five-year period—we’ve crushed the S&P.” Short-term pain is inevitable; patience pays.
Finally, bet on turnaround stories others can’t stomach. Whether it’s AIG (“Rumors of its death were greatly exaggerated”) or Sears (“trading for less than the cash they own in the bank”), Berkowitz looks for hated assets with hidden value.
His edge? Seeing reality while others react to trauma: “Eventually you have to get over [the past] and see what’s actually happening.”
Investing isn’t about following the herd—it’s about spotting dollar bills selling for pennies and having the guts to hold them. Or as Berkowitz would say: “Ignore the crowd. Count what matters.”
You can watch the entire interview here:
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