Feb Conference Call of Bruce Berkowitz FAIRHOLME CAPITAL

Bruce Berkowitz said: "As of the last report we have over 50 percent of the portfolio in pharmaceuticals, HMOs, aerospace and defense. These are profitable, growing companies, generating lots and lots of cash in relationship to the prices we pay and in relationship to their present market caps. And Uncle Sam is by far their biggest customer, a customer that pays. And after all, really, what is more important than the health and safety of our families. These companies provide essential services to our families. The fund also remains with a reasonable cash position at 8 percent and it’s amazing to me that many of our companies today appear to be worth more dead than alive when assessing their liquidating and run off value."

Bruce is getting hurt by the big drop in healthcare sector. But his insights are worth hearing:
http://www.fairholmefunds.com/player/index.htm

Question: How much longer can this decline continue and what are some of the key metrics that you watch?
Answer: Well I discussed one metric, which is quite interesting, looking at the gross domestic product versus the market capitalization. On more of a microcompany level, we still believe that it’s all about free cash flow. It’s all about the amount of cash a company generates that can be passed to its owners in relationship to the price that you have to pay for a share of their company. And it’s really what we – what we focused on and while those valuation levels can go lower, eventually the market will correctly value those cash flows. As Benjamin – as Benjamin Graham once said, in the short term the market’s a voting machine, but in the long term the market is a weighing machine. Eventually the market will get it right and I think the longer it takes, the more we can potentially prosper.