The mutual-fund manager's largest holding is insurer American International Group (AIG - Get Report), which announced today it is suing Bank of America (BAC - Get Report), which is in the No. 4 position. AIG represents 17% of the $16 billion fund, and Bank of America almost 6%.
Both stocks are taking a beating today, with Bank of America shares the most active, losing 17% of their value, while AIG's shares are down 10%.
|Bruce Berkowitz, manager of the Fairholme fund (FAIRX)|
Fairholme Funds' motto, "ignore the crowd," is being tested in the stock-market sell-off. The fund is down 21% this year versus the 3.6% decline of the S&P 500 Index.Berkowitz, 52, has been a golden boy among contrarian investors, as he's successfully made big bets on out-of-favor stocks. His fund has a 10-year average annual return of 8.6%, putting it in the top 1% of the large value fund category in terms of performance. The S&P 500 gained 1.8% in the same period AIG is suing Bank of America for $10 billion over alleged mortgage-securities fraud. AIG claims it lost $28 billion. The insurance conglomerate claims that Bank of America "caused billions of dollars in damage" to its business through alleged "fraudulent activity." The suit names the bank, its Countrywide Financial mortgage subsidiary and its brokerage arm, Merrill Lynch, for misrepresenting the quality of mortgages placed in securities and sold to investors. The bank acquired both firms in 2008 after the financial industry meltdown of 2008. Bank of America is the largest U.S.-based financial holding company, with assets of $2.3 trillion.