(Story updated to add that Mohawk Industries has invested in a China tile maker.)
BOSTON ( TheStreet) -- What would a pair of veteran mutual fund managers buy if given a clean slate?
These former Berkowitz acolytes' fund holds six of their favorites from when they were at Fairholme, where they were at various times analysts, fund managers and outside advisers from roughly 1999 to 2010. During that time, the fund had the large-value category's best return -- 13.6% versus 3.6% for its rivals, according to Morningstar. Those six stocks are: Warren Buffett's Berkshire Hathaway (BRK.B), retailing giant Sears Holdings (SHLD), the Bermuda-based insurance holding firm White Mountains Insurance (WTM), investment banker Jefferies Group (JEF), gold miner Barrick Gold (ABX) and flooring manufacturer Mohawk Industries (MHK). Other than that, the two are intent on going their own way. The new stocks in the 18-position GoodHaven portfolio range from mega-cap industry leaders such as Microsoft (MSFT - Get Report), to small-cap relative unknowns such as Quanex (NX), a maker of aluminum products used in doors and windows. Morningstar analyst Kevin McDevitt says Pitkowsky and Trauner "follow a similar go-anywhere value approach" to that of Fairholme, which entails "buying securities across the capital structure and of any market cap." An example of that is the fund's biggest bet, Spectrum Brands Holdings (SPB - Get Report), at 11% of the fund. It is a diversified consumer products company that emerged from bankruptcy in 2009. "Trauner and Pitkowsky believe that it will pay off a large chunk of its high-cost debt over the next year, creating substantial free cash flow," McDevitt said in his review of the fund. The fund's second-largest holding, at 8%, is another out-of-favor stock, computer conglomerate Hewlett-Packard (HPQ - Get Report), which is in the midst of trying to reinvent itself in a rapidly changing marketplace. The GoodHaven fund is up 14% this year, putting it in the top 20% of funds in the large value category, as tracked by Morningstar. The S&P 500 is up 13%. In contrast, the Fairholme Fund, with $8.2 billion in assets, has risen 30% this year versus the 13% for its fund category, putting it in the top 1% of those funds. It's also been the top-performing actively managed domestic stock fund of all categories this year. But if you look one year out, the results show a 10% decline, due to Fairholme's horrendous 2011, when the fund lost 32%, primarily due to too-early bets on the recovery of financials, a wager that is paying off now. Here are 10 of the 18 stocks in the GoodHaven fund portfolio in inverse order of their return this year:
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