An investment in American International Group demonstrates Fairholme's commitment to identifying established public companies trading at prices well below our estimates of their intrinsic value. A leader in global property and casualty insurance, with over 70 million* customers and client relationships worldwide, AIG is an example of a recovering icon that fell out of favor with investors.
*AIG.com, "Our Businesses"
Fannie Mae and Freddie Mac. We believe that these two companies may be the most important financial institutions in the United States – perhaps the world – and directly support housing affordability and accessibility, including the uniquely American 30-year fixed-rate mortgage. They are a major reason why our country did not descend into a second Great Depression. Millions of American families depend on Fannie Mae and Freddie Mac to lower the costs and improve access to homeownership. In times of stress, these two have helped to ensure the continued functioning of the U.S. housing market. They have no substitutes. Fairholme’s investment in Fannie and Freddie demonstrates a commitment to ignore the crowd and invest in valuable, systemically important institutions – even those that are politically unpopular.
Bank of America spent tens of billions to clean up Countrywide Financial, which was no easy task. As the heavy lifting winds down, we believe the bank's profitability will shine through and the stock will begin to flex some muscle.
Sears, a real estate behemoth in retailer's clothing, remains our proverbial beach ball held under water. Based on our latest estimates of underlying asset values, our research suggests that this may be a good long-term holding.
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