Positive Long-Term Growth for AIG: Bruce Berkowitz
AIG is a company with a positive long term outlook, Bruce Berkowitz, founder and portfolio manager of Fairholme Capital Management, and the largest private shareholder, 32.7 percent, of outstanding shares in AIG after the US government, told CNBC on Wednesday.
"At Fairhome we are up to about $22 billion assets and we have to be long term investors now ... we need to find companies that we can have a very long time span with and let time be our friend. I think AIG is gonna be one of those companies given what we've just been through," Berkowitz said.
"People are under the mistaken belief that AIG still owes the government a lot of money, $60 billion plus, but they don't," Berkowitz added.
The "re-IPO" of AIG may wind up being the year's biggest public stock offering, with estimates from $10- to- $30 billion, and may price as early as March.
The insurance giant collapsed in September 2008 under the weight of its gamble to insure mortgage-backed securities and drew nationwide outrage when it was learned AIG paid out hundreds of millions of dollars in executive bonuses.
Four banks—Bank of America, Deutsche Bank, Goldman Sachs , and JP Morgan Chase—have been named as lead underwritersfor the "re-IPO."
Another big holding for Berkowitz's Fairholme is St. Joe Company, a Florida real estate business along the Gulf Coast. Berkowitz responded to critics who don't understand why the company is still public based upon its price.
"For the company to go-private at this price would not be in the best interest of all shareholders. There's a lot that can be done there," Berkowitz said.
But David Einhorn, president of Greenlight Capital, argues that "St. Joe and its accountants might want to update their calculations ... They need to take a substantial impairment."
"I read David's report, it's very good, there's not a lot I disagree with ... my job is to make money for my shareholders," said Berkowitz. "It's not to debate someone on the merits of a position."
"Is it possible that some pieces of assets, reasonable people could argue, should be lower, yes, but it is reasonable that there's a lot of property at St. Joe that was bought in the 1930's that may be worth a little bit more than the property was worth in the 1930's, I think the answer is yes," he added.
"I'm seeing a huge chunk of Florida, on the Gulf, with a new international airport and a recovering economy, and population growth and a tax-free state, should do reasonably well over-time," Berkowitz said, adding, "you make your money during the most difficult times, you just don't know it at the time."
"We need to figure out the best highest inartistic value of the company for the owners of the company—if that means bringing in other developers, so be it."
Berkowitz also owns about 12 percent in Sears, a controversial holding to some.
"At one time people were very down on Apple—dead, finished, over—they came up with some creative ideas and took off. That's what Eddie Lambert is trying to do with Sears. He's thrown a lot of things at the wall and if one or two things stick [such as breaking up the store into smaller boutiques or building up the internet], it's going to be very interesting to see what happens...there's a lot to Sears," he added.
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