Barron's Interviews Bruce Berkowitz

Bruce Berkowitz of Fairholme Capital Management is this week's Barron's interview. I don't own any of the companies he discusses. But you know about St. Joe if you read Clyde Milton's Cheap Stocks blog, and if you keep up with the Barron's Roundtables you'll recall Meryl Witmer recommending Mohawk Industries back in January.

Perhaps the most interesting part of the Q&A concerns something endlessly debated by many investors -- portfolio diversification and concentration. Lawrence Strauss of Barron's asks about this, noting that Berkowitz runs a "very concentrated" portfolio with his top 10 holdings consisting of roughly 70% of assets.

Berkowitz answers:

If you can buy more of your best idea, why put [the money] into your 10th-best idea or your 20th-best idea? If we're confident in what we do, then that's the way we should do it. The only reason not to is a fear of being wrong. The more positions you have, the more average you are.

I'm not in Berkowitz' league, obviously, but I have no idea which stock is my best idea until after the fact. I try to find stocks I believe are selling for less than they're worth, get a basket of such stocks and . . . wait. It's boring as all get out at times, but there you go.

My best "idea" since launching this blog in 2005 has been Deckers Outdoor -- see the "Closed Positions" menu on the right hand side of this site. I thought it was a good buy. But that's was it.