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Rating:A Mutual Fund Star Pumps Up AIG, MBIA
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Wednesday, July 14, 2010

A Mutual Fund Star Pumps Up AIG, MBIA

News summary by MFWire's editors

Fundsters and fans of Bruce Berkowitz may want to check out today's report by Shara Tibken of Dow Jones Newswires. That's because Berkowitz has disclosed an inreased stake in two hard-hit companies: American International Group Inc. and MBIA Inc., sending shares of both insurers sharply higher and instilling more confidence in the sector.

Berkowitz's Fairholme Capital Management disclosed in a regulatory filing that it increased its holding of AIG to 24 percent from 19 percent and bought 22.7 million shares of MBIA , making it the second-largest investor behind private equity firm Warburg Pincus. As a result, MBIA shares jumped 10 percent to $7.10, up 82 percent over the past 12 months and AIG grew 6.8 percent to $38, nearly tripling over the past 12 months, according to the report.

To be sure, Fairholme is AIG's largest private shareholder, holding 24 percent ofthe government-rescued insurer while its benefactor owns some 80 percent of the company, according to the report.

MBIA was one of the hardest-hit firms during the financial crisis because of to its role in selling derivative-based guarantees on mortgage-backed securities and collateralized debt obligations. As house prices fell, MBIA was forced to make good on those guarantees. 

Edited by: Hung Tran


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