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Fund Times

Fairholme's Berkowitz Buys American International Group

Domestic Stock Fund Manager of the Decade continues his return to financials.

Bruce Berkowitz on Monday morning informed Morningstar that  Fairholme (FAIRX) and Fairholme Capital, advisor to the Fairholme fund, have initiated a sizable position in insurer  American International Group (AIG).

Berkowitz says Fairholme Capital owns more than 13 million of AIG's common shares, more than 20% of some tranches of the firm's convertible debt, as well as other AIG bonds.

Berkowitz says AIG is ready to move on. He says the firm retains a valuable franchise, is resuscitating its cash flows, and has done a good job walling off its risks. Berkowitz says more than two years under government scrutiny have cleansed the company, leaving it solidly positioned. The situation is now clear enough to see how taxpayers get paid back by AIG, according to Berkowitz. He also sees the potential for a rights offering to help the firm move forward.

The AIG purchases come hard on the heels of Fairholme's recent move into banker  Citigroup (C) and debt from small-business lender CIT Group .

Michael Breen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.