Fairholme’s Berkowitz Trims Holdings of Fannie, Freddie

May 15, 2014 6:24 pm ET

(Updates with preferred stock holdings in third paragraph.)

May 15 (Bloomberg) -- Bruce Berkowitz, the money manager battling the U.S. government over the future of Fannie Mae and Freddie Mac, cut his stakes in the common stock of both U.S.- owned mortgage finance companies in the first quarter.

Berkowitz’s Fairholme Capital Management LLC sold 6.8 million shares of Fannie Mae, bringing his holdings to 19.2 million shares with a market value of $74.7 million as of March 31, according to a regulatory filing today. He sold 2.2 million shares of Freddie Mac, cutting his stake to 17.2 million shares with a market value of $66.3 million.

Berkowitz’s main investment in the mortgage companies is through their preferred shares, which are more senior to common in the capital structure. Fairholme maintained its preferred shares in both firms, which rose in value during the first quarter to more than $1.4 billion.

The firm is pursuing a federal court challenge to the U.S. practice of sweeping up all of the companies’ profits each quarter. Fairholme, along with private shareholders including Perry Capital LLC, is pushing the U.S. to return the companies to private ownership, saying shareholders should benefit from their holdings.

Fannie Mae gained 42 percent this year and Freddie Mac climbed 46 percent.

--With assistance from Miles Weiss in Washington.