Fairholme Capital Management founder and managing member Bruce Berkowitz recently joined us for another fund manager Q&A. Focusing on Fairholme (FAIRX), he commented on where he's finding opportunities in today's volatile market, including American International Group (AIG), Bank of America (BAC), and the financials sector as a whole. He also sees the European crisis positively affecting business for U.S. banks and is staying away from the health-care sector as he believes it does not hold the same potential for reward as other areas in which he has invested.

1. Despite market volatility and troubles in Europe, you remain optimistic that there are abundant opportunities in the marketplace. Where are you finding these opportunities? Can you give us some specific examples of companies that are trading below their fair values?

Our current portfolios reflect where we find the most value. Most of our portfolio is still trading below book value, and most of these stocks are those of financial companies. AIG and Bank of America are two stocks that we believe will trade much higher once investors realize that the firms are putting their past troubles behind them. AIG's core insurance businesses are among the world's strongest insurance franchises. Bank of America's core businesses improve every quarter and are generating substantial cash flow. Both companies will benefit from deferred tax assets that won't have them paying the government for several years.

