Down nearly 20% on news that BAC offered to buy up MBIA bonds, providing speculation that holding much of MBIA's debt would mitigate the anticipated settlement to MBIA in the on-going lawsuit.
And with it FAAFX dropped 6%.
Ouch.
Life with our hero can mean steep rises and falls over short periods. Here are YTD charts of the fund's three top holdings (MBI, AIG, SHLD), which make up 60% of positions:
Each experienced roller-coaster runs this year. I'm sure the MBIA comeback strategy is in play. After all, its book value is $20/share, isn't it?
Actually, nearly my whole portfolio was down today: RNSIX, WBMIX, SFGIX, FAAFX, and DODBX. Only AQRIX did not sustain a daily loss.
Time for some Paso Robles' wine.
Comments
I suppose it's a matter not of whether I think Berkowitz is right or wrong with financials and SHLD as much as I find the idea of a fund with half of a fund in 3 names concerning (whether it be financials or whatever.) There's concentrated funds, then there's FAAFX.
I hope that the fund turns around, and sorry to hear about the 6%.
MBIA actually stemmed bleeding today. Speculation that others will come rescue and keep MBIA alive to fight the good fight with BAC.
Rest of market of course tanked today. Market certainly not responding well to election.
Hope, otherwise, all is well.
Although on paper it seemed like FAAFX should be superior to FAIRX (lower expenses, more flexibility, less assets, similar mandate), and indeed I believe FAAFX outperformed FAIRX last year, this year's divergence is a real concern. In particular, I don't know if Berkowitz is taking FAAFX seriously. Rather than using FAAFX as a super concentrated vehicle for his "best ideas," I feel like FAIRX is the one that gets the media attention and Berkowitz's diligence, whereas FAAFX is just a small pile of play money. As in, Berkowitz uses FAAFX to make some random bets, then he'll take credit for it if it does well, and pretend it doesn't exist if it doesn't.
I would be a bigger believer in FAAFX if it mirrored the top holdings of FAIRX. There is no reason why MBIA should be only 3% of one fund and almost 30% of the other. Apparently Berkowitz wanted to take credit if MBIA soared, but didn't want to risk his $7 billion fund on it.
Thanks again scott for the sympathy regarding 6% drop in FAAFX on the 14 Nov. MBIA has actually recovered strongly since, including a pop yesterday of 12%:
That said, SHLD just finished an awful week, down 18%:
Of course, this holding can swing more than a 100% annually. It's still up 66% YTD.
claimui, as for FAAFX's YTD performance, I think it's fair to say we are all still hoping for this young fund to break above 10.00 and stay there. Yes indeed it is concentrated. But I do not think for a minute Berkowitz is capricious with this fund. For one thing, he's seriously invested with 6,819,524 shares of FAAFX, or 22.44% of fund as of 2/29/12.
Basically, like David discussed when the fund opened last year in "Fairholme Asset Allocation (FAAFX)", it has to do with size. FAAFX can hold a higher percentage of MBIA, for example, than FAIRX, because of relative assets under managerment (AUM), only $250M versus $7B. Fact is, FAIRX actually owns many more shares of MBIA than FAAFX does. FAAFX allows concentration on smaller cap holdings, which would be impossible for FAIRX.
My take is that Mr. Berkowitz is a hard-core, deep value investor and extraordinary courage of conviction.