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While You Were Sleeping - FAIRX is #1 again

edited April 2022 in Fund Discussions
FAIRX ranks in the top 1 % percentile for Large Value funds (YTD)...rising from last in class...the fund's bifurcated performance over the last decade has been a very bumpy ride for shareholders. I exited the fund years ago. M* places FAIRX in the LV category yet describes it's investment style as Small Growth.

77% of the fund is one company (St Joe = JOE) which probably was bought at a low in 2008. JOE's weight seems to skew it into the SG investment style while the other holdings (24% of portfolio) appears more LV. 42% of JOE is owned by Fairholme. For that privileged Fairholme shareholders pay a 1% ER. Ouch!

Anyone use this fund in small amounts? Attempt to buy the lows, not the highs when it comes to the fund.



  • edited April 2022
    Seems more sensible to just buy St. Joe directly and avoid the potential tax hit of FAIRX selling some of its appreciated shares as well as FAIRX’s management fees. I sometimes wonder what it would feel like to be a manager getting paid millions of dollars for essentially a 1-stock portfolio. I think I would check my stock in the morning before the market opens, “oh nothing is happening to Florida coastal real estate, oh it continues to sit there.” Then I’d go fishing on my yacht shareholders paid for, bringing my phone of course. At noon I’d glance at the stock again—oh nothing is happening to Florida coastal real estate today, oh it continues to sit there.” Then I’d go back to fishing. To be more efficient, sometimes I wouldn’t even check my phone. I’d just look at the coast I’m fishing on and watch it continue to sit there. Occasionally, if I have the energy and am feeling generous, I might wave to the shareholders without yachts on the shore.
  • Fido shows FAIRX AUMs since 2013. It seems that anyone who wanted to sell did that by 2018.
  • $1.5 billion in assets X 1% expense ratio = $15 million annually.
  • beebee
    edited April 2022

    $1.5 billion in assets X 1% expense ratio = $15 million annually.

    And in bad years, like 2020, when his fund dropped (47%)...Bruce still collected 1% in fees...$7.5 million-ish. But that's true with every fund manager. They get paid in both up and down markets.

  • edited April 2022
    Agreed, but it is the one stock issue I'm referring to here when there are literally thousands of potential stocks to research and invest in worldwide, not to mention many more bonds, preferred stock and other securities to consider. The notion that only one of those should make up more than three-quarters of a fund's portfolio is bizarre. And then to pay several million dollars in fees each year for that one stock even stranger. For 1% in fees, I expect a manager to if not turn over every single rock, to turn over at least more than one. I have a hard time believing there aren't other attractive, perhaps much more attractive, companies to invest in.
  • edited April 2022
    Hi all, so I have owned FAIRX for a long time. I briefly bailed when Morningstar gave it a negative rating back in 2013 (I think) but came back. It has been rated negative by Morningstar for a long time now. I am holding on in the hopes that Fannie Mae preferred will eventually be good $. So far the court system (including supreme court) has been in favor of the gov and against hedge funds. More lawsuits are coming. TAREX owns preferred as well. Ackman owns Fannie Mae stock. Bill thinks that gov will eventually release them. However, since Dem and Rep can't agree on anything, not sure about Bill's thinking. Bruce lowered fees to 0.8 or 0.85 a little while ago and I am assuming that is still the case. Morningstar shows fee to be 1%. Bruce has been buying pipelines recently but FAIRX mostly in JOE. Bruce now publishes 3 paragraphs every 6 months (annual and semi annual reports). He went from talking a lot (TV, wealthtrack,..) to now just giving a 3 paragraph summary of the fund. Assets have held up at ~ $1 billion for a bit (more recently) since performance of JOE has been good. Not sure who owns the fund beside me (I am a very small time individual investor). Him and directors own ~ 20% I think. One FAIRX director retired or left recently. I also used to own TAVFX but bailed on that fund a while ago.
  • Thank you LewisBraham. In his latest report it mentions fee waiver. What to believe?
  • edited April 2022
    Well, there is a difference between a management fee and a final expense ratio, so it is actually possible both statements are true. The manager can waive a portion of their management fee, but the total expense ratio generally incorporates more than just that fee, including other things like administrative costs.
  • LewisBraham, Thank you for your reply. I didn't catch the distinction between management fee and er.
  • I used to own FAIRX and TAVFX too but bailed out many moons back. Bruce made some great calls post 2008 crisis (especially on Bank Of America when it was below $10) but his overall performance over the decade of 2010 was meh.
  • I used to be a proud owner of FAIRX for about 7-8 years during 2001-2008. It's part of my system(link).
  • It doesn't make sense to me for a mutual fund to have 77% AUM in a single company.
    This just seems plain crazy!
  • edited April 2022
    Years ago, I almost bought FAIRX but its $10K min put me off. I thought the guy had some nerve to set the min at $10 K when prevailing min were $1K-3K. Well, the guy did have steel nerves, but to me, he could do whatever without me.
  • Oh, great -- Bruce is back on top. That means we can expect to see the following:
    1. Bruce showing up tirelessly on literally every money show to pimp the fund, I mean, "communicate effectively with shareholders"
    2. Bruce making strange additions to his research team (hiring a head of research team, for example, with no experience in investing, working on, or managing such a team).
    3. Research team turnover.
    4. Fund proliferation.

    >75% invested in one company -- what could possibly go wrong (SEQUX-ish) ?
  • Not my kind of money manager. Make no sense to concentrate the risk to a single stock? Being #1 this year means little for my $.
  • Sven said:

    Not my kind of money manager. Make no sense to concentrate the risk to a single stock? Being #1 this year means little for my $.

    I totally agree.

  • edited April 2022
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