I'm brand new to investing (had 401K for 13 years, but never really researched or knew what I was doing before. My returns are the proof
). I've been spending a lot of time researching the past few months however and spending a lot of time on this site. It's been great reading. Today I was strongly considering opening a position on FAIRX. I've seen many discussions on this site about it and I see a lot of positives in the financial sector today, assuming based on recent financial earnings and with the whole US debt thing looking much more optimistic.
As far as future negatives, are there things I should consider that would hold me off from buying FAIRX right now? And I mean, I'm not concerned about our current environment. I see the US growing and specifically housing and financials for the long-term. But the things I don't understand are for instance the Europe debt issues, and is that or anything else, things that could overweigh the positive upside of financials and FAIRX?
If I do jump in, this is a position I expect to stay long on. I'm trying to build a strong core set of funds. At this point I'd be taking money from LEXCX and moving directly to opening the min. of $10K in FAIRX. If I continue to feel better about FAIRX, I can see myself adding more down the road. I also am thinking of increasing YACKX at some point and can see myslef building FAIRX & YACKX as the strongest weighted funds in my portfolio.
Again, I'm new to investing, and I feel like this would be a pretty big decision for me. I'm certainly willing to take on risk, as I'm fairly young at age 34, but just want to be smart about it.
Thanks in advance for any feedback.
Comments
That said, I don't think after a decade of great investing results, Berkowitz woke up stupid one day. I think he just made an ill-timed bet on financials, and with his focused investment style it cost him big time. He may have been way to early, but on the other hand, these stocks are looking pretty low right now. They could go lower, but at some point the financial sector will come back. This year, next year, who knows.
Anyway, if you are willing to take the risk as you said, this might be a good entry point, but you will be a contrarian to the heard jumping ship right now. I actually bought into his newer fund, FAAFX. I bought the manager, understanding every great manager has cold spells. I'm guessing he's early - not stupid - i hope
Good luck in your decision.
I'm not necessarily trying to time this perfectly, but I guess maybe the biggest question marks I have are what are the future negatives with financials specifically? The debt crisis have more effect on financials than other sectors, or are they mostly y all affected, regulation, any other things that I really don't understand well enough could end up keeping financials under-performing for much longer period.
I'm out on FAAFX, simply because of the $25K minimum. It's too much weight for my portfolio right now.
Fairholme will not always look this way, but I think it depends how long one might think it does - I don't believe Berkowitz is changing anytime soon. St Joe is an intriguing concept in what Berkowitz has "planned" for it, but the SEC investigation and fight with Einhorn turned into a debacle. Einhorn has not had a particularly good year, either, although personally, I'd rather invest with him in the roundabout fashion of Greenlight RE (GLRE, stock not fund). In terms of putting money with good managers sunk by bad financials, I went with Janus Overseas (JAOSX).
I'd also rather go with Berkshire Hathaway (BRK-B) than Fairholme. BRK-B is trading near 52 wk lows. Yes, BRK-B is not a fund.
I do, however, like Yacktman quite a bit for a long-term holding. I'd also find LEXCX preferable as a long-term holding.
Additionally, FAIRX is also $25K minimum, unless some service has it for less.
Personally, I continue to go with investments in real assets (agriculture, basic materials) and some technology as a focus. What do people really need at the end of the day continues to be really a focus.
I am also limited to only be able to invest into Mutual Funds in my VBO account. ETFs, stocks, etc. I can't get into.
Regarding the FAIRX minimum, maybe that changed from past, but I did verify it is only $10K. Shows up on M* in fact.
JAOSX looks interesting, although I'll be honest for me, is more of unknown, simply because I feel I understand more about the US economy than I do the rest of the globe. Not that I'm staying out of it, but I do have some of my portfolio allocated already in VEMIX & VDMIX which gives me most of my international exposure that I'd like right now.
I think what you said Scott about the regulation concerns etc. is right on with where I'm holding back a bit. I think what got me really thinking about FAIRX though is really the recent positive earnings from BAC & GS. And take a look today at how some other financials are doing when the rest of the market is flat. BAC & GS are up around 4%. MS is up 3%, C 2%. So is this a sign? Have these big financials bottomed out and are they ready to surge?
I'm torn. Thanks for all the feedback.
Bank of America's book value, according to Yahoo Finance, is $21.15. It's currently trading at $9.88. It reminds me of a CNBC interview with Jim Rogers where the reporter kept persistently asking why he didn't like BoA. She kept going on about the book value. He told her to forget what the screen was telling her - that the people at Bank of America don't even know what the book value is. There is no clarity on these entities, and given the fog that is caused by lack of clarity on regulation, I think it's difficult for anyone to have a strong sense of what the path is for these companies.
Berkowitz in 2009: "...Or take American International Group. If you looked at an AIG annual report six or seven years ago, you saw one paragraph on derivatives. You look at an AIG annual report today and you see 15 pages on derivatives. I don't think company insiders fully understand what's going on, let alone outsiders. So if I don't understand something, I've learned to walk away." (http://www.kiplinger.com/magazine/archives/2009/01/bruce_berkowitz.html)
I didn't believe that Berkowitz was suddenly able to get clarity on an entity like this shortly after.
Also, on BoA:
http://www.zerohedge.com/article/85-bank-americas-net-income-comes-reserve-release-and-msr-adjustment-capitalization-ratios-p
I'm sure there are a number of managers who couldn't wait to get out of these stocks selling into whatever is causing today's pop. If you want to bet on the bank stocks, that's up to you, but again, I wouldn't bet heavily and keep it as a side bet.
I think it's far more important to learn about other global markets and what's going on in other parts of the world than the financials - I just think other markets are going to play a larger and larger role in the next decade - but that's just me.
Regarding the global markets, I certainly want to understand them more, I think it's more for me at this time, that is even more overwhelming. I think what's more important to me right now is to not make any decisions that I don't really understand what I'm doing. I'd rather play it safe and buy less risky funds. Hence why I own a lot of LEXCX and several conservative and moderate allocation funds right now.
I like the idea of increasing my risk, but again I want to make smart decisions. So I'm not necessarily looking to get into any specific area, such as financials, unless I really think it has the potential to outperform other areas.
With all that said, I will take that advice and for the time being hold off on any financial funds and instead continue to try and better understand the markets better.
Thanks again.