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Sequoia Fund May Reopen To New Investors After Valeant Dive
I don't know professor, this situation begs the question. This board has discussed the falterings of a certain fund (FPACX) whose manager has or has not lost his way leading many to question the merits of holding vs. selling with the scales seemingly tilted toward the holding side. On the other hand you have SEQUX which has quite the stellar reputation of it's own, whose manager(s) blew one lousy call and everyone thinks they ought to be taken out and shot and then buried for good. If I needed either of these two funds and had the money to commit I'd be more inclined to hand it to the latter. Just one persons ridiculous opinion.
To be clear, I'm well aware these two funds are quite different. It all depends on what you already own, what you think you need to own and what your current investing goals and plan are.
I am a shareholder in sequoia but if I were not I would certainly want to know the current % of Valeant in the fund. Most investors in mutual funds are probably not interested in a fund whose fund NAV moves on the basis of one stock and not the market.
The question, at least for me, isn't "one lousy call." The question is whether there was a profoundly dysfunctional culture which led to a series of decisions which profoundly damaged Sequoia's shareholders. The media reports suggesting that no one on the management team would dare dissent and that things were bad enough that two independent directors resigned in protest, point in the direction of a big problem at the firm. From the perspective of investors and prospective investors, it's hard to know how much trust to have when there's no clear accounting for what happened. (Pending lawsuits have that effect; no one can afford to talk even if they'd want to.)
There is no such cloud over FPA. I expressed concern that the fund was too big and still growing; the manager and one of the fund's v.p.'s spent nearly an hour in subsequent conversation about strategy, evolution and size. You might or might not be fully satisfied with their reasoning, but it's impossible to fault their honesty or openness.
As a secondary matter, I have a concern about the evolution of the corporate culture which arises because a number of talented senior folks have recently left or imminently might. Those are transitions and many firms don't handle them well. That was an issue with Leuthold and Mairs & Power (which handled it well) as well as with Third Avenue (which imploded) and others. I had no evidence of a transition problem at F P A.
If you believe that Goldfarb was the problem and that Poppe is the solution, or if you believe that Valeant was a one-off situation, there's certainly reason to consider a reopened Sequoia.
RE: Sequoia, I don't mind a concentrated MF and I hold some. Still, I don't expect any one stock to represent more than 7.5% (at the outside) of the fund's holdings. When a stock swoons (i.e., ILMN yesterday), I think it might be time to pounce. Unfortunately, whether it's a stock or a fund, my timing is generally rotten.
For some insane reason my 2 kids and their spouses allow me to oversee their IRA's. I've had some fun with this project (for the 2 kids this has been over 20 years). Former FA's might remember my "Annual Angst' post wherein I asked advice on their then-current port, and received great responses. However, when I see a fund such as Sequoia falling over the cliff due to stupidity, I SELL, no need to ask. This has been my hobby, not theirs, and I think they (and I) might be happy with with index stuff now. We got out with a gain, but its made me wiser (ha, I hope). best, hawk
That is correct David Snowball. If SEQUX management is disheveled there is little reason to stick around. Currently none of us know if it was just one person or what. In any case that needs to be straightened out first.
@Mark- I hope that my wife does not come to the same conclusion, as I am rarely if ever completely heveled.
ORIGIN late Middle English :from obsolete dishevely, from Old French deschevele, past participle of descheveler (based on chevel ‘hair,’ from Latin capillus). The original sense was [having the hair uncovered] ; later, referring to the hair itself, [hanging loose,] hence [disordered, untidy.]
Comments
To be clear, I'm well aware these two funds are quite different. It all depends on what you already own, what you think you need to own and what your current investing goals and plan are.
The question, at least for me, isn't "one lousy call." The question is whether there was a profoundly dysfunctional culture which led to a series of decisions which profoundly damaged Sequoia's shareholders. The media reports suggesting that no one on the management team would dare dissent and that things were bad enough that two independent directors resigned in protest, point in the direction of a big problem at the firm. From the perspective of investors and prospective investors, it's hard to know how much trust to have when there's no clear accounting for what happened. (Pending lawsuits have that effect; no one can afford to talk even if they'd want to.)
There is no such cloud over FPA. I expressed concern that the fund was too big and still growing; the manager and one of the fund's v.p.'s spent nearly an hour in subsequent conversation about strategy, evolution and size. You might or might not be fully satisfied with their reasoning, but it's impossible to fault their honesty or openness.
As a secondary matter, I have a concern about the evolution of the corporate culture which arises because a number of talented senior folks have recently left or imminently might. Those are transitions and many firms don't handle them well. That was an issue with Leuthold and Mairs & Power (which handled it well) as well as with Third Avenue (which imploded) and others. I had no evidence of a transition problem at F P A.
If you believe that Goldfarb was the problem and that Poppe is the solution, or if you believe that Valeant was a one-off situation, there's certainly reason to consider a reopened Sequoia.
As ever,
David
best, hawk
the very definition of alpha, beta, etc....
ORIGIN late Middle English : from obsolete dishevely, from Old French deschevele, past participle of descheveler (based on chevel ‘hair,’ from Latin capillus). The original sense was [having the hair uncovered] ; later, referring to the hair itself, [hanging loose,] hence [disordered, untidy.]