Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
@Charles, I know you're in the patch with me. Still a very deep hole to climb out of, but at +20% for the year to date, do you think we've had at least had a sighting? We now need SHLD to have a day like FNMA... Still a fund I wish I'd never bought, but at least I'm glad I didn't sell it last year, as I considered.
VF: It's only about half equities now, and in the past that's been even lower, plus BB seems to be migrating toward natural resources now (and has long been heavy in retail via Sears) and certainly owns giant companies, so I don't think those comparisons are any better than M*'s category of Allocation -- 50-70% equity. No comparison really works for it, but by any, it's been a dog as measured since inception. But it is an interesting point: +20% YTD would beat the average for financials but only be about average for small value.
Over the past 4 weeks FAIRX is up nearly 29%! Morningstar rates FAIRX a one star for every time period (could be some kind of record for a fund that's been around more than 10 years).
Looks like FAAFX has made it YTD gains in the past 4 weeks also.
During this period of thanksgiving, I am grateful for Bruce Berkowitz (FAIRX, FAAFX), Scott Barbee (AVALX), Eric Cinnamond (ARIVX ... RIP), Malcolm Fobes (BFOCX), Ken Heebner (CGMFX, LOMMX) and the poker face David Einhorn (GLRE) for convincing me that I should mainly invest in low cost index funds/ETFs, and that I should be extremely cautious with investing in actively managed funds. And if I am tempted to invest in actively managed funds, I need to make certain that the fund is a category killer over the short and long haul (think PRWCX, POAGX, VWIAX) and that I have a disciplined exit plan such as a move below the fund's 20 or 50 day EMA. Get out when the getting is good, and do not hang on hoping that some day off in the distant future I will break even with my investment. Faith is good, but not in investing. Just my opinion.
I realize that most of the chatter on this and most mutual fund forums focus on "hot" funds that have "low assets" and are "emerging" and are "breaking out" and are "must own" and are projected to "beat the market," but ...
Lucy recently woke me up from my sleep in the pumpkin patch and walked me into shelter. I've sold-out of FAAFX, which I first bought in 2011.
The experience is marked by much downside interrupted by very few upward periods.
Six years is not really a long time, but it sure feels like it with this fund! This allocation fund has existed entirely in a bull market.
The table below shows the sad numbers since inception through April (click on image to enlarge):
So far in May, FAAFX is down another 10%.
The firm has never touted "The Fairholme Effect" on performance charts for FAAFX.
DODBX, which I have owned since 2003, is now my longest holding.
Of the many fund investing mistakes I've made, including WBMIX and AQRIX, invariably because of misguided expectations, I think FAAFX is the most disappointing.
Expectations for the fund were built-on my favorable experience with FAIRX in 2000's, which I held from about 2002 through 2011.
Which helps explain my disappointment. But four years ago, I wrote:
Yet, if I had to bet on one fund manager to deliver superior absolute returns over the long run, it would be Bruce Berkowitz. But many of us have come to learn, it’s gonna be a bumpy ride. Like some other deep value money managers, he may simply look beyond risk definitions as defined by modern portfolio theory…something fans of Fairholme may need to do also.
Good grief!
If I remember, Mr. Berkowitz stated during a Consuelo Mack interview on the eve of Trump's election that he can see light at end of tunnel ... and for a short time, it looked like maybe he did. But since about February, FAAFX is down another 20%, yet again.
Each quarter FAAFX reflects an ever increasing focus on extremely distressed, speculative, and illiquid securities.
Remember MBIA?
Remember St Joe?
Today, its Fannie/Freddie and SHLD.
Mr. Berkowitz hitched his wagon to Mr. Lambert and Mr. Mnuchin. I believe the latter was on SHLD's board while heading Trump's campaign finance committee, before becoming Treasury Secretary.
Has BB changed his stripes?
For years, he was heavy BRK and LUK.
The individuals behind all these entities are part of a billionaire's club: Lambert, Mnuchin, Buffet, and Cumming.
FAAFX is currently at $183M AUM, down substantially, half owned by Mr. Berkowitz. Flagship FAIRX is at $2.3B, about one tenth of peak.
Took me a while, as usual, but I'm joining kevindow, Sven, and others to be on sidelines going forward with Fairholme Capital Management, LLC.
Yesterday, SHLD popped 30% initially after a good earnings report, suspect short squeeze in play, but closed up "just" 14%. FAIRX and FAAFX jumped over 3%. But it is little solace to long-term investors.
This morning SHLD is down another 9%.
Maybe it's still possible for these bets to pay off.
Maybe it's just being part of what our friend Wes Gray calls "The Value Pain Train" and I've just fired god.
Maybe these really are the only deep-value investments, the "best ideas" Fairholme can find in the current elevated market.
But I don't think these are the investments that once earned Fairholme "Fund of the Decade" accolade or praise for being the next SEQUX (during its heyday).
So, after some 14 years investing with Fairholme, I'm out of the pumpkin patch and back in the crowd.
Hopefully, I've not disappointed you expatsp or other BB fans on the board. But if I have, my apologies. And if there are any friends still in FAAFX, I do hope the "Great Pumpkin" finally arrives.
Thanks for this. I'm a fellow sufferer, bought about the same time you did -- when it just opened. Like you, I'd been happy in FAIRX, which M* sent me to, but yes, this isn't the fund I thought I was buying.
I keep on thinking of selling, then hesitating, thinking he's bound to bounce back sooner or later (probably the day after I sell.) I sold FAIRX about a year and a half ago, but still have about 7% of my net worth in FAAFX.
It was my worst MF pick, I think, though I've had a few other bad ones. I've had even worse stock picks, though (like you, it seems) I no longer do those. I do still have a bunch of stocks that I've held for over a decade but I'm not adding to them.
When I do sell FAAFX, I'll probably move the money into DSENX or an index fund. I added up my winners and losers over the years, and I calculated that, after taxes, I would've done better in an index fund and had a lot less stress.
But that's me.
Here are my lessons:
Don't invest in a fund run by a single "great man" (prefer team-managed funds with great cultures like D&C or Primecap or index funds)
Don't invest in funds that make big macro / political / trend bets. They tend to look like geniuses--once.
Pay attention when a fund changes its approach, even if the names on top haven't changed.
Don't hold active MFs in taxable accounts unless they're tax managed.
All things I shoulda known years ago, but I'm a slow learner.
I've said this before, and I'll say this again. 1) When you buy vs What you buy 2) do not reinvest dividends (especially in the Dweebners and the Dorkiwitzs)
I'm in both CGMFX and FAIRX playing with the houses money. I have the luxury to just wait and see if they turn around or go bankrupt.
No such luck with Hussman though. Because I didn't follow my 1-2 mantra when I bought it back first in 2001. I thought if anything this was the fund to DCA into, and so I did. Now I'm selling little every year. Might sell out completely this year. Funds managed by 1-2 people need 1-2 mantra.
PVFIX, I'm considering adding now after so many years of just holding. COBYX, I did not time perfectly but not doing too badly. Not sending new money though.
How do you think Tillinghast and Danoff and their vast teams should get categorized?
Also, Sequoia was a team, right?
I don't know that there's an answer. D&C may be more democratic than some teams, I suppose.
Hi David,
Plenty of lousy team-managed funds out there, and among the few good funds are certainly some run by a great man. I just have seen far more one-man-shows blow up after a hot streak than with good team-managed funds, but I haven't made a scientific survey. If you show evidence that my belief is silly, I'll have no trouble changing it.
But I'm guessing that it's easier for a lone leader to let success go to his head and think he's a genius or has more skills than he really has. But clearly a Buffett and maybe the guys you mention can resist that.
@expatsp , thank you for sharing your learnings. I also bought the fund at inception but had a much shorter leash. I don't remember the exact timing, but I believe I sold it after a couple years.
Berkowitz was heralded as a great fund manager being able to run a focused fund given his success early on with FAIRX. But as Charles points out, that fund was actually very well diversified by having the bulk (and if memory serves, close to 30-50%) of his money in BRK and LUK. When he relied on his own "value" stock picks, he chose nothing but value traps. So in retrospect, his only genius was riding the coattails of other well diversified, great stock picking masters.
My leanings from owning FAAFX:
- deep value managers are a huge gamble not worth taking.
- managers with huge egos who can't adjust or admit mistakes are a huge gamble (I would lump Berkowitz and Hussman in that same category for non-adjustment).
- If a fund has not kept up with peers or it's index over 3 years - find a better choice.
- Don't worry about the fund turning around the minute you sell. Remember you re-invested with another option. Be confident you made your best decision at the time.
expat, Oh, no, I don't think your belief is silly or anything close, was just trying to think in generalities and extrapolate therefrom. Teamwork is often the path to success (that sounds like MJG), for sure. Single types are probably more hit / miss. Local rich friends who know Heebner (one of them anyway) say he is this majorly intense nerd, spending hours researching w pencil in hand. Tillinghast is famously similar, and (but?) even he outperforms only over long stretches. I remain fascinated that they live like a couple blocks apart downtown. I wonder what Soviero is up to now. I used to have a lot w W Weitz, on the advice of another friend who knew him a little. Not any longer.
If you are asking if it makes distributions, you are correct in that it has not in a while. Then again, it had bad time some time back and probably sitting on tax losses. On top of that may not be trading much lately. It's thesis has it short long term bonds for a while. Frankly one of the reasons I held on to it because I wanted to do that but couldn't myself.
If JORDX was still open I would have closed CGMFX position and moved it over. Unfortunately JORDX was one fund despite doing well could never garner assets to keep it viable.
Finally, don't mean to sound morose, but the manager is the fund at places like CGMFX and FAIRX. There is no succession planning as far as I can tell, and even if there was I wouldn't believe it. I had a good run with AKREX and got out for same reason. Needless to say I sold early but I felt COBYX was better long term bet than AKREX. AKREX suggests there is now succession planning, but I'm not buying it. Not as if Munger is waiting to fill Buffet. T
This is one issue with concentrated, eponymous funds I think investors should be aware off. Heebner is what?...76?
Comments
Looks like FAAFX has made it YTD gains in the past 4 weeks also.
I realize that most of the chatter on this and most mutual fund forums focus on "hot" funds that have "low assets" and are "emerging" and are "breaking out" and are "must own" and are projected to "beat the market," but ...
SPIVA Is Real
Kevin
Lucy recently woke me up from my sleep in the pumpkin patch and walked me into shelter. I've sold-out of FAAFX, which I first bought in 2011.
The experience is marked by much downside interrupted by very few upward periods.
Six years is not really a long time, but it sure feels like it with this fund! This allocation fund has existed entirely in a bull market.
The table below shows the sad numbers since inception through April (click on image to enlarge):
So far in May, FAAFX is down another 10%.
The firm has never touted "The Fairholme Effect" on performance charts for FAAFX.
DODBX, which I have owned since 2003, is now my longest holding.
Of the many fund investing mistakes I've made, including WBMIX and AQRIX, invariably because of misguided expectations, I think FAAFX is the most disappointing.
Expectations for the fund were built-on my favorable experience with FAIRX in 2000's, which I held from about 2002 through 2011.
But the two decades (or the two funds for that matter) don't compare. I examined them back in 2013 with Fairholme Fund (FAIRX) – What a Difference a Decade Makes, but I do not think it's improved much in the four years since, as evidenced in M*: Liquidity Risk Increases At Fairholme.
Which helps explain my disappointment. But four years ago, I wrote: Good grief!
If I remember, Mr. Berkowitz stated during a Consuelo Mack interview on the eve of Trump's election that he can see light at end of tunnel ... and for a short time, it looked like maybe he did. But since about February, FAAFX is down another 20%, yet again.
Each quarter FAAFX reflects an ever increasing focus on extremely distressed, speculative, and illiquid securities.
Remember MBIA?
Remember St Joe?
Today, its Fannie/Freddie and SHLD.
Mr. Berkowitz hitched his wagon to Mr. Lambert and Mr. Mnuchin. I believe the latter was on SHLD's board while heading Trump's campaign finance committee, before becoming Treasury Secretary.
Has BB changed his stripes?
For years, he was heavy BRK and LUK.
The individuals behind all these entities are part of a billionaire's club: Lambert, Mnuchin, Buffet, and Cumming.
FAAFX is currently at $183M AUM, down substantially, half owned by Mr. Berkowitz. Flagship FAIRX is at $2.3B, about one tenth of peak.
Took me a while, as usual, but I'm joining kevindow, Sven, and others to be on sidelines going forward with Fairholme Capital Management, LLC.
Yesterday, SHLD popped 30% initially after a good earnings report, suspect short squeeze in play, but closed up "just" 14%. FAIRX and FAAFX jumped over 3%. But it is little solace to long-term investors.
This morning SHLD is down another 9%.
Maybe it's still possible for these bets to pay off.
Maybe it's just being part of what our friend Wes Gray calls "The Value Pain Train" and I've just fired god.
Maybe these really are the only deep-value investments, the "best ideas" Fairholme can find in the current elevated market.
But I don't think these are the investments that once earned Fairholme "Fund of the Decade" accolade or praise for being the next SEQUX (during its heyday).
So, after some 14 years investing with Fairholme, I'm out of the pumpkin patch and back in the crowd.
Hopefully, I've not disappointed you expatsp or other BB fans on the board. But if I have, my apologies. And if there are any friends still in FAAFX, I do hope the "Great Pumpkin" finally arrives.
Thanks for this. I'm a fellow sufferer, bought about the same time you did -- when it just opened. Like you, I'd been happy in FAIRX, which M* sent me to, but yes, this isn't the fund I thought I was buying.
I keep on thinking of selling, then hesitating, thinking he's bound to bounce back sooner or later (probably the day after I sell.) I sold FAIRX about a year and a half ago, but still have about 7% of my net worth in FAAFX.
It was my worst MF pick, I think, though I've had a few other bad ones. I've had even worse stock picks, though (like you, it seems) I no longer do those. I do still have a bunch of stocks that I've held for over a decade but I'm not adding to them.
When I do sell FAAFX, I'll probably move the money into DSENX or an index fund. I added up my winners and losers over the years, and I calculated that, after taxes, I would've done better in an index fund and had a lot less stress.
But that's me.
Here are my lessons:
Don't invest in a fund run by a single "great man" (prefer team-managed funds with great cultures like D&C or Primecap or index funds)
Don't invest in funds that make big macro / political / trend bets. They tend to look like geniuses--once.
Pay attention when a fund changes its approach, even if the names on top haven't changed.
Don't hold active MFs in taxable accounts unless they're tax managed.
All things I shoulda known years ago, but I'm a slow learner.
Yeah... had about 6 GREAT years of tax loss carryover... followed by @5 years of not so great capital gains in my brokerage account!
>> run by a single "great man" (prefer team-managed funds)
How do you think Tillinghast and Danoff and their vast teams should get categorized?
Also, Sequoia was a team, right?
I don't know that there's an answer. D&C may be more democratic than some teams, I suppose.
1) When you buy vs What you buy
2) do not reinvest dividends (especially in the Dweebners and the Dorkiwitzs)
I'm in both CGMFX and FAIRX playing with the houses money. I have the luxury to just wait and see if they turn around or go bankrupt.
No such luck with Hussman though. Because I didn't follow my 1-2 mantra when I bought it back first in 2001. I thought if anything this was the fund to DCA into, and so I did. Now I'm selling little every year. Might sell out completely this year. Funds managed by 1-2 people need 1-2 mantra.
PVFIX, I'm considering adding now after so many years of just holding.
COBYX, I did not time perfectly but not doing too badly. Not sending new money though.
Plenty of lousy team-managed funds out there, and among the few good funds are certainly some run by a great man. I just have seen far more one-man-shows blow up after a hot streak than with good team-managed funds, but I haven't made a scientific survey. If you show evidence that my belief is silly, I'll have no trouble changing it.
But I'm guessing that it's easier for a lone leader to let success go to his head and think he's a genius or has more skills than he really has. But clearly a Buffett and maybe the guys you mention can resist that.
Berkowitz was heralded as a great fund manager being able to run a focused fund given his success early on with FAIRX. But as Charles points out, that fund was actually very well diversified by having the bulk (and if memory serves, close to 30-50%) of his money in BRK and LUK. When he relied on his own "value" stock picks, he chose nothing but value traps. So in retrospect, his only genius was riding the coattails of other well diversified, great stock picking masters.
My leanings from owning FAAFX:
- deep value managers are a huge gamble not worth taking.
- managers with huge egos who can't adjust or admit mistakes are a huge gamble (I would lump Berkowitz and Hussman in that same category for non-adjustment).
- If a fund has not kept up with peers or it's index over 3 years - find a better choice.
- Don't worry about the fund turning around the minute you sell. Remember you re-invested with another option. Be confident you made your best decision at the time.
If JORDX was still open I would have closed CGMFX position and moved it over. Unfortunately JORDX was one fund despite doing well could never garner assets to keep it viable.
Finally, don't mean to sound morose, but the manager is the fund at places like CGMFX and FAIRX. There is no succession planning as far as I can tell, and even if there was I wouldn't believe it. I had a good run with AKREX and got out for same reason. Needless to say I sold early but I felt COBYX was better long term bet than AKREX. AKREX suggests there is now succession planning, but I'm not buying it. Not as if Munger is waiting to fill Buffet. T
This is one issue with concentrated, eponymous funds I think investors should be aware off. Heebner is what?...76?
I made quite a lot with him and feel extremely lucky to have gotten out when I did
interesting piece, talk about outperformance:
http://archive.fortune.com/2008/05/23/magazines/fortune/birger_americas_hottest_investor.fortune/index.htm