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FAIRHOLME FUNDS, INC. PORTFOLIO MANAGER’S REPORT 2010


dcollon

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As of 2008, (page 118 stock market superstars book), the Sprott Managed Accounts have an annualized return since 1982 of almost 25 percent a year.

So he performed badly in 2008, fine in 2009, great in 2010.  So the 25% figure should not have gone down much, probably by a just a couple points.

 

Then again, some folks here will find issues with this performance  :)

 

It is like value investing, some folks get it, some just don't...

 

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Whats the breakdown of 1985 - 1999 and then 2000 - 2008?

Not trying to be difficult, actually just curious.

 

You dont think the bottom falling out of the commodity market affected his performance. It sure as hell affected my commodity stocks.

 

Also I am sure the greatest tech investor has an awesome return over his career. I am also sure he killed the markets from 1996 - 1999. Its a not a purist thing, just the way I see it. I have no bone to pick with Sprott. All im saying is its nice flying with the jet stream. You still get brownie points for picking the route.

 

Get it how you can, it all spends the same.  

 

 

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Whats the breakdown of 1985 - 1999 and then 2000 - 2008?

Not trying to be difficult, actually just curious.

 

You dont think the bottom falling out of the commodity market affected his performance. It sure as hell affected my commodity stocks.

 

Also I am sure the greatest tech investor has an awesome return over his career. I am also sure he killed the markets from 1996 - 1999. Its a not a purist thing, just the way I see it. I have no bone to pick with Sprott. All im saying is its nice flying with the jet stream. You still get brownie points for picking the route.

 

Get it how you can, it all spends the same.  

 

 

 

I agree with frog's "some people just don't get it" comment. (To clarify, this comment is not aimed at you myth.) Seems like some are happy to pass judgement without looking at the evidence.

 

As stated in my quote from the 2000 annual report, the performance was 23% from 1985-2000. The performance over the past 10 years is about the same. Proof enough that it was not a "commodities flash in the pan" result? One trick ponies do not survive for > 25 years. Mind you, these are all after fees of probably 2.5% + incentive (less than 20% for the Cdn Equity Fund). Fairholme has much lower management fees iirc.

 

Contrary to popular belief (and misconception), he did not do badly in 2008. The Sprott Hedge Fund LP lost only 5% in 2008 beating the benchmark by 20%. This is his flagship fund by which his performance should be measured as it is the fund in which he has the most flexibility in managing. Its long positions are identical to the Sprott Cdn Equity Fund and its returns are similar except with lower volatility because of the dampening effect of the short positions in the hedge fund.

 

Before, someone else repeats the "lucky dart throwing monkey" analogy, don't just go by the man's track record. Read and listen to the man - you will understand and appreciate him better. He is not only smart, he is comfortable surrounding himself with other smart guys who do not necessarily agree with him or share his style. Many of his managers (e.g. Allen Jacobs, JF Tardif (ex)) are from the pure value mold. Sprott himself has a strong value bias except that he overlays this with his macro views (which is not so different from HWIC's style even though the areas of focus may be different).

 

As for Staylehp's query, the mutual fund is open and I believe the hedge fund is too.

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Impressive. I have also been impressed by one of his co managers who appears on BNN, he values oil and gas investments on a value basis. Interesting I have always wondered how well one can do when they focus in one sector. Makes me feel better about my O&G investments.

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Impressive. I have also been impressed by one of his co managers who appears on BNN, he values oil and gas investments on a value basis. Interesting I have always wondered how well one can do when they focus in one sector. Makes me feel better about my O&G investments.

 

Ok, it's beginning to look like I'm flogging a dead horse here but these points are too significant to let pass:

 

The Sprott Hedge Fund beat its benchmark by a whopping 29 percentage points per year since inception.

 

If you combine Sprott's 1985-2000 Cdn Equity Fund returns with the Hedge Fund returns from 2000-2010, $100,000 would have compounded to $18.5 million after fees, a 185-fold return.

 

Compare that with FFH's numbers which show BVPS increasing roughly 100-fold from 1986 to 2010 ($4.25 to $400). (Some of FFH's growth in BVPS is due to issuance of shares at significant premia to BV which is why I excluded the 1985-86 BVPS growth which showed almost a tripling due primarily to issuance of shares at a huge premium to book.)

 

The Sprott returns are achieved without the use of material leverage except to the extent that short positions count as leverage. Gross long positions tend to be around the 100% mark or less and I believe they cannot use options for leverage.

 

Any more naysayers?

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Went on the Sprott site last night when I couldn't sleep.

 

Eddie you and I need to find some other hobbies.

 

 

oec2000 thanks for the info. I am now slightly curious why his returns from 2000 - 2006 werent higher. Either way you guys are right, the record speaks for itself.

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