Fairholme/Berkowitz

[Guest longinvestor]

Is Berkowitz going to be SHLDed like Nygren was WAMUed?

[Guest wellmont]

bruce started his fund at an incredible time for value investors. no coincidence. the fact is most of his out performance came when he was managing a much smaller asset base. and at this time he also had two partners who are no longer there. Having said that I think we are at or close to an inflection point where value strategies will start to out perform other strategies. too many smart people have been under performing for too long.

[peter1234]

Berkowitz has barely beaten the market over the last 10 years...

 

He's beaten it by about .75% annually over the past decade (which is top 9% of his peers according to morningstar). That includes terrible years like 2011 and this year. Since inception, his fund has destroyed the S&P 500. A $10,000 invest in FAIRX at inception would now be almost $49,000 vs about $17,300 for the S&P 500.

 

I think the 10-year ranking speaks more towards the general poor quality of most mutual funds and the difficulty for funds in the Large Value category (which is where morningstar places FAIRX) to distinguish themselves.

 

Most of Fairholme's outperformance came in its earlier years when it was much smaller and Berkowitz wasn't a media whore. See the attached 5-year rolling returns. Since rolling periods starting around 2007, it has been worse than the index.

 

Thanks for sharing, very interesting.

 

Howard Marks in one of his memos talked about starting and ending points for performance calculations and the big difference they can make.

 

It sure looks like Fairholme has become much less nimble.

 

With like 45% in AIG, it is also hard to compare to more prudently concentrated funds.

 

;)

[bargainman]

wow

 

http://performance.morningstar.com/fund/performance-return.action?t=FAIRX&region=usa&culture=en-US

 

been sucking wind for the last 1,3,5, 10 years...  maybe too big?  changed his approach?

[OracleofCarolina]

2011 screwed all his long term numbers up

[karthikpm]

Morningstar says " Hold off on the grave dancing." describing Fairholme

 

[tede02]

Yesterday I read two Howard Marks memos: Dare to Be Great and Dare to Be Great II (highly recommend especially if you're in the money management business).  Marks discusses all of the trade-offs investors and portfolio managers must make to generate superior returns.  For example, you have to do things that others aren't if you expect different results.  The problem is, these are often contrarian bets and or unconventional strategies that look stupid in the eyes of the crowd.  And you can look really stupid for a long time (sometimes so long that your clients leave you before a correct bet pays off).  Additionally, Marks talks about the necessity of concentrated holdings. Too much diversification dilutes away all of your winners.  Conversely, a big mistake can kill you (or being too early like Bruce in 2011). 

 

The memos by Marks perfectly describe the issues all FAIRX shareholders must confront.

 

I'm sticking with Bruce because I think his logic is sound.  But I also recognize that things might now pan out.  That is just the nature of the game (and it's not for everyone). 

[BargainValueHunter]

What do you guys think about the Fairholme Funds sight re-design?

 

It seems like Mr. Berkowitz is trying to focus visitors in on his investing philosophy far more than he did under the old design.

 

Buffett never went flashy.

[Eye4Valu]

I like it. Don't think it's too flashy. Does a better job of explaining things to a potential investor.

[merkhet]

I actually like the building. I know some people think it's gaudy, but I like it.

[CorpRaider]

I just don't see how the slick new website and high profile office space reconciles with his statements about closing his funds to prevent hot money from coming in and diluting performance and creating tax bills for the long term investors, if and when he starts to outperform again.  Most of his funds are already closed now an he just did his flip-flop on closing FAIRX within the last year.  I sort of prefer crappy marketing and websites with great numbers to the inverse.  That being said, I doubt I'm his target demographic.

[randomep]

Berkowitz has barely beaten the market over the last 10 years...

 

Most of Fairholme's outperformance came in its earlier years when it was much smaller and Berkowitz wasn't a media whore.

 

Well, a change of topic here, but you could say it for Pabrai too.

 

I respect Berkowitz because being a banking specialist, he avoided banks in 08 which destroyed the likes of Miller.

 

 

 

[innerscorecard]

I just don't see how the slick new website and high profile office space reconciles with his statements about closing his funds to prevent hot money from coming in and diluting performance and creating tax bills for the long term investors, if and when he starts to outperform again.  Most of his funds are already closed now an he just did his flip-flop on closing FAIRX within the last year.  I sort of prefer crappy marketing and websites with great numbers to the inverse.  That being said, I doubt I'm his target demographic.

 

I forgot, any website that doesn't look exactly like Berkshire Hathaway's is "slick."  ::)

 

It's just a nice-looking Squarespace template, really! It's something that any young person familiar with web design could throw together in a day. It's just modern design - which I don't think it's fair to immediately denigrate as "slick."

[CorpRaider]

Berkshire is a bit of a straw-man.  I would just focus on the totally illogical comparison to the actual previous Fairholme funds site, which was just upgraded with lots of pithy catch phrases, multiple cinematic head shots (I mean look at those monochromatic glamour shots) and pictures of his sand-crawler coincidentally, when his numbers went into the tank and he happened to launch a hedge fund with heightened marketing strictures?  It just strikes me as some panty-dropping, asset gathering fever activity.  Of course most mutual funds do it, but its not totally consistent with the persona BB had me buying.

[Guest]

How about Berkowitz lowering his fund fees instead of buying an art building?

[BTShine]

Oh, come on...

 

When someone makes a lot of money it's not out of line to erect a nice building and furnish it with art for the public to enjoy.  I enjoy nice art galleries that are open to the public (thanks to wealthy donors).  This is a healthy endeavor compared to building 180 foot yachts for personal enjoyment and the like.

 

That said, I've never been on a 180 foot yacht and I might find that enjoyable, too. 

 

Clearly Bill Gates is spending his money in a more honorable way, but Berkowitz is not a bad person because he's failed to match Bill Gates in this area of life. 

[peter1234]

As far as I know, BB is a 1 person investment operation. So this might be a bit of a distraction.

;)

[bargainman]

Clearly Bill Gates is spending his money in a more honorable way, but Berkowitz is not a bad person because he's failed to match Bill Gates in this area of life.

 

well BG did erect his famous bachelor pad before the foundation..

 

http://www.businessinsider.com/19-crazy-facts-about-bill-gates-house-2014-11

http://en.wikipedia.org/wiki/Bill_Gates's_house

[BTShine]

Awesome.  So, Mr. Gates bought the property in 1988 and presumably built the house in the late 80s and early 90s, right around when Microsoft came to dominate PC software...  Does that mean Mr. Berkowitz's project is bullish for Fairholme?  ;) 

 

Or does the Miami structure need to be a house for this to be bullish?

 

Charlie Munger has spent time on projects (erected an office building, hospital Board of Directors, etc.)  outside of Berkshire and DJCO, and look how that turned out.

 

Maybe this hobby will be good for Mr. Berkowitz

[merkhet]

People take the ascetic heuristic too far sometimes. Many good investors are frugal. However, non-frugal people are not necessarily bad investors. And a person who goes from frugal to non-frugal does not necessarily have to stop being a good investor.

[T-bone1]

Awesome.  So, Mr. Gates bought the property in 1988 and presumably built the house in the late 80s and early 90s, right around when Microsoft came to dominate PC software...  Does that mean Mr. Berkowitz's project is bullish for Fairholme?  ;) 

 

Or does the Miami structure need to be a house for this to be bullish?

 

Charlie Munger has spent time on projects (erected an office building, hospital Board of Directors, etc.)  outside of Berkshire and DJCO, and look how that turned out.

 

Maybe this hobby will be good for Mr. Berkowitz

 

Don't forget "Munger's Folly", the huge trimaran yacht that he basically supervised construction of after creating a company to build it for him

[Mephistopheles]

Buffett recently upgraded to a new Cadillac, even though he had one in decent condition. Time to short BRK.

[berkshire101]

Buffett recently upgraded to a new Cadillac, even though he had one in decent condition. Time to short BRK.

 

Let be fair though, he probably bought it used.  ;)

And when he sells it, it'll probably be worth more if he autographs it.

[Mephistopheles]

Buffett recently upgraded to a new Cadillac, even though he had one in decent condition. Time to short BRK.

 

Let be fair though, he probably bought it used.  ;)

And when he sells it, it'll probably be worth more if he autographs it.

 

Apparently it was new. Mary Barra convinced him to upgrade, so he sent his daughter to buy him a new one.

[CorpRaider]

People take the ascetic heuristic too far sometimes. Many good investors are frugal. However, non-frugal people are not necessarily bad investors. And a person who goes from frugal to non-frugal does not necessarily have to stop being a good investor.

 

Maybe.  But he told the Fortune reporter a few years ago (when he as putting up numbers) his wife made him buy a measly stereo because he was too obsessed with investing and had no hobbies and never left his home office.  Now he's a museum curator, architect and model who is devoting additional resources to marketing his firm and making sure he's a big Papi in the Miami scene.  Maybe he should move back to Connecticut to drown out the noise.  Does not compute for me.  Although, the same thing happened to Tubbs and Crocket.