@expatsp.
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 20
11.
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 20
11.
But the two decades (or the two funds for that matter) don't compare. I examined them back in 20
13 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:
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.
