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Fairholme Doubles Down on AIG Amid Continued Outflows

edited August 2011 in Fund Discussions

Sorry if this was already posted. I see it's a few days old.

Man, talk about concentrated! 27% in MBIA, 24% in AIG. I sure hope Berkowitz knows what he's doing. I bought FAAFX earlier this year hoping he would recreate the magic FAIRX had as a smaller, nimbler fund, and so far... not so good. I'm still thinking the guy didn't take a stupid pill. Here's hoping he/we get the last laugh.


  • edited August 2011
    It's a repost. Yahoo reposts Morningstar articles a couple weeks past its original appearance on M* site. This one appeared on 8/4 and I or someone else posted it as weekly M* Fund Times.
  • 51% in two stocks. Okay.
  • Here's a comment from The Reformed Broker:

    "...investors in Fairholme need to ask themselves the following:

    If Bruce Berkowitz's massive, concentrated stakes in the banking sector weren't so widely publicized and criticized, would he still be sticking to his guns this vehemently and buying even more into the teeth of a thesis that has been proven so utterly wrong for the last 18 months?

    In other words, can we really be sure that all of these moves are being made purely on the basis of wise allocation and not with the intention of saving face or bolstering his pride?

    It would seem to me that a man with the record that Berkowitz has built up is worthy of the benefit of the doubt. But I say that as a fellow professional who has been on the losing end of a thesis before so there is some degree of empathy in my feelings here. I also say this as someone with no skin in this particular game - I own zero shares in Fairholme and I don't particularly care for most of its top holdings, many of which I wouldn't buy on a dare. So while I can relate to what Bruce is going through in trying to run a portfolio in the public eye, I am glad to be far from the fray myself entirely."
  • To a good extent, Bruce brought this on himself.

    He did little to stem the flow of hot money coming in and seemed to seek out publicity wherever he could get it (" communicate more efficiently with shareholders..." was his argument). Sure, he raised the minimum to $10k, but he didn't close it even after the issue continually surfaced in the press and on conference calls. He even when on to open new funds.

    Now, the hot money wants out.

    And Bruce has lost his strategic cash reserve in the process.
  • edited August 2011
    Reply to @Pangolin: I don't believe there has ever been a fund as widely held that has taken on this level of risk.

    "In other words, can we really be sure that all of these moves are being made purely on the basis of wise allocation and not with the intention of saving face or bolstering his pride?"

    I'd say no.

    I'd much rather own Leucadia (LUK) or even Berkshire (BRK-B) than
    Fairholme. (and yes, those two are not funds.) At least with Leucadia
    you get discounted wine.
  • For the record, it looks as if FPA is also buying select financials.
  • Reply to @Shostakovich: Rommick is testing the water with < 2% invested in 3 banks. this year Crescent has done remarkably well comparing to Fairholme fund which has lost 26.9%. Ouch!
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