http://www.sec.gov/Archives/edgar/data/1096344/000091957413005233/d1406155_497.htmFAIRHOLME FUNDS, INC.
The Fairholme Fund
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Supplement dated August 15, 2013 to the Prospectus of The Fairholme Fund dated April 1, 2013 (the "Prospectus") and the Summary Prospectus of The Fairholme Fund dated April 1, 2013 (the "Summary Prospectus")
The Board of Directors of Fairholme Funds, Inc. has approved the re-opening of The Fairholme Fund (NASDAQ: FAIRX) to new investors. Effective August 19, 2013, The Fairholme Fund will offer its shares to new investors and begin accepting orders for the purchase of Fund shares from new investors.
The first four paragraphs under "Purchase and Sale of The Fairholme Fund Shares" in the summary section of the Prospectus and in the Summary Prospectus are deleted in their entirety and replaced with the following paragraph:
Purchases of shares of The Fairholme Fund are subject to the following minimum investment amounts (which may be waived by the Manager in its discretion):
The following paragraph is added as the second to last paragraph under "Purchase and Sale of The Fairholme Fund Shares" in the summary section of the Prospectus and in the Summary Prospectus:
The Fairholme Fund reserves the right to limit the sale of shares to new investors and existing shareholders at any time. The Fairholme Fund may reject any order to purchase shares, and may withdraw the offering of shares at any time to any or all investors.
Comments
1) Bruce probably has a target in mind to purchase shares of and he does not want to sell stock in other companies to fund it.
2) Or, he thinks today's rout might continue and do not want to sell shares on stock for paying redeemed shares so opening the purchase so hoping that new fund purchases will be enough to pay out leaving shareholders.
Max, Seriously "Risk factor scares me away". Your portfolio is scary to me. If I have your fund list correct none of your funds have beaten the S&P 500 using 3 year performance data.
While (FAIRX) had a bad 2011 its 3 year performance is right there with most of your other funds.
This high Beta fund (FAIRX) might be what your portfolio needs as most of your funds are a low beta except (MAPOX).
I will say it looks like there is a method to your madness in your portfolio and it seems to be working. Good for you.
Art
Max
There is risk in any investment, even under the mattress, the risk of inflation. The trick is to get the reward to match the risk.
Look like you have the portfolio that you can sleep with. For now.
Art
Beta is calculated using regression analysis, and you can think of beta as the tendency of a security's returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market.
Many utilities stocks have a beta of less than 1. Conversely, most high-tech, Nasdaq-based stocks have a beta of greater than 1, offering the possibility of a higher rate of return, but also posing more risk.
People have lots of different reasons for how they position their investments - not always apparent to others. (like: their sources of income, home & other tangible assets, savings & annuities, expected longevity, estate planning, tax & insurance considerations, spouse and family influences and their own past investment experiences - both favorable and unfavorable.)
I specifically recall the great Rukeyser mocking those who wouldn't get aboard the tech bandwagon in the 90s & early 2000s (as the bubble grew). Nothing short of investing morons in Lou's view. That's the only time I can ever recall the guy being wrong - but boy was he ever! ... NASDAQ 5,000 anybody?
Hell - had they accepted the conventional wisdom of their day, Orville & Wilbur probably would have spent the rest of their lives inventing the perfect bicycle:-)
He must be ready to dive (or already taken the plunge) into that preferred stock in Fannie Mae and Freddie Mac, even though Congress and the Treasury do not think investors like Berkowitz would prevail. It will be interesting to see how his latest thesis reveals itself.
I admire him for doing what he says he would do - "Ignore the crowd."
One thing you cannot argue about. He owns over 10 million of FAIRX shares. Not sure what the current NAV is. I think he owns north of $350M of the fund. I don't know anyone with that kind of gluttony for his own cooking. That doesn't mean no manager has that much money in a single fund. However, then, they would do everyone a favor by coming out with it. Does Gross own $500 M in PTTRX? I wonder...
This year bonds have not done well as many moved into cash. Ironically the high quality government and investment grade corporate performed poorly, while low quality junk bonds fared better. EM bonds performed even worse. Few active manged bond funds including those you mentioned did better. I also invested with Michael Hasenstab (particularly TRTRX) and Dan Fuss's LSBRX. The other bond I use is OSTIX. Earlier this year, I sold all PTTRX and PELBX, and slowly buying energy and European equity.