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Reply to @scott: Very cool. Mr. Berkowitz should become a legend after calling this one, along lately I've noticed FAAFX is not hyper-correlated with MBIA, like it was previously.
Reply to @Charles: Maybe not such a legend? FAAFX and FAIRX up less than 3% today. According to M*, MBIA was over 20% of FAAFX a little over two months ago. Seems like he got out early - can't think of another explanation. I own shares in FAAFX.
Reply to @scott: Berkowitz's FOCIX was up 11% -- kind of incredible for a bond fund. Looks like he kept the MBIA bonds and sold some or all of the stock.
Reply to @scott: MBIA has been a high conviction holding at Fairholme since mid 2010, something like 10% of company. Mr. Berkowitz called this very settlement, predicting a "win-win" outcome two years ago, just like has played out today. He's championed Jay Brown (unlike Mr. Ackman who shorted the company in years past). And, he's articulated how MBIA would be "only insurer to have kept its word." Hard to believe he sold before seeing outcome of BAC lawsuit through.
You don't think in some strange twist that him selling shares was somehow a precursor for the settlement?
Reply to @Charles: The MBIA situation to me has seemed very heavily event-driven; the main event in question being what finally happened yesterday - the stock's significant movements in recent months have - as far as I know - largely related to hints at this result.
Given that, I'd be surprised if he sold in advance of that and would be curious as to why. It's been a while, but I remember enjoying Ackman's "Confidence Game" about the MBIA situation (David Einhorn's somewhat similar "Fooling Some of the People All of the Time" is also an enjoyable read.)
Reply to @scott: I'll be very curious to see Fairholme's latest portfolio too. According to M*, in the last portfolio he was selling down MBIA and had opened a position in a Canadian miner. I wonder if he's in general make a shift from financials to commodities. They say it is the value investor's curse to always be a little too early.
But sometimes too his funds seem to react a day later than I would have thought. I wonder if he doesn't have a special, rather illiquid kind of investment in MBIA that doesn't get marked to market every day. But probably that is wishful thinking.
I own FAIRX & FAAFX I too was expecting a bigger bounce in FAAFX yesterday, though I am of course happy with FOCIX, which I bought for my retired mother.
Reply to @expatsp: "I wonder if he doesn't have a special, rather illiquid kind of investment in MBIA that doesn't get marked to market every day. But probably that is wishful thinking."
I pondered that as well - some sort of fair value pricing that will be reflected today. Not likely, but something that I thought too.
I'm very curious as to the thought process behind the Imperial Metals investment.
I just don't get it. Are they too young to have been inspired about journalism by young Woodward and Bernstein? Doesn't anyone want to write original work...not just repeat the superficial?
Here's my disapproving response, posted under M* comments, in support of a previous post by CarstenP:
Spot-on Carsten. Respectfully request that M* and Mr. Goldsborough perform more due diligence before headlining such cookie-cutter, out-dated, and ill-informed praise.
Mr. Berkowitz should have become a legend after calling this one back in 2010, but as Carsten notes, lately FAAFX has not correlated with MBIA at all.
According to M*, MBIA was over 20% of FAAFX a little over two months ago. Seems like he got out early - can't think of another explanation, unless there is another way to book-keep and report NAV. If it's true, Mr. Berkowitz suffers from premature disbursement in addition to premature accumulation.
MBIA has been a high conviction holding at Fairholme since mid 2010, something like 10% of company. Mr. Berkowitz called this very settlement, predicting a "win-win" outcome, just like has played out this week.
He's championed Jay Brown (unlike Mr. Ackman who shorted the company in years past). And, he's articulated how MBIA would be "only insurer to have kept its word." Hard to believe he sold before seeing outcome of BAC lawsuit through. But apparently, that's what he did...at least for his FAAFX OE fund stakeholders.
You don't think in some strange twist that him selling shares was somehow a precursor for the settlement?
In any case, trust he will explain to long-time FAAFX stakeholders why they did not reap benefits of extraordinary gains resulting from this week's settlement, finally, with BAC.
And, trust M* will dig a little further into this story and correct its misinformed and misleading headline. I suspect it would make a more interesting and responsible story than the one published today under Fund Times.
PS. If you want to applaud an OE fund for actively holding MBIA, consider Valley Forge VAFGX, which jumped 8% Monday on news of the settlement, or Mr. Berkowitz's FOCIX. But certainly not long-time holder FAAFX...long-time until money-time, that is.
Spot on, Charles. As a FAAFX shareholder, I too am looking for an explanation. The fund seems more correlated with Imperial Metals than with MBIA these days. It looks like he is rotating out of financials and into metals. I have faith in Berkowitz. His long-term record is spectacular and his short-term record still isn't bad in absolute terms. But to give him credit for holding MBIA in FAAFX when it seems pretty clear he's heavily reduced his position is absurd.
My personal guess is this: he said a while back that he thinks his favorite holdings can double or triple in the next few years and even in a worst case scenario will still be higher than they are now. Perhaps MBIA in his opinion was not quite that favorable: that we are now seeing the best case scenario (up 50%) and the worst case could have been far worse.
But I am looking forward to hearing what he has to say. He seems to give interviews pretty often and someone's gotta press him on ths.
Further investment in metals, I would think, would suggest belief in continued emerging market growth - a number of these companies have not done well due to slowing in China and continued sluggish growth elsewhere.
I continue to hold Glencore (which is now merged with miner Xstrata). Has not (nawt, even) done well, but have always considered it a long-term holding, given Glencore's unique qualities.
Most metals companies in Canada and elsewhere have done terribly - there are likely values in the sector for those who have a long-term time horizon, but I still question whether the level of time horizon that many people have is too short to really recognize what many managers believe to be value. (I still think there could be "bridge" products between mutual funds and hedge funds with lock-ups, but that's neither here nor there.)
If Berkowitz is really moving out of financials at this point, I'd be surprised. It does not seem like his thesis has fully played out. Beyond that though, I'd be more curious what about Imperial Metals was attractive and whether or not materials will be what the fund begins to rotate into.
Perhaps Berkowitz got out in March when the stock surged to 12.50, up from 8 in December. If so, it's hard to fault him for taking profits after such a run up. If I recall, the price shot up on rumors of a settlement that didn't materialize at that time.
Comments
http://www.zerohedge.com/news/2013-05-06/mbi-saga-over-bank-america-settle-long-running-litigation-take-5-stake
warburgpincus.com/portfolio
MBIA is listed within their LBO (leveraged Buyouts).
Warburg upcoming IPO - Antero Resources:
reuters
You don't think in some strange twist that him selling shares was somehow a precursor for the settlement?
Given that, I'd be surprised if he sold in advance of that and would be curious as to why. It's been a while, but I remember enjoying Ackman's "Confidence Game" about the MBIA situation (David Einhorn's somewhat similar "Fooling Some of the People All of the Time" is also an enjoyable read.)
But sometimes too his funds seem to react a day later than I would have thought. I wonder if he doesn't have a special, rather illiquid kind of investment in MBIA that doesn't get marked to market every day. But probably that is wishful thinking.
I own FAIRX & FAAFX I too was expecting a bigger bounce in FAAFX yesterday, though I am of course happy with FOCIX, which I bought for my retired mother.
I pondered that as well - some sort of fair value pricing that will be reflected today. Not likely, but something that I thought too.
I'm very curious as to the thought process behind the Imperial Metals investment.
Here on M*...headliner:
MBIA Investment a Big Win for Fairholme's Berkowitz
And here on Bloomberg...headliner:
Berkowitz’s MBIA Bet Soars as Wagers on Insurers Pay Off
I just don't get it. Are they too young to have been inspired about journalism by young Woodward and Bernstein? Doesn't anyone want to write original work...not just repeat the superficial?
Here's my disapproving response, posted under M* comments, in support of a previous post by CarstenP:
My personal guess is this: he said a while back that he thinks his favorite holdings can double or triple in the next few years and even in a worst case scenario will still be higher than they are now. Perhaps MBIA in his opinion was not quite that favorable: that we are now seeing the best case scenario (up 50%) and the worst case could have been far worse.
But I am looking forward to hearing what he has to say. He seems to give interviews pretty often and someone's gotta press him on ths.
I continue to hold Glencore (which is now merged with miner Xstrata). Has not (nawt, even) done well, but have always considered it a long-term holding, given Glencore's unique qualities.
Most metals companies in Canada and elsewhere have done terribly - there are likely values in the sector for those who have a long-term time horizon, but I still question whether the level of time horizon that many people have is too short to really recognize what many managers believe to be value. (I still think there could be "bridge" products between mutual funds and hedge funds with lock-ups, but that's neither here nor there.)
If Berkowitz is really moving out of financials at this point, I'd be surprised. It does not seem like his thesis has fully played out. Beyond that though, I'd be more curious what about Imperial Metals was attractive and whether or not materials will be what the fund begins to rotate into.