Sunday, July 10, 2011

Say What?

Famed value investor - Bruce Berkowitz has been under fire lately for the "poor" performance of  his flagship Fairholme fund. The fund has experienced $2.5 Billion in redemptions (still has $14 Billion under management)  in the last 3 months alone. Retail investors, in their short-sightedness, have run for the exits. This behaviour proves why markets are not perfectly rational - as some think. The market as a whole is impatient and cycles back and forth from optimism to pessimism and back again. I have been an avid reader over the years of anything Berkowitz related - he is a great teacher. His is truly one of the great investors of our time. Since inception of the fund in 1999, he has returned 13.90% compounded annually, while the S&P 500 has returned approximately -1% over the same time period (see chart below - WOW!- sorry for the small chart). He was named manager of the decade (last year) by Morningstar, for good reason - he has clobbered the indexes. The herd/short-term mentality will continue to hurt mutual fund investors as they try to move in and out of funds with precision. They usually end-up selling or buying at precisely the wrong time.  If you own mutual funds, study the manager's track record, style and investing framework. Then, if it suits your style and temperament, buy for the long-haul. Berkowitz is a BUY.


Click here for Fairholme Fund Chart -stretch out time frame to 10 years.

No comments:

Post a Comment