"Fund of the Decade"
- Taylor Larimore
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"Fund of the Decade"
Hi Bogleheads:
This morning I happened to look at the Miami Herald list of "150 Biggest Mutual Funds" Year-to-Date returns. Only one had a loss--The Fairholme Fund.
In 2010 Morningstar named the Fairholme Fund, Fund of the Decade for its performance from 2000 through 2009. It is now ranked in the bottom 1% of 1,233 Large-Value mutual funds for 1-year return.
Past performance does not guarantee future performance.
Edit in green.
This morning I happened to look at the Miami Herald list of "150 Biggest Mutual Funds" Year-to-Date returns. Only one had a loss--The Fairholme Fund.
In 2010 Morningstar named the Fairholme Fund, Fund of the Decade for its performance from 2000 through 2009. It is now ranked in the bottom 1% of 1,233 Large-Value mutual funds for 1-year return.
Past performance does not guarantee future performance.
Edit in green.
Last edited by Taylor Larimore on Thu Apr 28, 2011 2:50 pm, edited 1 time in total.
"Simplicity is the master key to financial success." -- Jack Bogle
Especially in the extremes (top 10% of returns one year) it seems like many times past results are inversely related to future performance!
"By singing in harmony from the same page of the same investing hymnal, the Diehards drown out market noise." |
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--Jason Zweig, quoted in The Bogleheads' Guide to Investing
- nisiprius
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A company named Adams Media has been publishing a series of books entitled "The 100 Best Stocks You Can Buy [year]" annually since 1996. Early editions by one John Slatter, later by Peter Sander.
It would be a nice project to track how these authors' recommendations have done. A nice project for someone else, of course. Quick Googling didn't turn up any systematic reports, although an Amazon Reader Review for The 100 Best Stocks You Can Buy, 2008, posted in 2009, says "The Worst stocks you could buy. None of these were right. They ALL had negative returns. The one that LOST the least was -2%, the one that lost the MOST was -78%!!!" But, for 2008? Maybe that's not so bad.
It would be a nice project to track how these authors' recommendations have done. A nice project for someone else, of course. Quick Googling didn't turn up any systematic reports, although an Amazon Reader Review for The 100 Best Stocks You Can Buy, 2008, posted in 2009, says "The Worst stocks you could buy. None of these were right. They ALL had negative returns. The one that LOST the least was -2%, the one that lost the MOST was -78%!!!" But, for 2008? Maybe that's not so bad.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Taylor, your statement is a little misleading. Morningstar currently ranks Fairholme in the bottom 1% of LV funds for <i>over the past four months</i>. At the end of 2010, just a few months ago, it fell within the top 1% of funds for the year.
If Fairholme had an extraordinary run and then crashed and burned over a period of several years, it might be a cautionary tale for performance chasers. Four months? Not so much.
If Fairholme had an extraordinary run and then crashed and burned over a period of several years, it might be a cautionary tale for performance chasers. Four months? Not so much.
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Mr. Larimore,
Thank you for the update and good information. Once again, we are reminded that we should stay the course, diversify, and lower costs. The FAIRX fund's expense ratio is 1.00%, and it is not exactly well-diversified, with over half of its assets held in 8 stocks.
Morningstar chart for Fairholme vs. Vanguard Total Stock Market, from 2000 until now:
Morningstar chart for Fairholme vs. Vanguard Total Stock Market, for 2011 YTD:
With that said, I may be benchmarking to the wrong index. I do apologize in advance - FAIRX changes Morningstar styles often, so I don't know what to compare it to.I did compare FAIRX to to Vanguard's small cap index for the 2000-2011 timeframe, and the results aren't nearly as impressive as when you include the 2000 to 2003 timeframe - most of the gains were already to be had, and those who purchased FAIRX afterwards seemed to have endured much higher risk for very little extra gain:
Thank you for the update and good information. Once again, we are reminded that we should stay the course, diversify, and lower costs. The FAIRX fund's expense ratio is 1.00%, and it is not exactly well-diversified, with over half of its assets held in 8 stocks.
Morningstar chart for Fairholme vs. Vanguard Total Stock Market, from 2000 until now:
Morningstar chart for Fairholme vs. Vanguard Total Stock Market, for 2011 YTD:
With that said, I may be benchmarking to the wrong index. I do apologize in advance - FAIRX changes Morningstar styles often, so I don't know what to compare it to.I did compare FAIRX to to Vanguard's small cap index for the 2000-2011 timeframe, and the results aren't nearly as impressive as when you include the 2000 to 2003 timeframe - most of the gains were already to be had, and those who purchased FAIRX afterwards seemed to have endured much higher risk for very little extra gain:
Last edited by centrifuge41 on Thu Apr 28, 2011 2:44 pm, edited 3 times in total.
While I agree that YTD returns are not terribly meaningful, after all the accolades Berkowitz has received over the last few years, I've been sort of expecting him to pull a Bill Miller and have a major crash.
Odds almost always catch up with you.
Odds almost always catch up with you.
" Successful investing involves doing just a few things right, and avoiding serious mistakes." - J. Bogle
- Taylor Larimore
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Correction of correction
Hi Scott:
Thanks for noticing my oversight.
I edited my post to state 1-year category rank is bottom 1%Taylor, your statement is a little misleading. Morningstar currently ranks Fairholme in the bottom 1% of LV funds for over the past four months.
Thanks for noticing my oversight.
"Simplicity is the master key to financial success." -- Jack Bogle
FAIRX outperformed the S&P 500 by 10.4% in 2010. So the underperformance is indeed solely from the past 4 months. This should mean nothing to a long-term investor, but of course message boards are filled with investors who are fed up with the "consistently bad" performance. Are the Bogleheads now encouraging more of this bad behavior by getting people to sell the fund during a period of weakness?
- Taylor Larimore
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- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
Hi Matt:matt wrote: Are the Bogleheads now encouraging more of this bad behavior by getting people to sell the fund during a period of weakness?
It appears you missed the point:
"Past performance does not guarantee future performance."
"Simplicity is the master key to financial success." -- Jack Bogle
But why is the measurement period should be so short? I don't think four months of underperformance improves that FAIRX is not going to have a future like its past. If value stocks underperform growth for four months, does everyone give up on the value premium? I don't think so.Taylor Larimore wrote:Hi Matt:
It appears you missed the point:
"Past performance does not guarantee future performance."
Top Ten Funds in Terms of Investment Totals:
USA Today publishes its list of the ten largest mutual funds and YTD returns. Number 1 is a tie between Vanguard Total Stock funds (Investor and Admiral). Dodge and Cox Stock is close behind as number 3.
Tim
Tim
He just blew the "market" away for almost 10 years...that is pretty amazing numbers...centrifuge41 wrote:Mr. Larimore,
Thank you for the update and good information. Once again, we are reminded that we should stay the course, diversify, and lower costs. The FAIRX fund's expense ratio is 1.00%, and it is not exactly well-diversified, with over half of its assets held in 8 stocks.
Morningstar chart for Fairholme vs. Vanguard Total Stock Market, from 2000 until now:
Morningstar chart for Fairholme vs. Vanguard Total Stock Market, for 2011 YTD:
With that said, I may be benchmarking to the wrong index. I do apologize in advance - FAIRX changes Morningstar styles often, so I don't know what to compare it to.I did compare FAIRX to to Vanguard's small cap index for the 2000-2011 timeframe, and the results aren't nearly as impressive as when you include the 2000 to 2003 timeframe - most of the gains were already to be had, and those who purchased FAIRX afterwards seemed to have endured much higher risk for very little extra gain:
I think he is due one off year...
Looks like Kiplinger's let you in on the secret in June 2007 (http://www.kiplinger.com/magazine/archi ... kip25.html). Despite recent underperformance, had you bought FAIRX at the end of that month, you would have outperformed the S&P 500 and Total Stock Market by a hair over 20% since then. So someone did tell you four years ago and the recommendation was worth almost 5% per year in outperformance. Seems pretty good to me.Rob5TCP wrote:Yes his performance is remarkable - I wish someone told me ten years ago he would outperform.
My problem is I can only find the geniuses AFTER the fact.
Considering his [FAIRX] exposure to Financials ,@ my last reading. As well as the % the financial sector has fallen, if RTM takes place in 5yrs he might in fact beat TSM. He's a "manager" a FA*.......he probably knows a bit more than you or I . That said, I'll stick to indexes and sectors myself.
" Wealth usually leads to excess " Cicero 55 b.c
They also let us in on 24 other secrets - did you check how they did? Or did you and your great prescience (though lack of a verified track record to confirm it) told you that this was the one of the bunch o trust?matt wrote:Looks like Kiplinger's let you in on the secret in June 2007 (http://www.kiplinger.com/magazine/archi ... kip25.html). Despite recent underperformance, had you bought FAIRX at the end of that month, you would have outperformed the S&P 500 and Total Stock Market by a hair over 20% since then. So someone did tell you four years ago and the recommendation was worth almost 5% per year in outperformance. Seems pretty good to me.Rob5TCP wrote:Yes his performance is remarkable - I wish someone told me ten years ago he would outperform.
My problem is I can only find the geniuses AFTER the fact.
Unfortunately, Kiplinger's also told me to buy:matt wrote:Looks like Kiplinger's let you in on the secret in June 2007 (http://www.kiplinger.com/magazine/archi ... kip25.html). Despite recent underperformance, had you bought FAIRX at the end of that month, you would have outperformed the S&P 500 and Total Stock Market by a hair over 20% since then. So someone did tell you four years ago and the recommendation was worth almost 5% per year in outperformance. Seems pretty good to me.Rob5TCP wrote:Yes his performance is remarkable - I wish someone told me ten years ago he would outperform.
My problem is I can only find the geniuses AFTER the fact.
LMOPX - underperformed its index by 40+%
MUHLX - underperformed its index by 30+%
BRAIX - underperformed its index by 28%
and several other funds that were beaten by their indices: CGMFX, JETAX, FBRVX, MXXIX, SLASX. Most of the others were pretty neutral with their index or the S&P.
Oops. Didn't check the bond funds, but it kind of looks like a crapshoot to me, not a list of the best funds from June 2007-present.
But why would I buy those other funds? I'm only interested in absolute return value managers.kenyan wrote:Unfortunately, Kiplinger's also told me to buy:
LMOPX - underperformed its index by 40+%
MUHLX - underperformed its index by 30+%
BRAIX - underperformed its index by 28%
and several other funds that were beaten by their indices: CGMFX, JETAX, FBRVX, MXXIX, SLASX. Most of the others were pretty neutral with their index or the S&P.
Oops. Didn't check the bond funds, but it kind of looks like a crapshoot to me, not a list of the best funds from June 2007-present.
I can assure you that investors who bought fairx during the past year based on it's performance record are not too happy. Fairx has been the focus of many posts on M* and fund owners are dumping it. Should they? Who knows. This is life with a very concentrated fund.
Paul
Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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That's the whole point, Paul. Performance-chasing investors pile in after the fund has had a nice run and then dump it at the first sign of trouble.pkcrafter wrote:I can assure you that investors who bought fairx during the past year based on it's performance record are not too happy. Fairx has been the focus of many posts on M* and fund owners are dumping it. Should they? Who knows. This is life with a very concentrated fund.
Paul
As we all know, buying high and selling low is a recipe for financial disaster.
Best Regards - Mel |
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Re: "Fund of the Decade"
Not sure how/why a die-hard indexer would even entertain such shortsighted thoughts?Taylor Larimore wrote:In 2010 Morningstar named the Fairholme Fund, Fund of the Decade for its performance from 2000 through 2009. It is now ranked in the bottom 1% of 1,233 Large-Value mutual funds for 1-year return.
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Hi Taylor
I think Fairholme illustrates a problem with active management well. With active management one can choose between a focused fund (Fairholme, CGM Focus, Oakmark Select, and in the 90's Janus Twenty) or a much more diversified one.
Focus funds can often deliver jaw dropping performance - for a few years. Inevitably a few of their picks will blow up, with massive negative impact. Example - Nygren (Oakmark) and Washington Mutual. Nygren loaded up on WAMU, believing it to be a good value. He kept defending it all the way to nearly 0. This (and other duds) hurt Oakmark badly. Betting that Fairholme will not meet the fate of their brethren is not a sound wager. I, for one, want to see how loading up on St Joe's plays out for Fairholme over the long term.
The other choice of broad diversification with active stock picking results in the fund being a closet index, where the expenses (ER, trading costs, tax impact etc) serve as a big drag on returns.
I think Fairholme illustrates a problem with active management well. With active management one can choose between a focused fund (Fairholme, CGM Focus, Oakmark Select, and in the 90's Janus Twenty) or a much more diversified one.
Focus funds can often deliver jaw dropping performance - for a few years. Inevitably a few of their picks will blow up, with massive negative impact. Example - Nygren (Oakmark) and Washington Mutual. Nygren loaded up on WAMU, believing it to be a good value. He kept defending it all the way to nearly 0. This (and other duds) hurt Oakmark badly. Betting that Fairholme will not meet the fate of their brethren is not a sound wager. I, for one, want to see how loading up on St Joe's plays out for Fairholme over the long term.
The other choice of broad diversification with active stock picking results in the fund being a closet index, where the expenses (ER, trading costs, tax impact etc) serve as a big drag on returns.
.
Following this thread I decided to check in on the portfolios set up as part of the Who’s the fairest of them all thread, which included the Fairholme fund. Since then I have also added to the asset allocation set: RAFI and Greenblatt portfolios; the security selection set: IVA Worldwide, and a portfolio of well respected active managers at the time (PRIMECAP, Yacktman, IVA, Dodge & Cox, Matthews, Fairholme, Harbor [Gross], Vanguard [Shroders]), and to the market timing set: a momentum portfolio of AQR funds (Asness). Here is the full set of portfolios FWIW: portfolios. Will continue to track these over time - out of interest. According to M*, here’s the recent performance (not adjusted for taxes). Time will tell.
Following this thread I decided to check in on the portfolios set up as part of the Who’s the fairest of them all thread, which included the Fairholme fund. Since then I have also added to the asset allocation set: RAFI and Greenblatt portfolios; the security selection set: IVA Worldwide, and a portfolio of well respected active managers at the time (PRIMECAP, Yacktman, IVA, Dodge & Cox, Matthews, Fairholme, Harbor [Gross], Vanguard [Shroders]), and to the market timing set: a momentum portfolio of AQR funds (Asness). Here is the full set of portfolios FWIW: portfolios. Will continue to track these over time - out of interest. According to M*, here’s the recent performance (not adjusted for taxes). Time will tell.