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Looking under Fairholme's hood
closer
06-28-2008, 9:58 PM | Post #2533727
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I originally bought Fairholme as a core fund for my Roth IRA, then added a small position in my 401(k) because I liked most of the core holdings (Berkshire Hathaway, CNQ, Dish, Leucadia, Mohawk) and, as Morningstar once noted, Fairholme used to have a relatively low correlation to the S&P 500 Index. I could even understand why Bruce Berkowitz might have thought Eddie Lambert had a viable plan for Sears Holdings. A few months ago, I read Fairholme's proxy statement and wondered out loud on one of these forums about the new role of one Charles M. Fernandez in the fund's management. A few weeks ago, I noticed a 4.21% position labeled "Miscellaneous Investments" and the appearance of two small positions in the IDT Corporation. In recent weeks, we have seen that Sears Holdings is struggling because its retail business model is a mess. Sears' parking lots are all but empty because Eddie Lambert doesn't care about selling socks. So the true value of Sears is the real estate it owns and which Eddie isn't likely to sell at a time when commercial property values are falling sharply. Meanwhile, Fairholme's day-to-day volatility increased as it began to correlate with the S&P 500 and the fund recently made a rather sharp reversal. Other than that, all is fair at Fairholme.
Topics
401(k)
Berkshire Hathaway
Roth IRA
S&P 500 Index
Sears Holdings
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