(PUB) Morningstar FundInvestor

April 2 014

Morningstar FundInvestor

15

Prior said that she doesn’t plan any significant changes to the bond group, which is widely respected for its careful, research-intensive approach to fixed- income investing. American Century Founder Stowers Dies at 90 American Century founder Jim Stowers Jr. died on March 17 of natural causes. He was 90 . Armed with $ 100 , 000 in seed money from 24 inves- tors, Stowers created the forerunner to American Century in 1958 , starting out with two mutual funds. Within a short time, Stowers became known not just for his growing firm but also for his philosophies underpinning how the firm managed its clients’ equity assets. Under Stowers’ leadership, the firm adopted the mind-set that “money follows earnings,” gravitating toward companies experiencing rapid sales and revenue growth. Although Stowers stepped down as the firm’s chief executive officer several decades ago, he remained co-chairman of the board up until 2010 , when he suffered a bad fall and gave up that role. Stowers remained on American Century’s board as a director until his death. In 1987 , Stowers was diagnosed and treated for pros- tate cancer, and his wife Virginia had surgery for breast cancer in 1993 . That prompted the couple to found the Stowers Institute for Medical Research in 1994 . Across three ownership transfers, the couple eventually transferred their more than 40% owner- ship stake in the firm to the institute. (The firm’s remaining ownership is made up of a 41% stake by CIBC and about 13% to 14% by its employees.) Today, in addition to being a large owner of American Century Investments, the institute operates a 10 -acre, 600 , 000 -square-foot research facility and houses 22 independent research programs and three technology development programs. In 2010 , Stowers and his wife signed the “Giving Pledge” championed by Warren Buffett and Bill and Melinda Gates that challenges wealthy individuals to donate more than 50% of their wealth to charity. For the couple, such a pledge was a

formality, as they already had transferred the majority of their wealth to the Stowers Institute.

Fairholme Invests in Fannie, Freddie Common Shares

There were two notable additions to Fairholme ’s FAIRX portfolio as of Nov. 30 , 2013 . One could have easily missed the fund’s new positions in the common shares of both Fannie Mae FNMA and Federal Home Loan Mortgage Corp. FMCC , also known as “Freddie Mac.”The two new positions were just 1 . 1% of the November portfolio, but they signal manager Bruce Berkowitz’s increasing confidence in his claim against the U.S. government and his belief that the shares won’t be rendered worthless. Berkowitz is suing the government to restore the rights of pre- ferred and common shareholders following the Treasury department’s 2012 decision to send all profits to the government. Berkowitz’s endeavor seemed quixotic at first, but the judge on the case allowed Fairholme to continue with discovery. This all began when Berkowitz built positions in Fannie and Freddie preferred shares last summer. (That combined position grew to 10 . 7% of the port- folio in November.) The preferreds offered a slightly less risky bet on the companies than the common shares because they’re higher in the capital structure. But the bet still looked extremely speculative given the government’s stated intention to wind down the companies in the aftermath of the housing crisis. Both Fannie and Freddie have recovered along with the housing market and will soon have more than repaid the $ 188 billion they received in a govern- ment bailout. Meanwhile, Berkowitz sent letters to the boards of the two companies exhorting them to honor their fiduciary duty to shareholders. The ultimate outcome of all this remains highly uncertain, but Berkowitz’s argument seems to be gaining some traction. œ