15
Morningstar FundInvestor
April 2
014
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
