5
Morningstar FundInvestor
May 2
013
Morningstar Analyst Rating
03-04-13
„
Morningstar Pillars
Process
Performance
People
Parent
Price
¶
Positive
Positive
Positive
Positive
Neutral
Morningstar Analyst Rating
Morningstar evaluates mutual funds based on five key pillars, which
its analysts believe lead to funds that are more likely to outperform
over the long term on a risk-adjusted basis.
Analyst Rating Spectrum
Œ „ ´ˇ ¨
Pillar Spectrum
Positive
§
Negative
¶
Neutral
NAV
35.28
31.44
23.15
35.58
30.09
21.84
31.86
28.99
25.19
22.77
18.70
15.09
Total Return %
12.21
35.81
-32.42
25.47
39.01
-29.70
12.35
16.72
13.74
24.93
23.96
-1.58
+/-S&P 500
-0.53
19.81
-34.53
10.41
12.55
7.30
6.86
0.93
8.83
14.05
-4.72
20.52
+/-Russ 1000 Vl
-1.80
18.30
-32.81
9.96
19.32
7.15
12.52
-5.53
6.69
8.44
-6.07
13.94
Income Return %
0.00
0.00
1.97
1.31
1.22
0.33
0.74
0.97
1.01
0.32
0.00
0.20
Capital Return %
12.21
35.81
-34.39
24.16
37.79
-30.03
11.61
15.75
12.73
24.61
23.96
-1.78
Total Rtn % Rank Cat
80
1
100
1
9
6
10
23
14
4
92
1
Income $
0.00
0.00
0.00
0.39
0.27
0.11
0.21
0.24
0.23
0.06
0.00
0.03
Capital Gains $
0.00
0.00
0.91
1.69
0.00
0.43
0.48
0.17
0.48
0.53
0.01
0.10
Expense Ratio %
.
1.00
1.01
1.00
1.00
1.01
1.00
1.00
1.00
1.00
1.00
1.00
Income Ratio %
.
0.52
-0.22
1.02
1.14
0.44
0.85
1.12
1.55
0.05
-0.13
0.05
Turnover Rate %
.
2
44
89
71
81
14
20
37
23
13
48
Net Assets $mil
7,787
7,253
6,962
18,838
11,208
7,247
6,690
3,839
1,578
264
93
49
Performance
04-30-13
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Total
2009
2010
2011
2012
2013
-12.45 32.74 10.44 8.32 39.01
12.86 -10.78
8.12 15.24 25.47
-2.30 -7.28 -25.47 0.11 -32.42
31.14 -4.91
4.02 4.70 35.81
8.40
. . . .
Trailing
Total
+/-
+/- Russ %Rank Growth of
Return% S&P 500 1000 Vl
Cat
$10,000
3 Mo
6 Mo
1 Yr
3 Yr Avg
5 Yr Avg
10 Yr Avg
15 Yr Avg
7.20 0.02
0.15
43 10,720
11.50 -2.92
-4.81
96 11,150
17.37 0.48
-4.43
64 11,737
3.37 -9.43
-8.98
100 11,045
4.44 -0.77
0.27
42 12,426
11.37 3.49
2.95
1 29,355
. . . . .
Tax Analysis
Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat
3 Yr (estimated)
5 Yr (estimated)
10 Yr (estimated)
2.65
100
0.70
74
3.84
38
0.57
53
10.81
1
0.51
17
Potential Capital Gain Exposure: 12% of assets
Rating and Risk
Time Load-Adj
Morningstar
Morningstar
Morningstar
Period Return % Rtn vs Cat
Risk vs Cat
Risk-Adj Rating
1 Yr
17.37
3 Yr
3.37
Low
High
5 Yr
4.44
Avg
High
10 Yr
11.37
High
High
Incept
12.05
Other Measures
Standard Index
Best Fit Index
S&P 500 Mstar SEC/Fin Svc TR
Alpha
-11.3
-3.2
Beta
1.32
1.04
R-Squared
69
82
Standard Deviation
23.95
Mean
3.37
Sharpe Ratio
0.25
Morningstar’s Take
by Kevin McDevitt, CFA 03-04-13
Fairholme is no less risky, but closing should stabilize
its shareholder base.
This fund’s decision to close to new investors at the
end of February should make it less vulnerable to
disruptive asset flows. Recall that investors have
pulled about $10 billion from the fund over the past
two years. This forced manager Bruce Berkowitz to sell
positions in 2011 and 2012 that he would rather have
held on to. Closing should reduce the risk of hot
inflows, which poured into the fund in 2010 and then
departed just as quickly in 2011. With the hot money
largely shaken out, the existing shareholder base is
likely more stable. This should make it easier for
Berkowitz to make the big contrarian bets that have
driven its superb long-term results. Closing will prevent
current positions from being diluted by potential
inflows, as diversification guidelines prevent the fund
from adding to positions greater than 5%, which
includes his highest-conviction ideas such as American
International Group AIG and Bank of America BAC.
With outflows slowing to a trickle, the portfolio
itself has become more solid, too. Reduced outflows
have allowed Berkowitz to rebuild the fund’s cash
cushion to its historical 20% norm, facilitated in
January by selling its General Growth Properties GGP
warrants. Increased cash lessens the odds that he
would need to sell shares to meet future redemptions.
Plus, it gives him flexibility should buying
opportunities arise.
Furthermore, greater cash should temper some of
the risk inherent in a portfolio that has become even
more concentrated. Berkowitz hasn’t added to a
position greater than 5% of assets since August 2011,
but the fund now has nearly 80% of assets in just
seven stocks. That’s because he met redemptions by
selling smaller positions and leaving his favorite ideas
intact, as opposed to the more common tack of selling
proportionally across the portfolio.
With its ultraconcentrated composition, this fund
remains suitable for a small minority. But with its
doors closed to newbies, there should be fewer
disruptions for true believers.
Address:
Fairholme Funds Inc
Miami, FL 33137
866-202-2263
Web Address:
Inception:
12-29-99
Advisor:
Fairholme Capital Management LLC
Subadvisor:
None
NTF Plans:
N/A
Minimum Purchase:
Closed
Add:
.
IRA:
.
Min Auto Inv Plan:
Closed
Add:
.
Sales Fees:
No-load, 2.00%R
Management Fee:
1.00%
Actual Fees:
Mgt:1.00% Dist:
.
Expense Projections:
3Yr:$318
5Yr:$552 10Yr:$1225
Income Distribution:
Annually
Data through April 30, 2013
Fairholme
Ticker
Status Yield Total Assets
Mstar Category
FAIRX Closed 0.0% $7,787 mil
Large Value
67% 79% 80% 79% 70% 79% 90% 88%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 04-13
Historical Profile
Return
Risk
Rating
Average
High
Neutral
Investment Style
Equity
Stock %
Manager Change
Partial Manager Change
Growth of $10,000
Investment Values of
Fund
Investment Values of
S&P 500
Performance Quartile
(within Category)
History
10.0
7.0
14.0
18.0
22.8
26.8
Portfolio Analysis
02-28-13
Share change since 11-12 Total Stocks:9 Sector
PE Tot Ret% % Assets
American International G
Finan Svs
9.3 17.34 40.68
Bank of America Corporat
Finan Svs 49.3 6.12 12.22
Sears Holdings Corporati
Cnsmr Cyc
.
24.13 8.53
St. Joe Corporation
Real Est
.
-15.21 6.67
Leucadia National Corpor
Cnsmr Def
8.9 33.74 4.39
Amer Intl Grp ([Wts/Rts]
Finan Svs
. .
3.98
MBIA Inc
Finan Svs
1.5 20.51 2.64
Fidelity Instl MM Fds Mo
. . .
0.75
Sears Canada Inc.
Cnsmr Cyc 9.6 -15.14 0.74
Mbia 7%
. . .
0.19
Mbia 7.15%
. . .
0.15
Mbia 5.7%
. . .
0.12
Orchard Supply Hardware
Cnsmr Cyc
.
-73.28 0.04
Orchard Sply Hardware St
. . .
0.01
Current Investment Style
Market Cap %
Giant
69.7
Large
0.0
Mid
17.0
Small
13.3
Micro
0.1
Avg $mil:
27,056
Value Blnd Growth
Large Mid Small
Value Measures
Rel Category
Price/Earnings
Price/Book
Price/Sales
Price/Cash Flow
Dividend Yield %
3.75
0.38
0.59
0.62
0.09
0.30
0.23
0.53
0.10
0.03
Growth Measures
% Rel Category
Long-Term Erngs
Book Value
Sales
Cash Flow
Historical Erngs
12.00
4.47
-28.98
1140.23
-37.99
1.35
0.90
NMF
203.61
NMF
Profitability
% Rel Category
Return on Equity
Return on Assets
Net Margin
-4.71
-3.50
5.52
NMF
NMF
0.47
Sector
Weightings
% of
Stocks
Rel
S&P 500 High
3 Year
Low
Cyclical 94.51 3.28
BasicMat 0.00 0.00
. .
CnsmrCyc11.65 1.36
. .
FinanSvs 74.51 4.75
. .
Real Est 8.35 5.72
. .
Sensitive 0.00 0.00
CommSrvs 0.00 0.00
. .
Energy 0.00 0.00
. .
Industrl
0.00 0.00
. .
Technlgy 0.00 0.00
. .
Defensive 5.49 0.20
CnsmrDef 5.49 0.45
. .
Hlthcare 0.00 0.00
. .
Utilities 0.00 0.00
. .
h
r
t
y
u
j
i
o
p
a
k
s
d
f
Composition - Net
(% of Stock)
Cash 16.1
Stocks 79.9
Bonds 0.3
Other
3.7
Foreign 0.9
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2013Morningstar, Inc.All rights reserved. The information herein isnot represented orwarranted to be accurate, correct, complete or
timely. Pastperformance isnoguarantee of future results.Access updated reports at
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