Top mutual funds of 2012 rebound from poor 2011
It was the exact opposite of 2011, when Fairholme was the worst performer in its category, losing more than 32 percent. That was an unwelcome surprise for Fairholme investors who earned an average 13 percent a year from 2000 through 2009 — 14 percentage points ahead of the S&P 500.
The reason for the worst-to-best results? About three-quarters of Fairholme's portfolio was recently invested in financial stocks such as insurer AIG and Bank of America. Those two picks lost more than 50 percent in 2011. But last year, financial stocks led the industry groups in the S&P 500 and Berkowitz' favorites were among the biggest winners. Bank of America surged 109 percent, and AIG 52 percent. Berkowitz holds a small number of stocks in his fund; at latest count, it had just 11.
Berkowitz didn't return a message seeking comment on his 2012 results.
However, Fairholme's recently inconsistent results have been too volatile for many investors. They've withdrawn billions of dollars from the fund, and its $7 billion in assets is less than half its total just two years ago.
LITTLE-KNOWN FUND HAS ANOTHER BIG YEAR
The Matthew 25 fund (MXXVX) posted a return of 31.6 percent, the top result in the large-cap growth stock category.
What's more remarkable is that the fund also finished in the top 1 percent of its category in 2011 with a 10.5 percent return, and in the top 2 percent in 2010, with a return of nearly 32 percent. It's been a big comeback for a fund that underperformed during the financial crisis of 2008.
The fund is named after a chapter in the Bible's Gospel of Matthew, consisting of three parables of Jesus. While the fund doesn't invest according to religious-based stock-picking criteria, the parables reflect values that fund manager Mark Mulholland strives to live by as a Roman Catholic.
He attributes his 2012 result in part to Apple, the fund's largest holding at 15 percent of the portfolio. The maker of iPhones and iPads gained 31 percent last year, despite falling in the final three months of the year. Mulholland still likes Apple, a stock his fund has owned continuously since early 2008.
"It's an exceptional company at an incredibly cheap price," he said.
The fund's second-largest holding, Cabela's Inc., surged 64 percent last year to nearly $42 a share. Mulholland first began buying the stock in the outdoor sporting goods retailer in 2008. Back then, shares briefly sank below $5.
Mulholland is the fund's sole manager, and he and his wife are its biggest individual shareholders. He doesn't have analysts to aid his stock-picking. Fund assets recently climbed to $278 million, up from $63 million at the end of 2011.
But he's not expecting Mathew 25's standout performance over the past three years to continue. That's a relatively short span for investors saving for retirement, he notes.
"In a given year," he says, "a fund's performance is often a matter of luck."
Questions? E-mail investorinsight(at)ap.org
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